Fully Profit (Asia) Ltd v Secretary for Justice (Court of Final Appeal)

In Fully Profit (Asia) Ltd v Secretary for Justice ([2013] HKEC 717, CFA) F owned several neighbouring plots of land. Each lot was the subject of a Government lease containing a restriction against building more than one house on the land. The question was whether building a single 26-storey residential building straddling the lots would be a breach of the covenant not to build more than one house on the land.

The plots had been carved out of a larger lot the subject of Conditions of Exchange which provided that if more than one ‘building’ were erected on the land then there would be a separate lease for each building (special condition 6). They also required the construction of ‘one or more good and permanent buildings’ on the land. There was a prohibition on industrial use and a restriction on building more than twenty houses. The lot covered by the Conditions of Exchange had twenty houses on it, each being the subject of a separate Government lease containing the restriction on building more than one house. There was nothing to indicate that the leases were intended to introduce any additional restrictions beyond those contained in the Conditions of Exchange.

The Court of Final Appeal (reversing the decision of the Court of Appeal) held that the proposed development would amount to a breach of the covenant.

Ma CJ emphasised the key role that context has to play in the process of contractual interpretation ([15]).

Applying that principle to this case, he continued:

‘In context, it is clear that the meaning of the word “house” under the Government Leases must have reference to those characteristics of the houses which were actually standing at the time the Government Leases were entered into … [H]ouses were actually standing on each of the individual, sub-divided Lots at the time the Government Leases were created. In the context of those Leases, the meaning of the word “house” should be taken to mean the type of house existing on the individual lots. ([17])

Michael Lower

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