GREENS NURSERY & TREE PLANTING DESIGN LTD v. SECRETARY FOR JUSTICE

HCA 1286/2015

[2018] HKCFI 2558

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1286 OF 2015

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JUDGMENT

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A.   THE CLAIM

1.  On 14 January 2014, after a tender process, the Government of the Hong Kong Special Administrative Region as landlord entered into a short term tenancy agreement with the plaintiff as tenant (the “Tenancy Agreement” or “STT 1564”). The pieces of land leased thereunder were described in the Tenancy Agreement as “All those pieces of ground situate atFo Chun Road, Pak Shek Kok, Tai Po, New Territories, Hong Kong comprisinga total area of 19,000 square metres or thereabouts” (the “Premises”). Disputes subsequently arose between the parties.  The plaintiff on 11 June 2015 issued a Writ, naming as the defendant the “Secretary for Justice (for and on behalf of Director of Lands)” [1].  The allegations are (i) the defendant has breached a warranty or representation that the Premises would be fit for running a fee-paying car park or open storage (“the alleged Warranty/ Representation” and “the Fitness for Purpose Claim”); and (ii) the defendant has derogated from its grant and/or acted in breach of the covenant for quiet enjoyment (“the Derogation/Quiet Enjoyment Claim”).  This is the trial of that claim.

B.   THE UNDISPUTED FACTS

2.  Most facts are not in dispute.  I set them out as follows.  The main factual issue that is in dispute is whether the plaintiff intended to use the Premises as a fee-paying car-park.  I will deal with that issue separately.

3.  The plaintiff is a limited company and was incorporated on 8 October 2013.

4.  The Premises comprise two plots of land.  One of them is bigger (“the Main Plot”), and the other smaller (“the Small Plot”).  Their total size is about 19,000 square metres.  They are divided by Fo Chun Road, and were adjacent to a housing development called Providence Bay.

5.  Prior to about October 2008, the Premises were mostly barren land with little or no vegetation. 

6.  Between 12 September 2008 and 16 December 2013, the Premises were leased by the defendant to a company called Glory Cheer Limited (“GCL”).  That was done pursuant to Short Term Tenancy 1443 (“STT 1443” or “the Previous Agreement”). 

7.  Clauses 2(f) and 2(h), and Special Condition 18 of the Previous Agreement provided as follows:

“ 2. The Tenant hereby agrees with the Landlord as follows:

…

(f) To maintain and keep to the satisfaction of the District Lands Officer the Premises including retaining and boundary walls and fences (if any) belonging thereon in good and tenantable repair and condition and (subject to Clause 2(h) hereto) so to hand over the same on termination of this Agreement;

…

(h) To yield up the Premises with vacant possession to the Landlord at the expiration of the term or sooner termination of this Agreement in good clean and tenantable repair and condition in accordance with the stipulations contained herein.  The Tenant shall, if so required by the District Lands Officer, at his own cost and expense before the expiry or sooner termination of the tenancy reinstate and remove all structures or fixtures or additions including foundation, paving or other surfacing which is then standing on or forms part of the Premises (irrespective of whether they were erected or installed by the Tenant), make good and repair in a proper and workmanlike manner any damage to the Premises and thereafter landscape the Premises to the satisfaction of the District Lands Officer and without any compensation therefore being paid by the Landlord to the Tenant.”

Special Condition 18:

“ The Tenant shall at his own expense fence the Premises and thereafter maintain such fencing to the satisfaction of the District Lands Officer.”

8.  The First Schedule to the Previous Agreement provided that the Premises might be used for six purposes:

(a)   fee-paying public carpark; or

(b)   open storage; or

(c)   landscaping area; or

(d)   plant nursery; or

(e)   sales office for flats and show flats; or

(f)   any combination of the above.

9.  During the tenancy period of the Previous Agreement, the Premises were used primarily as a landscaping area.  Some grassy mounds were formed.  Trees and vegetation were also planted.

10.  In about September 2013, the defendant published a Tender Notice for a new one-year tenancy of the Premises (the “Tender Notice”).  A Form of Tender (“Tender Form”) was annexed thereto.  Tenders must be made in that form.  The tenancy to be awarded to the successful tenderer (the “Draft Tenancy Agreement”) was also annexed. 

11.  I set out some of the relevant terms contained in the Tender Notice:

“ 1. Tenders are invited for a tenancy of one lot of Government land (hereinafter referred to as ‘the Premises’) described in the First Schedule to the Tenancy Agreement annexed hereto (hereinafter referred to as ‘the Tenancy Agreement’) on such terms and conditions as specified in the Tenancy Agreement.

…

7. Tenderers must forward with their tender:

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(b) a proposed scheme of security (‘Scheme of Security’) as referred to in Special Condition No.10 of the Second Schedule to the Tenancy Agreement in the event of the Premises or any part thereof is intended to be used as fee‑paying public carpark.

…

10. If a tender is accepted, the successful tenderer shall be the Tenant, and he shall within 7 days of being called upon by the District Lands Officer/Tai Po so to do sign/execute the Tenancy Agreement …

…

12. The successful tender shall accept the Premises in the state and condition in which they are at the date possession is given.

13. Notwithstanding anything provided to the contrary in thisTender Notice, the Government hereby advises and all tenderers hereby acknowledge and unconditionally agree that:

…

(b) notwithstanding the due execution of the Tenancy Agreement, in the event that the Outgoing Tenant fails to deliver vacant possession of the Premises to the Government on or before 17^thDecember 2013 for whatever reason, the commencement date of the Tenancy Agreement shall be the day after the Government has regained legal and physical vacant possession of the Premises from the Outgoing Tenant. The date of commencement of the tenancy and the respective periods set out in (i), (ii) and (iii) of the First Schedule to the Tenancy Agreement shall be adjusted accordingly but all other terms and conditions of the Tenancy Agreement shall remain unchanged ….

…

It is hereby specifically declared by the Government that any statement, whether oral or written, made and any action taken by any Government officer in response to any enquiry made by a prospective tenderer shall be for guidance and reference purposes only.  Any statement shall not be deemed to form part of this Tender Notice and such statement or action shall not and shall not be deemed to amplify, alter, negate, waive or otherwise vary any of the terms or conditions as are set out in this Tender Notice or the Tenancy Agreement.”

12.  I set out some of the relevant terms contained in the Draft Tenancy Agreement annexed to the Tender Notice:

“ 3. THE LANDLORD HEREBY AGREES WITH THE TENANT as follows:

To permit the Tenant on his duly paying the rent and observing and performing the obligations on his part herein contained to have quiet possession and enjoyment of the Premises without any interruption by the Landlord or anyone lawfully claiming under or in trust for the Landlord until such time as this Agreement is determined.

4. IT IS HEREBY MUTUALLY AGREED BY AND BETWEEN THE PARTIES HERETO AS FOLLOWS:

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(e) That the tenancy hereby created is (without prejudice to the terms and conditions hereof) subject also to the Special Conditions contained in the Second Schedule hereto;

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(p)   That this Agreement constitutes the entire agreement of the parties about the subject-matter of this Agreement, and that no statement, representation or promise made by either the Tenant or duly authorized officers of the Landlord has been relied upon by the other party to enter into this Agreement, and that no communications, understandings, representations, promises, oral or written statements, warranties, arrangements or agreements, conditions made by either the Tenant or duly authorized officers of the Landlord prior to the execution of this Agreement with respect to the subject-matter of this Agreement may in any way be read or incorporated into this Agreement.”

13.  The First Schedule to the Draft Tenancy Agreement set out, under the heading “PURPOSES FOR WHICH THE PREMISES MAY BE USED” the following uses:

(a)   fee-paying public carpark; or

(b)   open storage; or

(c)   landscaping area; or

(d)   plant nursery; or

(e)   any combination of the above.

14.  The Second Schedule to the Draft Tenancy Agreement was a setof Special Conditions (“Special Conditions”) that would govern the tenancy. I set out some of the relevant terms contained therein:

“ 9. (a) The Tenant shall have no right of ingress or egress to or from the Premises for the passage of motor vehicles except between the points X and Y through Z and between the points U and V through W shown and marked on the plan annexed hereto or at such other points as may be approved in writing by the District Lands Office.

(b) The Tenant shall not exercise the right of ingress and egress in sub-clause (a) of this Special Condition unless and until a run-in for each point of ingress and a run-out for each point of egress from and onto the existing public roads or footpaths adjoining the Premises have been designed and constructed to the satisfaction of the District Lands Office …. The said works of design, construction … shall be undertaken by the Tenant at his own expense in accordance with the terms of this Agreement, in particular Special Condition No.35 hereof, and in all respects to the satisfaction of the District Lands Officer.

…

10. In the event of the Premises or any part thereof are being used as fee-paying public carpark, without prejudice to Special Condition No.8,

(a) upon the commencement of the tenancy hereby created or the commencement date of the operation of the fee-paying public carpark (as the case may be), the Tenant shall forthwith seek approval from the Commissioner of Police … of a proposed scheme of security …. The Tenant shall obtain the approval of the said scheme of security … from the Commissioner within three calendarmonths from either the commencement of the tenancy or the commencement date of the operation of the carpark (as the case may be) or such other extended period as may be approved by the District Lands Officer ….

(b) within two calendar months from the date the Commissioner approved the scheme of security or such other extended period as may be approved by the District Lands Officer and throughout the tenancy, the Tenant shall at the Tenant’s own expense, implement the Approved Scheme in all respects to the satisfaction of the Commissioner ….

…

13. In the event the Premises or any part thereof are being used as fee-paying public carpark, the Tenant shall at his own expense erect appropriate traffic signs at suitable locations near the ingress and egress points referred to in Special Condition No.9(a) hereof …. Such traffic signs and the locations thereof shall be subject to the prior written consent of the Commissioner for Transport ….

14. Subject to the prior written approval of the District Lands Officer, signs related to the Tenant’s operation of a fee-paying public carpark may be erected on the Premises at the Tenant’s own expenses.

…

19. No tree growing on the Premises or adjacent thereto shallbe removed or interfered with without the prior written consent ofthe District Lands Officer who may, in granting consent, impose such conditions as to transplanting, compensatory landscaping or replanting as he may deem appropriate.

