The Dairy Farm Company, Limited v. Secretary for Justice for and on behalf of the Director of Lands

HCMP 2423/2017

[2020] HKCFI 306

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 2423 OF 2017

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J U D G M E N T

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A. INTRODUCTION

1.The plaintiff, Dairy Farm Company Limited, is the registered owner of Rural Building Lot No. 758 (the “Lot”) in Pokfulam by an Agreement and conditions of Exchange (No. 5959) dated 17 March 1958 (“Land Grant”).

2.By its Originating Summons of 27 October 2017, the plaintiff seeks the following relief:

(1)     A declaration that on a proper construction of Special Condition (“SC”) 20 of the Land Grant the Government of the HKSAR (“Government”) must give the plaintiff a vehicular right of way (“VROW”) from Pokfulam Road to the Lot.

(2)     A declaration that by failing and/or refusing to give to the plaintiff a VROW between Pokfulam Road and the Lot, the Government has acted in breach of, or has derogated from, the Land Grant.

(3)     An order that the Government do give to the plaintiff a VROW.

(4)     Further or alternatively, damages to be assessed for breach of, or derogation from, the Land Grant to be paid by the Government to the plaintiff.

3.In summary, the plaintiff has submitted that it is entitled to such relief because:

(1)     On a proper construction of the Land Grant – the express language used and the background factual matrix – SC 20 confers a private general right of way, covering rights of both pedestrian and vehicular access between the Lot and Pokfulam Road.  This right of way is separate and distinct from (a) the existing footpath; and (b) the proposed stepped access and new road to be constructed under SC 10, which are public rights of way.

(2)     Contrary to the Government’s case:

(a)     It has no discretion to decide on the mode or quality of user (with or without vehicle etc) of the right of way to be given under SC 20.

(b)     It has no discretion to refuse the granting of the right of way whether on grounds of “delay” or otherwise.  Nor is the plaintiff’s claim barred by laches, particularly when Government has suffered no prejudice.

(3)     The Government has therefore acted in breach of the Land Grant.  Moreover, without a VROW, the Lot has become unfit for the purpose for which it was granted as it is impractical to maintain or redevelop the staff quarters on the Lot.  As such, the Government has derogated from the Land Grant.

B.     BACKGROUND

4.The facts set out in this Section are reproduced from the plaintiff’s Skeleton Argument and, unless otherwise stated, are undisputed or cannot be seriously disputed.

B1.    The Land Grant

5.The Lot was originally part of a larger farm lot in Pokfulam (“Old Lot”) granted to the plaintiff under a Crown Lease dated 4 October 1910 (“Crown Lease”).  Under the Crown Lease, no person shall use the Old Lot for purposes other than farm, agricultural or garden grounds, or the erection of any buildings on the land except for the proper maintenance, care and enjoyment of the land as a farm or gardens.

6.Before 1956, various one to two storey buildings were erected on the Old Lot, including quarters for staff and workmen.  These buildings were only accessible via a footpath from Pokfulam Road (the “Footpath”) which has existed since at least 1945.  By the time of the Land Grant, there was no vehicular access from Pokfulam Road to the Old Lot, and the Lot had been surrounded by unleased Government land.

7.In or around late 1955 or early 1956, the plaintiff proposed to the Government to erect a further block of quarters for its staff and workmen.  It was subsequently agreed that the plaintiff should surrender a portion of the Old Lot of about 120,000 sq ft in consideration for the grant of a rural building lot of about 30,000 sq ft (ie the Lot).

8.The correspondence between the plaintiff and the Government shows that:

(1)     The parties agreed on the surrender of a portion of the Old Lot and the grant of the Lot with reference to a “layout plan of the area”: see the letter dated 18 January 1957 from the Director of Public Works to the plaintiff, which stated “[t]he area coloured red, which is proposed as the new rural building lot has been increased to 30,000 square feet to conform as far as possible with the layout plan of the area and the portion of Farm Lot No.71 to be surrendered has been proportionately increased to 120,000 square feet as shown coloured blue”.

(2)     The “layout plan of the area” referred to in the 18 January 1957 letter is the “Layout Plan No. L.H. 10/5” dated 6 June 1956 (“Layout Plan”) sent on or around 26 June 1956 to the plaintiff – which was acknowledged by the Government to have a “considerable interest in Pokfulam Village”.  The portion depicted by the plan attached to the 18 January 1957 letter notably resembles Plan No. 1 attached to the Land Grant, as well as the relevant part of the Layout Plan.

9.The Layout Plan reflected the proposed layout for redevelopment of Pokfulam Village.  The Layout Plan provided for, inter alia:

(1)     the widening of Pokfulam Road to 60 feet;

(2)     two 45 feet feeder roads connecting Pokfulam Road with the north and east of Pokfulam Village.  The Lot would be accessible from the feeder road parallel to the west side of the Lot (“Proposed New Road”) via a pedestrian stepped access (“Proposed Stepped Access”);

(3)     a layout of building blocks suitable for two-storey buildings;

(4)     a series of 30 feet streets suitable for two-storey houses, which would be capable of taking some vehicular traffic; and

(5)     sites for public purposes, such as bath and latrine, market and clinic.

10.There is no dispute that vehicular use was already common in or around 1958.

11.During the land exchange negotiation, the plaintiff was already building a new block of staff quarters with 8 storeys.  The block was completed on or about 30 January 1957.

12.On 17 March 1958, the plaintiff and the Director of Public Works executed the Land Grant, effecting the surrender of a portion of the Old Lot to the Government in exchange for the grant of the Lot for a term of 75 years from 25 June 1956.  The Land Grant contains, inter alia, the following General Conditions (“GC”) and SC:

(1)     GC 5, which provides that the lessee must maintain all buildings erected or which may at any time thereafter erected on the Lot in good repair and condition.  In the event of demolition of the buildings standing on the Lot, the lessee shall replace the same either by buildings of the same type of no less volume or by buildings of such type and value as shall be approved by the Director of Public Works.

