SONNIX LTD. v. KAIFULL INVESTMENTS LTD.

HCA 5793/1993

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 5793 OF 1993

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JUDGMENT

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1. This action is concerned with 2 primary issues surrounding the sale of certain land by the Defendant to the Plaintiff. The issues are:-

(a) is the Defendant entitled to challenge the "verification" of the net site area of the land (to be taken for calculation of plot ratio) performed by a surveyor appointed by the parties pursuant to the terms of an agreement?

(b) if the Defendant is entitled to do so, what is the net site area of the land to be taken for calculation of plot ratio under the Buildings Ordinance (Cap. 123) for a wholly commercial redevelopment of the land?

2. For the purposes of writing this Judgment, it would be more convenient to set out my decision on issue (b) first as it follows naturally from the factual introduction.

BACKGROUND FACTS

The Land

3. In June 1992, the Plaintiff ("the Purchaser") agreed to buy and the Defendant ("the Vendor") agreed to sell the land registered in the Land Office as Subsection 1 and the Remaining Portion of Section F, and Subsection 1 and the Remaining Portion of Section G, of Inland Lot No. 2769 ("the Land").

Sun Yuen Mansion

4. There was erected on the Land a building known as Sun Yuen Mansion, Nos. 171 & 173 Thomson Road and Nos. 205, 207, 209 & 211 Johnston Road (Johnston Road being a continuation of Thomson Road). This building was constructed in the 1960's.

5. The frontage of Sun Yuen Mansion was on Thomson and Johnston Roads, i.e. the building faced south. It was a composite commercial and residential building, and was tenanted at the time of the agreement.

The Strip of land

6. Sun Yuen Mansion did not occupy the entire area of the Land. There was a strip of land unbuilt upon, which ran along the entire northern and eastern sides of the Land ("the Strip").

7. The width of the Strip (i.e. the distance between Sun Yuen Mansion and the boundary of the Land) was 5 ft at the northern side and 10 ft at the eastern side.

8. Beyond the northern (but not the eastern) boundary of the Land, there was a further piece (also 5 ft wide) of unbuilt land belonging to Sections D and E and the Remaining Portion of Inland Lot No.2769 ("the Hennessy Road lots"). The buildings erected on the Hennessy Road lots have their frontages on Hennessy Road. Putting it simply, both Sun Yuen Mansion and the buildings on the Hennessy Road lots backed onto the unbuilt land (altogether 10 ft wide) between them.

9. To the west is a compound housing the Hennessy Road Government Primary School. The evidence was that in 1993-4, there was a small gate between the school and the 10 ft wide unbuilt land between Sun Yuen Mansion and the Hennessy Road buildings.

10. Exhibit "D-1" (a copy of which is to be kept with this Judgment) shows the situation clearly. This exhibit (which is agreed) comprises :

(i) an extract from Plan No. 3 annexed to a Deed of Partition made in 1933,

(ii) an extract from the approved building plans for Sun Yuen Mansion in 1965-6 and

(iii) a transparency to be superimposed over both extracts, which shows the situation of the Strip, with that part of it subject to a Right of Way coloured Yellow, and that part of it called the "Set Back" area coloured Green.

Area within the Strip subject to Right of Way

11. Part of the Strip is subject to a right of way. The Right of Way is along the entire length of the Strip, but stretching only 3 ft into the Land along the length of the northern boundary, and only 6 ft into the Land along the length of its eastern boundary.

12. The Right of Way was created in 1933 by a Deed of Partition made between owners of various sections of Inland Lot No. 2769. The Deed created mutual rights of way, with the owners of the Hennessy Road lots enjoying the Right of Way over part of the Strip, and the owners of the Land enjoying a right of way over part of the Hennessy Road lots.

13. It would appear from the plan annexed to the Deed of Partition that in 1933, the line of buildings standing on the Land extended up to, but not into, the area subject to the Right of Way. In other words, the entire Land was built upon, except for the area over which there is a Right of Way.

