District Court Judge Leung Chun-man said the case would have raised an issue of great public interest had it proceeded to trial. His view was echoed by Connie Lau Yin-hing, chief executive of the Consumer Council, which funded the plaintiffs' case.

She said that in light of the settlement, there was an urgent need for society to debate further and define floor heights. 'I hope there will be further discussions ... to define 'height of storey',' she said.

'The Consumer Council will continue to follow the issue as it is of great public interest. For consumers, I recommend they think before signing their sales and purchase agreement to buy a flat; and ask developers for more accurate details when they find anything unclear.'

Plaintiffs Rigo Tang Chi-wing and Cheung Lai-yee bought their flat in block two for HK$1.855 million in November 1999; Kong Yiu-chung bought a flat in block one for HK$1.987 million in the same year.

In their two 2004 writs, they claimed a total of about HK$300,000 in damages from Hugetop Holdings.

The lawsuits, funded by the council's legal action fund, were launched by the flat owners, who contended they were misled to believe the height of each flat was 10 feet and four inches, or 3.15 metres, as stated in the sales brochure and advertisements of the Sheung Shui private estate.

But in April 2001, when they took possession of the flats, they found the height was only nine feet and seven inches (2.92 metres); the measurement was further reduced to eight feet and two inches (2.52 metres) in the dining room in one of the two flats because of a beam.

Yesterday, both sides came to a settlement in the District Court after five hours of closed-door negotiations. The settlement terms were kept confidential.

Jason Pow SC, for Hugetop, read out a joint statement in court, stating the plaintiffs believed the term 'height of storey' represented the height from the floor to ceiling. However, the statement revealed the developer took the measurement from the upper surface of a floor to that of the floor above, which included the thickness of the slab between floors.

'The developer was adopting a practice commonly used in the trade. The developer disagrees that an ordinary purchaser would understand the term storey height as meaning the floor-to-ceiling height,' Mr Pow said from the statement yesterday.

Ms Lau said: 'Despite there being no trial [yesterday], I respect that both the property developer and the flat owners have agreed on a settlement they found satisfactory.'

A property agent in Sheung Shui said the case was unusual because most flat buyers understood there would be discrepancies because of a lack of standard definitions.

'Most buyers only take the numbers given to them for reference,' the agent said. 'For example, a flat size is claimed to be 500 sq ft, but will a buyer really use rulers to measure the width, length and height of every wall? We all know there is discrepancy between the claimed area and the actual area, but no one would really go through the trouble and take the matter to court.'

He said private developers had their own way of calculating flat prices and sizes. 'If there is no profit to be made, who wants to be a private developer and invest so much money to build flats?'