(2)     SC 2, which provides that no buildings shall be erected on the Lot except those for providing housing for staff and employees of the grantee and dependent members of the families of such staff and employees, non-paying guests and domestic servants employed by them.

(3)     SC 10, which provides: –

“The proposed stepped access shown coloured green on Plan No.1 will be constructed by Government at the lessees’ costs as and when the new road is formed.” (emphasis added)

As noted above, Plan No. 1 resembles the relevant part of the Layout Plan, depicting the Proposed Stepped Access which connects the Proposed New Road.  It is not disputed that the “new road” referred to in SC 10 (ie the Proposed New Road) has never been formed, and the Proposed Stepped Access has consequently never been built by the Government.

(4)     SC 20, which provides: –

“A right-of-way from Pokfulam Road to the new lot on a line to be approved by the Director of Public Works will be given. The lessee shall construct a road or path on the piece of ground over and along which such right-of-way shall be given at such time or times and in such manner as the Director of Public Works may direct and shall uphold, maintain and repair such road or path and everything forming portion of or appertaining to it to the satisfaction of the Director of Public Works, and the lessees shall be responsible for the whole as if they were absolute owners thereof. Any alteration of the government road to which the right-of-way is given absorbing a portion of such places of ground or affecting the gradient thereof shall not give rise to any claim by the lessees who shall carry out all consequent alterations to such road or path constructed by them.” (emphasis added)

(5)     SC 21, which provides: –

“The grant of the right-of-way referred to in Special Condition No. (20), shall be in such form and on such conditions as may be approved by the Land Officer and shall not give the lessees the exclusive rights to use the road or path constructed by them, and Government reserves the right to grant right-of-way over such road or path to the lessees of any other lots which may be sold in the vicinity or to take over the whole or any portion of the said road or path for the purposes of a public road without payment of any compensation to the lessees or to other lessees to whom right-of-way over the whole or any portion of the said road or path shall have been granted.” (emphasis added)

13.Given its geographical position, absent effective access via a right of way the Lot will be functionally “land-locked”.

14.Despite the scale and other characteristics of the Lot (further discussed below) and of Pokfulam Road (a four lane arterial roadway), there exists between them no vehicular access, despite the right of way clause in SC 20 of the Land Grant.

15.Instead, the Lot to present day remains accessible from Pokfulam Road only via the Footpath, which is surrounded by squatter structures on unleased Government land.

B2.    The staff quarters

16.In 1961, the block of quarters built in 1957 was extended.  The entire block of staff quarters as completed is now known as Block B of the Dairy Farm staff quarters.  In 1965, another block of staff quarters was completed, and it is now known as Block A of the Dairy Farm staff quarters.

17.In or about 2005, the use of the Lot as staff quarters ceased.  This is because the 2 blocks of staff quarters, due to their old age, became uninhabitable and it was increasingly difficult to maintain the buildings due to the lack of vehicular access.

18.The staff quarters are now in a dilapidated condition, and it is necessary for the plaintiff to erect hoardings around the staff quarters to prevent unauthorised entry as the condition of the buildings poses a real danger to persons within and in the vicinity of the buildings.

19.Due to lack of vehicular access, it is difficult if not impossible and economically infeasible to carry out proper maintenance of the staff quarters or to demolish and replace the same by the construction of new buildings in compliance with GC 5 of the Land Grant, since heavy machinery is required for the demolition of the existing buildings and construction of new buildings on the Lot.

20.A Defective Building Order has been issued in respect of Block B of the staff quarters.

B3.    The plaintiff’s applications for a VROW

21.Between 2000 and 2005, through its then land consultant David C Lee Surveyors Ltd (“DLS”), the plaintiff sought approval from the Government to grant a VROW from Pokfulam Road to the Lot:

(1)     On 28 September 2000, DLS wrote to District Lands Office (“DLO”) and applied for a VROW resembling the proposed road indicated on the Pokfulam Outline Zoning Plan.

(2)     On 30 November 2000, DLO replied and stated that it was prepared to grant a right of way over the Footpath leading from Pokfulam Road to the southern boundary of the Lot subject to no adverse comments from the departments concerned.

(3)     On 16 February 2001, DLS rejected DLO’s offer and pointed out that the Footpath was distinct from the right of way under SC 20.

(4)     On 15 October 2002, given DLO’s refusal to grant a VROW, DLS proposed to DLO a non-in-situ land exchange.  This proposal was rejected on 21 January 2003, but in the letter DLO stated that it would be prepared to grant a right of way under SC 20 which is considered feasible and acceptable to the Government.

(5)     On 24 April 2003, a new proposed alignment of the road which runs along the northern boundary of the existing school site in Pokfulam was submitted by DLS to DLO for consideration.

(6)     On 16 June 2004, an alternative approach for a VROW was submitted by DLS to DLO.  On 6 August 2004, DLO replied that the proposal would involve clearance of squatter structures on the Government land and would “generate strong opposition from the local community”.  It suggested DLS providing further proposed road alignment for study.

(7)     On 6 October 2004, another proposed road alignment for a VROW was submitted by DLS to DLO.  DLS also stated that the plaintiff would be willing to meet the cost of clearance of Government land including the cost of reprovisioning of the temporary sitting out area which lies within the proposed alignment.  The plaintiff’s intention was confirmed again in a letter dated 26 may 2005 from DLS to DLO.

(8)     However, the plaintiff’s proposal has never been approved by DLO.

