Case Detail

HCA003327A/1973

IN THE SUPREME COURT OF HONG KONG

(ORIGINAL JURISDICTION)

ACTION NO. 3327 OF 1973

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BETWEEN
	KUNG Wai-ying	Plaintiff
	and
	The Attorney General	Defendant

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Coram: Leonard J. in Court.

Date of Judgment: 15th July, 1974.

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JUDGMENT

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1. In this action the plaintiff claims a declaration that she is entitled in equity to be relieved against the forfeiture by the Crown of her interest in Castle Peak Town Lot No. 12 and an order vacating the Memorial of Re-entry registered in the District Office in relation to the said lot. It was common case that, under an agreement dated the 2nd April, 1970, the Crown agreed to grant to the plaintiff the lot No. 12 for the residue of 99 years less three days commencing from the 1st July 1898, and that possession of the land was given to the plaintiff on the same date. This agreement, although in common form, is somewhat a strange document and it is fortunate that nothing turned on its interpretation because of the manner in which it has been drafted. It is entitled "Agreement And Conditions Of Grant Of Castle Peak Town Lot No. 12". Throughout it the plaintiff is referred to as the "grantee" but it is not clear from its terms what precisely is granted to the plaintiff. It visualizes the grant at some time in the future of a Crown Lease in respect of the lot but the area over which the Crown Lease is to be granted is indefinite as are its boundaries. Thus, paragraph 3 requires the plaintiff to apply to the District Commissioner. New Territories for the lot to be "set out on the ground" and prohibits her from commencing operations for building until it has been set out.

Clause 5(a) of the General Conditions obliges the District Commissioner, New Territories to determine the boundaries of the lot before the issue of the Crown Lease and makes his decision as to these boundaries final. There is a reference in Clause 2 of the General Conditions to "The Particulars Of The Lot" but the only particulars I can find are contained in a map headed "Proposed Lease Castle Peak Town Lot No. 12". In this map the lot is shown coloured red bounded on the south side by a pedestrian way on the west side by road "D4" and on the east side by road "12A". The area is given as "4,800 sq. ft (about)". Although it does not expressly so state this document is apparently intended to create something in the nature of a defeasible tenancy for Clause 8 of the General Conditions states inter alia that :

"The fulfilment by the grantee of his obligations under these General and Special Conditions shall be a condition precedent to the grant or continuance of the tenancy"

but the property over which the tenancy is to be enjoyed is ill-defined as is the interest of the grantee so long as the "conditions precedent", presumably to the grant of a tenancy remain unfulfilled. In this case nothing turns on these questions because of the pleadings. I mention my difficulties in construing the document merely in case my doing so may be of assistance in future alienations of Crown land in the New Territories.

2. Clause 4(a) of the General Conditions of Grant lays down that the :

"grantee shall develop the lot by the erection thereon of a building or buildings complying with the Special Conditions and in all respects in accordance with the provisions of all Ordinances, Byelaws and Regulations relating to building and sanitation which are or may at any time be in force in the New Territories, other than New Kowloon such building/s to be completed before the expiration of 36 months from the date upon which possession of the lot is given, and shall expend thereon a sum of not less than $50,000.00 (such sum to exclude moneys spent on site formation, foundations, access roads and other ancillary works)."

Clause 8 having made fulfilment by the plaintiff of her obligations a condition precedent goes on to state that :

"in the event of any default by the grantee in complying therewith such default shall be deemed to be a continuing breach and the subsequent acceptance by or on behalf of the Crown of any Crown rent or rates or other payment whatsoever shall not (except where the Crown has notice of such breach an has expressly acquiesced therein) be deemed to constitute any waiver or relinquishment or otherwise prejudice the enforcement of the Crown's right of re-entry for or on account of such default or any other rights, remedies or claims of the Crown in respect thereof under these Conditions which shall continue in force and shall apply also in respect of default by the grantee in the fulfilment of his obligations under the General and Special Conditions within any extended or substituted period as if it had been the period originally provided."

Clause 9 of the agreement empowers the Crown to re-enter for breach and goes on to provide that :

"in the event of re-entry, the grantee should not be entitled to the refund of any premium paid by him or any part thereof, or to any payment or compensation whatsoever whether in respect of the value of the land, or for any buildings thereon, or for any amount expended by him in the preparation, formation or development of the lot or otherwise."