Area within the Strip set back (for lane widening)

14. In the 1960's, when Sun Yuen Mansion was constructed, the original building line was pushed further back from the boundary, by 2 ft along the northern side and by 4 ft along the eastern side.

15. In other words, when Sun Yuen Mansion was constructed,

2 areas of the Land were unbuilt upon:-

(a) the area subject to the Right of Way and

(b) the area of this "set back".

Area (b) has been referred to at times as the "set back" area and at times, as the "lane widening" area. For convenience only, I will refer to this area as the "Set Back" area.

No agreement to surrender or dedicate

16. These two areas (the area subject to the Right of Way and the Set Back area) form the Strip. There is no evidence of any agreement to surrender any part of the Land or to dedicate any part of it to the public. Although one of the witnesses called for the Purchaser, Mr Kenneth Lai, said he presumed there was an agreement to surrender, Mr Lai had not had sight of the building file and I find there was no evidence (actual or inferential) of any such agreement.

17. The reason for the Set Back may well be that when Sun Yuen Mansion was constructed as a partly domestic building, the area subject to the Right of Way and the Set Back area at its rear (totalling 5 ft wide) was required to be unbuilt upon, to comply with Reg. 25(2) of the Buildings Ordinance (1956 ed.) that "no part of any domestic building shall be erected within 5 feet of the rear boundary of the site."

Relevance of Net Site Area to Purchase Price

18. On 2 June 1992, the Purchaser agreed to buy and the Vendor agreed to sell the Land on terms set out in writing. Clause 8(e) of the document provided as follows :-

"The Vendor declares to the best of its knowledge and belief that the net site area of the Property to be taken for calculation of plot ratio for wholly commercial redevelopment purposes under the Buildings Ordinance (Cap. 123) is 3,957 square feet. In the event that the aforesaid net site area of the Property as verified shall be more or less than 3,957 square feet, the Purchase Price of the Property shall be increased or decreased accordingly at the rate of $36,644.00 per square foot and any adjustment as to payment of the Purchase Price ... shall be made on the balance of the Purchase Price payable on completion. In the event that the Vendor and the Purchaser cannot agree on the aforesaid net site area of the Property, a surveyor will be appointed by agreement between the Vendor and the Purchaser or failing such agreement by the Chairman of the Royal Institution of Chartered Surveyors (Hong Kong Branch) on application by either party to the said Chairman, who will verify the net site area of the Property aforesaid and the costs of appointment of such surveyor shall be borne by the parties in equal shares".

Purchaser's submission of plans to the Building Authority

19. On 19 June 1992, Paliburg Development Consultants Ltd. ("PDC"), the Purchaser's Authorised Person, submitted plans to the Building Authority for the redevelopment of the Land for a proposed commercial/office building.

20. In a letter to the Building Authority dated 22 June 1992, PDC set out its calculations, deducting from the area of the Land the area subject to the Right of Way only.

21. As for the Set Back area, PDC submitted that the existing composite building (Sun Yuen Mansion) had been set back for lane widening so as to provide a service lane in accordance with Building (Planning) Reg. 28. However, since there was no requirement for a service lane for the proposed non-domestic building, no deduction of the Set Back area was made. The net site area so calculated was therefore 372.772 sq. m. (4,012.484 sq. ft). PDC confirmed however that the building line for the proposed non-domestic building would still be set back by the existing dimensions so as to maintain the existing lane pattern.

Building Authority's position on Site Area

22. On 23 July 1992, the Building Authority replied to PDC saying that the "existing lane areas should be excluded from site area under Building (Planning) Reg. 23(2)(a) for the purposes of site coverage and plot ratio calculation". The Building Authority "confirmed" that the area subject to the Right of Way and the existing Set Back area were existing lanes and were to be deducted from site area for redevelopment.

23. PDC did not challenge the Building Authority's statement. Plans were approved by the Building Authority on 18 August 1992 on the basis that the site area of the Land, after deducting the area subject to the Right of Way and the Set Back area, was 3,731.812 sq. ft., i.e. less than the contractual figure.

