Extent of waiver of Special Condition

In Favourable Issue Co Ltd v Secretary for Justice ([2013] HKEC 1851, CA) 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. The question was whether this waiver covered the building works that had been carried out.

Cheung JA expressed the relevant principles thus:

‘Although the ambit of a waiver in a given situation is one of construction, the following principles are relevant:

1) there is a clear distinction between waiver of a breach of the covenant and waiver of the covenant itself.

2) waiver of a covenant cannot lightly be inferred. It can be, but only where the conduct of the grantor is sufficiently clear and unambiguous that it would be inherently unfair for him to be permitted to go back on his word, either actually spoken or inferred from his conduct.’ ([25])

Here the waiver that had been given was in respect of a particular proposed set of works and what was actually built was more extensive that what had been proposed. Hence the works were not covered by the waiver ([26]).

Michael Lower

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