The plaintiff failed to comply with the Building Covenant set out in Clause 4 of these General Conditions and by notification G.N. 1506 published in the Hong Kong Government Gazette on the 15th June, 1973 the Crown :

"pursuant to its right of re-entry under the Crown Rights (Re-entry & Vesting Remedies) Ordinance published a Memorial of Re-entry relating to the said lot".

This admission is made in paragraph 15 of the plaintiff's Statement of Claim. The plaintiff's explanation for her failure as adumbrated in the Statement of Claim was that some time after the 2nd April 1970 the plaintiff through her daughter, TONG Siu-ping, approached the Hongkong Chinese Bank Ltd. with a view to financing the construction of a two-storeyed factory building; that when she did so the officers of the bank represented to her that they would be prepared to finance the entire construction cost for an eight-storeyed factory building on condition that upon completion the bank or its business associates would be assigned the top six floors; that she thereupon gave instructions to her architect to draw up plans for an eight-storeyed factory building; that these plans were not approved until August 1971 and that, "the said officers of the bank after deliberating on the matter for a few months withdrew from the said arrangement". The plaintiff was, according to her Statement of Claim, unable to finance the construction of the eight-storeyed building although she was in a position to finance a two-storeyed factory which would accord with the Building Covenant and so indicated to Mr. Dixon, Estate Surveyor of Yuen Long District, at a meeting in April 1972. The Statement of Claim went on to allege that at a further meeting in July 1972 Mr. Dixon suggested to the plaintiff's daughter that the plaintiff's original intention for the construction of a two-storeyed building should be pursued in substitution for the eight-storeyed development: that the plaintiff's daughter told Mr. Dixon that this would entail further delay, but that Mr. Dixon said that if the plans for two-storeyed factory building were submitted these would be approved within twenty-eight days as required by law. I should state at this stage that having heard the evidence of the plaintiff's daughter, TONG Siu-ping and the evidence of an official of the Hongkong Chinese Bank Ltd. and that of Mr. Dixon and having perused the agreed bundle of documents, I am quite satisfied that no representation was ever made by the officers of the Hongkong Chinese Bank Ltd. to the effect that they would be prepared to finance the entire construction cost for an eight-storeyed factory building; that the bank was in no way interested in the acquisition of the top six floors of any building to be erected on the site and that no arrangement for financing the construction of the building having been agreed to or entered into by the bank there was no question of the bank's withdrawing from any such arrangement. A Mr. Chow, the Deputy Managing Director of the bank, gave evidence which I accepted without reservation, to the effect that no such arrangement had ever been contemplated or proposed. Again while I am prepared to accept that Miss TONG Siu-ping informed Mr. Dixon of her difficulties in arranging financial support I am quite satisfied that Mr. Dixon never advised Miss Tong that if plans for a two-storeyed factory building were submitted these would be approved within twenty-eight days.

3. The admitted facts and agreed bundle of documents show that the plaintiff contemplated the erection of an eight-storeyed factory on the site in June 1970 plans for which were submitted in that month. By August 1971 certain plans relating to this proposed erection had been approved. The District Commissioner of the New Territories was concerned about the development of this site in February 1972 and on the 14th of March 1972 Mr. Dixon informed the District Commissioner, New Territories that :

"An enquiry reveals that the company is apparently having some financial difficulties and although some plans have been approved by B.O.O. on 19th December 1970 and 9th October, 1971 (no notes in my files), as far as can be determined, no tenders are being called for for the construction work. It would appear, therefore, that the Company have no intention of commencing development in the near future."

The "Company" to which reference is made is the Pak Kut Milk & Noodle Production Company, a firm of which the plaintiff was at all material times the sole proprietor. On the 30th March, 1972, Mr. Dixon wrote to the plaintiff under the title of that firm drawing to her attention the fact that the Building Covenant had only twelve months to run before it expired. The final paragraph of his letter reads :

"Government will not automatically extend the building covenant period and should, at the expiration of the building covenant, there still be no development of the lot, then in all probability Government will commence re-entry proceedings against your company with a view to taking back the land."

On the 8th May 1972 the plaintiff's daughter in her letter to the District Office, Yuen Long referring to the above quoted letter stated :

"We take this opportunity to inform you that building of our development land is under careful planning and construction will be commenced at a suitable time."

On the 6th July, 1972 Mr. Dixon addressed the plaintiff's daughter in the following terms :

"	It is apparent that you fail to appreciate the importance of my letter dated 30th March 1972 and if I may, I would spell this out more clearly by stating that if Buildings satisfying the Building Covenant amount are not completed within the original building covenant period then I will recommend to Government that the lot is re-entered.
	As you are leaving you (sic) precious little time to affect the development of this site may I suggest that you make an appointment to discuss this matter with me so that the implications of your not completing development of this land can be more fully explained to you."