20. (a) The Tenant shall at his own expense keep and maintain all trees growing on the Premises at the time of signing of this Agreement (hereinafter referred to as ‘the Existing Trees’) in a healthy and safe condition to the satisfaction of the Landlord.

…

21. The Tenant shall not form, surface, level or pave the Premises nor cut away, remove or set back any Government land adjacent to or adjoining the Premises or carry out any building up, filling in or any slope treatment works of any kind whatsoever on any Government land except with the prior consent of the District Lands Officer ….

…

24. The Tenant shall at his own expense fence the Premises and thereafter maintain such fencing to the satisfaction of the District Lands Officer.

…

35. (a) The Tenant shall take or cause to be taken all proper and adequate care, skill and precautions at all times and particularly during any construction, maintenance, renewal, repair, removal or reinstatement work, including that referred to in Special Condition No. 9 hereof, to avoid doing any damage to any … ‘Works and Services’.

(b)  Before carrying out any of the works referred to in sub-clause (a) of this Special Condition, the Tenant shall make or cause to be made such proper search and enquiry as may be necessary to ascertain the present position and levels of the Works and Services, and shall submit his proposals for dealing with the Works and Services in writing to the District Lands Officer for his approval.  No such works shall be carried out until the District Lands Officer has given his written approval.”

15.  The entrances mentioned in Special Condition 9(a) require some explanations.  The one marked on the annexed plan (“Annexed Plan”) with “YZX” is the entrance to the Main Lot (“Main Plot Entrance”).  The other one that is marked with “UWV” is the entrance to the Small Plot (“Small Plot Entrance”).

16.  As has been said above, tenders must be made with the Tender Form annexed.  Paragraph 3(b) thereof set out two boxes for tenderers to choose between:

(a)   the 1^st box stated:

“ I/We

intend to use the Premises or any part thereof as fee-paying public carpark and have submitted herewith a proposed scheme of security as required under paragraph No.7(b) of the Tender Notice (‘Scheme of Security’).”

(b)   the 2^nd box stated:

“ I/We

do not intend to use the Premises or any part thereof as fee-paying public carpark, and I/We understand that the submission and implementation of the Scheme of Security to the satisfaction of the Commissioner of Police within the specified time frame underSpecial Condition No.10 of the Second Schedule to the Tenancy Agreement are required if I/We later decide to use the Premises or any part thereof for the use of fee-paying public carpark.”

17.  On 10 October 2013, the plaintiff submitted its Tender Form.  It ticked the 2^ndbox under paragraph 3(b) of that Form.

18.  Mr Wan Chung Hei (“Mr Wan”) was the Managing Consultant of the plaintiff between about October 2013 and March 2014.  Prior to joining the plaintiff, he had about 10 years’ experience as project coordinator and manager operating carpark business.  Mr Wan was called by the plaintiff as its only witness.  According to him, he used his experience and professional knowledge in running carpark business for the plaintiff.  He confirmed that prior to the submission by the plaintiff of the Tender Form, he had studied the Tender Notice and the Tenancy Agreement annexed thereto.  The fact that the plaintiff had done so was also stated on the Tender Form Tender, that:

“ I/We, Greens Nursery & Tree Planting Design Ltd. having read the forgoing Tender Notice and the Tenancy Agreement and examined the plan therein referred to, hereby offer to rent …”

Mr Wan further confirmed that prior to the submission of the Tender Form, he had inspected the Premises.

19.  The plaintiff was successful with its bid.  On 20 November 2013, STT 1564 was awarded to it.  It was signed by the plaintiff on 28 November 2013.  The District Lands Officer, Tai Po (“DLO/TP”) subsequently signed the same and dated it 14 January 2014.  The signed Tenancy Agreement was in all material aspects the same as the Draft Tenancy Agreement.  The tenancy term was for one year, commencing on 17 December 2013, and thereafter quarterly until such time as the Tenancy Agreement was terminated. 

20.  On 22 November 2013, the plaintiff submitted to the Police a proposed Scheme of Security.  What subsequently happened to this submission may conveniently be dealt with here.  By letter dated 30 December 2013, the plaintiff informed DLO/TP that it had done so on 22 November 2013, and that it was waiting of the Police’s approval.  The plaintiff later on 17 January 2014 submitted an amended version of the scheme.  That amended scheme was approved by the Police in writing on 27 January 2014.  On 20 March 2014, the Police wrote further to the plaintiff and recited what they had been informed of by Mr Wan, that “the captioned location is no longer planned to be used for the purpose of a fee-paying public carpark”. The plaintiff was then reminded of the steps it was required to take should it later intend to use the Premises as fee-paying carpark again.  However, the plaintiff had apparently missed those letters from the Police.  On 28 March 2014, it wrote and chased the Police for an answer to its original submission made on 22 November 2013.  The Police wrote back on 8 April 2014 and told the plaintiff that the amended scheme had in fact been approved, but that due to lapse of time and the departure of Mr Wan from the plaintiff, the plaintiff was required to submit an updated Scheme of Security.  There is no evidence that the plaintiff had followed up on this. 

21.  Also on 22 November 2013, and according to what Mr Wan has said in in paragraph 15 of his witness statement, “the plaintiff submitted its application for construction of the run-in and run-out of the fee-paying public car park to be operated on the Premises”.  That was not correct.  What actually happened was that the plaintiff on that day made application to the Highways Department via the internet and through the Excavation Permit-Management System (“XPMS”) for an excavation permit. On 19 December 2013, the Highways Department in writing acknowledged the plaintiff’s application. An account in the XPMS had also been set up for the plaintiff.   

22.  On 3 December 2013, a pre-handover meeting (“Pre-handover Meeting”) was held.  Amongst those who attended were Mr Wan and a Mr Jimmy Lam representing the plaintiff, Mr Alnwick Chan representing GCL, and Mr Tsang Hon Yin (“Mr Tsang”, Land Executive of the Lands Department) representing the defendant.  According to Mr Wan, amongst those who represented GCL was a surveyor from Knight Frank, which was a property consultancy company.  He was likely to be Mr Alnwick Chan.

23.  According to Mr Wan, during the Pre-handover Meeting he toured around the Premises and noticed 200 odd trees of 2 to 3 meters tall were thereon.  There were also hills and mounds on the Premises.  The Premises were also not fenced. He subsequently took photographs of the Premises, which photographs have been produced before me.  He said that he pointed out during the Pre-handover Meeting to Mr Tsang that due to the trees, mounds and slopes on the Premises, and due to the absence of proper fencing, the Premises in that state were not suitable for the plaintiff to run any carpark and storage business.  He requested Mr Tsang and the officers of DLO/TP to remove all the trees on the Premises.  He also raised his view that under the terms of the Previous Agreement, GCL must clear all miscellaneous items or articles (including all tress), repair all damaged fencing, and level and flatten the ground.  He said that at that juncture, the surveyor from Knight Frank said to him “Don’t cut those trees.  Each tree is worth several hundred thousand dollars.”  He said that Mr Tsang in reply said to him that it was not necessary for GCL to remove the trees.  Mr Tsang then produced a tree plan showing the location of those trees on the Premises (“the Tree Plan”, a copy of which was subsequently provided to the plaintiff on 4 December 2013). 

24.  Mr Tsang was called by the defendant as a witness.  He has prepared a file note on the Pre-handover Meeting (the “File Note”).  What he noted down is not inconsistent with Mr Wan’s evidence.  The material parts of his file note read as follows:

“ 1. A pre-handover meeting by tenant of STT 1443 (represented by Mr. Alnwick Chan …, the tenant of coming STT 1564 (represented by Mr. Jimmy Lam …), members of LE/C1, and this team was made at the subject site in this morning. The following are summarized records:

(a) Existing Trees: The undersigned explained and pointed out to the participants (as per DSO’s provided trees plan No. TPM 5747) that there were about 231 nos. of existing trees within the subject site, all of them would remain upon return of the site. The coming tenant (STT 1564) would need to accept the site including the existing trees in the state and condition in which they will be, as at the date the site taken over by them from this office. Afterwards, all the existing trees will be subject to the trees preservation and maintenance requirements within the tenancy agreement ….

(b) Site Boundary Fence: Mr Alnwick Chan (STT 1443) informed that they had no objection to fence the site boundary, but he needed to know the Government’s specifications prior to works commencement making surethat the completed works to meet this office standards ….

(c) Structure(s) and Site Condition: Structure was no [sic] found within the site after inspection by the participants. It had also observed that there were other items includingwater meters and stands, spot-lights installed on ground,uneven landscaped surface and troughs for surface runoff within the site.

…

2.   After the meeting, Mr Lam (STT 1564) expressed his strong views especially (a) above, and he had great concern about their needs for proper vehicular access serving the subject site.  The undersigned explained to Mr Lam and his friend Mr Wan … about their rights and obligations in accordance with the tender docus including paragraphs 12 within Tender Notice and SCs (19) and (20) of the TA.  The undersigned also reminded both gentlemen that it requires the tenant (STT 1564) to strictly adhere to the tenancy agreements of STT 1564 when using the subject site, or otherwise they would surely be enforcement actions against their unauthorized acts, including terminating of the STT.”

During cross-examination, Mr Tsang added that he had received instructions from his superior that the STT 1564 was a special tenancy, in the sense that there was no need to remove the existing trees, and that no reinstatement by the previous tenant was required.

