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

CACV 77/2020

[2022] HKCA 1902

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 77 OF 2020

(ON APPEAL FROM HCMP NO 2423 OF 2017)

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Before:  Hon Au, G Lam and Chow JJA in Court

Date of Hearing:  12 October 2022

Date of Judgment:  23 December 2022

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J U D G M E N T

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Hon G Lam JA (giving the Judgment of the Court):

Introduction

1.The plaintiff, Dairy Farm Company Limited, is the Government lessee of Rural Building Lot No. 758 in Pokfulam (“Lot”) on which certain buildings formerly used as the plaintiff’s staff quarters still stand. This appeal is concerned with the interpretation of the terms of the grant made in March 1958 on which the Lot is held and, in particular, whether there is an entitlement to a vehicular right of way from the Lot over Government land to Pokfulam Road.

Background

2.The plaintiff was the Government lessee of a farm lot, namely, Farm Lot No. 71, covering several acres of land in Pokfulam (“Farm Lot”). That lease (“Farm Lease”) was for a term of 75 years from 30 September 1907. Under its terms, no person shall, without the prior licence of the lessor, “use the said premises for any other purpose than for farm agricultural or garden grounds nor erect any buildings upon the said premises except such as may be required for the proper maintenance and care and enjoyment of the same premises as a farm or gardens …” Such agricultural buildings could be erected with no charge other than increased Crown Rent, and certain 1- or 2-storey staff quarters had existed on the Farm Lot since as early as 1920 and continued to be built up to 1950.

3.In late 1955 or early 1956, the plaintiff discussed with the Crown Lands & Survey Office the building of further quarters, in the course of which the plaintiff made a proposal to surrender part of the Farm Lot to the Government in return for the grant of a rural building lot, so that it could erect multi-storey quarters with greater security of tenure than was available under the Farm Lease which would expire in 1982.

4.In May 1956, the plaintiff was told that the Government had approved in principle the grant of an area within the Farm Lot as a rural building lot (broadly at the location of the Lot as eventually granted) in consideration of the surrender of a larger area within the Farm Lot (roughly corresponding in location to the area eventually surrendered, the “Old Lot”), though the precise boundaries and sizes of the parcels to be granted and surrendered respectively and the terms of the exchange remained the subject of discussion.

5.In June 1956, the Public Works Department, for the purposes of development of the Pokfulam Village area, prepared a layout plan no. LH10/5 intituled “Hong Kong Planning Area No. 10 Pokfulam Village – Proposed Layout” (“Layout Plan”). As summarised in a Government memorandum dated 26 June 1956, the Layout Plan provided for, inter alia: (1) a substantial widening of Pokfulam Road (to 60 ft); (2) two 45 ft feeder roads to residential development to the north and east of Pokfulam Village with a single junction to Pokfulam Road; (3) a layout of building blocks in the village proper suitable for two-storey buildings; (4) a series of 30 ft streets suitable for two-storey houses and capable of taking some vehicular traffic; and (5) sites for public purposes. In late June 1956, the Superintendent of Crown Lands & Survey, recognising the plaintiff’s “considerable interest in Pokfulam Village”, sent it a copy of the Layout Plan, with the caveat that the plan was tentative only and not yet approved and that it was a long-term one.[1]

6.On 18 January 1957, the Director of Public Works informed the plaintiff that the area of the new lot to be granted had been increased to 30,000 sq ft “to conform as far as possible with the layout plan of the area” and that the portion of the Farm Lot to be surrendered (which included the area to be covered by the new grant) had proportionately increased to 120,000 sq ft. This being acceptable to the plaintiff, the location and extent of the Lot and the Old Lot were thus settled.

7.Prior to the grant of the Lot and the surrender of the Old Lot, the area was accessible only via a footpath (“Footpath”) running through, inter alia, the land that became the Old Lot and abutting the southern boundary of the area that became the Lot (as described below). The Footpath led, westwards, down the slope and passing over a stream, to Pokfulam Road. The width of the Footpath at different points ranged from 1.2 m to 2.1 m in 1958, and from 1 m to 2.3 m in modern times. There is no dispute that the Footpath was not wide enough throughout to be used by motor vehicles.

8.Meanwhile, in 1956 to early 1957, a 7-storey building was erected by the plaintiff as staff quarters at a location within the land that later became the Lot (which was then held as part of the Farm Lot under the Farm Lease). The occupation permit was issued in January 1957. This has been referred to in the evidence as the “Existing Building”. At the time, the Existing Building did not enjoy vehicular access.

