YING HO CO. LTD. AND OTHERS v. THE SECRETARY FOR JUSTICE

CACV 365/1999

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 365 OF 1999

(ON APPEAL FROM HCA 10834/1998)

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J U D G M E N T

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Hon Godfrey VP :

Introduction

1. This is an appeal against a ruling made by Yam J on 2 December 1999 in an action between a number of companies forming part of the Chinachem group of companies (as plaintiffs) and the Secretary for Justice (as defendant).

2. The directions then given by the judge pursuant to Practice Direction 5.7 (Long Cases) included a direction as to the issues to be tried in the action. It is this to which the plaintiffs take exception, and in relation to which they have, accordingly, come to this court. It is rare for this court to interfere with the directions of the judge in relation to matters of case management. But Mr Martin Lee, SC, who appeared for the plaintiffs before us, submitted to us that there are matters here which warrant consideration by this court. In order to indicate what those matters are, it will be necessary briefly to refer to the nature of the action.

The background

3. The dispute is a dispute between landlord and tenant. The plaintiffs are tenants of the government under an Agreement and Conditions of Grant relating to Tsuen Wan Lot No. 353 ("the Agreement"). The plaintiffs wanted to build upon the Lot a building described in the statement of claim as "the tallest building in the world", with a transport terminus. The Agreement, however, contains a common form provision, Special Condition 9(e), as to the design, disposition and height of any buildings to be erected on the Lot. Special Condition 9(e) provides that the design, disposition and height of any such building "shall be subject to the prior written approval of the Director and no building works (other than site formation works) shall be commenced on the Lot until such approval shall have been obtained". The Agreement also contains provisions as to when it is that the buildings on the Lot are to be completed.

4. But, whatever the Agreement provided, it is said by the plaintiffs that the contract between the parties was varied by a subsequent oral agreement, arrived at between representatives of the plaintiffs and the government. The variation so concluded, say the plaintiffs, took effect in order to resolve disputes which had arisen between the plaintiffs and the government as to the height of the proposed building, and as to the time when it was to be completed. This oral agreement is said to have entitled the plaintiffs to build the building to a height of 324 metres in height, lower than the plaintiffs had originally wanted. The plaintiffs say that the government has reneged on this oral agreement, and has made things difficult for the plaintiffs, both as to the height to which they are entitled to build their proposed building, and as to the time in which they are expected to complete it. If, however, say the plaintiffs, they are unable to sustain their case against the government based on this oral agreement, then, say the plaintiffs, they are thrown back on the terms of the Agreement, into which, they say, a number of terms are to be implied in order to give business efficacy to the same. The implied terms are set out in paragraph 8 of the statement of claim. I shall recite them :-

"(1) that the Plaintiffs are entitled to design and construct on the Lot the tallest building in the world;

(2) that the Government shall process the Plaintiffs' applications for approval of MLPs [Master Layout Plans] and other building and planning applications without delay;

(3) that the Government shall not refuse or withhold approval of such applications save upon reasonable grounds;

(4) that the Government shall not directly or indirectly do any act or refrain from doing any act which would prevent or make it impossible for the Plaintiffs from fulfilling or to fulfil their obligations under any condition or conditions of the Agreement;

(5) that Special Conditions 6(a) and (b) shall not be enforced and/or the time for completion of the development of the Lot and Transport Terminus shall be extended where the Government itself is responsible in whole or in part for delaying the approval of the Plaintiffs' MLPs and other building and planning applications."

5. The plaintiffs also assert in paragraph 9 of the statement of claim as follows :-

"9. Further or alternatively, it is an implied term of the Agreement necessary to give business efficacy to the same that if the Plaintiffs' failure to complete the development of the Lot and Transport Terminus within the time or times specified under the Agreement is due to delay wholly or in part, directly or indirectly on the part of or attributable to the Government, then :-

(1) the Government shall extend the Building Covenant periods;

(2) the Government shall refrain from exercising or threatening to exercise its power of re-entry under General Condition 11;

(3) the Government shall not be entitled to demand or exact and the Plaintiffs shall not be liable to pay any charges premiums penalties or liquidated damages pursuant to the Agreement or otherwise by reason of such delay, or as the result of any extension of the Building Covenant periods rendered necessary by reason of such delay."

6. By the time the plaintiffs acquired the Lot, the Government had already announced the construction of the Chek Lap Kok Airport. The plaintiffs announced their intention to construct on the Lot "the tallest building in the world", claiming that there were no height restrictions in respect of the Lot, and announced that the height of the building was to be 522 metres. The plaintiffs' case is that the government has unilaterally sought to and has imposed a height restriction of 324 metres on the proposed building which it was not entitled to do. It is the fact that the government did restrict the height of the building to 324 metres. This restriction was justified by the government on aviation safety grounds.