25.  After the Pre-handover Meeting but still on 3 December 2013, the plaintiff wrote to DLO/TP.  In that letter, the plaintiff referred to the Pre-handover Meeting and said:

「 由於場內有大量樹木，不可能停泊任何車輛或用作倉庫 (包括通道及上落貨) ，而致本公司不能根據租約作上述用途使用，現本公司向貴處申請，請貴處將場內所有樹木搬走。而且，根據政府與舊租戶所簽訂的合約條款，舊租戶必須在租約完結交還土地予貴處前，清理場內一切雜物 (包括所有樹木) 、維修已損毀之圍網，以及平整場内地面，現請貴處盡快通知舊租戶，於2013年12月17日移交土地給本公司時，必須將場內所有樹木移走，確保租用範圍已加設圍網及平整場内地面。」

26.  Between the Pre-handover Meeting and the formal handover on 17 December 2013, the plaintiff had repeated to DLO/TP similar requests.  It made clear in its letter of 5 December 2013 to the DLO/TP that the existing trees had no use to it, and requested DLO/TP to liaise with GCL to remove all the trees and to fence up the Premises for the handover.  In responses, DLO/TP variably referred the plaintiff to Clause 12 of the Tender Notice and Special Conditions 19 and 20 of the Tenancy Agreement.  In particular, in its reply dated 13 December 2013, the DLO/TO, after referring to a number of letters from the plaintiff, said that:

「 本處已要求現時承租人在交還該土地時，清除雜物及圍網。標題租約的招標公告第12條說明中標者必須按照移交管有權當日該土地的狀況及情形接收該土地，本處抱歉不能接納你有關搬走該土地内所有樹木及平整土地的要求。

   懇請注意，租約內特別條文第19款及第20款已清楚載明承租人就該土地內所有樹木的責任，承租人必須按照以上特別條文處理該土地的所有樹木。本處藉此提醒你，在租約期內，在未得本處同意前，你是不能移走或干擾該土地內及鄰近土地的樹木……」

27.  On 17 December 2013, formal handover took place.  The Premises were inspected.  According to Mr Wan, the state of the Premises remained mostly the same.  The trees remained there.  The ground remained landscaped with low grassy mounds.  The odd items (as observed at paragraph 1(c) of the File Note) and green barriers were still there.  He said that there was no fencing erected in most of the boundary of the Premises.  He noted the absence of fencing in certain particular areas.  In respect of those areas, Ms Lou Kin Lin, Estate Surveyor of the Lands Department (“Ms Lou”, who was the only other witness called by the defendant), explained in her evidence that as there were boundary walls already erected along them to delineate the boundaries, no iron-railing or chain-link fence were erected.  Mr Wan on the other hand noticed that some workers were fencing up certain area, though there was no sign that the entire Premises were going to be fenced up.

28.  Ms Lou was cross-examined about the condition of the Premises.  She explained that GCL were not required to reinstate as the permitted uses under the Tenancy Agreement were similar.  She did not agree that because of the trees and the mounds, the Premises could not be used as a fee-paying public carpark. She said that there had been similar cases before, and the successful tenderers could make appropriate applications for removal of trees or levelling of grounds.  She said that the trees on the Premises were not planted densely together (her words were “不是密密麻麻佈滿晒”).  When being asked whether in general unlevelled ground would prevent the operation of a fee-paying public carpark, she said that it would be dependentupon the operator’s arrangement, and that cars could be parked on the flatter areas.  Specifically in respect of the Premises, it was raised with her during cross-examination that there were “not much” (“無乜”) flat areas for parking.  She said that all operators were expected to carry out some basic works on the grounds.  

29.  After the inspection on 17 December 2013, Mr Wan on behalf of the plaintiff signed a Handover Certificate.  It reads as follows:

“ I, Wan Chung Hei … of [the plaintiff] have inspected the Premises … and hereby accepted the Premises in the state and condition inwhich they are at the date possession is given, i.e. on 17.12.2013. I confirm that upon termination … I also note the existing trees as identified to me on site and fully understand the tenant’s obligations on such trees in accordance with Special Conditions (19) & (20) within the Tenancy Agreement.”

30.  Mr Wan said that given what he had observed about the Premises, he wrote on the Handover Certificate the following remarks:

“ Remarks: on the date of handover

* did not remove trees

* did not remove the green barriers

* without site formation

* without proper fencing

*  the site is not suitable for any purpose.”

31.  According to Mr Wan, after the formal handover, the plaintiff took steps to prepare the Premises for use as a fee-paying carpark.  Some sections of the barriers were removed so that heavy vehicles could gain access to the premises.  On the morning of 17 December 2013, trucks were directed to enter the Premises to remove some of the unmarked plants.  Workers were also instructed to perform site formation at the Main Plot Entrance.  Mr Wan said that police officers, officers from the management office of the Providence Bay and the Highways Department attended the entrance and made enquiries.  Officers from the Environment and Hygiene Department also attended and tried to remove advertisement banners for parking services put up at the Premises.

32.  In the afternoon of 17 December 2013, the plaintiff wrote to the Lands Department.  Various complaints were made.  In particular, the plaintiff complained again that the defendant had failed to require the previous tenant to reinstate the Premises upon termination of the Previous Agreement.  The letter was referred to the DLO/TP for reply, which he did on 7 February 2014.  The DLO/TP stated, inter alia, that:

「 根據上述租約的招標文件，該場地可作多種用途， 包括收費公眾停車場、露天存放場，園景區、苗圃、或前述任何一項用途的多項組合。因此，在保育樹木、珍惜環境資源及場地可容許多種用途各方面詳細考慮後，本處在安排場地接管時，容許場內現存的多棵樹木保留。儘管如此，上述租約內的特别條文第十九款及第二十款亦已包含有關處理現存樹木的規定，給予租約承租者在申請及獲本處正式批准後，合適地處理場內 (包括搬走) 樹木，以配合場可作的用途。

   按照上述租約的招標公告第十二條說明，中標者須按移交管有權當日該土地的狀況及情形接收該土地。本處在處理上述場地的交收工作是按照有關招標文件的內容進行。」

33.  I come back to the chronological account of the facts.  According further to Mr Wan, on 18 December 2013 at about 10:00 am, officers from the Highways Department placed temporary barriers along the temporary entrance at the Main Plot Entrance.  Vehicular ingress and egress was blocked.  Mr Wan protested.  According to him, the officers ofthe Highways Department said that they were acting upon the instruction ofDLO/TP and that the plaintiff should contact DLO/TP to resolve the problem. 

34.  By two letters both dated 18 December 2013 issued to the plaintiff, the DLO/TP reminded the plaintiff to (a) install fire extinguisher in the Premises, and (b) in the event of the Premises being used as a fee-paying public carpark, submit a proposed Scheme of Security to the Police and signs for the DLO/TP’s approval.

35.  On 19 December 2013 at about 9:15 am, officers of the Highways Department again attended the Premises and replaced the temporary barriers placed the day before at the Main Plot Entrance with permanent metal railings. Mr Wan was again told to contact DLO/TP.

36.  On that day, the plaintiff wrote to the DLO/TP and complained that fencing was not properly erected in a number of sections of the Premises, and green barriers were left inside the site by GCL.

37.  On 20 December 2013, Knight Frank wrote to the Lands Department.  The letter was signed by Mr Alnwick Chan.  They claimed to act on behalf of the developers of TPTL 186, 187 and 188 (on which Providence Bay is situate).  They referred to STT 1564.  They said that their clients were extremely concerned by the adverse impact to the environment the incoming tenant might bring if the tenancy conditions were not fully observed.  They highlighted Special Conditions 19 to 21.  They “request your office to strictly enforce these covenants”.  They said further that “We therefore expect the existing landscaping features including the turfing and site profile/terrain will not and cannot be disturbed.”

38.  On 24 December 2013, the plaintiff wrote to the Highways Departments as follows:

「 本公司成功投得上述土地後……，已於11月尾向路政署申請建造出入口工程，而本公司於2013年12月17日接收上述土地。根據以往所有短期租約租户，在未得路政署正式批出掘路紙建造合規格車輛出入口前，租户都會根據慣常做法，臨時開設了一車輛出入口方便車輛及工程車輛進出，以便進行場內工程，但是次路政署人員於12月18及19日竟派人以鐡欄圍封本場之臨時出入口，導致工程車輛無法進出，所有場內工程全部停頓，嚴重影響工程進度及延遲開業時間。此舉在過往所有短期租約從未發生，是次事件路政署行政失當，以雙重標準處理事件，而且特別針對本公司，請貴署解釋及回覆。」

39.  On 6 January 2014, the Highways Department replied as follows:

「 題述事宜及短期租約的車輛出入口，根據現有程序，貴公司必須提供擬建車輛出入口的設計資料，向大埔地政處申請，得到該處及有關部門批准後，才能動工建造車輛出入口，詳情請聯絡大埔地政處。」

40.  On 13 January 2014, the plaintiff replied in writing and insistedthat in all previous short term tenancies, applications concerning run-ins and run-outs were made to the Highways Department but not the District Lands Office.  The plaintiff repeated what it claimed was the practice in that regard.  

41.  On 25 January 2014, the plaintiff wrote to the Lands Department on inter alia the issue of metal railings erected by Highways Department at the Main Plot Entrance.  The letter was referred to the DLO/TP for reply, which he did on 31 March 2014.  It was stated that:

「 關於來信提及的場地車輛出入口被圍封一事，路政處亦於二〇一四年一月二十三日回覆，提醒貴公司須根據現有程序，並在租約指定的位置，提供擬建車輛出入口的設計，供本處及有關部門審核。在獲得批准後，才能動工建造。」

42.  According to Mr Wan, those railings remained there until the subsequent termination of the Tenancy.

43.  On 16 September 2014, the plaintiff gave 3 months’ notice to the DLO/TP that the plaintiff would surrender the Premises to the Government on 17 December 2014.  In that same letter, the defendant repeated a lot of the complaints it had previously made in respect of the Premises and the Tenancy Agreement.

C.   APPLICATIONS UNDER THE TENANCY AGREEMENT

44.  According to the terms of the Tenancy Agreement, and depending upon what the plaintiff intended to do with the Premises, specific applications would have to be made to a number of different governmental departments:

(a)   Construction of run-in and run-out:

Despite what Mr Wan has said in paragraph 15 of his witness statement (see paragraph 21 above), he accepted during cross-examination that the plaintiff had never sought approval from the DLO/TP for the construction of any run-in or run-out at the Main Plot Entrance (as was required by Special Conditions 9(a), 9(b), 35(a) and 35(b) if any were to be built). What the plaintiff had applied for was an excavation permit.  That application was made to the Highways Department via the XPMS.  The fact that the plaintiff had lodged no such applications was confirmed by Ms Lou.  She had checked the records of the DLO/TP.  According to those records, no application from the plaintiff for the construction of any run-in or run-out had been received by the DLO/TP, and no approval had been given by DLO/TP to the plaintiff for construction of the same.  Her evidence has not been challenged by the plaintiff.

(b)   Scheme of Security:

The plaintiff did submit one for the approval of the Police.  The amended version of the scheme was approved on 27 January 2014.  However, there is no evidence that the plaintiff had, as was required by the Police on 8 April 2014, submitted any updated scheme.

(c)   Traffic signs:

No application to the Commissioner of Transport for the erection of traffic signs had been made (which was required by Special Condition 13 if any traffic signs were to be erected).