Mr. Dixon, when questioned on this letter and in particular the final paragraph of it, indicated and I was satisfied that at the time in question the District Office, Yuen Long was primarily concerned with seeing that Castle Peak Town was developed in an orderly manner so that industrial development should keep pace with commercial and residential development. In fact this purpose was not being achieved and a large number of grantees of land intended for industrial development were slow to develop their land and to comply with Building Covenants. Mr. Dixon desired discussion in order to bring home to the plaintiff's daughter the necessity for development for it was immediate development and not forfeiture that the Crown sought at that stage. It was alleged by the plaintiff's daughter that in the course of this interview (held in July 1972) she outlined the attempts which she had made to obtain financial support to Mr. Dixon whereupon he suggested that the plaintiff should revert to her original intention for the construction of a two-storeyed building; that she told Mr. Dixon that this would entail further delay having regard to the necessity of having plans approved; and that thereupon Mr. Dixon said that if plans were submitted they would be approved within twenty-eight days. Mr. Dixon could not remember having held this conversation but was adamant that if a conversation had been held in July 1972 he would not have informed the plaintiff that plans would be approved within twenty-eight days. Section 15(1) of the Building Ordinance lays down that where an application is made for the Building Authority to approve plans, he shall be deemed to have given his approval unless within twenty-eight days he has notified the applicant of this refusal to give approval. In July 1972, however, the operation of this section had been suspended by the Buildings (Amendment) Ordinance 1972. The provisions of the Buildings Ordinance never required the Building Authority to give his approval to plans within twenty-eight days; plans were deemed to be approved if he failed to indicate his disapproval of them within that period - a very different matter. Having heard Mr. Dixon, I am quite satisfied that he could not have indicated to the plaintiff's daughter that plans would be approved within twenty-eight days. The suspension of the relevant provisions of the Buildings Ordinance is therefore to a large extent immaterial. Plans for a two-storeyed factory were submitted on 25th September 1972 and these were not approved until the 9th April 1973. By the 15th June 1973 when by Gazette Notification 1506 the Crown published its Memorial of Re-entry no building had been started.

4. The plaintiff's daughter was cross-examined at length on her evidence as to her conversation with Mr. Dixon. I found her to be an uncandid witness and where her evidence conflicted with that of Mr. Dixon I accepted that of the latter. Certainly the case for the appellant was not proved on any balance of probabilities. On the facts therefore I do not consider that the plaintiff has made out any case for relief against forfeiture. Indeed the sole factor of which she can make any complaint with a scintilla of justification is the delay of 6 ½ months in approving the plans for the two-storeyed development.

5. It is therefore unnecessary for me to go at any great length into the authorities on the question as to whether or not there is jurisdiction to grant relief where the breach of covenant alleged is other than to pay rent or due to accident, surprise or mistake. In Cheung So Yin-kay v. Cheung Biu Briggs, J. (as he then was) held that :

"Apart from statute law the authorities clearly show that the only instances where relief would be given in cases where there is a breach of covenant other than a covenant to pay rent, are cases where the breach was due to some accident, surprise or mistake."

This case was, of course, decided before that of Shiloh Spinners Ltd. v. Harding⁽¹⁾ where the cases of Sanders v. Pope⁽²⁾; Hill v. Barclay⁽³⁾ and Barrow v. Isaac & Son⁽⁴⁾ were exhaustively examined and explained by the House of Lords. There the breaches leading to re-entry were failure to fence boundaries, failure to keep in repair, breaking up openings into a retained roadway and diminishing support and protection of retained premises. The Law Lords held that the case was one which fell within the class of case in which a court of equity could intervene and grant relief against forfeiture. They refused so to do since the evidence established a case of clear and wilful breaches of more than one covenant, a case of continuous disregard by the respondent of the appellant's rights over a period of time coupled with lack of evidence as to the respondent's ability speedily and easily to make good the consequences of his default.

