RAIDER LTD. v. THE SECRETARY FOR JUSTICE

1998, No. MP2523

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

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JUDGMENT

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1. The plaintiff is, in effect, the owner of the 22nd floor of a building on Kwun Tong Inland Lot 415 situated at No 1 Hung To Road, Ngau Tau Kok, Kowloon (the premises). The use to which the plaintiff may put the premises is restricted by special condition 2(a) of the conditions of sale of the lot. This reads -

"The lot shall be used only for industrial purposes excluding any trade which is now or may hereafter be declared to be an offensive trade under the Public Health and Urban Services Ordinance, 1960, or any enactment amending the same or substituted therefor."

There is another condition to which my attention has been drawn that Mr Andrews says is relevant. This is condition 2(b), which reads -

"No building shall be erected on the lot except a factory, ancillary offices and quarters for persons essential to the safety and security of the building, the number of such quarters and persons to be subject to the special approval of the Commissioner of Labour."

In 1995, the District Lands Officer, Kowloon East, wrote to the plaintiff saying that "portions of the above premises are being used for paging services and office purposes in contravention of" condition 2(a). The District Officer also said that it may be possible to "regularize selected non-conforming commercial uses" upon application and payment of fees, which, according to the evidence, were very high; well over $1.2 million a year. There were some comings and goings following this letter, but, on 13 May 1998, the District Lands Officer wrote to the plaintiff saying that "the primary use of the subject premises have been classified as 'non-industrial' and therefore the office portion is not considered as ancillary office related to industrial use.".

2. The plaintiff did not accept that it was contravening condition 2(a) so, by issuing an originating summons on 4 June 1998, it sought three declarations, in the alternative, that -

a) its user of the premises does not breach and has not breached special condition 2(a) of the conditions of sale of the lot;

b) the primary use of the premises by the plaintiff is and was at all times industrial; or

c) the use of the premises by the plaintiff is and has been for industrial purposes.

3. The activities on the premises are not all conducted by the plaintiff. The plaintiff is one of a group of companies, all under one holding company, each of which carries on a particular part of the overall connected business. The plaintiff's evidence is that this was done as a matter of convenience. This is not contradicted. Mr Andrews did, at one stage, seek to make something of this separation of functions, but he did not urge the point, or, indeed, even mention it, in his closing address. I am satisfied that the activities on the premises should properly be regarded as one business for the purposes of determining whether or not there has been a breach of condition 2(a). For simplicity, I shall refer to the whole business as that of the plaintiff.

4. The plaintiff is involved in what is commonly called the telecommunications industry. The plaintiff designs, manufactures and sells a sophisticated paging device. The pager itself is, of course, a physical product, but it also contains software that permits it to receive information, both general information, such as that relating to the stock market and weather, and private messages. Some of the pagers are sold overseas where the user must use some information service other than that of the plaintiff. But pagers sold for use in Hong Kong are supported only by the plaintiff's information service. If that information service were not supplied, the pager in Hong Kong would have no useful function. Without this service, attempting to use it would be, as has been suggested in evidence, like trying to read a book with blank pages. The public promotional literature issued by the plaintiff makes it quite clear that that the purpose of the pager is to receive private and public information "bundled" with it. The unchallenged evidence of the plaintiff is that the pager cannot be used in Hong Kong for the purpose for which it was designed without the information supplied, and the reader of this advertising literature would gain the impression that the pager and the information are inseparable. There is no suggestion in the literature that "You buy our pager and you may also have access to our information service." Rather it is said "The information comes with, and is part of, our pager." The literature speaks of the information and messages as "various functions provided", and that the pager "provides five groups of databases which include" various types of information. So, to my mind, it is quite clear that the product being supplied by the plaintiff to the user is a package, which includes the information service.

5. So that is the nature of the plaintiff's business conducted on the premises. In order to turn out the product that I have described, the plaintiff has a research and development department, a production department and a paging centre that handles the information I have mentioned. It also has all those areas that one would expect in such a business; an entrance and a reception area, a goods delivery facility, storerooms, a repairing and customer services department, lavatories, restrooms and financial and administrative offices.

6. There is, one might think, nothing unusual in any of this in a modern business in the telecommunications industry, or indeed in any modern industry. These days, one does not buy only the physical product, but also the services that go with it, including various kinds of information. For example, a major company in the computer industry makes or assembles computers, but it also provides an online service to give advice to its customers and help when trouble strikes. That is what is now expected by the buying public. Surely no one would seriously suggest that using the same premises where the computers are produced to supply the information the customer expects nowadays is not part of the same industrial use, or, at least, ancillary to it.

7. The commonly accepted meaning of "industry", as might be found in the Oxford Dictionary, is "a trade or manufacture". The meaning of the word is not confined to manufacturing. It has a very wide meaning, covering a whole range of human activities aimed at making money. Without more, there could be no doubt at all that the plaintiff is using the premises for industrial purposes. As I understand him, Mr Andrews accepts this. He says, however, that, in this case, the phrase "industrial purposes" must be interpreted in the context, and this, he submits, leads to the conclusion that the phrase is restricted to manufacturing only; not any other kind of industrial activity. He does not shrink from saying that, if this is right, the plaintiff may not even repair and service its own pagers on the premises. That is a remarkably restrictive interpretation of the permitted user, and, in my view, it would require clear words to justify this extraordinary result.