9.The plaintiff and the Government eventually entered into the Agreement and Conditions of Exchange dated 17 March 1958 (“Land Grant”), whereby the plaintiff agreed to surrender the Old Lot (designated as Farm Lot No. 71, Section A, leaving behind Farm Lot No. 71, Remaining Portion), and the Government agreed to grant a lease over the Lot (designated as Rural Building Lot No. 758) to the plaintiff for the residue of a term of 75 years from 25 June 1956, without payment of premium, on the conditions therein set out, which consisted of the General Conditions (“GC”) and Special Conditions (“SC”). We set out the relevant provisions as follows.

10.GC 5 imposes an obligation on the plaintiff as lessee to maintain the buildings on the Lot, in these terms:

“ The lessee of the new lot shall throughout the tenancy maintain all buildings erected of which may at any time hereafter be erected on the lot in good and substantial repair and condition … In the event of the demolition at any time during the tenancy of the buildings then standing on the lot or any of them or any part thereof the lessee shall replace the same either by sound and substantial buildings of the same type and of no less volume or by buildings of such type and value as shall be approved by the Director of Public Works. In the event of demolition as aforesaid the lessee shall, within three months of such demolition, submit plans for redevelopment of the lot to the Building Authority, and upon approval of such plans shall within one month thereof commence the necessary work of redevelopment, and shall complete the same to the satisfaction of, and within such time limit as is laid down by, the Director of Public Works.”

11.SC 1 contains a strict prohibition against alienation as follows:

“ The grantees shall not except with the consent in writing of the Governor first had received, and then only in a form of deed or document to be approved beforehand by the Land Officer, assign, mortgage, charge, let, underlet, sublet, or part with the position of the lot or any part thereof or interest therein or any building thereon or flat, suite rooms, apartment or space therein either temporarily or permanently, whether for the remainder of the term of the lease or any portion thereof, or enter into any agreement so to do, and shall prevent his employees tenants permittees and licensees from so doing provided that the occupation of portions of the lot strictly in accordance with the provisions of Special Condition (2) shall not be deemed a breach of this condition.”

12.SC 2 restricts the type of building that may be erected and the user of the Lot to staff quarters in these terms:

“ No buildings shall at any time be erected on the lot except blocks of flats for providing housing for staff and employees of the grantees and dependent members of the families of such staff and employees, non paying guests and domestic servants employed by them. The grantees shall prevent the use occupation or enjoyment of the same or any part thereof for any other purpose or by any other person, corporation or association.”

13.SC 10, concerning a proposed stepped access (“Proposed Stepped Access”), provides as follows:

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

14.There are two plans annexed to the Land Grant. The first, Plan No. 1 (“Plan 1”), is an extract from the Layout Plan with the Lot shown on it coloured red. The second plan shows the location of the Old Lot. The “new road” referred to in SC 10 is not defined, but it is common ground that it refers to the proposed 45 ft feeder road to the west of and parallel to the Lot as shown in the Layout Plan (“Proposed Road”). The portion of the Footpath abutting the southern boundary of the Lot and leading to the Proposed Road is coloured green with steps marked on its lower part.

15.SC 20, the clause that confers the right of way, provides as follows (for ease of reference, we have added the designations (a), (b) and (c) to its three sentences as follows):

“ (a) 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.

(b) 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.

(c) [A]ny alteration of the government road to which the right-of-way is given absorbing a portion of such piece 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.”

16.SC 21, a provision relating to the grant of the right of way, reads as follows:

“ 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 right to use the road or path constructed by them, and Government reserves the right to grant rights-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.”

17.In 1961, an extension to the Existing Building was completed on the Lot (“Extension”). The extended building became known as “Block B”. Another block of staff quarters, known as “Block A”, was completed in 1965 on the Lot.

18.In the event, the development envisaged in the Layout Plan was not implemented, and neither the Proposed Road shown in the Layout Plan and Plan 1 nor the Proposed Stepped Access referred to in SC 10 was ever constructed. Nor had the Government granted a right of way to the plaintiff pursuant to SC 20 and 21.

19.With the passage of time, the buildings on the Lot approached the end of their useful lives, and redevelopment of the Lot came under consideration by the plaintiff. In September 2000, the plaintiff, through a consultant, requested the Government to grant the right of way under the Land Grant. The District Lands Officer, Hong Kong South (“DLO”) replied in November 2000 that he was prepared to recommend to the Government that a right of way be granted to the plaintiff over the Footpath. That suggestion was rejected by the plaintiff, and in October 2002 the consultant wrote again, pointing out that the absence of a right of way over a road would frustrate the plaintiff’s plans for re-provisioning its staff quarters, as no emergency vehicular access would be available which was a requirement for approval of building plans under the Buildings Ordinance. It was proposed that an alternative site capable of being redeveloped be exchanged for the Lot. In his reply dated 21 January 2003, the DLO rejected the request for an exchange but stated that the Government “will be prepared to grant such right-of-way which is considered feasible and acceptable to Government” and that the plaintiff could make an application for the Government’s consideration.