6. Shiloh Spinners Ltd. v. Harding⁽¹⁾ was considered at length by Mr. Justice Li in interlocutory proceedings in the present case. He concluded that this, too, was a case in which a court of equity could intervene and grant relief. With this I agree; I do not however consider this is a case in which I should intervene in the exercise of my equitable jurisdiction. I have arrived at this conclusion because I do not believe the evidence of the plaintiff's daughter who was the plaintiff's agent throughout in this transaction. I do not believe that any officers of the Hongkong Chinese Bank Ltd. represented to her that they would be prepared to finance the construction cost for an eight-storeyed factory on condition that upon completion the bank or its business associates would be assigned the top six floors. I accepted the evidence of Mr. Chow, that the bank does not deal in property; that it was not interested in acquisition of any part of a building and that at no stage did the plaintiff's daughter indicate to the bank the finance she required. Equally, I do not believe that Mr. Dixon had told her that if plans for two-storeyed factory building were submitted these would be approved within twenty-eight days. Admittedly the Buildings (Amendment) Ordinance 1972 was in force at the time the plans for the two-storeyed factory were submitted but before that Ordinance came into force the Building Authority was not obliged to approve plans within twenty-eight days. This the plaintiff's daughter well knew from her previous experience with the plans for the eight-storeyed building. Again it is true that before that amendment came into force plans which had not been refused were deemed to have been approved after twenty-eight days. That this is a very different thing from suggesting that the Building Authority were required to approve plans within twenty-eight days is self-evident. The approval of the plans for the two-storeyed factory was undoubtedly delayed but by the time of their submission for approval almost 5/6ths of the time given for completion of the building had already passed and while the evidence was that the plaintiff had funds to erect a two-storeyed factory there was no evidence that she could have wholly or substantially completed the construction by the 2nd of April, 1973 even if approval had not been delayed. In the circumstances I cannot see that the plaintiff has established any equity which would entitle me to grant relief against forfeiture.

7. The primary object of the condition in question was to secure development of the property within a reasonable period. Well in advance of the completion of that period the plaintiff received ample warning as to what would happen if the property was not duly developed. That the plaintiff realised her position is amply demonstrated by her letter of the 29th of May 1973 to the District Commissioner, New Territories in which she stated that she acknowledged without reservation that a breach of the General Conditions did occur; that the process of submission of plans is of necessity time-consuming; that the implications of non-fulfilment of the Building Covenant were clearly explained to her at an interview on the 14th April, 1972. It is particularly noteworthy that in this letter she did not suggest that Mr. Dixon had told her in July 1972 that plans for the two-storeyed building would be approved within twenty-eight days.

8. Had the plaintiff come before me on the basis of the various representations contained in that letter I might well have felt sympathy for her. She has instead chosen to put forward a case which I cannot accept and her attitude as shown by the evidence which her daughter gave persuades me that the delay in complying with the Building Covenant was a wilful one. That she considered it necessary to fabricate excuses seems to me to indicate that the true reason for delay was one she felt would be detrimental to her case. Be that as it may I am quite satisfied that in giving evidence the plaintiff's daughter, who acted throughout as the plaintiff's agent, lied consistently and deliberately. This alone would prevent me from granting equitable relief.

9. When the case came on before me, the Statement of Claim was amended to include an averment that on or about the 16th March 1974 the Crown had demanded payment of the sum of $3,136.00 from the plaintiff, being the 5th instalment of the premium due under the Agreement of the 2nd April, 1970 and this sum was paid on the 25th March 1974. In the amendment of the Statement of Claim, the plaintiff suggested that the demand for and payment of this sum would make it inequitable if the plaintiff's interest were forfeited or alternatively that the agreement must be deemed to have been revived; or that the right to forfeiture was waived; and that the plaintiff should be granted relief. This argument ignores the provisions of the Crown Rights (Re-entry & Vesting Remedies) Ordinance, Section 4(2) of which lays down that immediately on the registration of a Memorial of Re-entry the Crown shall be deemed to have re-entered and the land and tenements shall thereby become re-vested in the Crown. I was assured by Crown Counsel and I accept the assurance, that the demand note for the sum of $3,136.00 was issued in error and that the amount paid would be refunded. The conditions themselves indicate that the acceptance of any-sum due under the agreement or payable under the agreement shall not amount to a waiver or relinquishment or otherwise prejudice the enforcement of the Crown's right of re-entry. The plaintiff can have been in no way deceived by the demand. Had she been she would have raised the matter at the outset not by way of a belated amendment to the Statement of Claim. The land had already re-vested in the Crown by virtue of the publication of the Gazette Notification and the issue of the demand note and the consequent payment could not revive the plaintiff's interest. Accordingly I do not consider that the demand and receipt by the Crown of the sum of $3,136.00 from the plaintiff affects the matter. It was clearly a mistake arising from bad liaison between the departments concerned. This case must accordingly be dismissed with costs.

