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Legal Update

What does “house” mean in Government Leases? It all depends on the context, says the Court of Final Appeal in Fully Profit.

20 May 2013
Mayer Brown JSM Legal Update
The Court of Final Appeal (“CFA”) handed down its long-awaited decision in Fully Profit (Asia) Limited vs. The Secretary for Justice for and on behalf of the Director of Lands (FACV 17/2012) on 13 May 2013. The appellant Fully Profit owns a site at Nam Kok Road, Kowloon City, comprising five lots held under five separate virtually identical Government Leases, each of which contains a restriction that the owner cannot erect or allow to be erected more than one house on the lot. The CFA reversed the unanimous decision of the Court of Appeal and held that a 26-storey building straddling the five lots cannot be a “house” within the meaning of the word in the Government Leases.

The CFA was of the opinion that in construing a contract, it is not helpful in most cases to refer to the “ordinary and natural meaning” of words. Context should be the starting point (together with purpose), rather than looking at what may be the natural and ordinary meaning of words. In this case, when the Crown Leases were issued in the 1960s, a “Chinese type house” had already been erected on each of the lots. The CFA held that in the context of this case, “house” must be taken to mean the type of house existing on the individual lots. The proposed 26-storey building straddling the five lots cannot be regarded as a Chinese type house and is therefore not permitted.

The result of Fully Profit is that a developer can no longer be certain of what he can or cannot build on his site where there is a “house” restriction in the Government Lease. The case creates uncertainty and is likely to lead to more litigation.


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