(d)   Signs relating to the operation of fee-paying carpark:

No application to the DLO/TP had been made for the erection of such signs (which was required by Special Condition 14 if any were to be erected).

(e)   Removal of trees:

Whilst the plaintiff had complained on a number of occasions about the failure of the part of the defendant to either remove the trees on the Premises or to require GCL to do so upon termination of the Previous Agreement, the plaintiff had never applied under the terms of the Tenancy Agreement to remove the trees at its own expense.  Mr Wan’s evidence during cross-examination in this regards was as follows:

「 問： 喺呢幾封信入面，我咁樣講正唔正確，原告人係要求地政專員同埋要求地政總署去命令舊租戶移走樹木同埋加設圍欄，同埋平整土地，我咁樣形容呢幾封信正唔正確？

答： 正確。

問： 因為原告人公司就係覺得移走樹木、加設圍欄、平整土地，呢啲係政府嘅責任同埋舊租戶嘅責任，原告人公司係咁樣諗嘅，係咪？

答： 係。

問： 原告人公司係唔覺得係自己嘅責任去做呢啲嘢？

答： 係，冇錯，因為我哋之前同地政處交收嘅時候，個情況都係咁樣。

問： 係，原告人公司係唔覺得係原告人公司嘅責任，啱唔啱？

答： 係。

問： 所以，原告人公司就冇話過--話自己會自費做呢啲嘢，係咪？

答： 係。」

D.   THE CLAIM AND THE DEFENCE

D.1.   The plaintiff’s pleaded claim

45.  As I have introduced above, the plaintiff has in its Amended Statement of Claim pleaded two claims: the Fitness for Purpose Claim and the Derogation / Quiet Enjoyment Claim.

46.  In respect of the Fitness for Purpose Claim, the plaintiff’s pleaded case goes as follows:

(a)   The plaintiff pleads the First Schedule of the Tenancy and the permitted use of the Premises (§3 of the Amended Statement of Claim);

(b)   The plaintiff then pleads in §4 and §5 of the Amended Statement of Claim that:

“ 4. In a Tender Notice issued by the Lands Department prior to the signing of the Agreement between the Plaintiff and the Defendant, it stated that the Premises may be used for the purposes set out in paragraph 3 above.

5.   In the circumstances, the Defendant warranted and/or represented that the Premises, at the date when possession was given to the Plaintiff on 17^th December 2013 and on the date of the Agreement, would be suitable for use as a fee paying public car park or open storage.”

(c)   The plaintiff pleads Clauses 2(f), 2(h) and Special Condition 18of STT 1443 (§6 of the Amended Statement of Claim).  It thenpleads in paragraphs 8, 9, 11 and 12 of the Amended Statement of Claim that:

“ 8. By reason of the terms of STT 1443 and the warranty and/or representation pleaded at paragraph 4 [sic] hereinabove, at the date when possession was given to the Plaintiff on 17^th December 2013, the Premises would be suitable for use as a fee paying public car park, in particular:

(a) trees planted by GCL and hills and mounds formed by GCL on the Premises would be removed;

(b) the Premises would be properly fenced; and

(c) the Premises would be reinstated to the condition that they were before STT 1443 was granted by GCL.

9. In December 2013 prior to the handing over to the Plaintiff, the Premises was:

(a) overgrown with shrubs and trees;

(b) land had been formed with hills and mounds; and

(c) the Premises had not been fenced by GCL contrary to Special Condition 18 of STT 1443

thereby rendering the Premises unsuitable for passage and parking of vehicles and/or for use a [sic] public fee-paying car park.

…

11. Further, despite repeated requests and demands in writing by the Plaintiff to the District Lands Office before and after the handing over of the Premises on 17th December 2013 the Defendant, either on its own failed, and/or refused, and/or disallowed the Plaintiff, and or/cause to:

(a) remove trees and shrubs on the Premises;

(b) carry out site formation; and

(c) fencing the Premises,

until the termination of the Agreement on 17th December 2014, such that the Premises would be fit for the purposes stated in the Notice to Tender and/or the Agreement, in particular for the purpose of public fee-paying car park.

12.   By reason of the above, the Defendant had breached its warranty as to fitness / suitability of the user or purpose [sic] the Premises, thereby causing loss to the Plaintiff.”

47.  In respect of the Derogation / Quiet Enjoyment Claim:

(a)   The plaintiff pleads the covenant on quiet possession and enjoyment (§13 of the Amended Statement of Claim).  The plaintiff pleads further Special Condition 9(a) concerning the tenant’s right of ingress and egress (§14);

(b)   It then pleads in paragraphs 15 and 16 of its Amended Statement of Claim that:

“ 15. Upon possession of the Premises being given to the Plaintiff, the Defendant well know that the Plaintiff intended to use the Premises as a public fee-paying car park or open storage and vehicle entrance to the Premises [sic] for the via points of ingress and egress was necessary for construction and/or engineering works thereat. In breach of the covenant for possession and enjoyment of the Premises without any interruption from the Defendant, the Defendant on 18th December 2013, via the Highways Department, placed railings or barriers at Point XY and UV, as described on the plan to the Agreement, being the only ingress or egress points to the Premises. Such railing or barriers remained there until the termination of the Agreement on 17th December 2014.

16.   By reason of the forgoing, including matters pleaded in paragraph 11 hereinabove, the Defendant had derogated from itsgrant to the Plaintiff; and was in breach of the covenant for quietenjoyment referred to in paragraph 13; and Special Condition 9(a)of the Agreement; and the Plaintiff has suffered loss and damage …”

D.2.   The defendant’s pleaded defence

48.  The defendant’s case, as summarized by Mr Leung, counsel for the defendant, is as follows:

(a)   In respect of the Fitness for Purpose Claim:

(i)   the defendant did not make the alleged Warranty / Representation;

(ii)   the plaintiff is unable to prove that it intended to use the Premises as a fee-paying public carpark; and

(iii)   in any event, the plaintiff is unable to prove that the Premises were completely unsuitable for the relevant uses.

(b)   In respect of the Derogation / Quiet Enjoyment Claim:

(i)   in late 2013, the Highways Department received complaints on the damage of the railing in Fo Chung Road and therefore repaired the railings immediately;

(ii)   Special Condition 9(b) provided that the plaintiff should not exercise the right of ingress and egress at the designated points unless and until the run-in and run-out had been designed and constructed to the satisfaction of DLO/TP;

(iii)   no application for approval of the design and construction of the run-in and run-out had been received by DLO/TP from the plaintiff; nor had any approval ever been given by DLO/TP to the plaintiff; 

(iv)   in so far as the plaintiff seeking to rely on the part of its case on the Fitness of Purpose Claim to prove its Derogation / Quiet Enjoyment Claim, the defendant relies on the same defence as summarized above.

E.   THE LIST OF ISSUES

49.  On liability, the issues agreed between the parties are:

(a)   Issue #1—Whether the plaintiff intended to use the Premises as a fee-paying public carpark;

(b)   Issue #2—Whether or not there was a warranty/representation that the Premises would be suitable for use as a fee-paying public carpark;

(c)   Issue #3—If the answer to (b) above is yes, whether or not such warranty / representation was breached by the defendant;

(d)   Issue #4—Whether the defendant derogated from the grant or breached the covenant for quiet enjoyment by:

(i)   failing to require GCL to reinstate the Premises and remove the trees shrubs and saplings, or permit the plaintiff to do the same[2];

(ii)   placing railing or barriers at the Premises.

50.  Issues #1 to #3 relate to the Fitness of Purpose Claim, whereas Issue #4 relates to the Derogation / Quiet Enjoyment Claim.

F.   THE CREDIBILITY OF THE WITNESSES

51.  I deal first with the credibility of the witnesses.  As has been stated above, the plaintiff’s only witness is Mr Wan, who was the Managing Consultant of the plaintiff between about October 2013 and March 2014.  The defendant has called two, who were Mr Tsang, Land Executive of the Lands Department, and Ms Lou, an Estate Surveyor of the Lands Department. 

52.  The credibility of the witnesses was not in serious dispute, and their evidence not subject to serious challenge during cross-examination.  I have considered the evidence given by them.  The court has to decide thecredibility of each witness by assessing the inherent probabilities of his/her evidence and test them against the contemporaneous documents and prevailing circumstances.  I find all of them to be honest witnesses. 

53.  For the sake of completeness, I record the following matters:

(a)   In paragraph 45 of his statement, Mr Wan said as follows:

“ I verily believe as a result of the pressure imposed by the developers of Providence Bay, the Government failed and/or refused, and/or cause to remove trees and shrubs on the Premises,carry out site formation and fencing the Premises until termination of the Agreement such that it would be fit for the purposes stated in the Notice to Tender and/or the Agreement, in particular for the use as a car park. Further, the Government also deviated from the established practice of allowing a successful tenderer to start using the Premises as a fee-paying public carpark immediately after the commencement of tenancy while the approval of the Scheme of Security was pending.”

(b)   In addition to what was in paragraph 45 of his statement, when giving evidence in court, Mr Wan also mentioned some matters pertaining to certain so-called practices. In the course of Mr Leung’s closing submissions, Mr Pang SC, leading counsel for the plaintiff, made it clear that he would not be taking any point on trade practice or custom.  I therefore ignore those evidence.  I add also that in any event, the evidence before me fell far short of establishing any “established practice”;

(c)   In addition to the allegation of pressure from the developers of Providence Bay upon the Government, Mr Wan when giving evidence in court also made against the defendant some vague allegations of collusion.  None of those allegations have however been specifically canvassed and put to the witnesses called by the defendant.  In the course of his closing, Mr Pang acknowledged that those were nothing more than the plaintiff’s or the witness’s suspicion, and the plaintiff was not in any position to develop the suspicion further into any claim.  That being the case, and as I told Mr Pang during his closing, I will ignore those allegations.  There is no evidential basis for thoseallegations. The plaintiff’s suspicion is in any event irrelevant.   

G.   ISSUE #1—WHETHER THE PLAINTIFF INTENDED TO USE THE PREMISES AS FEE-PAYING PUBLIC CARPARK  

54.  This is the only factual issue that was in dispute.

55.  On behalf of the defendant Mr Leung submitted that the plaintiffhad failed to prove that it had the intention of using the Premises as fee-paying public carpark.  He pointed to the fact that when the plaintiff submitted the Tender Form, it checked the 2^ndbox in paragraph 3(b) thereof.  He also pointed to the fact that the plaintiff had not made some of those applications necessary for it to use the Premises as a fee-paying public carpark.  