	(P.F.X. Leonard)
	Puisne Judge

Representation:

Mr. Litton Q.C. and Mr. Bokhary (Woo, Kwan, Lee & Lo.) for plaintiff.

Mrs. Jackson-Lipkin, C.C. for defendant/Attorney General.

(1) (1973) 1 All E.R. 90.

(2) (1906) 12 Ves. 282.

(3) (1803-13) All E.R. Reprint Reports 379.

(4) (1891) 1 Q.B.D. 417.

HCA003327/1973

IN THE SUPREME COURT OF HONG KONG

ORIGINAL JURISDICTION

ACTION NO. 3327 OF 1973

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BETWEEN
	KUNG WAI YING	Plaintiff
	and
	THE ATTORNEY GENERAL	Defendant

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Coram: Li, J. (In Chambers)

Date of Judgment: 4th January, 1974

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JUDGMENT

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1. This is an appeal from the Registrar's decision dismissing the defendant's application to strike out the plaintiff's action on the ground that it discloses no cause of action and, alternatively, that it is vexatious, frivolous and an abuse of process.

2. The facts of the case are as follows: On the 2nd of April, 1970 the plaintiff obtained a grant to a piece of land from the Crown under certain conditions, one of which was to build a super-structure to the value of $50,000 on or before the 1st of April, 1973. The plaintiff submitted plans for an 8-storey building and arranged for financial support of this project. The plan was approved in August 1971 by the Building Office. But by that time the bank which was supposed to give financial support to this project withdrew its support. Meetings therefore followed between the plaintiff's representative and one Mr. Dixon, an estate survey or in the Yuen Long District Office, between April and July 1972. In one of these meetings Mr. Dixon suggested that the plaintiff could build a 2-storey building in substitution for the 8-storey building and that the plans would be approved in 28 days. (Pausing at this stage I may observe that such a representation turned out to be incorrect although it may well have been an innocent mis-representation.) The plaintiff submitted plans for approval on the 25th of September, 1972 and such plans were not approved until the 9th of April, 1973. By this time the period for which the covenant to build was to be observed had expired. As a result the Crown re-entered under the Crown Rights (Re-entry & Vesting Remedies) Ordinance on the 15th of June, 1973. The plaintiff issued a writ against the Crown in the name of the Attorney General to ask for a declaration that she is entitled in equity to relief against such forfeiture and for an order to vacate the Memorial of Re-entry registered in the District Office in relation to that lot of land. The Attorney General, the defendant, entered a conditional appearance and then applied to the learned Registrar on the 19th of December, 1973 to strike out the plaintiff's action for disclosing no cause of action and for being vexatious, frivolous and an abuse of the process. The learned Registrar dismissed the application. Hence this appeal.

3. Before me, learned counsel for the defendant advances several propositions in support of the contention that the plaintiff has no cuase of action and that if there is any cause of action - if at all - the action must fail. For this reason it is further contended that the action is frivolous, vexatious and an abuse of the process.

4. The reasons, if I understand learned counsel for the defendant correctly, are these: First, the Crown chooses to re-enter under the previsions of the Crown Rights (Re-entry & Vesting Remedies) Ordinance and has not come to court to ask for possession. As such there is no room for the plaintiff to ask for equitable relief. Secondly, the re-entry was done in accordance with proper procedure and the steps taken were all correct; the Crown was only asserting its rights. Thirdly, relief from forfeiture is open to the plaintiff only if the forfeiture is based on a breach of covenant to pay rent. (The Law Property Act 1925, which provides for relief from forfeiture on the ground of breach or other covenants, is not applicable to Hong Kong.) Fourthly, Mr. Dixon's representation is not binding upon the Crown. Fifthly, all the conditions and covenants in the conditions of grant are conditions precedent and there has been no fulfillment of such conditions. There was no grant and there was no lease. For this reason, it is not appropriate for the plaintiff to come to court to ask for relief from forfeiture of a lease. Lastly, but not the least, that the Crown Rights (Re-entry & Vesting Remedies) Ordinance provides for a remedy to the plaintiff, namely that it is for him to petition the Governor to grant him relief against the vesting notice.