22.  Several years later, by a letter dated 10 October 2012, the plaintiff through Larry H.C. Tam & Associates Ltd applied once more for provision of a VROW under SC 20 of the Land Grant, submitting a proposal setting out inter alia the proposed alignment and layout of the vehicular access to DLO.

23.On 31 May 2013, DLO rejected the plaintiff’s application, stating that the Government is not obliged to grant a VROW to the plaintiff.  No reason was given for DLO’s position.

24.In 2016, the plaintiff requested the Government to review its rejection to grant a VROW.  There has been no open reply to the plaintiff’s request by the Government.

25.From the correspondence, it is apparent that the Government’s unwillingness to grant a VROW to the plaintiff is due to its unwillingness to clear the squatters on the Government land to make way for this.  The Government has not sought to deny this in its affidavit evidence.  In fact, there is no dispute that the Government can carry out clearance if it decides to do so.

C.     CONSTRUCTION OF THE LAND GRANT

C1.    Relevant legal principles

26.In the case of an express grant of a right of way, the extent of the rights granted depends on the express terms of the grant.  Those terms must be construed in accordance with the general rules as to the interpretation of legal documents.  As submitted by the plaintiff, the general principles here are well-established:

(1)     Interpretation is the ascertainment of the meaning which the document would convey to a reasonable person having all the background knowledge which would reasonably have been available to both parties in the situation in which they were at the time of the execution of the document.

(2)     The court will focus on the meaning of the relevant words in their documentary, factual and commercial context.

(3)     The meaning of the words is to be addressed in light of:

(a)     The natural and ordinary meaning of the provision.

(b)     Any other relevant provisions in the document.

(c)     The overall purpose of the relevant provisions.

(d)     The facts and circumstances known or assumed by the parties at the time that the document was executed.

(e)     Commercial common sense.

(4)     The process is an objective one, subjective evidence as to the intentions of the parties is to be disregarded.

(5)     The general rule is that all relevant facts and circumstances can be taking into account as an aid to interpretation of the words used in the document.

(6)     As an exception to the general rule referred to in (5) above, the court will not take into account the contents of pre-contractual negotiations save in so far as those negotiations reveal the existence of a background fact which is otherwise relevant.

See Gale on Easements, 20^th edn (2017), §§9-18 – 9-21; also Jumbo King Ltd v Faithful Properties (1999) 2 HKCFAR 279 at 296D-I per Lord Hoffmann NPJ; River Trade Terminal Co Ltd v Secretary for Justice (2005) 8 HKCFAR 95 at §§34-36 per Ribeiro PJ; Fully Profit (Asia) Ltd v Secretary for Justice (2013) 16 HKCFAR 351 at §15 per Ma CJ; and recently Eminent Investments (Asia Pacific) Limited v Dio Corporation[2019] HKCA 606 at §7.3 per Cheung JA.

27.Where the agreement was a formal and complex one, or was negotiated and prepared with the assistance of skilled professionals, the interpretation may be achieved by a greater emphasis on the textual analysis: Wood v Capita Insurance Services Ltd [2017] AC 1173 at §13 per Lord Hodge.

28.Subsequent conduct of the parties is generally inadmissible to construe a contract: James Miller & Partners Ltd v Whitworth Street Estates (Manchester) Ltd [1970] AC 583 at 603E per Lord Reid; SNE Engineering Co Ltd v Chim Kee Machinery Co Ltd (unreported, CACV 101/2016, 11.7.2017) at §52 per G Lam J (sitting in the Court of Appeal).

29.As stated in Gale (at §9-37), the true principle appears in the Judgment of Jenkins J in Kain v Norfold [1949] Ch 163 at 168:

“[Counsel] says, and I think he is supported by authority, that a right given to the grantee of property at all times hereafter to go, pass and repass over and along a certain way without any reference to horses, carriages, carts or anything else will, per se, unelaborated as it is, give a right of way for all purposes, that is to say, a right to pass with vehicles as well as on foot, provided that the way to which the grant refers is a way suitable at the date of the grant for use by vehicles. I think that accords with the statement of law contained in the judgment of Jessel MR in Cannon v Villars.” (emphasis added)

This was said in the context of a right being granted over a “defined strip” within the servient tenement.

30.Halsbury’s Laws of England 5^th ed, vol 87 §953 states: “A grant of a right of way to a dwelling house prima facie amounts to a grant of a right of way for all reasonable purposes required for the dwelling house, and would include the right to the use of cars by the dominant owner to set down or pick up passengers, or a right to have a van draw up to the door to load or unload goods.”

31.In Charles v Beach & Anor (unrep., 1.7.1993),[1] a common vendor of 2 adjoining properties and a narrow strip of land in the form of a roadway of about 9 ft 6 ins wide separating the two properties granted to the purchaser of the dominant tenement a right to use the “path or roadway” lying between the 2 properties.  Because the dominant tenement’s frontage to the front one third of the driveway was largely occupied by the flank wall of her house, a right of access to the property with vehicles could only be enjoyed effectively if such access was available from the rear two thirds of the driveway.  The county court held that the dominant owner was entitled to vehicular access over the whole of the driveway.  The decision was upheld by the English Court of Appeal. Waite LJ held that[2]:

“(1)  The use of the words “path or roadway” when applied to the driveway in the deed of grant provide a strong prima facie indication of intention by the grantor to confer the widest rights of both pedestrian and vehicular access.

(2)  The imposition upon the grantee of a duty to contribute a one quarter share of the expense of keeping the “path or roadway” in repair provides a further powerful indication of intention to confer a right of user in the widest terms.” (emphasis added)

32.As pointed out by the plaintiff, the various principles above were effectively affirmed and applied by the Court of Appeal in Wisename Ltd v The Secretary for Justice [1998] 1 HKLRD 71, a case with striking parallels with the present:

(1)     There, the Court of Appeal considered the nature and extent of the plaintiff lessee’s right of way under a special condition (SC 12) to a right of way between a government road and his otherwise land-locked lot. 