56.  In this regard, and for the following reasons, I accept Mr Wan’s evidence that when the plaintiff submitted the Tender Form and executed the Tenancy Agreement, until about February 2014, it had the intention of using the Premises as a fee-paying public carpark. 

57.  On why the plaintiff decided to check the 2^nd box in paragraph 3(b) of the Tender Form, I accept Mr Wan’s explanation that:

「 其實嗰陣時我哋點解咁剔呢，因為呢一--呢一張嘢，要我哋簽呢張嘢，過往我做過咁多個tender都未見過有要簽啲咁嘅嘢嘅，所以我亦都覺得奇怪點解要剔呢樣嘢。我哋商討過、考慮過之後，我哋覺得--因為佢個條款嗰度都寫咗，之後我哋可以申請做呢個停車場㗎嘛，咁而我哋嗰刻，我哋覺得如果我哋剔咗呢樣嘢，我哋就會增加嗰個中標嘅機會，……」

Indeed, according to the wording of the 2^nd box, checking it did not mean that the tenderer could not subsequently change its mind and use the Premises as fee-paying public carpark.  It was just that if the tenderer did, it would have to submit and implement the Scheme of Security within the specified time frame.  Mr Wan’s explanation is consistent with that, and is not inherently improbably.  As things turned out, the plaintiff did on 22 November 2013 submit to the Police a proposed Scheme of Security.

58.  As to why the plaintiff did not apply to the DLO/TP for the construction of any run-in and run-out, Mr Wan explained that in the previous short-term tenancies he had handled, he made similar applications to the Highways Departments.  His explanation is consistent with what the plaintiff said in the several letters it issued to the Highways Department.  I accept that that was the reason why the plaintiff did not apply to the DLO/TP for the construction of any run-in and run-out.  The implication of the plaintiff not having done so in the present case in accordance with the Tenancy Agreement is a separate issue, and will be considered below.  But given Mr Wan’s explanation, I find that the plaintiff’s failure to do so does not suggest that it did not at that material time have any intention of operating a fee-paying public carpark at the Premises.

59.  As to the absence of any applications to erect traffic signs and signs relating to the operation of any fee-paying public carpark, Mr Wan explained that he saw no need to do so.  His views might or might not be correct.  But given his views, which I accept he held, the failure on the plaintiff’s part to make those related applications again does not suggest that the plaintiff at that material time had no intention of operating a fee-paying public carpark at the Premises.

60.  During cross-examination, Mr Wan said that the plaintiff no longer had any intention to operation a fee-paying public carpark by about February 2014.  That is consistent with the contents of the letter dated 20 March 2014 from the Police to the plaintiff.  The reason Mr Wan gave was that by then, the Tenancy Agreement had commenced for a while, and it was only for the short term of one year.

61.  However, despite my finding, I make no corresponding finding that the defendant knew of the plaintiff’s intention during the entirety of that same period.  The plaintiff did on 22 November 2013 submit to the Police a proposed Scheme of Security.  During the Pre-handover Meeting, objections were also made by Mr Wan to the effect that in his view, the Premises were not suitable for use as fee-paying public carpark or for open storage.  However, and relevantly, up to the important date of 20 November 2013 when STT 1564 was awarded to the plaintiff, there is no evidence which suggests that the defendant knew of that intention of the plaintiff.  The evidence in fact suggests otherwise.  The plaintiff was incorporated only on 8 October 2013, two days before it submitted the Tender Form.  It had no prior course of business.  Its name gave no clue that its intended business was the operation of a fee-paying public carpark.  Most importantly, in the Tender Form, it ticked the 2^ndbox under paragraph 3(b).  There was further no evidence of any other correspondence between the parties during that period which might suggest to the defendant that the plaintiff had that intention in mind.  

62.  Mr Leung submitted that if the plaintiff could not establish that it had any intention of operating a fee-paying public carpark at the Premises, the Fitness of Purpose Claim may on this ground alone be dismissed.  Given my finding on this issue, it will be necessary for this Court to proceed to consider the other issues.  This I now do.   

H.   ISSUE #2—WHETHER OR NOT THERE WAS A WARRANTY / REPRESENTATION THAT THE PREMISES WOULDBE SUITABLE FOR USE AS A FEE‑PAYING PUBLIC CARPARK

H.1.   The Issue refined

63.  The exact nature of the plaintiff’s case in this regard has first to be identified:

(a)   The plaintiff’s pleaded case has been set out above.  It is not its case the Tenancy Agreement contained any express and specific warranty or representation.  None has been pleaded.  Rather, it seeks to rely on the First Schedule of the Tenancy Agreement and the Tender Notice to contend that:

“ the defendant warranted and/or represented that the Premises, at the date when possession was given to the Plaintiff on 17 December 2013 and on the date of the Agreement, would be suitable for use as a fee paying public car park or open storage”;

(b)   Nor is the plaintiff seeking to rely upon any implied term.None has been pleaded.  In the course of his closing submissions, Mr Pang also made clear that he was not talking about implied term;

(c)   Nor is the plaintiff seeking to rely upon any representation or warranty extraneous to the Tenancy Agreement.  Mr Pang said this in paragraph 8 of his written opening, that:

“ The said purposes are permitted users under the Agreement and incorporated under Clause 1 of the Agreement. As such, these are warranties incorporated into the Agreement and not by the Defendant before the execution of the Agreement.”

Indeed, in the course of his closing, Mr Pang further made it clear that whilst the Amended Statement of Claim makes reference to STT1443, it is not the plaintiff’s case that any terms therein constituted any representation or warranty. Rather, the plaintiff is seeking to rely on STT 1443 and the terms it contained as part of the factual matrix against which the Tenancy Agreement should be construed;

(d)   The sole issue is therefore, as a matter of contractual interpretation, and applying the right approach, whether the defendant has made the alleged Warranty / Representation. In Mr Pang’s words in closing, the case is about “how the 1^st Schedule — the obligations to deliver the land is to be construed.”  So put, Mr Pang submitted, the plaintiff’s case is not inconsistent with Clause 4(p) of the Tenancy Agreement (which is in effect an “entire agreement clause”).

H.2.   The law on contractual interpretation

64.  I remind myself of the applicable legal principles, which I will apply.

65.  The principles were summarized in the famous speech of Lord Hoffmann in Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 WLR 896, at 912H – 913F, that:

“ (1) Interpretation is the ascertainment of the meaning which the document would convey to a reasonable person having all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract.

(2) The background was famously referred to by Lord Wilberforce as the ‘matrix of fact,’ but this phrase is, if anything, an understated description of what the background may include. Subject to the requirement that it should have been reasonably available to the parties and to the exception to be mentioned next,it includes absolutely anything which would have affected the way in which the language of the document would have been understood by a reasonable man.

(3) The law excludes from the admissible background the previous negotiations of the parties and their declarations of subjective intent.They are admissible only in an action for rectification. The law makes this distinction for reasons of practical policy and, in this respect only, legal interpretation differs from the way we would interpret utterances in ordinary life. The boundaries of this exception are in some respects unclear.But this is not the occasion on which to explore them.

(4) The meaning which a document (or any other utterance) would convey to a reasonable man is not the same thing as the meaning of its words. The meaning of words is a matter of dictionaries and grammars; the meaning of the document is what the parties using those words against the relevant background would reasonably have been understood to mean. The background may not merely enable the reasonable man to choose between the possible meanings of words which are ambiguous but even (as occasionally happens in ordinary life) to conclude that the parties must, for whatever reason, have used the wrong words or syntax: see Mannai Investments Co. Ltd.v.Eagle Star Life Assurance Co. Ltd. [1997] A.C. 749 .

(5) The ‘rule’ that words should be given their ‘natural and ordinary meaning’ reflects the common sense proposition that we do not easily accept that people have made linguistic mistakes, particularly in formal documents. On the other hand,if one would nevertheless conclude from the background that something must have gone wrong with the language, the law does not require judges to attribute to the parties an intention which they plainly could not have had. Lord Diplock made this point more vigorously when he said in Antaios Compania Naviera S.A. v. Salen Rederierna A.B. [1985] A.C. 191, 201:

‘if detailed semantic and syntactical analysis of words in a commercial contract is going to lead to a conclusion that flouts business commonsense, it must be made to yield to business commonsense.’”

66.  In Jumbo King Ltd v Faithful Properties Ltd (1999) 2 HKCFAR 279, at 296D–I, Lord Hoffmann NPJ explained further:

“ The construction of a document is not a game with words. It is an attempt to discover what a reasonable person would have understood the parties to mean. And this involves having regard, not merely to the individual words they have used, but to the agreement as a whole, the factual and legal background against which it was concluded and the practical objects which it was intended to achieve. Quite often this exercise will lead to the conclusion that although there is no reasonable doubt about what the parties meant, they have not expressed themselves very well. Their language may sometimes be careless and they may have said things which, if taken literally, mean something different from what they obviously intended. In ordinary life people often express themselves infelicitously without leaving any doubt about what they meant. Of course in serious utterances such as legal documents, in which people may be supposed to have chosen their words with care, one does not readily accept that they have used the wrong words. If the ordinary meaning of the words makes sense in relation to the rest of the document and the factual background, then the court will give effect to thatlanguage, even though the consequences may appear hard for oneside or the other. The court is not privy to the negotiation of theagreement—evidence of such negotiations is inadmissible—and has no way of knowing whether a clause which appears to have an onerous effect was a quid pro quo for some other concession. Or one of the parties may simply have made a bad bargain. The only escape from the language is an action for rectification, in which the previous negotiations can be examined. But the overriding objective in construction is to give effect to what a reasonable person rather than a pedantic lawyer would have understood the parties to mean. Therefore, if in spite of linguistic problems the meaning is clear, it is that meaning which must prevail.”

67.  In Fully Profit (Asia) Ltd v Secretary for Justice (2013) 16 HKCFAR 351, Ma CJ emphasized the importance of “context”.  His Lordship, after referring to Investors Compensation and Jombo King, explained at paragraph 15 that:

“ … 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 experiencetells 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.”