Agreement for stakeholding pending verification of Net Site Area

24. Meanwhile, the Vendor had procured an architect's opinion to the opposite effect - i.e. that both the area subject to the Right of Way and the Set Back area should be included in the site area.

25. On 21 August 1992, the parties entered into a Supplemental Agreement contemporaneously with the Assignment of the Land. The Supplement Agreement recited that the Purchaser had assessed the net site area at 3,731.815 sq. ft, that the Vendor did not agree to such assessment, and that the "parties are unable yet to verify the net site area of the Property in manner described in Clause 8(e) ... and the parties are in the course of verifying the same".

26. The parties agreed that of the purchase price, a sum of HK$8,252,000 (approximately [3,957 sf - 3,731.815 sf] x $36,644) would be paid by the Purchaser to stakeholders. Meanwhile, the parties would continue to procure the net site area of the Land to be verified.

27. The parties agreed that as soon as the net site area of the Land shall have been verified in manner set out in Clause 8(e), the amount stakeheld with accrued interest would be disposed of, in that :

(i) if the verified net site area was equal to or more than 3,957 sq. ft, the sum stakeheld would be paid out to the Vendor, and the Purchaser would further pay the Vendor for the excess area at $36,644 per sq. ft; and

(ii) if the verified net site area was less than 3,957 sq. ft, there would be paid out to the Purchaser a sum equal to the shortfall at the same rate of $36,644 per sq. ft, with further payment to be made by the Vendor in case the stakeheld sum should be insufficient.

Appointment of Surveyor

28. The parties having been unable to resolve their differences, the Purchaser applied in October 1992 to the Chairman of the Royal Institution of Chartered Surveyors for the appointment of a surveyor under Clause 8(e).

Terms of Remit

29. Mr Michael Mann, then of Vigers Hong Kong Ltd, was appointed. After consulting both parties, he set out his terms of reference as follows:-

"i) We are appointed in accordance with clause 8(e) of the Memorandum of Agreement.

ii) We will verify the net site area of the Property to be taken for calculation of plot ratio for wholly commercial redevelopment purposes under the Buildings Ordinance (Cap. 123) [emphasis added]

iii) We will take into consideration relevant information supplied by [the Purchaser and the Vendor] as well as hold discussions with the Building Authority.

iv) We will arrange for a specialist Land Surveyor to undertake actual physical on-site measurements as directed by us.

v) We will then prepare a report with our findings and recommendations, together with our net site area calculations and this report will be given to both parties".

There were further terms which related only to fees and which are not relevant to this action.

The Report

30. On 23 March 1993, he presented a report to the parties. Paragraph 5.14 stated :-

"We believe that as stated by the Building Authority and also as stated in the Building (Planning) Regulations, Section [sic] 23(2)(a) that the service lane at the rear is an established service lane and should therefore be excluded from site area calculations".

Under "analysis of information", he stated :-

"6.1 We have consulted with the Buildings Ordinance Office who had stated quite categorically that established service lanes are not to be included for site area calculations as stated under Regulation 23(2)(a).

6.2 In the case of Sun Yuen Mansion, the service lane is an established lane.

6.3 Consequently, the area of the lane cannot be included in the net site area, not even that part given over for Lane Widening within the original Lot boundary."

31. On-site measurements were taken by Sam Mak & Associates, land surveyors appointed by Mr Mann. The area subject to the Right of Way was 434.43 sq. ft. and the Set Back area was 279 sq.ft.. Deducting both these areas from the site area, the land surveyors computed that the net area of the site was 3,742.64 sq. ft. (It would be noted that arithmetically, the above 3 figures add up to 4,456.07 sq ft. This is 8 sq ft more than the 4,448.07 sq ft which is said in paragraph 6.9 of the Report to be the total area within the boundary of the Land).

32. Mr Mann's conclusions were as follows :-

"7.1 It is quite clear that the service lane at the side and rear of Sun Yuen Mansion is an established service lane.