5. I shall deal with those reasons that can be easily disposed of.

6. The argument that the right for an application to the Supreme Court for relief against forfeiture is gone once the Crown chooses to re-enter under the provisions of the Ordinance is obviously to my mind untenable. Section 8, subsection 2, paragraph (b) provides as fellows:

"(2) Subject to subsections (3) and (4), where a vesting notice has been registered under section 7 in the Land Office, the former owner of a relevant interest which is the subject of the vesting notice may -

	(a)	...............................................................................................
	(b)	apply to the Supreme Court in its equitable jurisdiction for relief against the vesting -

	(i)	if he disputes the right of the Crown to proceed under section 7; or
	(ii)	if the circumstances are such that he would have been entitled to apply for relief against re-entry had the lesser been a private party and exercised his right of re-entry."

Having regard to the plain language of this subsection I am of the opinion that such a right is provided for by the Ordinance in express language. The fact that the Crown chooses to re-enter under the provisions of this Ordinance is plainly stated at the beginning of subsection 2 of Section 8. For this reason I say that the plaintiff is entitled to apply to the Supreme Court for relief as a further alternative to petitioning the Governor. This is abundantly clear in view of the provisions of subsection 4 of Section 8 of the same Ordinance. This subsection provides that:

"(4) A petition to the Governor under paragraph (a) of subsection (1) or paragraph (a) of subsection (2) shall be a bar to any subsequent application to the Supreme Court under paragraph (b) of subsection (1) or paragraph (b) of subsection 2."

Nor do I feel that the alternative remedy of petitioning the Governor should be a reason to bar any application to the Supreme Court, unless the plaintiff has already petitioned the Governor.

7. Yet another point which I can dispose of fairly quickly is the contention that the covenants are all conditions precedent and as there is no fulfillment or compliance with such covenant therefore there has been no lease and as such there is nothing for which the plaintiff can apply for relief against forfeiture. Learned counsel for the plaintiff has directed my attention to the case of Barton Thompson & Co. Ltd. v. Stapling Machines Co. in 1966 Chancery, page 499. This is a case for the hiring of machines and it was contended that the plaintiff had failed to comply with certain conditions and covenants. It was held in that case that:

"... although relief against forfeiture was normally only granted in the case of a lease of land, it was not plain and obvious as a matter of law that the court could not in certain circumstances, even in the absence of unconscionable behaviour, grant relief against forfeiture in the case of a lease of chattels, and, accordingly, the plaintiffs should be allowed to argue their case if it was maintainable on other grounds."

Furthermore, the condition of grant - no matter what one calls it - is very similar to an agreement of a lease. If that is the case then obviously there is good reason for the plaintiff to apply for relief against forfeiture.

8. As to the contention that Mr. Dixon's representation is not binding on the Crown, I must observe that Mr. Dixon, if what is alleged is true, was a servant of the Crown and also an officer dealing in land matters in the New Territories. His representation that the plans would be approved within 28 days might be a correct statement of fact and law as it then stood. Unfortunately a disaster intervened necessitation the Legislature to suspend the provisions of a certain Section of the Building Ordinance. As a result the Building Office was not obliged to indicate its approval or rejection of any building plan within 28 days. Thus I say that whatever happened, however innocent that representation might have been, it was still a mis-representation - or a representation which was changed by subsequent events through no fault of the plaintiff.

9. The only thing that is left for me to consider is whether equitable relief is open to the plaintiff in cases of breach of covenant other than a covenant to pay rent. It is quite correct to say that the relief provided for by provisions of the Law Property Act 1925 do not apply to Hong Kong. It is also true that there are two schools of thought as to the circumstances under which equitable relief may be granted. My attention has been directed to the case of Cheung So Yin-kay v. Cheung Biu in 1970 Hong Kong Law Reports, page 383 in which Mr. Justice Briggs, as he then was, in his judgment, said this:

"	The plaintiff claims forfeiture of the lease. However, the defendant asks for relief against forfeiture invoking the equitable jurisdiction of the court. This was sought in a counterclaim, a procedure favoured by the Full Court in Ta Sheng Plastic Goods Co. Ltd. v. Green Island Cement Co.
"	The question is whether the court here in Hong Kong has jurisdiction to grant relief from forfeiture for the breach of a covenant in a lease other than a covenant to pay rent or a covenant to insure. The latter is conferred specifically by section 5 of the Law of Property Amendment Ordinance (Cap. 24).
"	This branch of the law has been extensively developed in England by various statutes which do not apply in Hong Kong. Apart from statute law the authorities clearly show that the only instances where relief would be given in cases where there is a breach of a covenant other than a covenant to pay rent, are cases where the breach was due to some accident, surprise or mistake."