68.  Mr Pang, relying on the above view expressed by Ma CJ in Fully Profit, submitted in his closing that “context is of primary importance in construing a contract.”  Whilst that is so, it does not mean that the actual words used in the contracts can be ignored.  I do not understand Mr Pang as seeking to make any submission to that effect, and if he were, I reject the same.  In Yung Chi Keung v Protection of Wages on Insolvency Board (2016) 19 HKCFAR 469, the learned Chief Justice observed and explained at paragraph 22 that:

“ … This Court has on numerous occasions stated that statutory construction requires a purposive approach to be adopted; in other words, the words of a statute must be construed in the light of their purpose. Context of course also plays an important part. However, it must always be borne in mind that context and purpose are not to be seen in isolation. Just as it would be wrong to construe words in a statute without regard to context and purpose, it is equally impermissible to ignore the actual words used in a statute in order to construe its effect. In China Field Ltd v Appeal Tribunal (Buildings) (No 2), Lord Millett NPJ warned of the impermissibility of adopting an approach which would ‘distort or even ignore the plain meaning of the text and construe the statute in whatever manner achieves a result which they [the courts] consider desirable.’ While the plain or natural meaning of the relevant text may not always be clear cut (hence the obvious need to bear in mind as a starting point context and purpose) [citing Fully Profit], the actual words used cannot be ignored. The Court is after all an ‘interpreter not a legislator’.”

While Yung Chi Keung is a case on statutory interpretation and the learned Chief Justice’s observations were made in that context, in my view, the same rationale applies to contractual interpretation.  In the former context, the Court is an interpreter not a legislator; in the latter, the Court is an interpreter not a contracting party. 

69.  That the actual words used by the parties cannot be ignored is also reiterated by Lord Neuberger PSC in Arnold v Britton [2015] AC 1619, where he observed at paragraph 17 that:

“ … the reliance placed in some cases on commercial common sense and surrounding circumstances (e g in Chartbrook [2009] AC 1101, paras 16–26) should not be invoked to undervalue the importance of the language of the provision which is to be construed.The exercise of interpreting a provision involves identifying what the parties meant through the eyes of a reasonablereader, and, save perhaps in a very unusual case, that meaning ismost obviously to be gleaned from the language of the provision. Unlike commercial common sense and the surrounding circumstances, the parties have control over the language they use in a contract. And, again save perhaps in a very unusual case, the parties must have been specifically focusing on the issue covered by the provision when agreeing the wording of that provision.”

70.  It is also relevant to note that in Arnold v Britton, Lord Neuberger PSC explained that when interpreting a contract, only those facts which were known or reasonably available to both parties can be taken into account as part of the factual matrix:

“ The fifth point concerns the facts known to the parties. When interpreting a contractual provision, one can only take into account facts or circumstances which existed at the time that the contract was made, and which were known or reasonably available to both parties. Given that a contract is a bilateral, or synallagmatic, arrangement involving both parties, it cannot be right, when interpreting a contractual provision, to take into account a fact or circumstance known only to one of the parties.”

H.3.   The law on warranty as to fitness — “caveat lessee”

71.  The law has been authoritatively stated.  Where a piece of land is leased for a particular purpose, and if the lease is otherwise silent on the question of warranty, the law reads into the lease no warranty that the land is fit for that purpose.  In Southwark LBC v Mills [2001] 1 AC 1, Lord Hoffmann twice described that principle (which I will call “the caveat lessee principle” for ease of reference) as being “fundamental” (at 7H – 8B and 12C–D):

“ Neither tenancy agreement contains any warranty on the part of the landlord that the flat has sound insulation or is in any other way fit to live in. Nor does the law imply any such warranty. This is a fundamental principle of the English law of landlord and tenant. In Hart v Windsor (1843) 12 M&W 68, 87–88 Parke B said: ‘There is no contract, still less a condition, implied by law on the demise of real property only, that it is fit for the purpose for which it is let.’ And in Edler v Auerbach [1950] 1 KB 359, 374 Devlin J said:

‘It is the business of the tenant, if he does not protect himself by an express warranty, to satisfy himself that the premises are fit for the purpose for which he wants to use them,whether that fitness depends upon the state of their structure,the state of the law, or any other relevant circumstances.’

….

If one stands back from the technicalities of the law of landlord and tenant and construes the tenancy agreement in accordance with ordinary contractual principles, I think that one reaches the same conclusion.  In the grant of a tenancy it is fundamental to the common understanding of the parties, objectively determined,that the landlord gives no implied warranty as to the condition or fitness of the premises.  Caveat lessee.  It would be entirely inconsistent with this common understanding if the covenant forquiet enjoyment were interpreted to create liability for disturbanceor inconvenience or any other damage attributable to the condition of the premises.”

72.  The caveat lessee principle was applied by Chu J (as she then was) in Golden Sunrise Ltd v Lee Kwok Hung [2005] 1 HKC 466, where Her Ladyship observed at paragraph 37 that:

“ In the absence of express agreement, the common law does not imply into a lease a condition or term that the property is fit for the purpose for which it is let.Accordingly, a tenant takes the property subject to any defects existing at the time of the letting,and to any events that subsequently affect its value. Accordingly, even where the property has become useless to the tenant byreason of the landlord’s neglect of an obligation to repair, the rent continues to be payable: see Halsbury’s Laws of England (4th Ed Reissue) para 243.”

See also the judgment of B Chu J in Time Rich 08 Ltd v DBE (HK) Ltd HCA 566/2017 (unreported, 23 November 2017) at paragraphs 47 – 50.

73.  Mr Pang criticized the applicability of Southwark and Golden Sunrise to the present case on the basis of their different facts.  I accept Mr Leung’s submission in this regard.  The two cases were cited to me in support of the existence of the caveat lessee principle, but not how it was applied to the facts in those cases.  The differences in facts are therefore irrelevant.

74.  I also add this.  Mr Pang has not been able to place before me any authority in which a warranty or representation of the nature which the plaintiff is contending for has been, whether as a result of a process of contractual implication or interpretation, read by the Court into the tenancy.  In the course of Mr Pang’s closing, I enquired whether his team was able to find any case to that effect, even on different facts, and be the term of the tenancy short or long.  Mr Pang in his usual candour informed me that they were not.

75.  In the discussion above, I qualified the statement of principle by the words “if the lease is silent on the question of warranty”.  On the basis of freedom of contract, the landlord is of course at liberty to give the type of warranty / representation being contended for.  By the same logic, if the Court is satisfied, having carried out the process of contractual interpretation as discussed above, that the landlord has in fact given the warranty and/or representation, the caveat lessee principle will not prevent the Court from so concluding.  But that does not mean that the existence of the caveat lessee principle is not relevant when the Court is carrying out that process of contractual interpretation:

(a)   As Lord Hoffmann has explained in Jumbo King, the discoveryof what a reasonable person would have understood the parties to mean involves having regard to, amongst other matters, the “legal background against which [the contract] was concluded”. The existence of the caveat lessee principle forms part of this “legal background”;

(b)   In the context of implication of terms, the same concept applies.  As has been explained by Vos J (as he then was) in Spencer v Secretary of State for Defence [2012] 2 All ER (Comm) 480, at paragraph 73:

“ … There might be considerable argument about whether a particular fact should be regarded as being reasonably available to the reasonable third party observer, but in respect of the law (at least clear law) the position seems to me to be less difficult. A reasonable person cannot be assumed to be in ignorance of clear and well-known legal principles.”

(c)   The same approach was in fact and indeed adopted by Lord Hoffmann in Southwark—see the part of His Lordship’s speech at page 12C–D (cited above).

H.4.   The principle of non-derogation from grant

76.  Mr Pang submitted that in construing the Tenancy Agreement, it is also relevant to have regard to the principle of non-derogation from grant.  That principle forms also part of the legal background against which the Tenancy Agreement was concluded.  That being the case, it will be convenient for me to consider the principle here.

77.  In gist, the principle is that a grantor may not act so as to frustrate the purpose for which in the contemplation of both parties the grant was made — see Rank Profit Industries Ltd v Secretary for Justice [2009] 1 HKLRD 194, per Tang VP (as he then was) at paragraph 26.  In Kung Ming Tak Tong Co Ltd v Park Solid Enterprises Ltd (2008) 11 HKCFAR 403, Li CJ explained at paragraph 61 that:

“ The rule that a man may not derogate from his grant is a general principle of law. As noted above, it has been described as a maxim which merely encapsulates in a legal maxim a rule of common honesty. As Bowen LJ put it in Birmingham, Dudley &District Banking Co v Ross: ‘… a grantor having given a thing with one hand is not to take away the means of enjoying it with the other.’ This approach was endorsed by Lord Denning MR in Molton Builders Ltd v City of Westminster London Borough Council & Another, where he said:

  … if one man agrees to confer a particular benefit on another,he must not do anything which substantially deprives the otherof the enjoyment of that benefit: because that would be to take away with one hand what is given with the other.”

78.  In On Loong Investment Co Ltd v Incorporated Owners of Wah Luen Industrial Centre HCA 341/2014 (unreported, 8 January 2016), Au-Yeung J summarized the principle as follows:

“ 42. The non-derogation principle is that a grantor, having given a right with one hand, is not to take away the means of enjoying it with the other hand. It is based upon the presumed intention of the parties, and thus is closely connected with the obligation not to breach an implied term: Rank Profit Industries Ltd v Secretary for Justice [2009] 1 HKLRD 194, §§20 – 21 per Tang VP.

43.   It is the conveyancing equivalent of an implied term derived, in a broad sense, from the construction of the transaction into which the parties have entered: Canon Kabushiki Kaisha v Green Cartridge Co (Hong Kong) Ltd [1997] AC 728, at 736H – 737A (Privy Council, on appeal from Hong Kong), Lord Hoffmann.”

79.  The correct approach to adopt when applying the principle has been authoritatively explained by Li CJ in Kung Ming Tak Tong, at paragraph 63, that:

“ In Platt v London Underground Ltd, Neuberger J summarises the case-law and helpfully indicates how the non-derogation doctrine is to be applied:

3. [The exercise of determining the extent of the implied obligation not to derogate from grant] involves identifyingwhat obligations, if any, on the part of the grantor can fairlybe regarded as necessarily implicit having regard to the particular purpose of the transaction when considered in the light of the circumstances subsisting at the time the transaction was entered into: ….