The problem

7. The problem faced by the judge, and now the subject of consideration by this court on the plaintiffs' appeal, concerns the issues which fall to be decided at the trial of the action. The issues which give rise to the problem were those framed by the government as follows :-

"2(a) Whether as a matter of law it is an implied term of the Agreement that the Hong Kong Government should not refuse or withhold the Plaintiffs' applications for approval of MLPs and other building and planning plans save on reasonable grounds.

2(b) If so, whether the Hong Kong Government in deciding whether or not to approve the Plaintiffs' application for construction of Nina Tower on the Lot, the Hong Kong Government is entitled to have regard to height restriction which would be imposed by legislation under Section 3(1AA) of the Hong Kong Airport (Control of Obstructions) Ordinance, Cap. 301."

8. The plaintiffs, as I understand it, say that on the pleadings the following alternative (or additional) issues arise. They frame these as follows :-

"2(a) Whether the construction of a building exceeding the height restriction of 324 mPD [metres Principal Datum] on the Lot would render the Instrument Landing System ('ILS') and the operation of the Chek Lap Kok Airport unsafe from the point of view of aviation safety as alleged by the Hong Kong Government.

2(b) Whether the Hong Kong Government, having stated on numerous occasions that the height restriction of 324 mPD on the Lot was imposed for aviation safety purposes, has to prove that the said height restriction of 324 mPD was both necessary and reasonable."

9. If the plaintiffs are right in their submission that those issues fall to be tried, there would be a considerable amount of expert evidence to be led on both sides in relation to such issues, and considerable discovery, in particular to be made by the government in relation to the advice it had received in relation to aviation safety.

10. The defendant says that these issues do not, in fact, arise on the pleadings.

The judgment below

11. The judge accepted the government's submission. He referred to the case of Hang Wah Investment Co. Ltd v. Attorney General [1981] 1 WLR 1141 saying correctly that in that case it had been held in the Privy Council that the Director of Lands' refusal or withholding of approval under such a clause as is contained in special condition 9(e) need not be upon reasonable grounds (emphasis added).

12. So, the plaintiffs complain that the judge expressed himself in terms which decide or appear to decide the issues which have to be tried. But what the judge actually said was this :-

"I must say I accept the Defendant's submissions. It is clearly provided in the Special Condition in the DDH Clause that the Director of Lands has the power to impose height restrictions. In fact such an imposition can only be done pursuant to the DDH Clause. It is not unreasonable for him to impose such a height restriction upon the advice of the Director of Civil Aviation which advice was never challenged by the Plaintiffs, and least of all not by way of a judicial review.

Thus the Defendant is right in submitting that the first issue under this heading is only whether as a matter of law, there was an implied term of the agreement that the Government should not refuse or withhold the Plaintiffs' application for approval of MLPs and other building and planning plans save on reasonable grounds. Further, the issue is whether the Director of Lands is entitled to have regard to height restriction which would be imposed by legislation under s.3(1AA) of Cap.301.

Accordingly, the issue to be tried is not for the Government to justify that it is reasonable to impose the height restriction of 324 mPDh on the Lot on aviation safety or effect on the ILS. In short, it is not for the Government in this case to justify that such a height restriction was both necessary and reasonable. Consequently, it is not necessary for the Defendant to disclose its Aviation Safety Report or documents connected thereto and there is no issue to be tried in respect of expert evidence on aviation safety or the effect of the tall tower on the ILS.

Since I find this issue in favour of the Defendant, the normal costs order shall follow the event and the Defendant is entitled to an order nisi on costs against the Plaintiffs in any event."

Conclusion

13. In my judgment, it must be left to the trial judge under Practice Direction 5.7 to deal with all matters of case management, including (where the parties differ) settling the issues which will fall to be decided by the court at the trial of the action. Although I accept that, as Mr Martin Lee, SC told us, the way in which the judge expressed has led the plaintiffs to assume that the judge was deciding those issues in advance of the trial, such assumption is unjustified. The judge was doing no more, as it seems to me, than settling the issues which fell to be tried, as he was perfectly entitled to do.

14. Having considered the pleadings, I am of the opinion that the only issues which fall to be tried are these.

15. First, whether there is any term to be implied in the Agreement to the effect that the government shall not refuse or withhold approval for an application to build a building to a certain height "save upon reasonable grounds".

