SECAN LTD. v. ATTORNEY GENERAL

1994 M.P. No. 3322

H E A D N O T E

By an agreement in January 1988 between the Government and the Plaintiff a substantial development occurred at Ap Lei Chau, now called 'South Horizons'. A clause, loosely drafted, but intended to deal with environmental problems, says that the developer "... shall implement such ameliorative measures as deemed necessary by the Director of Environmental Protection". The developer was told in March 1989 to build a louvre tunnel to shield four residential blocks from traffic noise. This solution was later abandoned. In November 1992, the developer was told to build a large noise barrier. He had insulated the flats to an acceptable standard.

1994 M.P. No. 3322

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

MISCELLANEOUS PROCEEDINGS

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J U D G M E N T

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1. This is an oral judgment. In view of the urgency of this matter, I think it right to give judgment straight away so that the losing party may, if they wish, appeal at the earliest opportunity.

2. Ap Lei Chau had on it a disused Hong Kong Electric Co. power station and in the middle of the 1980s, it was decided that a substantial redevelopment could occur on that island. On the 28th January 1988, a Memorandum of Agreement was entered into between the Plaintiff company, which is a combination of various development organizations, and the Government to carry out substantial redevelopment at Ap Lei Chau. The Plaintiff company decided to construct approximately 9,800 residences in 34 tower blocks of up to 42 storeys together with roads, commercial areas, formation of school sites and other ancillary services. It is, on any view, a most substantial development. The residential areas are now called `South Horizons'. Many of the blocks are inhabited and provide luxury accommodation. A few blocks, four blocks in particular with which I am concerned, are as yet unoccupied. I have had the benefit of spending an afternoon last week being taken round the site and being shown various matters, for which I am grateful to the parties.

3. The matter that has arisen today is unusual and involves the court being brought in to overcome a problem facing the Plaintiffs insofar as it is going to be permitted to assign the flats. Briefly, what has happened is that the Government, as the landowner and the other party to the agreement whereby the Plaintiffs were entitled to develop this land, is insisting that the Plaintiffs will not be given a consent, so that it can assign the flats on the 4 particular blocks, unless they build a very large noise barrier. It is a very substantial construction of approximately 7 metres high, a cantilevered type, 140 metres long running down the side of Lee Nam Road and close to the 4 blocks. The Plaintiffs are somewhat aggrieved at this insistence, and have sought the court to declare that they are not bound to construct this barrier. There have been filed substantial voluminous affidavits containing a large amount of information and documentation running to many hundreds of pages which it is not necessary for me to go into in any detail, because it is clear that the issues between the parties can be somewhat distilled. What happened briefly was as follows.

4. At the time of entering into the Agreement, the parties agreed certain Special Conditions. The particular one of relevance today is Special Condition 12(a), which says:

"The Grantee (the Plaintiffs) shall within six months from the date of this Agreement submit to the Director (the DLO) for his approval proposals to mitigate any environmental problems, as identified and notified to the Grantee within two months from the date of this Agreement by the Director, which may directly affect the lot or neighbouring lots or premises and shall implement such ameliorative measures as deemed necessary by the Director of Environmental Protection."

5. Not only is this a grammatically imperfect clause, but both parties agree it is very loosely drafted and has really given rise to the problem today. On the 25th March, the Environmental Protection Department notified certain environmental problems affecting this site. The only one of importance is No. 6, which says:

"Traffic noise impact on the dwellings and schools in the proposed development.

Regarding Items 4, 5 and 6, Chapter 9 of the Hong Kong Planning Standards and Guidelines should be referred to in particular section 5 on Noise.

Please be reminded that you are required under the Clause to submit your proposals to mitigate the problem within six months from the date of the Agreement (within four months at the date of the letter). To avoid any last minute delays or complications, you are also strongly recommended to consult with this Department in drawing up the referenced proposals."