(2)     The words of SC 12 were in substance identical to those of SC 20 in the present case, save that SC 12’s opening words specified the line of the right of way as “shown coloured yellow on a plan deposited at the District Office”, whereas SC 20 refers to a right of way from Pokfulam Road to the Lot “on a line to be approved by the Director of Public Works”.  As with the disputed term in Charles v Beach(above), which referred to “path or roadway”, both SC 12 and SC 20 refer to “road or path”.

(3)     The Court of Appeal’s primary ruling was to affirm that SC 12 conferred “a general right of way”, which included “effective vehicular access”: see e.g. p.78I-J (Liu JA).

(4)     Construing SC 12 “in the factual matrix of the circumstances surrounding the signing of the New Grant” (p.77H-I), Liu JA noted that: “No restrictive words were incorporated into [SC 12], nor could they be found elsewhere in the New Grant” and there were “no circumstances or disclosed intention to suggest that the right of way granted was restrictive”: p.78F-G.

(5)     Noting that the “nature and extent of the right of way turns on a construction of the whole grant including but not restricted to Condition 2” (p.80H), Chan CJHC (as he then was) stated inter alia that:

“It is significant to note that there is no restriction in Condition 12 or anywhere in the New Grant on the use of the right of way, such as it is only to be used only as footpath and not for vehicular access. The burden is on the Crown (now the HKSAR) to show that it is restricted in use in any particular way. In my view, the government has failed to discharge this burden. On the contrary, there is every indication that the right of way may be exercised and was intended to be exercised for uses including that for vehicular access. In the absence of any express or implied restriction, the right of way in question is a general right of way” (p.81J-82A; with emphasis supplied).

(6)     In reaching their core conclusions, both Liu JA and Chan CJHC had regard to the circumstances at the time of the New Grant in that case.  As analysed below, the background in the present case also strongly supports the same reading of the express words of SC 20 as endorsed by the Court of Appeal.

C2.    Why SC 20 obliges the Government to grant a vehicular right of way

33.It is pertinent to start with a textual analysis of the express language used in the Land Grant.  The plaintiff correctly made the following points in this regard:

(1)     The Land Grant was drafted by the Government, which obviously had carefully chosen the words on the contract.

(2)     SC 20 provides that a right of way from Pokfulam Road to the Lot will be given, although the alignment (ie the “line”) of the way proposed by the plaintiff would have “to be approved” by the Director of Public Works at its discretion.  This means that the Government has no discretion to generally refuse to grant a right of way to the plaintiff.  In other words, the express terms make clear that it is the specific alignment of such right of way under SC 20 that is “to be approved”, but save for the Director’s discretion in that limited regard, the right of way “will be given” as a matter of unqualified legal entitlement.

(3)     The grant of the right of way was for access to domestic premises.  Prima facie, this amounts to the grant of a right of way for all reasonable purposes required for the use of such premises. 

(4)     SC 20 then provides that the lessee shall construct a road or path on the piece of ground over and along which the right of way shall be given, at such time and in such manner as the Director of Public Works may direct.  This has been stated by Gale at §9-109 as a settled ancillary right to which the dominant owner is entitled to make the grant effective.  Here, the choice is the plaintiff’s to decide whether to build a road or path.  The language of “road or path” (which is identical to that in Wisename) itself indicates the intention of the Government to confer the widest rights of both pedestrian and vehicular access: see Charles v Beach discussed in paragraph 31 above.

(5)     SC 20 imposes no express restriction on the mode or quality of user of the right of way.  On the contrary, it requires the plaintiff to maintain and repair the “road or path”. These are powerful indications of the Government’s intention to confer a right of user in the widest terms.  In Keefe v Amor[1965] 1 QB 334 at 345F, Russell LJ observed that an obligation to pay a fair portion of the cost of keeping the way in good repair and condition would be unusual if “all that was envisaged was the impact of human feet”.

(6)     The last sentence of SC 20 is a standard clause which can be found in other government leases.  It means that if there is alteration to Pokfulam Road (ie the “government road” to which the right of way gives access) which absorbs a portion of the ground over which the right of way is given or affects its gradient, the lessee shall not have any claim and shall carry out consequent alterations to the road or path it constructs.

(7)     And as Chan CJHC noted in Wisename (p.81H-J), the maintenance, repair and other obligations imposed on the grantee should inform the proper construction of SC 12/ SC 20 and in particular the first sentence, “which cannot be read in isolation”. 

(8)     SC 21 gives the Land Officer (as opposed to the Director of Public Works) a discretion to approve the “form and conditions” of “the grant” of the right of way that SC 20 substantively accords.  In other words, the particular form and conditions of the legal instrument granting the right of way shall be at the Land Officer’s discretion.  SC 21 does not give the Government a discretion to decide on the form or other characteristics of the substantive right of way itself, be they its alignment, mode or quality of user.  Those matters are governed by SC 20.

(9)     The right-of-way under SC 20 is to provide access to and from Pokfulam Road which is vehicular, and this in itself is an indication that the right-of-way is intended to be vehicular.  This is the true object and purpose of SC 20 – the object of SC 20 is not to prevent the Lot from being land-locked as the Lot and the Old Lot could always be accessed via the Footpath.  SC 20 thus plainly intended to confer something “extra”, namely vehicular access to Pokfulam Road, and from that the wider road network that was being contemplated in the area.

34.Further, the above textual points stand in tandem with – and are reinforced by – the following contextual factors.  There are two main sets of factors in this regard.