16. Secondly, if the plaintiffs succeed upon that issue, so that it is held at the trial that the government was not entitled to refuse or withhold approval of a building at any particular height "save upon reasonable grounds", the issue will be whether the government's refusal to approve a building over a height over 324 metres on aviation safety grounds was reasonable or not (the burden of proof on that issue being on the plaintiffs, as the judge observed). The issues as framed by the defendant, and accepted by the judge in 2(a) and 2(b) of the defendant's formulation, seem to me correctly to reflect the issues raised on the pleadings. The judge took the view that, in relation to those issues, it was not necessary for the defendant to disclose "its Aviation Safety Report or documents connected thereto" and that there was "no issue to be tried in respect of expert evidence on aviation safety or the effect of the tall tower on the ILS." I agree with the judge. Much too much time, and money, is wasted in litigation here by chasing after irrelevant "issues" with the assistance of "expert" evidence.

17. If, after the trial of the action, it appears that the plaintiffs have suffered a substantial miscarriage of justice by reason of any ruling made by the judge in the course of any pre-trial review, or at the trial itself, that would be a proper subject of an appeal after judgment in the action. The judgment in the action might go the plaintiffs' way and there will be nothing to appeal about. This is one of the reasons why interlocutory appeals on case management matters fall strongly to be discouraged. On the face of it, the judge's ruling was well within the ambit of the discretion conferred upon a judge in conducting a pre-trial review. I reject the suggestion made to us by Mr Martin Lee, SC that the judge in some way breached the provision of 6(c) in Practice Direction 5.7, which reads as follows:-

"6(c) At least 3 weeks prior to the date of trial the parties shall file in Court an agreed list of issues which will fall to be decided in the action and in default of agreement each party will serve on the other party(ies) a list of the issues and file a copy of the same in Court."

18. That must be read in connection with the introductory words of paragraph 6 :-

"6. In all cases

On any application in an action or hearing for directions the Judge shall have power to make orders for any matter necessary for the further conduct of the proceedings whether the same shall have been notified by any of the parties to any other or not."

19. The judge's ruling falls fairly and squarely within the provisions of the Practice Direction and I see no legitimate ground for interfering with it.

20. For these reasons, I would dismiss this appeal.

Hon Rogers JA :

21. I agree.

22. The judge had before him draft issues put forward on the one hand by the plaintiffs and on the other hand by the defendant.

23. He considered that the issues which arose in this case were those put forward by the defendant. As I understand it, the defendant says that they stand or fall by those issues. I do not see that this court should interfere with that decision of the judge.

24. The matter is important. On this appeal, the plaintiffs seek, amongst other things, the following order.

25. First, in relation to discovery, that there should be an order that "all Aviation Safety Reports and/or documents connected therewith be disclosed by the plaintiffs (appellants) and the defendant (respondent)" and then, in relation to expert evidence, that there should be an order that "expert evidence in the form of reports on aviation safety and/or the effect of the tall tower on the ILS be exchanged between the plaintiffs (appellants) and the defendant (respondent)".

26. This case comes within the Practice Direction relating to long cases, that is, those cases which are expected to last 15 days or longer. The Practice Direction therefore brings long cases within a similar regime to cases in other specialist lists. It is designed so that there should be detailed case management with a view to simplifying the issues in the case and reducing what might otherwise be burdensome or complex interlocutory steps.

27. Key points in any pre-trial preparation are, of course, discovery and the evidence which is going to be called at the trial. Unnecessary discovery is a scourge of litigation, it leads to delay and heavy costs.

28. Unnecessary expert evidence is equally undesirable. It is costly to prepare and can be lengthy during the trial. As an aside in this case, I have to say that I have my doubts that a view as to how a building would impinge on the Instrument Landing Safety could be given in absolute terms. It seems to me that it is more likely that the view will be given in percentage terms. I cannot see how a court could form an opinion as to what percentage of risk would be acceptable. That is a matter which has to be left to Government.

29. Be that as it may and even if I am wrong about that, on the matters which the judge has given directions, it is unnecessary that expert evidence should be permitted.

30. I too would dismiss this appeal.

Hon Sakhrani J :

31. I agree that the appeal should be dismissed for the reasons given by Godfrey VP and Rogers JA. There is nothing that I can usefully add to those reasons.

Hon Godfrey VP :

Costs

32. We now have to deal with the question of costs. As to the costs below, the judge made an order nisi giving the government its costs. Since the issue before the judge was an issue of case management, I would, for my part, have made an order that the costs of the hearing before the judge be costs in the cause. But I am satisfied that it was well within the proper exercise of his discretion for the judge to make the order which he did, although it is not the order which I would myself have made. It is further to be observed that the order that the judge made was an order nisi, so that the plaintiffs had an opportunity to go back to the judge and ask for some other order for costs had they chosen to do so after considering the judge's judgment.

33. Accordingly, the judge's order as to the costs below will stand.

34. As to the costs here, the plaintiffs have chosen to bring this unsuccessful appeal. The government is entitled to its costs of the appeal.

35. The order we will make as to costs here is an order that the costs of the government be taxed, if not agreed, and paid by the plaintiffs to the government.