6. This, on any view, was a very general form of notification of what are said to be the environmental problems. The words "Traffic noise impact on dwellings" do not really mean much, there are no details given at all. However, I do not attach any significant importance to that, because the parties then entered into a form of discussion to try to solve the particular problem of traffic noise. The development was shown as having residential blocks alongside Lee Nam Road, which is a road leading down towards the sea and was carrying industrial traffic by virtue of the users there and was anticipated in the future to carry greater volumes of industrial traffic as industrial development was proposed. The Buildings and Lands and the Environmental Protection Departments sought to encourage the developers to move the blocks further away from the road. The developer said that it could provide weather strips and thicker glass for the windows facing the road. The problem of moving the blocks was that this was a development of a "single concept", it was developed according to what is called a concept plan, that is an overall plan, so that moving blocks would cause problems in other parts of the site, for example, the transport terminus which was an important factor would have to be moved, as indeed would the school site.

7. In February 1989, the EPD requested that the blocks be moved. Mr. Pannach a representative of Director of Building and Lands proposed a road cover. This was to be in the form of a concrete louvre tunnel. It is a complete cover over the road. That in itself, of course, would cause substantial problems insofar as narrowing of pavements and other physical problems associated with a tunnel, but the Environmental Protection Department apparently thought that that was an appropriate method of dealing with the noise and deemed it necessary on 16th March 1989. Environmental matters, of course, cover a wide spectrum, not only noise but visual matters and when this proposal got to the Highways Department, they described it as a "monstrous structure" and ACABAS which is a Government body dealing with bridges and structures described it as "hideous" and "unacceptable".

8. The Plaintiff all along had not wished to build this large monstrous structure and had sought to persuade the appropriate Department that the matter of noise can be overcome by insulation to the building. However, the Government Departments including EPD insisted that this must happen and the developer acquiesced in this and expended substantial time and money on preparing drawings and instructing engineers for this proposal. A meeting was held on the 11th November 1991, between various Government Departments and the Plaintiffs with regard to this road cover, and from the minute found at page 105:

"3.1 In view of the adverse effects of the structure or solution proposed, all representatives favour the double glazing and air-conditioning option to protect affected flats excepting EPD, who would only consider this as a last resort in exceptional circumstances."

9. It is clear, therefore, that other Government Departments were prepared to have a method of insulating the building rather than this monstrous structure which was abandoned and formally turned down by the Building Authority on the 3rd February 1992. It must be remembered that at this time the developer was constructing the development.

10. On the 17th November 1992, by a letter of that date, the Highways Department asked the consulting engineers of the Plaintiffs who had been working on this road tunnel to examine the feasibility of erecting a noise barrier along the road to replace the proposed road cover and enclosed some sketches showing a 7½ metres high barrier. This was some months after the decision to turn down the road cover. There was debate between the parties as to the number of heavy goods vehicles that would use the road and as to the proposed noise level calculation. The road barrier was then discussed between the parties, and it is quite clear that the Environmental Protection Department then required that this noise barrier be built.

11. In 1993, the blocks of flats were being constructed and the developers took a decision to insulate these particular flats so that the windows had up to the 10th floor 10mm glass and the higher floors 6mm glass. There was mechanical ventilation with air-conditioners.

12. The issue, therefore, can be simply stated. The developer says, "We have now implemented the noise measures because we have provided the flats with noise insulation. Not only the flats that would be protected by the barrier (which is the first four floors) but all of the floors, and we have overcome the problem which the visual intrusion of the substantial barrier would have on those living in or visiting this site". It is not the function of the court, of course, to step into the shoes of either party, but speaking for myself, I can well understand the developers of this high-quality residential development objecting to this physical barrier, which causes loss of view and loss of view between the blocks which I have examined myself. Noise barriers are only used in Hong Kong on very limited occasions. However, my personal view is really immaterial. My sole function is to construe as a matter of law this unusually worded Special Condition. The Attorney General, for whom Mr. McNamara appears, makes his submission on the basis that as the clause says "shall implement such ameliorative measures as deemed necessary" (which both parties accept means as decided by the Director of Environmental Protection) the Director of Environmental Protection call tell these developers exactly what to do, and if they do not do it, they do not obtain consent so that they can assign the flats.