20.In April 2003 and June 2004, the consultant wrote to the Government with different proposed routes for an access road to the Lot. On 6 August 2004, the DLO replied, noting that the proposal would involve clearance of structures on Government land and would “generate strong opposition from the local community”, and suggested that the consultant provide further proposed road alignment for assessment. The consultant wrote again in October 2004 with a revised layout of the access road, adding that the plaintiff would be willing to meet the costs of clearance of Government land.

21.The correspondence did not bear fruit. In around 2005, the staff quarters on the Lot ceased to be used. Its dilapidated condition led to a “defective building” order being issued by the Building Authority against Block B in June 2010 under section 26A of the Buildings Ordinance.

22.On 10 October 2012, the plaintiff, through another consultant, wrote again to the DLO with a detailed proposal for vehicular access from the Lot to Pokfulam Road which, in their view, would cause the least disturbance to the squatters residing in the area. On 31 May 2013, the DLO, rejecting the application, replied that the Government was not obliged to grant a vehicular right of way to the plaintiff. This was apparently the first time that the Government had expressly stated that the Land Grant did not confer any entitlement to a vehicular right of way.

23.After a request by the plaintiff in April 2016 to the DLO to review his decision, without prejudice discussions followed, but the dispute was not resolved. The Government continued to refuse to grant any vehicular right of way to the plaintiff.

24.On 27 October 2017, the plaintiff issued proceedings by originating summons in the Court of First Instance, claiming (1) a declaration that the Government must give the plaintiff a vehicular right of way from Pokfulam Road to the Lot; (2) a declaration that by failing or refusing to give such right of way or vehicular access to the Lot, the Government has acted and continues to act in breach of or has derogated from the Land Grant; (3) an order that the Government do give to the plaintiff the vehicular right of way; and (4) further or alternatively, damages to be assessed.

The judgment of the Court of First Instance

25.On 5 March 2020, Wilson Chan J issued his judgment (“Judgment”) in favour of the plaintiff. In his textual analysis of the Land Grant, the judge noted that SC 20 provides that a right of way will be given and that it is only its specific alignment that is to be approved by the Director of Public Works. The Judge reasoned that, the right of way being for access to domestic premises, the grant should meet all reasonable purposes required for the use of such premises. The provision of access to Pokfulam Road, which is itself vehicular, is an indication that the right of way is also vehicular. The choice is the plaintiff’s whether to build a “road or path” as referred to in SC 20. That phrase indicates an intention to confer wide rights of both pedestrian and vehicular passage. The repair and maintenance obligations on the plaintiff also suggest a right of wide scope.[2]

26.Apart from the language of SC 20, the judge also considered that in a long lease of 75 years, especially with redevelopment obligations under GC 5, the parties were objectively likely to have intended that there should be a right of way that could be used by vehicles at some future point, especially in light of the contemplated redevelopment of the Pokfulam Village area as evidenced by the Layout Plan. The reference in SC 2 to “domestic servants” of the staff shows that it was contemplated that the Lot could provide housing for the plaintiff’s more senior staff, which militated against a pedestrian-only right of way.[3]

27.The judge rejected the defendant’s argument that SC 10 shows that a pedestrian right of way is intended and that the grant of the right of way would be fulfilled when the Proposed Stepped Access was built. He also rejected the argument that SC 20 is intended only to ensure that the Lot is not landlocked and not to confer vehicular access which the area had not hitherto enjoyed.[4] The judge did not accept the defendant’s argument that SC 21, by referring to the “form” and “conditions” of the grant of the right of way, meant that the Government can determine the scope of the right.[5]

28.The judge considered that even if the Government had a discretion to decide the scope of the right of way, it had taken irrelevant matters into account or had come to an irrational decision.[6] Finally, the judge also rejected the defendant’s argument based on laches and acquiescence.[7]

29.By way of relief, the judge granted the declarations sought and ordered that the Government do give to the plaintiff a vehicular right of way from Pokfulam Road to the Lot or other means of vehicular access between Pokfulam Road and the Lot, with liberty to apply for the purpose of carrying the order into effect. No damages was awarded as it was sought in the alternative.

