Construction of ‘curtilage’ covenant in Government lease

In New Mercury Holdings Corp v Secretary for Justice ([2013] HKEC 435, CFI) P wanted to re-develop the residential properties on sites it owned. It sought a declaration that the government should permit these developments. There were two applications. One concerned the redevelopment of property on two neighbouring lots. The other concerned the redevelopment of a ‘stand-alone’ lot. The relevant leases contained the following covenant:

“[The plaintiff] … shall at all times during the term hereby created maintain and preserve in respect of and exclusively for the purposes of the residential premises now erected or being upon the demised premises a curtilage or compound of an area (including the area covered by buildings) of not less than Eight thousand square feet; AND shall at all such times provide maintain and preserve in respect of and exclusively for the purposes of any other residential premises which may at any time be erected upon the demised premises in each case a curtilage or compound as aforesaid of like minimum area”

Essentially, the question was whether, as the government contended, the purpose and effect of the covenant was to control the density of permissible development: did the clause require each house to have its own ‘curtilage or compound’ of eight thousand square feet? The developer contended that this was not the correct interpretation and that houses could share their curtilage with each other (so that two semi-detached houses could share some of the eight thousand feet with each other).

The government succeeded.

The court reminded itself of the relevant legal principles:

‘7. These are not in dispute: (a) when construing the terms of a land grant, the court can take into account the matrix of fact (that is, the objective surrounding circumstances known (or reasonably known) to both parties) at the time of the grant: see, for example, Gold Shine Investment v Secretary for Justice [2010] 1 HKC 212 , 218; Investors Compensation Scheme Ltd v West Bromwich [1998] 1 WLR 896 , 912; Jumbo King Ltd v Faithful Properties [1999] 4 HKC 707 , 726;

(b) the court shall have regard to the object and purpose of the term, which can be informed by the genesis, the background and the context: River Trade Terminal Co Ltd v Secretary for Justice (2005) 8 HKCFAR 95 , 107 (para 34 to 36);

(c) the above are applicable to the construction of a lease: Woodfall’s Law of Landlord and Tenant (2012) Vol 1, para 11.007 and 11.008).’  (Andrew Chung J.)

The factual matrix and the relevant term construed in the context of the rest of the document all supported the government’s contention.

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