…

6. When considering a claim based on derogation from grant,one has to take into account not only the terms of the lease,but also the surrounding circumstances at the date of the grant as known to the parties: ….

7.   One test which is often helpful to apply where the act complained of is the landlord’s act or omission on adjoiningland is whether the act or omission has caused the demised premises to become unfit or substantially less fit than the purpose for which they were let: …”

80.  In Rank Profit FAMV 8/2009, 25 June 2009, in refusing the plaintiff’s application for leave to appeal, Ribeiro PJ confirmed the decision of the Court of Appeal and held (at paragraph 15) that:

“ … the obligation said to be necessarily implicit has to be one which both parties must necessarily be taken to have accepted as part of the transaction.”

H.5.   The plaintiff’s submissions arising

81.  Relying upon Investors Compensation, Jumbo King and Fully Profit, Mr Pang invited me to construe the First Schedule and the defendant’s contractual obligations to deliver possession of the Premises to the plaintiff in context and against the full factual matrix.  The full factual matrix in his submissions included the Tenancy Agreement as a whole (not merely Special Conditions 19 and 20 and Clause 12 of the Tender Notice), the terms of the Tender Notice, the terms of STT 1443 (and in particular Clauses 2(f), 2(h) and Special Condition 18 of the same), the previous condition of the Premises, the short duration of the term of the Tenancy Agreement, the fact that the plaintiff as the incoming tenant had the obligation to re-instate if so required, and the time gap between the Tender Notice and the execution of the Tenancy Agreement.  Mr Pang further urged me to take into account the principle of non-derogation.  He submitted that the Tenancy Agreement (and the First Schedule specifically), properly construed, contained the alleged Warranty / Representation.

H.6.   The defendant’s submissions

82.  Mr Leung submitted that the Tenancy Agreement did not contain the alleged Warranty / Representation.  He relied on the actual wording of the First Schedule and the caveat lessee principle.  He argued that the plaintiff’s case is illogical: there being a number permitted uses (as set out in the First Schedule), was the defendant supposed to have warranted and represented that the Premises were fit for all of them? He also pointed to anumber of documents and events which he submitted positively contradicted the existence of the alleged Warranty / Representation.

H.7.   Discussion

83.  I have carefully considered and interpreted the Tenancy Agreement, the First Schedule, and the defendant’s obligations under the same to deliver possession of the Premises to the plaintiff.  I do so in the context of and against the factual matrix explained below. 

84.  I note the state of the Premises before GCL took possession of the same under STT 1443.  They were mostly barren.  It was GCL which transformed them into the state they were in when STT 1443 was terminated in 2013.

85.  Following from the above, if GCL were to be required to reinstate the Premises, they would have become barren again. 

86.  I have considered the terms of STT 1443.  I have considered in particular Clauses 2(f), 2(h) and Special Condition 18 thereof.

87.  The first point to note is that it was a lease between GCL and the Government.  The rights and obligations were only enforceable inter se.

88.  The second and equally important point is that those obligations on the part of GCL to reinstate, make good and repair under Clause 2(h) were subject to the express words of “if so required by the District Lands Officer”.  There was nothing in STT 1443 or otherwise which obliged the District Lands Officer to demand performance of those obligations.

89.  Having read STT 1443, the fictional reasonable person would see no basis to conclude that upon termination of STT 1443, the Premises would necessarily be reverted to their barren state, and/or that they would be fenced.

90.  That view of the fictional reasonable person will be further reinforced when he or she reads the terms of the Tender Notice and the Draft Tenancy Agreement, which I next come to.

91.  I have found that between the time the plaintiff submitted the Tender Form and about February 2014, the plaintiff did have the intention of using the Premises as a fee-paying public carpark.  However, I have also found, relevantly, that up to the important date of 20 November 2013 when STT 1564 was awarded to the plaintiff, there is no evidence which suggests that the defendant knew of that intention of the plaintiff.  It means that there is no evidence which suggests that when the defendant drafted the Tender Notice and the Draft Tenancy Agreement, they did do with knowledge of the relevant intention of the plaintiff.  I note that the terms of the Draft Tenancy Agreement were the same as those of the Tenancy Agreement.

92.  As a commercial entity with the intention of carrying out a business operation, the plaintiff would be expected to have studied carefully the terms of STT 1443, the Tender Notice, the Draft Tenancy Agreement and the First Schedule.  Indeed, Mr Wan confirmed that he had prior to the submission of the Tender Form studied its terms.  He had also inspected the Premises.

93.  The main body of the Tender Notice did not contain the alleged Warranty / Representation.

94.  The main body of the Draft Tenancy Agreement did not contain the alleged Warranty / Representation.

95.  The First Schedule did not contain the alleged Warranty / Representation in any express form.  The absence is conspicuous.  The plaintiff is in effect seeking to persuade the Court to, by a process of contractual interpretation, read into that Schedule extra words which it did not contain.  I note that even in respect of the permitted uses, the word used was “MAY”.

96.  The reasonable person cannot be assumed to be in ignorance ofclear and well-known legal principles.  The caveat lessee principle has been described by Lord Hoffmann in Southwark as “a fundamental principle”.  That was part of the legal background against which the Tenancy Agreement was concluded.  In this regard, it is useful to repeat what Lord Hoffmann has observed in Southwark (at p 12D), that:

“ In the grant of a tenancy it is fundamental to the common understanding of the parties, objectively determined, that the landlord gives no implied warranty as to the condition or fitness of the premises. Caveat lessee.”

97.  The Tender Notice and Draft Tenancy Agreement were not just silent on the existence of the alleged Warranty / Representation.  They contained terms which were in fact inconsistently with the existence of the same:

(a)   Clause 12 of the Tender Notice was in effect an “as is” clause.  I agree with Mr Leung’s submission that it undermines the plaintiff’s contention that the defendant was warranting the suitability of the Premises to be used for certain purposes;

(b)   Mr Pang relied on Clause 13(b) as apparent support for the interpretation that the GCL was obliged to deliver vacation possession of the Premises (in the sense as explained in Toho Ltd v Ng Sik Yu CACV 36/2004 (unreported, 29 October 2004).  But that clause would have to be read in conjunction with the “as is” clause in Clause 12, and other clauses in the Draft Tenancy Agreement (in particular Special Conditions 19 and 20 which I will come to).  Mr Pang contended that the terms of STT 1443 form part of the factual matrix.  On that basis, the reasonable person would understand that the obligation on the part of GCL to deliver vacant possession and effect reinstatement was in fact subject to the requirement of the DLO (as has been discussed above);

(c)   Special Condition 19 of the Draft Tenancy Agreement prohibited the removal of trees growing on the Premises.  Special Condition 20 obliged the successful tenderer to maintainall such trees at its own expenses growing on the Premises.  Those two conditions are inconsistent with any suggestion that GCL would necessarily be required to reinstate the Premises back to their original barren state.  Because if they were to be so required, there would have been no trees left on the Premises.  Equally, they are inconsistent with the existence of any warranty or representation that the Premises would be free from trees so that it would be immediately fit for use as fee-paying public carpark.  The reasonable person would see the inconsistencies between those two conditions and any construction that the defendant has given the alleged Warranty / Representation;

(d)   Special Condition 24 required the successful tenderer to fence Premises and to maintain the same.  I agree with Mr Leung that this condition contradicts the plaintiff’s contention that the defendant was warranting or representing that the Premises would, amongst other things, be properly fenced when handed over to the successful tenderer;

(e)   The reasonable person will see that all the above terms are inconsistent with the construction which the plaintiff is contending for.

98.  Mr Wan had read the Tender Notice and the Draft Tenancy Agreement before the plaintiff submitted the Tender Form.  He, and hence the plaintiff, had full knowledge of the terms. 

99.  Mr Pang referred to the time gap between the submission of the Tender Form and the execution of the Tenancy Agreement.  He submitted that unless GCL was required to reinstate, the plaintiff would not know with certainty what it would get when possession was delivered.  There was however nothing in either the Tender Notice or the Draft Tenancy Agreement which guaranteed that certainty.  Quite the contrary, the Tender Notice contained an “as is” clause (Clause 12).

100.  Mr Pang referred to the fact that the plaintiff itself would be subject to the obligation to reinstate.  I do not see how that assists the plaintiff.  In any event, that obligation was also subject to the same words of “if so required by the District Lands Officer”.

101.  Mr Pang relied on the short duration of STT 1564.  It should however be noted that whilst the initial term of the STT 1564 was for one year, commencing on 17 December 2013, it continued thereafter quarterly until such time as the Tenancy Agreement was terminated.

102.  Mr Pang relied on the principle of non-derogation as part of thelegal background against which the Tenancy Agreement should be construed.  In my view, the mere existence of that principle does not assist the plaintiff.  One will have to consider how it operates.  I have discussed that above.  The obligation said to be “necessarily implicit” has to be one which both parties must necessarily be taken to have accepted as part of the transaction.  But the Court is here at the stage of trying to decide, by a process of contractual interpretation, whether the defendant had given the alleged Warranty / Representation.  The Court cannot in the course of that process assume that the defendant must necessarily have accepted that those Premises should be fit for the purposes being contended for.  That would be circular.  In any event, as will be explained below, I find against the plaintiff on the issue of non-derogation of grant—see Section J.2 below.

103.  I have considered what had happened during the Pre-handover Meeting and during the formal handover.  I have also considered the contemporaneous correspondence between the parties.  I have set them out in details above.  I was not taking into account any declaration of subjectiveintents.  I was considering whether there is objectively any contemporaneousconduct on the defendant’s part which may be inconsistent with its case that it had not given the alleged Warranty / Representation.  I have seen none.

104.  I record that I have considered Mr Wan’s evidence (at paragraph 8 of his witness statement) that the plaintiff considered that the defendant has given the alleged Warranty / Representation.  That might have been what he believed.  But that belief of his was subjectively affected by what he said was his previous experience in operating fee-paying public carpark, and with no proper regard to the wording of the Tender Notice and the Tenancy Agreement.  His evidence is tantamount to a declaration of subjective intents, and should be excluded from the factual matrix.

105.  For the reasons given above, I am of the view that the Tenancy Agreement (in particular the First Schedule) would not convey to a reasonable person (having all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract) the meaning that it contained the alleged Warranty / Representation.