8. So let us look at the context. Well, the immediate context, by excluding use for any "offensive trade", confirms the ordinary meaning of the phrase as including non-offensive trades. Mr Andrews points out that the definition of "offensive trade" in the statute mentioned includes "manufacture", but it also includes "trade", so that definition is not restrictive.

9. At the end of the day, the only basis on which the defendant can seek to justify the extreme restriction mentioned is by pointing to condition 2(b). I repeat what this says - "No building shall be erected on the lot except a factory, ancillary offices and quarters for persons essential to the safety and security of the building . . ."

10. To achieve the defendant's ends, Mr Andrews was obliged to argue that the government meant to restrict the use of the premises to manufacturing only, but it did so, not by saying so directly, which it could have done quite easily, but by defining the user in wide terms and then restricting it by requiring that only a factory be built on the lot. That, if indeed it was the government's intention to confine the use of the lot to manufacturing, was a very odd way of going about it. I reject this interpretation. It is artificial and convoluted. The way in which the government restricts, or should restrict, a use is by restricting the use, not by restricting the type of building that may be erected. A person to whom a lease is granted by the government is entitled to be told, in clear terms, what he may and what he may not do on the property. Here, he was told in clear terms that he could use the lot for trade or manufacture, and it is not right, morally or otherwise, that the government should now pretend that what it said was not what it meant, but that the lessee should have read beyond the restriction in user and found a restriction in the type of building that could be erected.

11. And if there is any doubt about this, which, in my view, there is not, this must be resolved in favour of the plaintiff. If the government has failed to define the restriction on user clearly, it must bear the consequences of this, and it cannot legitimately complain that there has been a breach of a condition that it failed to spell out clearly.

12. In any event, even if one says that the user should be restricted to the sort of user one would expect to find in a factory and ancillary offices, this does not help the defendant. A factory building, in the context of this property, means nothing more than a building designed so that it can be used for workshops, with the sort of facilities, such as appropriate entrances and heavy-duty lifts for moving heavy articles. There is no dispute that the building on the lot is such a building, although it is a very smart factory building with attractive finishes. So it cannot be suggested, and is not suggested, that there has been any breach of this covenant.

13. If it were necessary to do so, because the phrase "industrial use" was to be restricted to manufacturing, I would have found that, looking at the plaintiff's business overall, the primary use to which the premises are put is the manufacture of pagers, and the information service is an essential part of this, or, at least, an ancillary office to it. I should say that Miss Chow, who gave evidence for the defendant, classifies the information service as an office use

14. The defendant seeks to deal with the problem of "ancillary offices" mentioned in condition 2(b) - "ancillary" meaning offices that provide support for the central function - by changing its case radically. Until Miss Chow gave evidence for the defendant, the defendant's case had always been that the primary use to which the premises were put was the information service with ancillary offices, and the use for the production of the pagers was not the primary use. Having perhaps realised that, if I found to the contrary - that the production of the pagers was the primary use - there was a danger that I would then find that the information service was ancillary, Miss Chow said in evidence that the defendant's case now was that there was indeed no primary use at all, but two separate and independent uses; the manufacturing of the pagers and the provision of the information service. This, on the evidence, is absolute nonsense, and is contrary to everything for which the defendant had contended up to this stage. As I have said, the ordinary use of the pagers was absolutely dependent on the information service; the pagers could not operate usefully in Hong Kong at all without this. There is no basis at all for suggesting that the information service was a separate and independent use.

15. But even if one looks at the information service quite apart from the production of the pagers, there is no reason to conclude that this use if not an industrial purpose. If it is so, as I believe it is, that a business using these premises for the receipt, sorting, packing and delivery of tangible articles, such as a shipping firm like DHL or a postal sorting office, is using them for an industrial purpose; that is, a kind of trade, the fact that what the business receives, sorts and sends are intangible messages and information rather than physical objects cannot make any difference. At its lowest, this sort of use is one that might reasonably be contemplated under the wide meaning of industrial use, and, in that event, the defendant cannot show that there has been a breach of condition 2(a).

16. Of course it is so that the plaintiff could move the information service to another building, although, from an economic or practical point of view, this would make no sense at all. It is a mystery to me why the defendant wants this. I suppose the fact of the matter is that the defendant does not really want this; it just wants the plaintiff to pay a lot of money for the privilege of conducting its business in this sensible coherent way. Miss Chow was quite unable to point to any reason why it was thought desirable that the plaintiff should not operate its information service from the premises; in the end, her evidence was that the only reason for the enforcement policy being implemented here was to raise revenue. If this is really the policy of government in dealing with local industries, perhaps it should think again. This policy seems destined to drive industries from our shores by seeking to impose totally unreasonable restrictions.

17. I should say that my attention has been drawn to Mexx Consdolidated (Far East) Ltd v Attorney General [1987] HKLR 1210 and Cavendish Property Development Ltd v Attorney General [1986-88] CPR 212. In so far as my conclusions differ from those of the judges in those cases, I so differ with respect.

18. In the result, I find that the plaintiff has demonstrated that it is not in breach of condition 2 (a), or, at least, the defendant has failed to show that there has been any breach. The plaintiff is entitled to a declaration to this effect. I order accordingly.

19. As to costs, I can think of no obvious reason why these should not follow the event. I make an order nisi that the defendant pay the plaintiff's costs.