35.First, a number of significant practical considerations strongly support the plaintiff’s reading of SC 20:

(1)     The Land Grant granted a long lease of 75 years.  It is not disputed that vehicular use was already common in 1958.  A reasonable person would have concluded that the parties have objectively intended to stipulate for a general right of way that could be exercisable by the use of vehicles at some point in future, with the likely continued development of both (a) the Pokfulam neighbourhood and (b) the prevalence of vehicular modes of transport generally and in that area.

(2)     In any event, as the Court of Appeal noted in Regal Shining Limited v Secretary for Justice [2016] 3 HKC 291 at §41 (in a dispute over the scope of another form of provision in a Government lease), the long term nature of such a lease militates against restricting the scope of its provisions “by reference to the specific practice at the time when the lease was made”.

(3)     It is highly relevant to note that the plaintiff’s undertaking of maintenance and redevelopment obligations under GC 5 would last for a period of 75 years.  This strongly supports the construction that the right-of-way is for a vehicular access.  This is highlighted by the undisputed fact that it would be practically difficult and economically infeasible for the plaintiff to comply with GC 5: see Section B2 above.  Indeed, as a practical proposition, it would have been reasonably apparent even in 1958 that the longer the life of whatever buildings existed or were contemplated at the time of the grant, the greater would be the logistical demands of maintenance, repair and any rebuilding or redevelopment in respect of those structures.

(4)     Another relevant consideration is that it was contemplated that the staff quarters on the Lot would provide housing for more senior staff of the plaintiff: see SC 2 which referred to “domestic servants” of the staff.  The contemplation of such residents again militates against any restriction of the wide words of SC 20 to pedestrian access only.

36.Second, in terms of the wider documentary and developmental context, it can be seen that:

(1)     The Layout Plan was part of the factual (including geographical and developmental) and documentary matrix known to both the plaintiff and the Government: see paragraph 8 above.  It contemplated that the Pokfulam Village would be redeveloped with a network of roads and streets capable of taking vehicular traffic.  Vehicular access connecting the Lot with such road network leading to Pokfulam Road would align with that planning intention.

(2)     That the Layout Plan did not itself provide for a vehicular access from the Lot to the Proposed New Road does not assist the Government.  The Layout Plan indicated the public road network intended to be constructed by the Government. SC 20, however, concerns the provision of a private right of way, the alignment of which had yet to be agreed between the plaintiff and the Government by the time of the Land Grant.  Accordingly, the “road or path” envisaged under SC 20 would and could not have been shown on the Layout Plan.

37.The Government heavily relies on SC 10 and suggests that since SC 10 only provides a pedestrian stepped access, SC 20 only provides for a similar pedestrian access as a contingency to cater for the possibility that the Proposed New Road is not constructed.  It argues that the obligation on the part of the Government under SC 20 can be satisfied by granting a right of way over the Footpath or the Proposed Stepped Access.

38.I agree with the plaintiff that any such reliance on SC 10 is untenable:

(1)     Linguistically, it violates the plain and wide language of SC 20, which provides that the lessee shall construct a “road or path” – with both words capable of designating vehicular means of access.

(2)     Structurally and substantively, SC 10 and SC 20 are clearly separate and distinct.  The Proposed Stepped Access under SC 10 is to be constructed by the Government (at the plaintiff’s costs) as and when the Proposed New Road is formed, as part of the redevelopment of the Pokfulam Village indicated in the Layout Plan.  In contrast, the “road or path” over which the right of way separately provided for under SC 20 is to be constructed by the plaintiff.

(3)     Whereas SC 10 refers to “new road” to be formed, it is reasonably clear from the factual background that this was a reference to the road which was being proposed under the scheme shown in the Layout Plan.  The roads being proposed would not provide direct vehicular access to the Lot, and hence the need for a “stepped access” under SC 10.

(4)     The road network detailed in the Layout Plan was intended to be public roads.  Such a public road network should be distinguished from the private “road or path” that would be constructed by the plaintiff as lessee upon the right of way created in favour of the Lot under SC 20.  It is evident from SC 20 that the “road or path” to be constructed by the lessee under SC 20 was, at least initially, to be a private road.

(5)     There is no language in the Land Grant to the effect that SC 20 is engaged only if the Proposed New Road and the Proposed Stepped Access under SC 10 are not built.  SC 20 clearly creates an independent right of way.  If SC 10 is implemented, the “road or path” under SC 20 could connect the Lot to any point of the Proposed New Road, with the precise alignment being subject to the Government’s approval.

(6)     Accordingly, there is no basis to equate or conflate the intention or purpose of SC 10 with that of SC 20.  It is, in all the circumstances, absurd to say SC 20 can be satisfied by the Footpath.  The Footpath, which existed since 1945, has always been used by the public.  There is a public right of way over the Footpath.  It could not have been the intention of the parties under the Land Grant to grant a private right of way over the Footpath.

39.Miscellaneous other (at best) tangential points have been raised in the affidavit evidence filed for the Government.  As submitted by the plaintiff, none of them is of merit:

(1)     It is said that the Lot or the Old Lot lacked vehicular access prior to the Land Grant.  But this is nowhere to the point: SC 20 is precisely intended to grant additional rights from a future-looking perspective.

(2)     The Government relies on the internal valuation of the Lot and particularly the statement that “one must have due regard to the inaccessibility of the site with the usual accompanying engineering difficulties”.  However, there being no evidence that the way the Government valued the Lot was known to the plaintiff at the material time, this cannot begin to serve as an aid to interpretation.  Whether and if so how the right of way under SC 20 was taken into account by the Government in the valuation is also utterly unclear.  In any event, it would not have been unreasonable for any assessment of value of the Lot at the time to exclude consideration of a right-of-way when the right has not yet materialised and when it was wholly uncertain as to when a road or path would be constructed.

(3)     The post-contractual matters relied on by the Government are inadmissible for interpretation.