The appeal

30.In broad terms, the defendant has raised three main grounds of appeal:

(1)  that the judge erred in the construction of SC 20 and in holding that it obliges the Government to grant a vehicular right of way;

(2)  that the judge erred in the construction of SC 21 and in holding that it does not give the Government a discretion to decide on the form or other characteristics of the right of way, including the mode of user or the manner of its enjoyment; and

(3)  that, on the basis that the Government had a discretion, the judge erred in finding that the exercise of the discretion was vitiated.

31.The principal points made by the defendant in support of these grounds will be dealt with below. Although Ground 1 and Ground 2 which concern SC 20 and SC 21 are dealt with separately below, we do not lose sight of the principle that the instrument must be construed as a whole.

Discussion

32.There is no dispute that whether the grant of a right of way is a right of footway or a general right including vehicular passage is a question of construction of the grant, which depends on the circumstances at the time of the execution of the instrument, including the nature of the locus in quo over which the right of way is granted and the purpose for which it is intended to be used: Cannon v Villars (1878) 8 Ch D 415, 420-421; Wisename Ltd v Secretary for Justice [1998] 1 HKLRD 71, 77-78, 81.

33.The general principles of construction of legal documents, including those by which easements are created, are also not in dispute and may conveniently be taken from Gale on Easements (21^st edn), §9-20, as follows:[8]

“ (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 in which one disregards subjective evidence as to the intentions of the parties;

(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”.

Ground 1 – construction of SC 20

34.We start with the text of the contractual provisions, giving due weight to the fact that the Land Grant was a sophisticated document prepared with the participation of civil servants responsible within the Government for land administration matters: see Eminent Investments (Asia Pacific) Ltd v DIO Corp (2020) 23 HKCFAR 487, §45(c).

35.It is not in dispute that SC 20(a) confers a right to a right of way, as is evident from the words “will be given”. The right of way is described in general terms, without any words of restriction confining it to a footway, even though, as is undisputed, by 1958 the use of vehicles was already common in Hong Kong. Contrary to the defendant’s submission,[9] we do not consider that the power on the part of the Director of Public Works to determine the alignment of the way includes also the power to determine its scope and in particular whether it covers vehicular passage. The right of way is to extend to Pokfulam Road, a road for both pedestrian and vehicular traffic. SC 20(c) envisages that the right of way will lead to a government road. There is no suggestion that the topography of the area was such that no way suitable for vehicles could be constructed along any reasonable alignment from the Lot to Pokfulam Road.

36.This unrestricted language of the grant calls into play the principle that, provided the way to which the grant refers is a way suitable for use by vehicles, a right of way granted in general terms, without reference to being confined to pedestrians, will prima facie give a right of way for all purposes, that is to say, a right to pass with vehicles as well as on foot, unless the scope of the right is subject to some restriction gathered from the surrounding circumstances: Kain v Norfolk [1949] 1 Ch 163, 168; St Edmundsbury and Ipswich Diocesan Board of Finance v Clark (No 2) [1973] 3 All ER 902, 923; Wisename, at 78; Robinson v Bailey [1948] 2 All ER 791, 795B.

37.SC 20(b) requires the lessee to construct “a road or path” over the ground designated for the right of way. As the plaintiff has pointed out, at common law the grantee of a right of way may enter the grantor’s land over which the right extends, for the purpose of making the grant effective, such as to construct a way suitable for the right granted: Gale on Easements, §9-113(1). The purpose of SC 20(b) seems to be to make it an obligation for the lessee to build the road or path, but the choice remains the lessee’s whether to build a road or a path. Whilst the word “path” may be neutral, the word “road” is usually used to refer to a way wide enough for vehicles. At the very least it cannot be (and has not been) contended that any intended restriction in the scope of the right of way can be found from the phrase “road or path”. On the contrary, it is a phrase perfectly capable of accommodating a vehicular right of way: see Wisename; Charles v Beach (unreported, Eng CA, 1 July 1993). SC 20(b) also obliges the lessee to build the road or path at the time and in the manner directed by the Director of Public Works, but it has, rightly in our view, not been suggested that this power to direct “the manner” in which the road or path is to be constructed has a restrictive effect on the scope of the right of way. The further obligation placed by SC 20(b) on the lessee to uphold, maintain and repair the road or path and everything forming portion of or appertaining to it is another indicator that a right of user of a wide scope was intended: Keefe v Amor [1965] 1 QB 334, 345; Charles v Beach. These provisions do not sit comfortably with the defendant’s suggestion that the intention was that, if the Layout Plan was not implemented, the right of way would simply be along the Footpath.