Thus, even in the case where there is some allegation of accident, surprise or mistake, the court of equity may grant relief in breaches of covenant other than the covenant to pay rent.

10. The case of LI Sui-yuet v. The Attorney General was decided on other grounds. That was a case where the plaintiff had committed a breach of covenant and petitioned the Governor for relief against re-entry. The re-entry notice was revoked subject to certain conditions to be fulfilled and complied with by the plaintiff. The plaintiff committed a further breach in not complying with the conditions. It was held that because the conditions had not been fulfilled the revocation would stand and as such there had never been any relief from the re-entry because there had been no compliance with the conditions. That case has no bearing upon the grounds upon which the court will give relief where there is a breach of other covenants.

11. Perhaps the classic case is that of Hill v. Barclay in which Lord Eldon took the very strict line that equitable relief against forfeiture would only be given in cases where the breach of covenant is one of non-payment of rent. But on the other side of the argument is the case of Sanders v. Pope where Lord Erskine applied a much more liberal attitude.

12. These cases and the line of cases following the two schools of thought have been carefully considered in the recent case of Shiloh Spinners Ltd. v. Harding in 1973 I All England, page 90. Mr. Litton, counsel for the plaintiff, has directed my attention to the Judgment of the House of Lords in England. To begin with, I might observe that this is a unanimous judgment on the point and history as to when equitable relief should be given. Lord Wilberforce, in his judgment said this - and I will not apologise for quoting him at length:

"	There cannot be any doubt that from the earliest times courts of equity have asserted the right to relieve against the forfeiture of property. The jurisdiction has not been confined to any particular type of case. The commonest instances concerned mortgages, giving rise to the equity of redemption, and leases, which commonly contained re-entry clauses; but other instances are found in relation to copyholds, or where the forfeiture was in the nature of a penalty. Although the principle is well established, there has undoubtedly been some fluctuation of authority as to the self-limitation to be imposed or accepted on this power. There has not been much difficulty as regards two heads of jurisdiction. First, where it is possible to state that the object of the transaction and of the insertion of the right to forfeit is essentially to secure the payment of money, equity has been willing to relieve on terms that the payment is made with interest, if appropriate, and also costs (Peachy v. Duke of Somerset and cases there cited). Yet even this head of relief has not been uncontested: Lord Eldon LC in his well known judgment in Hill v. Barclay expressed his suspicion of it as a valid principle, pointing out, in an argument which surely has much force, that there may be cases where to oblige acceptance of a stipulated sum of money even with interest, at a date when receipt has lost its usefulness, might represent an unjust variation of what had been contracted for (see also Reynolds v. Pitt). Secondly there were the heads of fraud, accident, mistake or surprise always a ground for equity's intervention, the inclusion of which entailed the exclusion of mere inadvertence and a fortiori of wilful defaults.
	Outside of these there remained a debatable area in which were included obligations in leases such as to repair and analogous obligations concerning the condition of property, and covenants to insure or not to assign. As to covenants to repair and cases of waste, cases can be quoted before the 19th century in which relief was granted (see Webber v. Smith and Nash v. Earl of Derby). There were hostile pronouncements. In Wadman v. Caloraft both Sir William Grant MR and Lord Eldon LC are found stating it to be clear that relief cannot be given against the breach of other covenants - i.e. than covenants to pay rent.
	It was soon after that the critical divide or supposed divide occurred, between the liberal view of Lord Erskine LC in Sanders v. Pope and the strict view of Lord Eldon LC in Hill v. Barcla. The latter case came to be followed as the true canon; the former was poorly regarded in Lincoln's Inn, but it is important to observe where the difference lay. This was not, as I understand it, in any disagreement as to the field in which relief might be granted for both cases seem to have accepted that, in principle, relief from forfeiture might be granted when the covenant was to lay out a sum of money on property: but rather on whether equity would relieve against a wilful breach."

13. The present case is one of laying out money on property. Further on his Lordship has this to say:

"	The suggestion that relief could not be granted against forfeiture for breach of other covenants was not one that followed from either case: relief was so granted in Bargont v. Thomson. Equally in Barrow v. Isaac & Son, a case of a covenant against under-letting without consent, a high water mark of the strict doctrine, the emphasis is not so much on the nature of the breach which may or may not be relieved against, but on the argument that it is enough to show that compensation can be given; .......
	'..... it was soon recognised that there would be great difficulty in estimating the proper amount of compensation; and, since the decision of Lord Eldon in Hill v. Barclay, it has always been held that equity would not relieve, merely on the ground that it could give compensation, upon breach of any covenant in a lease except the covenant for payment of rent.'"