7.2 Consequently under Section [sic] 23(2)(a) of the Building (Planning) Regulation (CAP. 123) it states that no account shall be taken of any service lane in determining the area of the site on which a building is erected.

7.3 We believe that the area of the service lane should be excluded for site area calculations for Sun Yuen Mansion redevelopment.

7.4 Therefore, we would conclude that the net site area of [the Land] to be taken for calculation of plot ratio for wholly commercial development purposes under the Buildings Ordinance (CAP. 123) is 347.7 sq. m. [3,742.64 sq. ft]."

THE ACTION

33. On the basis of this report, the Purchaser commenced the present action for payment of part of the stakeheld sum, viz. $7,855,008 (i.e. [3,957 sf - 3,742.64 sf] x $36,644).

34. In its Defence and Counterclaim, the Vendor has challenged the correctness of Mr Mann's `verification' of the net site area, contending that on the correct interpretation of the Building (Planning) Regulations and as explained in the judgment of the Privy Council in Hinge Well Co Ltd v Attorney General [1988] 1 HKLR 32, the Set Back area ought not be deducted from the site area for the calculation of plot ratio. The Vendor accepts that the area subject to the Right of Way has to be deducted from the site area for calculation of plot ratio.

35. On this basis, the net site area for a wholly commercial redevelopment was 4,021.64 sq. ft (which is derived by adding the Set Back area of 279 sq. ft to 3,742.64 sq. ft as the net site area computed by the land surveyors). Consequently, in addition to the stakeheld money, the Vendor has counterclaimed for $2,368,668.16 ([4,021.64 sf - 3,957 sq ft] x $36,644).

Determination of site area for calculation of plot ratio

36. It would be more convenient for me now to first set out my decision on the issue of the site area, assuming that the Vendor is entitled to challenge the surveyor's report.

37. The issue between the parties is whether in the determination of the site area for calculation of plot ratio under the Buildings Ordinance Cap. 123 for the wholly commercial redevelopment of the land (under Clause 8(e) of the Agreement and the Terms of Remit to Mr Mann), the Set Back area must be excluded as part of a "service lane".

References to "established" service lane or "existing" service lane

38. Before examining the legislation, I would first deal with the references in the evidence to the terms "established" service lanes and "existing" service lanes.

39. Neither the term "established" service lanes nor "existing" service lanes can be found in the Buildings Ordinance or in any of the Regulations to which I have been referred.

40. However, Mr Mann's report referred in a number of places to the "service lane" here being an "established" service lane. In his conclusions, he stated "the service lane at the side and rear of Sun Yuen Mansion is an established service lane. Consequently under Section [sic] 23(2)(a) of the Building (Planning) Regulation (CAP. 123) it states that no account shall be taken of any service lane" [emphasis added].

41. It is nevertheless clear from Mr Mann's evidence that he did not use the term "established service lane" as a term of art. In his evidence, he accepted that he had simply "picked up" the term from the Building Authority to describe lanes known to be in use. Although he described them as "legal" service lanes, he did not say that an "established" service lane had any special status under the law different from other service lanes.

42. The evidence of Mr Lai, formerly Chief Building Surveyor in the Buildings Ordinance Office, was that the Building Authority simply used the expression "established" service lane to describe a lane which was in use.

43. As for the term "existing" service lane, this appeared in the Building Authority's letter to PDC in which the Building Authority set out its position that the Set Back area should be deducted from the site area. Mr Lai said in evidence that there was a subtle difference between "existing" service lane and "established" service lane, but he did not satisfactorily explain any difference between these two terms or their use.

44. In any event, whatever nomenclature may have been used by the Building Authority and whatever practices may have been adopted, the question whether the Set Back area should be included or excluded from the site area for calculation of plot ratio as part of a "service lane" must be answered only on the proper interpretation of the Buildings Ordinance and its subsidiary legislation. I find therefore that nothing is added to the present debate by references to an "established service lane" or an "existing service lane", or by evidence as to practices adopted.