(4)     Furthermore, the Government contends that the buildings to be erected on the Lot were intended to be occupied by agricultural labourers to work on the immediate vicinity of the Lot with limited transportation needs.  But as submitted above, SC 2 shows that the staff quarters were intended to accommodate senior staff of the plaintiff, and moreover given the long span of the grant, there are no grounds for excluding the use of the buildings for persons or functions requiring vehicles from the scope of SC 20.  In any case, it cannot even be shown as a matter of prevailing fact that agricultural labourers would necessarily have no vehicles and no transportation needs after they are off from work.

40.As Chan CJHC held in Wisename v SJ (above) at p.81J, the burden falls on the Government as grantor to establish any particular restriction on the scope of SC 20, as a matter of its express terms or of (necessary) implication.  For all the above reasons, I agree the Government comes nowhere close to this.  On a proper construction of the Land Grant, the plaintiff is entitled to a general right of way from Pokfulam Road to the Lot, including vehicular access, rather than just the presently available pedestrian access.  

C3.    The Government’s case in sum

41.By way of oral submissions, the Government’s essential case appears to rest on just these points:

(1)     The Lot was land-locked at the time of the Land Grant.

(2)     SC 20 was not intended to accord anything beyond what was already in place at the time.  Its purpose was merely to ensure that the Lot would not be land-locked, whatever the Government was going to do on the surrounding Government land.

(3)     If the Government did not implement the Layout Plan and build the new road network, SC 20 could be fulfilled by the existing pedestrian Footpath.  It would then be for the plaintiff to improve the Footpath or construct another (pedestrian) road or path if it wished, pursuant to SC 20, and the alignment of such road or path is not set in stone.  SC 20 also conferred the Government a right to modify the alignment of the ROW without compensation.

(4)     If the Proposed New Road were built, the Government would be obliged under SC 10 to construct the Proposed Stepped Access which would encroach onto the existing Footpath.  The Stepped Access as built would serve as the right of way under SC 20.

(5)     The wording of SC 21, which the Government says supports its reading of SC 20.

(6)     The user of the staff quarters, and the locus in quo, informed the construction of the Land Grant.

SC 20 intended to confer an additional vehicular right-of-way to the plaintiff

42.The fundamental premise of the Government’s argument is that SC 20 should be construed as not intended to accord any right to the plaintiff, other than an assurance that the lot would not be landlocked. This fundamental premise is unsustainable as a matter of construction of SC 20.

43.I agree with the plaintiff’s submission that the Government’s case on SC 20 is beset by several major fallacies.

44.First, as noted in paragraph 6 above, the Footpath existed since at least 1945.  By the time of the Land Grant, it must have become a “highway” (ie public road) by dedication and acceptance given the long user: see the principles in Fortune v Wiltshire Council [2013] 1 WLR 808 at §§11-14 (Lewison LJ).

45.The “once a highway, always a highway” maxim applies here (see Fortune at §11; Colin Sara, Boundaries and Easements,7^th edn (2019), §7-009):

(1)     There was simply no need to have SC 20 in the Land Grant, if its purpose was only to confer a right of way over the Footpath. The plaintiff and other members of public already enjoyed a right of way. 

(2)     Further, and in any event, insofar as the Lot was landlocked, the plaintiff would have an implied right of way by necessity: Gale at §3-167.  If SC 20 were intended (as the Government contends) to assure the plaintiff that it would have a ROW, it would have been superfluous.

46.Second, on a plain textual reading, SC 20 is manifestly future-looking.  It provides that a right-of-way “will be given” and that, thereafter, the lessee “shall construct” a road or path for that purpose.  SC 21 provides that the grant “shall be” in such form and on such conditions as “may be approved” by the Lands Officer.  The language is starkly inconsistent with the proposition that SC 20 was intended to be fulfilled by the existing Footpath.

47.In this regard, Fully Profit (Supra) is plainly distinguishable from the present case.  That case concerned the meaning of the word “house”, which was plainly tied to the existing structure standing on the lot in question at the time of the contract.  Here we are concerned with SC 20, which contemplates a road or path which had not yet been built (and is thus inherently forward-looking).  In other words, in contrast to the situation in Fully Profit, the meaning of the words “road or path” under SC 20 cannot be ascertained by reference to the physical situation at the time of grant.  That situation necessarily did not include the road or path that was not yet built.

48.The same problem besets the Government’s reliance on the locus in quo.  This argument ignores the fact that SC 20 is plainly forward looking; and also ignores the fact that even within Plan No. 1 attached to the Conditions of Grant, the parties plainly contemplated substantial development within the area including new roads and high density residential housing in the area.

49.Third, SC 20 was plainly intended to provide a ROW to Pokfulam Road,rather than merely a provision to ensure that the lot is not landlocked.

50.Fourth,if SC 20 was intended merely to reflect the existing Footpath, it would not have provided for an alignment to be “on a line to be approved by the Director of Public Works.”  Instead, it would simply have proceeded to set out the alignment of the ROW (like what happened in Wisename).  Furthermore, if the intention was to provide the Government with the right to alter the alignment, SC 20 would have been very differently drafted.  What was contemplated in SC 20 was the provision of a ROW once and for all, and not a flexibility to the Government to change the alignment of an existing footpath from time to time.

51.The Government’s argument involves a complete rewrite of SC 20:

(1)     Once the ROW is given under SC 20, the parties have no right to change the alignment of the ROW under the clause.  See Gale at §9-98.

(2)     The words starting with “any alteration of the government road to which the right of way is given …” clearly do not give such right.  It simply means if the Government alters the alignment of Pokfulam Road (ie the “government road to which the right of way is given”), the plaintiff should carry out consequent alteration of the ROW without compensation. If these words meant what the Government contends, SC 20 could have simply provided the Government has a right to modify the alignment of the ROW as granted.