13. The first matter which must be decided is what this Special Condition means. The principles of law are not in dispute I, in construing this commercial document, must do my best to place myself in the same factual background as the parties were at the time when they entered into the transaction, see the speech of Lord Wilberforce in Reardon Smith Line Ltd. v. Hansen Tangen & Ors. [1976] 1 WLR 989 at p. 995-6.

14. The scope of the work to be carried out, as an ameliorative measure, must be that which the reasonable businessman would have expected, having regard to the provisions of the Guidelines which were specifically drawn to his attention.

15. In my judgment, the construction of this clause does not permit the Director to insist on any works, or as Mr. Kat neatly submits, it does not give him "a blank cheque".

16. The surrounding circumstances at the time of this contract were that in Hong Kong, those who enforced the law, insofar as environmental matters were concerned and those who developed, all used a booklet, which is called Environmental Guidelines for Planning in Hong Kong. These are not inflexible, but they are of vital importance for any member of the public to know what he is entitled to do. Indeed, the letter of the 25th March specifically drew attention to these Guidelines, and so the developer on examining the problem which he had to solve was told that it was unacceptable to have residential development which is exposed to a level of more than 70 dB(A). The statistical basis of noise measurement is well known to me and I do not think it necessary in this judgment to explain it. The measurement is taken from a certain position and can be determined by an exercise carried out by examining the volume of traffic, the mix of heavy goods vehicles compared with ordinary vehicles and a prediction can be made as to what that noise level will be. In this case, although Mr. Kat sought to argue, not very strongly, that the Government was only entitled to look at matters in 1988, in my judgment, it is entitled to look at matters in accordance with the Guidelines which took the position up to 1996. Any developer, therefore, would have known that he must carry out noise protection measures for a traffic position arising in 1996, so that if other developments had occurred or traffic volumes were increasing, he must take steps accordingly.

17. There are various methods to reduce noise. One of these is to build noise barriers. These are generally constructed by either earth or solid fences. These, which are very common in Europe which has low rise development, can shield residential buildings from the noise caused by traffic. For example, if one drives on the continent or in England on motorways which are on embankment, or passing alongside residential development, one sees fences, generally about 5 or 6 feet high which extend either side of the motorway. Hong Kong, however, does not have low-rise buildings, unless one travels out to the New Territories. On Hong Kong Island, the number of low-rise buildings are very small and one only has to walk around South Horizons to be quite amazed at the very high and fairly dense blocks; this is a fairly standard form of residential development in Hong Kong. For example, driving through Mid-levels, one does not see any low rise blocks, because of the value and shortage of land, and so the Guidelines at para. 5.34 says on noise barriers these words:

"It is unlikely that they will have widespread application in Hong Kong where high-rise buildings have to be protected. However their use should be investigated in the following situations:

* Where low-rise buildings are to be protected

(which does not apply here)

* On urban flyovers and elevated roadways

(which does not apply here)

* In passive recreation areas where earth berms may be incorporated into landscaping works.

(which does not apply here)"

18. Any commercial developer, therefore, in March 1988 would have known that it was inappropriate to build a noise barrier for the development at Ap Lei Chau. The Environmental Protection Department, of course, are entitled to their point of view that this is what they wish to occur. It is clear from the correspondence that albeit that the developer did not want to do this, they were prepared to carry out this road cover. The position, however, as a matter of fact, as I find on the evidence before me, is that all of these blocks have now been built with acoustic treatment. An expert report has been filed on behalf of the Applicant, and much play in this case has been over the wording of these Guidelines. In my judgment, reading these Guidelines as one should do as in March 1988 by a reasonable commercial developer, he would know from para. 5.15 that the Guidelines "...... apply to buildings which use windows as their main source of ventilation." I confess I do not know any residential blocks which were built without opening windows, and on the evidence which I have heard, it may be that this is because of the fire regulations, but it is quite clear that a developer would know that he is entitled to provide for acoustic treatment for windows which open. Indeed Table 5.3 para. 5.28 says, "It is possible to insulate buildings from outside noise by using permanently closed windows." (In my judgment, this means windows which are kept permanently closed; this may necessitate air-conditioning, or mechanical ventilation.) "Generally, insulation is a feasible noise control measure only in new projects, such as hospital, high quality residential buildings where air-conditioning and sealed windows are planned from the outset. "In my judgment, this is a high quality residential development where these blocks have been deliberately designed to have sealed windows and air-conditioning. The Table shows the noise level reduction. It is suggested by Mr. Chan, on behalf of the Environmental Protection Department, that Table 5.3 only applies to windows which are kept permanently shut. In my judgment, this Table is for windows and I am fortified in this by the evidence which I have heard from the expert that for fixed and sealed single glazing a lowering of 20-25 dB(A) would occur. It must be remembered that the measurement of noise in decibels is on a logarithmic scale. In other words, a lowering of 10 decibels halves the noise level.