At page 103, Lord Simon has this to say:

"With reference to the fifth question - whether this is a case where a court of equity might grant relief against exercise of the right of entry - I agree that Sanders v. Pope and Hill v. Barclay are not in themselves inconsistent authorities; nevertheless, they seem to me to be the respective culminations of a more liberal and a stricter attitude towards equity's jurisdiction to relieve against forfeiture. Lord Eldon LC's inclination, with its emphasis on strict respect for contractual rights and obligations, was more congenial to the following age, and came to be followed. Barrow v. Isaacs & Son was a natural consequence; and I am bound to say that it seems to me to demonstrate an abnegation of equity, and to show that the trail from Hill v. Barclay leads into a juristic desert. Since what was said by Lord Cairns LC in Hughes v. Metropolitan Railway Co. was obiter, and merely reflects the acceptance then generally current none of the authorities binds your Lordships. The last 100 years have seen many examples of relaxation of the stance of regarding contractual rights and obligations as sacrosanct and exclusive of other considerations: although these examples do not compel equity to follow - certainly not to the extent of overturning established authorities - they do at least invite a more liberal and extensively based attitude on the part of courts which are not bound by those authorities. I would therefore myself hold that equity has an unlimited and unfettered jurisdiction to relieve against contractual forfeitures and penalties. What have sometimes been regarded as fetters to the jurisdiction are, in my view, more properly to be seen as considerations which the court will weight in deciding how to exercise an unfettered jurisdiction (of Blunt v. Blunt and Kara v. Kara and Holman). Prominent but not exclusive among such considerations is the desirability that contractual promises should be observed and contractual rights respected, and even more the undesirability of the law appearing to condone flagrant and contemptuous disregard of obligations. Other such considerations are how far it is reasonable to require a party who is prima facie entitled to invoke a forfeiture or penalty clause to accept alternative relief (e.g. money payment or re-instatement of premises) and how far vindication of contractual rights would be grossly excessive and harsh having regard to the damage done to the promise and the moral culpability of the promisor. (I do not intend this as an exhaustive list.) It is these internal considerations which may limit the cases where courts of equity will relieve against forfeiture, rather than any external confine on jurisdiction."

Mrs. Jackson-Lipkin, counsel for the defendant, has urged me to disregard the English authorities on the grounds that they have no application to Hong Kong because we have not the statutory provisions to provide for the relief that may be granted in England. However, I must observe that these authorities referred to by the learned Law Lords were authorities considered before any statutory provision for additional remedies was introduced in England. The two passages in the judgment of their Lordship are considerations of English law as it stood before the introduction of other statutory remedies in England.

14. I am further invited to consider the conduct of the plaintiff that there was wilful default and delay in this matter. However, at this stage I am only concerned whether the plaintiff may or may not have a cause of action. If all the allegations in the statement of claim are as stated it appears that misunderstandings and unexpected events were causes for the delay. Had there been no landslide in the summer of 1972 there would have been no suspension of the provisions in the Building Ordinance and, second, plans submitted in September 1972 would have been approved within 28 days. That would have left the plaintiff time to develop the property in compliance with the covenant.

15. Having regard to Shiloh's case and the judgment of the House of Lords, I am of the opinion that the court has jurisdiction to grant, in appropriate cases, equitable relief against forfeiture on the ground of breach of covenant other than a covenant to pay rent. The criterion whether such relief will be granted at all is based on the circumstances which have been partly listed in Lord Simon's judgment.

16. At this stage it is premature to decide for myself whether the conduct of the plaintiff is such that she should be denied relief. This is within the province of the trial judge. All I have to decide is that the court has jurisdiction and is entitled to look at the conduct of the parties to see whether there has been wilful default on the part of the plaintiff or whether such re-entry is too harsh treatment to the plaintiff as such and whether the defendant would be unfairly prejudiced if relief were granted. Once I resolve that the court has jurisdiction I cannot say that the plaintiff has no cause of action at this stage.

17. Having considered the balance of the two issues I am of the opinion that this application should be dismissed. I find that I am unable at this stage to say that the plaintiff has clearly no cause of action. Once I have decided that question I cannot say in my conscience that the action is frivolous, vexatious or an abuse of the process. Accordingly, the appeal must be dismissed with costs.

	(Simon F.S. Li)
	Puisne Judge.

Representation:

KUNG WAI-YING v. ATTORNEY GENERAL

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