52.Fifth, if SC 20 were intended to be fulfilled by the Proposed Stepped Access as and when it is built, one would surely expect SC 20 to be linked by express reference to SC 10, which would make plain that the right conferred by SC 10 and SC 20 are in the alternative.  Instead, there is nothing in SC 10 or SC 20 to suggest that if SC 10 kicks in, the plaintiff will have no right under SC 20.

53.Sixth, if SC 20 could be satisfied by the Footpath, and the Government wanted to alter or extinguish the Footpath, it would be contrary to common sense that the burden would be on the plaintiff to construct a road or path and to be responsible thereafter for its maintenance and repair. 

SC 21

54.As mentioned in paragraph 33(8) above, it was necessary to include SC 21 in the Land Grant because the alignment of the right-of-way had not been decided and therefore a separate legal instrument (ie the noun “grant” in the first line) was necessary.  This was not the case in Wisename.

55.Further, a deed would be necessary to create a legal estate for the easement.  In 1958, there was no statutory provision (c.f. Conveyancing and Property Ordinance, Cap 219, section 14) to convert equitable interest under the Government lease to legal estate.

56.The reference to “conditions” in SC 21 plainly connotes a further written instrument where the conditions will be set out. What SC 21 was referring to was the legal form and conditions for the grant.  This also explains why SC 21 referred to the Land Officer (who in those days was concerned with legal matters), rather than the Director of Public Works named in SC 20.

57.SC 1 indeed assists the plaintiff rather than the Government, as it shows that the function of the Land Officer (as opposed to the Director of Public Works) was to approve the “form of deed or document” in those days.  The difference in the language between SC 1 and SC 21 is entirely explicable.  SC 1 deals with a situation where the plaintiff proposes to enter into an agreement with a third party, and SC 1 provides that the deed or document must be pre-approved by the Land Officer.  SC 21 is concerned with the form and conditions of the grant as between the plaintiff and the Government.

58.The Government’s argument that the word “form” in SC 21 meant scope of the grant must be rejected.  It is plain from the context and reading SC 20 with SC 21 that the “form” refers to the legal form in which the grant would take, for example, whether it would be by way of a deed of grant, or by a letter of modification.  The Government failed to explain why in SC 21, the reference was to the Land Officer, when in SC 20, it was the Director of Public Works.

59.Indeed, it appears that in other government leases where the alignment of the right-of-way had not been drawn up, a condition like SC 21 would similarly be provided: see Favourable Issue Co Ltd v Secretary for Justice (unrep., HCA 3344/2001, 19.10.2012) at §13.

User of the staff quarters and construction/ maintenance logistics

60.It is wrong to suggest that the existing interior design of the block of staff quarters standing on the Lot in 1958 should inform the construction of SC 20.  The building on the Lot could of course be redeveloped subject to the limitation under GC 2, bearing in mind that the lease is a 75 years’ lease.  As noted, GC 2 envisages occupation of the buildings by domestic servants.

61.There is also no factual basis to say the workers living in the staff quarters would not need vehicles (which could well be arranged by their employer), particular when time moves on.

62.It is also misconceived to rely on the possibility of construction or maintenance of buildings at the site without vehicular access, the examples cited by the Government are only exceptions. 

63.At the time of the Land Grant, it would have been known that having vehicular access would be a significant advantage for both such purposes, particularly since Pokfulam Road was itself available for large transport vehicles.  

64.The question then is: what reason would there be to positively restrict the scope of the right of way, and exclude the option of vehicular access for such purposes.  To this, the Government gives no answer.

D.     OTHER ARGUMENTS OF THE GOVERNMENT

65.As an alternative, the Government argues that SC 20 provides a vehicular or pedestrian right of way from Pokfulam Road to the Lot which the Director of Public Works should in his discretion decide.

66.For the reasons set out in Section C (see in particular paragraph 33(4) above), this argument must be rejected.  The Government has no discretion to decide the mode or quality of user of the right of way.

67.Under SC 20, the Government does not have any discretion.  The contractual duty was that a ROW will be given; not that it may be given.

68.As a further alternative, the Government submits that it is not unreasonable for it to refuse to provide a VROW in the exercise of its discretion having regard to:

(1)     Alleged delay on the part of the plaintiff.

(2)     The fact that the staff quarters were in use for over 40 years despite the lack of a VROW.

(3)     The fact that the remainder of the term of the Land Grant is less than 15 years.

(4)     The time, costs and disturbances which may be incurred by (or caused to) both the Government and inhabitants of the locality if a vehicular right of way is to be provided and constructed now, as opposed to much earlier.

69.I agree with the plaintiff that this submission cannot stand:

(1)     As analysed in Section C (see in particular in paragraph 33) above, the Government has no discretion to refuse to grant a VROW to the plaintiff.  When sought, a VROW will and shall be given under SC 20.

(2)     The Government rejected the latest VROW application by the plaintiff without giving any reasons: see paragraph 23 above.  The Government’s resolute silence at the time sits uncomfortably with its present assertion that it exercised the discretion to refuse to provide a VROW on the grounds set out in paragraph 68 above, and suggests that these grounds may be merely ex post facto justifications. 

(3)     Its opposition to the present proceedings on the basis that SC 20 did not grant to the plaintiff a VROW is plainly misconceived. Any purported exercise of discretion when the Government has not correctly recognized its obligation cannot possibly stand.

(4)     In any event, a contractual discretion has to be exercised rationally and in a way consistent with its contractual purpose, taking only relevant considerations into account: Barganza v BP Shipping Ltd [2015] 1 WLR 1661 at §§29-30 per Baroness Hale.

