Lost waiver and its effect on later agreement between the parties


In Favourable Issue Co Ltd v Secretary for Justice ([2012] HKEC 1416, CFI (later overturned as regards the issue of waiver by the Court of Appeal) the Government granted a lease to F’s predecessor of some land in 1962. The lease contained a special condition prohibiting any building exceeding 30% of the overall size of the Lot. The Lot was eventually assigned to F. The Government later wrote to F informing it that it was in breach of the special condition and requiring it to carry out work to comply with the special condition. Both F and the Government believed that there had been a breach of the special condition. A Temporary Waiver (and certain ancillary documents concerning breach of the terms of the licences of adjoining Government land occupied by F) were agreed.

Later, it was discovered that the relevant Government departments had, at the time the building was erected, given their express consent to the building as it stood even though it covered significantly more than 30% of the Lot.  F successfully argued that the Government had waived the breach long before the Temporary Waiver. Thus, the Temporary Waiver was the result of a common mistake that the Government had been entitled to enforce the special condition and so the Temporary Waiver was void or rescinded ([78]). F was not estopped (by its entry into the Temporary Waiver and associated dealings) from attacking the basis on which the Temporary Waiver had been entered into ([87] – [88]).

F failed, however, in its attempt to argue that it had taken over the benefit of Permits to occupy adjoining Government Land granted to F’s predecessor. Further, the Government’s claim that there had been breaches of these Permits was accepted.

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