Building (Planning) Regulations

45. The concept of a "service lane" is found in the Building (Planning) Regulations. Part III of these Regulations establishes standards for site coverage, plot ratio, height of storeys, open spaces and lanes.

46. These regulations may be grouped into 3 separate categories: (i) Regs. 19-23, which contain provisions concerning site coverage and plot ratio; (ii) Reg. 24, which contains provisions concerning the height of storeys; and (iii) Regs. 25-28, which contain provisions concerning space around a building, and requirements for a service lane.

Regulation 28

47. Regulation 28 provides :-

"(1) In addition to any open space required under Regulation 25, every domestic building shall be provided with a service lane at the rear or side of such building :

Provided that a service lane shall not be required -

(a) where a public lane not less than 3m wide or a street already exists;

...."

Regulation 28 does not apply to non-domestic development

48. It is clear that this Regulation applies to domestic buildings only. There is no requirement under this regulation for a service lane to be provided for a wholly non-domestic building. It has not been suggested by Mr Patrick Fung SC, counsel for the Purchaser, that there is any other regulation in the Buildings Ordinance or its subsidiary legislation requiring that a service lane be provided for a wholly non-domestic building.

49. Accordingly, Reg. 28 does not apply to, and no service lane is required under the Buildings Ordinance for, the wholly commercial redevelopment of the Land contemplated under Clause 8(e).

50. It cannot be suggested that this Regulation requires private land to be used to provide a service lane for domestic buildings on other lots, even though the building on the land itself does not require a service lane. Much clearer language would have to be used if it is to be suggested that somehow under this Regulation, private land is made subject to a "public easement" where there is no private easement. In the present case, for instance, only part of the "service lane" is subject to the Right of Way. That part of the "service lane" which has been called the Set Back area is not subject to any right of way.

51. In Hingewell v Attorney General, Lord Oliver delivering the judgment of the Judicial Committee of the Privy Council held (p.42):-

"It is implicit in the regulation [Regulation 28] that the purpose of the service lane is solely that of serving the domestic building which is the reason for its existence. Once there ceases to be a building on the land capable of being served, it is difficult to see how the area formerly dedicated to the purpose of serving it can realistically be treated as a "service" lane nor why the mere fact that there are adjoining properties which may enjoy rights of passage over the area from the service lanes forming parts of those properties should preserve its character as a "service lane" in relation to the property of which it forms part." [emphasis added]

52. In my judgment, since Reg. 28 does not apply to the wholly commercial redevelopment of the Land contemplated under Clause 8(e) and a service lane would consequently not be required, the Strip would no longer be a service lane within the meaning of Reg. 28 when Sun Yuen Mansion is demolished for the redevelopment of the Land.

Regulation 23(2)(a)

53. The next question then is whether, in determining the site area for calculation of plot ratio for the wholly commercial redevelopment of the Land, the Set Back area must still be deducted as part of a "service lane", notwithstanding the fact that a service lane is not required for that redevelopment.

54. The Purchaser's case for deduction is based on Reg. 23(2) which provides :-

"In determining for the purposes of regulation 20, 21 or 22 the area of the site on which a building is erected -

(a) no account shall be taken of any part of any street or service lane; and

(b) there shall be included any area dedicated to the public for the purposes of passage".

55. It was not part of the Purchaser's case that the Strip formed a "street" in Reg. 23(2)(a) or that Reg.23(2)(b) is applicable in any way. Its case is that the Strip was an "established service lane", and even though a service lane would not be required for the redevelopment, Reg. 23(2)(a) still applies to deduct the "service lane" area from the site area. In my judgment, that view is incorrect.

Reg. 23(2)(a) to be interpreted and applied in context of Reg. 28

56. As with all legislation, Reg. 23(2)(a) should not be interpreted and applied in a vacuum. It should be interpreted and applied in the context of Reg. 28 because it is Reg. 28 which sets out the circumstances calling for the provision of a service lane.

57. Once it is understood that under Reg. 28, a service lane serves only the domestic building for which it is provided, it is clear that the land used for the lane has to be a service lane only for as long as that building exists. The land is only required to be used as a service lane as an appendage to that building - required only because that building is a domestic building.