(5)     I agree with the plaintiff’s submission that properly analysed, the four matters relied on by the Government (see paragraph 68 above) in the exercise of the purported discretion are irrelevant considerations, or alternatively are matters which rendered the decision irrational and inconsistent with the purpose of the grant of the right of way:

(a)     §68(1): I do not agree that the plaintiff has materially “delayed” given (i) the lack of any temporal limitation (in the context of a 75-year lease) as to when the plaintiff must make any demand for a VROW.  Moreover, delay alone, in the absence of detrimental reliance, is not a valid reason to deny the plaintiff’s right: see paragraph 70 below.

(b)     §68(2): This completely ignores the plaintiff’s difficulty in complying with the maintenance and redevelopment obligations under GC 5.  The reasoning is also fallacious: it is a non-sequitur to contend that a VROW is somehow wholly unnecessary or unwarranted now merely by reference to past use.  Moreover, if the plaintiff is otherwise entitled to a VROW (for the reasons set out above, including the contextual/practical considerations favouring the plaintiff’s reading of SC 20), any discretionary reason for denying vehicular access based on “necessity” must be very cogently shown for it to be reasonable.  Indeed, even if vehicular access were only highly convenient and beneficial to the plaintiff’s use of the site (and not in practical terms absolutely necessary), it would be wholly unreasonable to deny such access absent the strongest countervailing reasons.

(c)     §68(3): 15 years remain a significant period of time. Further, the Land Grant is a special purpose lease which, as a matter of the Government’s policy, may be extended for a term of 50 years without payment of a premium.  The fact that the Government retains the “sole discretion” whether to renew a lease under the policy does not mean that the Government may depart from its own policy.  By way of example, the Director of Immigration retains a discretion whether to grant, say a dependant visa to an applicant; but since the Director has set out his policy, there is a public law duty on the part of the Director to follow his own policy unless there are cogent reasons not to do so.  

(d)     §68(4): The inhabitants (squatters) in the vicinity have no legal rights in the Government land, and are subject to enforcement by the Government in accordance with the land leases.  Furthermore, the plaintiff was willing to bear the cost of clearance as previously expressed (see paragraph 21(7) above) and is still open to any similar cost proposal if the Government considers cost as an issue.

70.The Government further contends that the grant of a VROW can be denied on the ground of laches and acquiescence.  This too is without merit:

(1)     Under the equitable doctrine of laches, the court would determine whether it is “practically unjust” to award relief, and this turns on the circumstances of each case.  The two important factors are the length of the delay, and the nature of the acts done during the interval: Lindsay Petroleum Co v Hurd (1874) LR 5 PC 221 at 239-240 per Sir Barnes Peacock.

(2)     As already noted, in the context of a 75-year lease in which the parties did not contractually agree any temporal limitation on the invocation of SC 20, there is no reasonable basis for the Government or, for present purposes, the court to find that there has been delay; and still less any delay that should deprive the plaintiff of its contractual rights.

(3)     Further, in Fisher v Brooker [2009] 1 WLR 1764 at §64, Lord Neuberger, citing Lindsay Petroleum, considered that some sort of detrimental reliance is, even if not immutably, “usually an essential ingredient of laches”.

(4)     The Government has not suffered any prejudice that is sufficient to render the grant of relief to the plaintiff unjust.

71.The defence of laches and acquiescence is therefore rejected.

E.     BREACH OF LAND GRANT AND DEROGATION FROM GRANT

72.For the reasons stated above, I hold that the Government’s refusal to provide a VROW amounts to breach of SC 20.

73.Further or alternatively, I agree that the Government has acted in derogation from grant:

(1)     The principle of derogation from grant has been described as one which merely encapsulates in a legal maxim a rule of common honesty.  The principle may be succinctly stated as being that, “A grantor having given a thing with one hand is not to take away the means of enjoying it with the other”: see Kung Ming Tak Tong Co Ltd v Park Solid Enterprises Ltd (2008) 11 HKCFAR 403 at §61 per Li CJ.

(2)     The application of the principle requires identifying in the first place what obligations, if any, on the part of the grantor can fairly be regarded as necessarily implicit in the grant, taking into account the particular purpose of the transaction when considered in the light of the circumstances subsisting at the time it was entered into; then one can determine whether the grantor’s conduct constitutes a derogation from grant in violation of the implicit obligation identified: see Rank Profit Industries Ltd v Secretary for Justice (unrep., FAMV 8/2009, 25.6.2009) at §12 per Ribeiro PJ.

(3)     By refusing to provide a VROW as promised under SC 20, the Lot is now practically unusable: see Section B2 above.  The Government has accordingly acted in derogation from grant.

F.     DISPOSITION

74.For all the reasons stated above, I grant the declarations in terms of paragraphs 1 and 2 of the Originating Summons.

75.I make an order in terms of paragraph 3 of the Originating Summons that the Government do give to the plaintiff the Right of Way.  I further give liberty to the parties to apply for the purpose of carrying the said order into effect.

76.Under paragraph 4 of the Originating Summons, the plaintiff prayed for damages to be assessed for breach of, and/or derogation from, the Land Grant.  However, the plaintiff has confirmed at the hearing that damages is only sought as an alternative mode of relief. Accordingly, I make no order under paragraph 4 of the Originating Summons.

77.I order that the costs of these proceedings be paid by the defendant to the plaintiff, such costs are to be taxed if not agreed with a certificate for two counsel.

78.The above order as to costs is nisi and shall become absolute in the absence of any application within 21 days to vary the same.

79.Lastly, I express my gratitude to counsel on both sides for their helpful assistance in this matter.

Mr Benjamin Yu, SC and Mr Abraham Chan, SC leading Mr James Man, instructed by Messrs Mayer Brown JSM, for the plaintiff

Mr Ambrose Ho, SC and Mr Jenkin Suen, SC, instructed by the Department of Justice, for the defendant