106.  I answer Issue #2 in the negative.

I.   ISSUE #3—IF THE ANSWER TO (B) ABOVE IS YES,WHETHER OR NOT SUCH WARRANTY / REPRESENTATION WAS BREACHED BYTHE DEFENDANT

107.  In the light of my decision above, Issue #3 is not engaged.  But for completeness sake, I consider this issue briefly as follows.

108.  It is important to recall what the plaintiff’s pleaded case exactly is, that “the Defendant warranted and/or represented that the Premises … would be suitable for use as a fee paying public car park or open storage” (§5, with emphasis added).  If the Premises were suitable for either use, the Alleged Warranty / Representation strictly speaking had not been breached, and the plaintiff’s pleaded case in this regard fails.

109.  I agree with Mr Leung’s submissions in closing that as shown by the photographs and the Tree Plan, but subject to the issues relating to the run-in and run-out issue which I will come to below, the Premises were at least suitable for use as landscaping area, open storage of tenant’s own goods, and plant nursery.

110.  Even in respect of use as fee-paying public carpark, the evidence of Ms Lou has to be noted.  I have summarized her evidence above.  She testified that the trees on the Premises were not planted densely together (“不是密密麻麻佈滿晒”).  She said that dependent upon the operator’s arrangement, that cars could be parked on the flatter areas.  When Mr Pang raised with her that there were “not much” (“無乜”) flat areas within the Premises for parking, she said that all operators were expected to carry out some basic work on the ground.  I accept her evidence.

111.  Hence, on the evidence, and if necessary, I would have held that there had been no breach of the alleged Warranty / representation.

J.   ISSUE #4—WHETHER THE DEFENDANT DEROGATED FROM THE GRANT OR BREACHED THE COVENANT FOR QUIET ENJOYMENT

J.1.   The law

112.  I have set out the law on the principle of non-derogation above.

113.  In respect of the covenant for quiet enjoyment, Lord Hoffmann explained in Southwark (at page 10E–F) that it is:

“ … a covenant that the tenant’s lawful possession of the land will not be substantially interfered with by the acts of the lessor or those lawfully claiming under him.For present purposes, two points about the covenant should be noticed. First, there must be a substantial interference with the tenant’s possession. This means his ability to use it in an ordinary lawful way. The covenant cannot be elevated into a warranty that the land is fit to be used for some special purpose …. On the other hand, it is a question of fact and degree whether the tenant’s ordinary use of the premises has been substantially interfered with. …

….

    There is however another feature of the covenant …. It is prospective in its nature ….  It is a covenant that the tenant’s lawful possession will not be interfered with by the landlord or anyone claiming under him.  The covenant does not apply to things done before the grant of the tenancy, even though they may have continuing consequences for the tenant. …”

114.  In AVC Property Development Co Ltd v Joyful Grace Trading Ltd HCA 529/2013 (unreported, 21 February 2014), Deputy Judge Marlene Ng, relying on Southwark and Halsbury’s Laws of Hong Kong Vol 17(1) (2007 Reissue) paragraph 235.353, observed at paragraph 101 that:

“ A covenant for quiet enjoyment is prospective in operation and does not apply to (a) things done before the grant of the tenancy even though they may have continuing consequences for the tenant or (b) interferences consequent upon the condition of the property before the grant of the tenancy.”

115.  In Rank Profit Tang VP (as he then was) cited at paragraph 21 with approval the following passage from Platt v London Underground Ltd [2001] 2 EGLR 121, at 122 that:

“ There is a close connection, indeed a very substantial degree of overlap, between the obligation not to derogate from grant, the covenant for quiet enjoyment and a normal implied term in a contract. Thus, in words that apply equally to an implied term in a contract, Bowen LJ said in Myers v Catterson (1889) 43 ChD 470 at p.481, in relation to the derogation from grant principle, that one should give effect to what he called ‘the obvious intention of the parties, so as to give the transaction between thema minimum of efficacy and value which upon any view of the case it must have been their common intention that it should have’. In Southwark London Borough Council v Mills [1999] 4 All ER 449 at p.467F, Lord Millett explained that, to a large extent, the covenant for quiet enjoyment, and the obligation of a landlord not to derogate from his grant amounted to much the same thing.”

J.2.   Issue #4(i)—whether breach by failing to require GCL to reinstate the Premises and remove the trees shrubs and saplings, or permit the plaintiff to do the same

116.  Two matters have to be considered separately, namely, whether the defendant has committed any breach of the principle of non-derogation by:

(a)   failing to require GCL to reinstate the Premises and remove the trees shrubs and saplings, or

(b)   failing to permit the plaintiff to do the same.

117.  In respect of the alleged failure on the part of the defendant to require GCL to reinstate the Premises and remove the tree shrubs and saplings:

(a)   In relation to the principle of non-derogation, the crux of the issue is whether the obligation said to be “necessarily implicit” (namely to require GCL to reinstate the Premises and remove the tree shrubs and saplings) was one which both the plaintiff and defendant must necessarily be taken to have accepted as part of the transaction;

(b)   I have carefully considered the terms of STT 1443, the Tender Notice and the Tenancy Agreement.  I have noted the absence of any express term to that effect.  I have further noted the presence of terms which is inconsistent with the contention that the defendant had accepted that obligation as part of the transaction;

(c)   I have carefully considered the full circumstances of the case.  I find that there is no contemporaneous documents or conduct on the part of the defendant which may suggest that the defendant had accepted that obligation as part of the transaction;

(d)   I find that the plaintiff has failed to establish that the defendant had accepted that obligation as part of the transaction.  The defendant had accepted no obligation to undertake those acts themselves, and had further accepted no obligation to require GCL to do so;

(e)   The plaintiff had sought to rely on some sort of vague practice or custom that the defendant would require the outgoing tenant to reinstate.  But as I have recorded above, Mr Pang in the course of Mr Leung’s closing made it clear that he (Mr Pang) would not be taking any point on trade practice or custom.  I therefore ignore those evidence;

(f)   For completeness, I record that for similar reasons, I find also that the defendant cannot be taken to have accepted the obligation to require GCL to fence the Premises;

(g)   As has been discussed above, “the covenant for quiet enjoyment, and the obligation of a landlord not to derogate from his grant amounted to much the same thing”.  For the same reasons, I find in this regard that there has been no breach of the covenant for quiet possession.

118.  In respect of the alleged failure on the part of the defendant to permit the plaintiff to do the same:

(a)   I have recited above the relevant evidence given by Mr Wan (see paragraph 44(e) above).  Whilst the plaintiff had complained on a number of occasions about the failure of the part of the defendant to either remove the trees on the Premises or to require GCL to do so upon termination of the Previous Agreement, the plaintiff had never applied under the terms of the Tenancy Agreement to remove the trees at its own expense;

(b)   On the evidence, the plaintiff has failed to establish its case that the defendant had failed to permit the plaintiff to remove the trees etc on the Premises;

(c)   For completeness, I record that there is no evidence that the defendant had wrongfully failed to permit the plaintiff to fence the Premises;

(d)   Given my findings above, plaintiff’s claim based on alleged “failure to permit” must fail.

119.  By reason of the above, I answer Issue #4(i) in the negative.

J.3.   Issue #4(ii)—whether the defendant derogated from the grant or breached the covenant for quiet enjoyment by placing railing or barriers at the Premises

120.  The combined effects of Special Conditions 9(a), 9(b), 35(a) and 35(b) are clear.  I will not repeat them in full here.  The plaintiff had no unlimited right of ingress or egress to or from the Premises via the Main Plot Entrance or Small Plot Entrance.  A run-in / run-out would have to be constructed first.  Despite what Mr Wan has said in paragraph 15 of his witness statement, he accepted during cross-examination that the plaintiff had never sought approval from the DLO/TP for the construction of any run-in or run-out at the Main Plot Entrance (as was required if any were to be built). What the plaintiff had previously applied for was an excavation permit.  That application was made to the Highways Department via the XPMS.  The fact that the plaintiff had lodged no such applications was confirmed by the records of the DLO/TP which Ms Lou has checked.

121.  I have recorded that the plaintiff had sought to rely on certain practice that a new tenant would, upon handover, be permitted to immediately gain vehicular access to the land, even before obtaining any approval to construct a run-in and run-out.  In the course of Mr Leung’s closing submissions, Mr Pang made it clear that he would not be taking any point on trade practice or custom.  I therefore ignore those evidence. 

122.  On the principle of non-derogation, I find that the defendant could not be taken to have accepted the obligation to allow the plaintiff to exercise any right of ingress or egress in breach of the Tenancy Agreement.  On the covenant for quiet possession, I accept Mr Leung’s submission that the same could not have been breached by the defendant by simply adhering to the express terms of the Tenancy Agreement.

123.  By reason of the above, I answer Issue #4(ii) also in the negative.

K.   QUANTUM

124.  Given my findings above, there is no need for me to consider the issue of quantum.  In all cases, the issue of quantum is directly linked to the nature and extent of breach(es) that the infringing party is found to have committed.  I do not want to consider quantum on any hypothetical basis.  It is particularly so in the present case where the plaintiff has raised a number of different causes of action on different bases.  I add only this, that there are a lot of merits in Mr Leung’s submissions to the following effects.  The evidence given by Mr Wan on the issue of quantum has three major problems: (1) why the plaintiff said the Premises could be demarcated into 1,000 car‑parking spaces; (2) the monthly rental of each car-parking space, and (3) the failure on its part to deal with the operating expenses.  I note that the plaintiff has called no expert evidence in those regards.  I see therefore some merits in Mr Leung’s submission, based on McGregor on Damages, 20^thed (2018), paragraph 10-001, that the plaintiff has failed to prove its loss, and that its claim may be dismissed on this basis alone.  There is however some evidence which suggests that the defendant might have suffered a small loss (in the sum of HK$10,600, being alleged expenses in engaging contractors for excavation works at the Premises).  The parties also did not address me on the possibility of nominal damages.  On that basis, and given my earlier conclusions, I decide to dismiss the plaintiff’s claim on its failure to establish those framed issues on liability.  I make no findings on the issue on quantum before what I have discussed in this paragraph. 

L.   CONCLUSION

125.  For the reasons set out above, I dismiss the plaintiff’s claim in its entirety.  I make a costs order nisi that the defendant shall have the costs of the action, to be taxed if not agreed.