58. It must logically follow that if the domestic building is demolished, the land previously used as its service lane would be freed from that function, and Reg. 23(2)(a) would not apply to that land. I see nothing in Reg. 28 or Reg. 23(2) that stipulates that once land had been used as a service lane for a building, that land would be burdened with that character permanently, even after that domestic building which it served has been demolished and even if the building to be put up is a non-domestic building.

59. Thus, the reference to a service lane in Reg. 23(2)(a) presupposes that there is a domestic building there which it serves. The Regulation itself refers to a site "on which a building is erected".

60. Hence, if there is currently erected on the site a domestic building, so that a service lane is provided as required under Reg. 28, then in determining the site area for calculation of plot ratio on the basis of the site's present use, the area of the service lane should not be taken into account. In the light of Reg. 28, Reg. 23(2)(a) is clearly understood to mean the following:- "in determining ... the area of the site on which a building is erected - no account shall be taken of any part of any ... service lane [which is provided for that building]".

61. Similarly, if one is determining the site area for an intended domestic development, so that a service lane would be required, then the area of the intended service lane should be deducted in determining the site area for plot ratio on the basis of the site's intended use (Hingewell v Attorney General, pp. 42J - 43B). Thus, Reg. 23(2)(a) applied in these circumstances would be understood to mean the following:- "in determining ... the area of the site on which a building is to be erected - no account shall be taken of any part of any ... service lane [which is to be provided for that building]".

62. What is not justified, in my view, is to apply the present provision of a service lane (which is required only because there is now a domestic building on the site) to the determination of the site area for calculation of plot ratio for a commercial redevelopment in the future, when there would ex hypothesi be no domestic building erected on the site, and thus no requirement for a service lane appendage.

63. It is inherently inconsistent to apply a present requirement to a future situation which does not call for that requirement, as if the regulation read as follows:- "in determining ... the area of the site on which a [future non-domestic] building is to be erected - no account shall be taken of any part of any ... service lane [which had been provided for a previous domestic building]". That is not the language of the Regulation, and such an interpretation is unjustifiable. It is a well-established canon of interpretation that all parts of a piece of legislation should be interpreted self-consistently. This includes self-consistency in time.

64. In my judgment, therefore, in determining the site area for calculation of plot ratio for wholly commercial redevelopment purposes under the Buildings Ordinance (under Clause 8(e) of the Agreement and the Terms of Remit to Mr Mann), the Set Back area should have been included, even though it was currently part of a "service lane" for Sun Yuen Mansion. It is perhaps ironic that this was in fact the first position that PDC took when it submitted plans in 1992.

65. As a matter of completeness, I should note here that the Purchaser, through its expert Mr Lai, placed some reliance on the Building Authority's internal Practice Note No. 40 as support for his opinion - for which Mr Chang S.C. has coined the phrase "once a service lane, always a service lane". I do not see how that Note advances the Purchaser's case, but insofar as the Purchaser suggests that this is the authority for the Building Authority's position that the Set Back area also had to be excluded even though the Land was to be redeveloped for wholly commercial purposes, then I have to say that that position is not consistent with the true interpretation of Reg. 28 and Reg.23(2)(a) as set out above.

Surveyor's verification open to challenge

66. It follows that, in my judgment, Mr Mann's "verification" of the site area was incorrect as he had deducted the Set Back area. However the issue is whether the Defendant is entitled to challenge Mr Mann's "verification". I find, for the reasons following, that Mr Mann's "verification" is open to review by the court.

67. Jones v Sherwood Computer Services plc [1992] 1 WLR 277 is the source authority for the principles to be applied in a court's consideration of such an issue. It was held that the first step was to see what the parties have agreed to remit to the expert, this being a matter of contract. The next step was to see what the nature of the mistake was, if there is evidence to show that mistake. In the light of those factors, the court then sees whether the mistake made was such that the expert had not done what he was appointed to do (p.287 A-C).