19. From the evidence which has been placed before me, the blocks of flats as built now fall within the Guidelines. The difficult question I have to answer, therefore, is as follows.

20. The ameliorative measures as deemed necessary by the Director of Environment Protection were first, the building of a road cover. Mr. Kat submits that once that decision is made, the Director is not allowed to change his mind. I have some sympathy for that submission, because it is understandable that the Director once he comes to a decision, really ought to be bound by it. Mr. Kat complains that it is no fault of the developer that this has been turned down and the Environmental Protection Department should have recognized from an early moment that what they were proposing was indeed a monstrous structure. Mr. McNamara submits that that was their decision, now they have made a different decision. In my judgment, what has to be considered here, as a matter of law, is whether or not the ameliorative measures which are decided upon as being necessary are, in the circumstances of the decision, unreasonable.

21. As at the date when the proposal was made for a noise barrier, that is in November 1992 when it was first proposed, the Plaintiff had spent substantial money and effort in seeking to satisfy the Director on this louvred cover. Time was passing, 1992 turned into 1993, and the developer made a conscious decision himself to carry out ameliorative treatment. In my judgment, on the facts which are laid before me, I am satisfied that the acoustic treatment which has been carried out by the developer does satisfy the standard set out in the Environmental Guidelines. It has considerable benefit in that the visual intrusion is no longer present. It provides additional protection for persons on higher floors than would otherwise be and also, albeit that the matter has not been analysed on a detailed basis, the road is a sloping road going down from South Horizons to the sea. The barrier is very long and runs at the grade of the road, whereas the blocks are built to the horizontal, so that the lower one goes down, the less effect the barrier has. Although, as I have said, there has not been explained to me any statistical basis for this, I merely refer to that as a matter of visual appreciation on a site visit.

22. Furthermore, the Plaintiffs have expended sums of money which have not been quantified, but I am satisfied that building to the standard they have done, they have now expended sums of money on insulating these flats to an acceptable standard, and the question they pose, is whether they should expend more money for this very long structure.

23. Mr. McNamara submits that the object of the barrier is to protect those who live there. It must be remembered that these are fairly luxury buildings, the Plaintiffs themselves know that they have to sell these buildings. The bulk of people who live in Hong Kong may not have air-conditioning and therefore must open their windows for ventilation. These have been deliberately designed to have mechanical ventilation so that the air-conditioning plant, on which I do have evidence, not only provides air-conditioning but has a fan operation if required.

24. In my judgment, therefore, the requirement by the Director to force the developer to build is unreasonable and I would grant a declaration of suitable wording to demonstrate that the court disapproves of the action he is seeking to take by preventing the developers from obtaining a consent so that they can assign these flats.

25. I have been referred to different standards in a 1990 revision published in 1991 of the Hong Kong Planning Standards and Guidelines. When they are examined they are all dealing with the position of what are called "openable windows". I do not agree that those who live within these flats will suffer the environmental disbenefit which the Environmental Protection Department assume that they will have. I have not referred to all of the many documents placed before the court and, as I have said, this is a matter of some urgency, because the Plaintiffs have waited some substantial time to have this matter resolved. They had been told as long ago as 1990 they have to build a concrete cover. Five years have now passed. In my judgment, they have acted responsibly and reasonably and the Government is now not entitled to insist that this large barrier be built. I therefore grant a declaration in appropriate words, but I shall listen to counsel further as to what declaration the court should make.