Terms and character of remit

68. In the present case, the agreed terms of Mr Mann's remit was to "verify" the net site area for calculation of plot ratio under the Ordinance for a wholly commercial redevelopment of the Land.

69. In my judgment, the parties' choice of the word "verify" shows that they contemplated that the result was capable of ascertainment in an absolute, objective way. This may be distinguished from cases where the agreed terms of remit were e.g. for the expert to give his "opinion" as to a "fair value", where some subjectivity may be inevitable and which would not be capable of review by the court. Mr Mann was therefore required by the terms of the remit to find out what the true net site area was under the Ordinance. That meant that he had not only to take proper measurements, but also to interpret the legislation correctly.

70. It cannot be said that to "verify" meant simply to ascertain the Building Authority's position on the matter. At the time when Mr Mann was appointed, the Building Authority's position had already been made known in its letter to PDC dated 23 July 1992 so, obviously, the parties did not regard the Building Authority's view (which could be challenged) to be the last word.

71. As to the character of the remit, there were no actual or implied terms in the remit that Mr Mann's report was to be conclusive, final or binding, whatever the result.

72. Thus I find that what the parties had agreed to remit to the surveyor was the "verification" or ascertainment of the true net site area, which contemplated actual measurements and a correct interpretation of the relevant legislation.

Evidence and nature of mistake

73. The next step is for the Court to see what is the nature of the mistake, if there is evidence to show that. In a "speaking" certificate such as Mr Mann's report, the evidence of the mistake arises, in the first instance, from the report itself. It is clear from the conclusion section of Mr Mann's report (repeated below) that he had erroneously extended the present requirement for a service lane for Sun Yuen Mansion (a partly domestic building) to the future redevelopment of the Land for a wholly commercial building, which does not require the provision of a service lane . The conclusion section of his report reads:-

"7.1 It is quite clear that the service lane at the side and rear of Sun Yuen Mansion is an established service lane.

7.2 Consequently under Section [sic] 23(2)(a) of the Building (Planning) Regulation (CAP. 123) it states that no account shall be taken of any service lane in determining the area of the site on which a building is erected.

7.3 We believe that the area of the service lane should be excluded for site area calculations for Sun Yuen Mansion redevelopment.

7.4 Therefore, we would conclude that the net site area of [the Land] to be taken for calculation of plot ratio for wholly commercial development purposes under the Buildings Ordinance (CAP. 123) is 347.7 sq. m. [3,742.64 sq. ft]."

74. In the light of my judgment on the interpretation of Reg. 28 and Reg. 23(2)(a), that conclusion has been reached in error. Where an expert has been instructed to "verify" or ascertain the truth of a matter in a process which raises a question of interpretation, and he misinterprets the legislation and makes a determination on the basis of an incorrect interpretation, he is not dealing with the question as intended by the parties and his decision is open to review by the courts (cf Mercury Communications Ltd v Director General of Telecommunications [1996] 1 WLR 48, 58G - 59A).

75. In making a determination on the basis of an incorrect interpretation, the surveyor here has departed from the parties' instructions to "verify" the net site area in a material respect. His error was clearly material because it substantially affected the ultimate result (reflected by the value of the 279 sq ft deducted for the Set Back area).

76. In my view, therefore, this was an error which is open to review by the Court. Given that the parties are agreed as to the arithmetic, it is not necessary for this court to send the matter back for recalculation.

Order

77. Accordingly, I would dismiss the plaintiff purchaser's action, and give judgment to the defendant vendor on paragraph (1) and paragraph (3) of the Counterclaim to the extent of paragraphs 14(a)(i), (ii) and (iii).

78. In place of interest in terms of paragraph 14(a)(iv), I would order that interest be paid on the amount of $2,368,668.16 at the commercial rate of prime + 1% from date of the Defence and Counterclaim to date of judgment. Thereafter there shall be interest on the judgment sum until payment.

79. I would also make an order nisi that the costs follow the event, i.e. that the Defendant should have its costs.