38.Mr Ho SC highlights the fact that the area which became the Lot used to enjoy pedestrian access to Pokfulam Road via the Footpath without any vehicular access. Part of the Footpath near the Lot was located within the Old Lot and therefore surrendered to the Government as part of the transaction in the Land Grant but, he submits, there would not be any right of way via the Footpath westbound to Pokfulam Road arising by necessity because there remained alternative access via the Footpath in the eastern direction. Further, portions of the Footpath to the west of the Lot would be absorbed into the Proposed Road and other components of the intended development if and when it materialised. The true purpose of SC 20 is therefore, he submits, to ensure that the Lot continues to enjoy the same kind of access to Pokfulam Road after the Land Grant and after the planned development. In particular, the terms of the grant operate in three posited scenarios as follows: (1) if development of the area takes place which extinguishes or alters the Footpath, the access from the Lot to Pokfulam Road remains guaranteed by SC 20; (2) as and when the Proposed Road is formed, such access is secured by the Proposed Stepped Access under SC 10; (3) if, however, the planned development does not take place, the lessee of the Lot can still enjoy the Footpath without invoking SC 20. In each scenario, only a pedestrian way is intended.

39.We do not accept this submission:

(1)  It is true that part of the Footpath near the Lot fell within the land being surrendered, and would therefore fall outside the plaintiff’s control after the Land Grant. But in our view it does not follow from this that the right of way to be granted under SC 20 is intended to permit only the type of access available via the Footpath, i.e. pedestrian passage. The transaction under the Land Grant was not simply a surrender of leased land subject to the reservation (whether by way of regrant or otherwise) of a right of way in favour of the remaining, unsurrendered land held under the existing lease. It involved a more fundamental change, including the grant of the Lot – a new rural building lot – for a new term of over 73 years with a different permitted user, in consideration of the surrender of the Old Lot which was part of the Farm Lot limited to farm-related user with a remaining term of only 24 years. The right of way was not immediately created, by reservation or otherwise upon the surrender, but was intended to be granted at a future date on a line to be approved for the purpose of serving this new rural building lot, with a new permitted user and a new term.

(2)  While the purpose of SC 20 is obviously to grant a right of access in favour of the Lot to Pokfulam Road, it cannot be presupposed that upon entering into the Land Grant, which conferred a new estate, the parties intended that the Lot should enjoy no greater scope of access to Pokfulam Road than that hitherto available to the area under a very different lease. Their true intention must be ascertained without predisposition from the language they used construed in the context of the relevant circumstances. It is notable, in the context of the present argument, that the parties referred in SC 20(a) simply to a “right-of-way” without any qualification, and chose to refer in SC 20(b) to a “road or path” even though there was no existing “road” leading to the Lot. On the defendant’s submission, if the Layout Plan was carried out, there would be pedestrian access to the Lot via the Proposed Stepped Access pursuant to SC 10; if it was not carried out, there would be pedestrian access via the Footpath without invoking SC 20. This seems to give too little work to do for SC 20.

(3)  Nor does it follow from the fact that part of the Footpath would potentially disappear to make way for feeder roads, streets and residential properties under the Layout Plan, that the right of way under SC 20 was simply to guarantee access equivalent to that available via the Footpath. In fact, SC 10 specifically provides for stepped access to the Lot over a portion of the Footpath next to the Lot, to be constructed at the lessee’s cost as and when the Proposed Road is formed. The defendant’s interpretation suggests that in the event the Layout Plan was implemented, so that the immediate neighbourhood became an area served by a network of roads and streets, the Lot would remain accessible only on foot over the Proposed Stepped Access by virtue of SC 10. Such an arrangement does not in our view appear to be likely to have been the parties’ intention. See also §§48 – 49 below.

(4)  Incidentally, while it appears from the available map that to the east of the Lot, the Footpath wound its way through the hills eventually joining the road that linked certain cowsheds, we do not consider it is open to the defendant to contend that the Lot had alternative access in the eastern direction via the Footpath, as this is contradicted by the defendant’s own evidence (which suggests that the Footpath leading from the Lot westwards to Pokfulam Road was the only means of access at the time) and was not investigated in the court below.

40.Mr Ho also submits that since the Proposed Road would be near the Lot, it could not have been the objective intention of the parties that there would be a separate vehicular road connecting the Lot with Pokfulam Road, which would be superfluous and might even “cut across” and “clash head-on” with the proposed new road network in the Layout Plan. He submits that if vehicular access was intended to be given to the Lot, the western boundary of the Lot could have been fixed immediately next to the Proposed Road, but instead the boundary ran parallel to the Proposed Road at a 30 ft distance.

41.We are not persuaded by this argument. There is no basis to suggest that a vehicular right of way would clash with the proposed road network, especially when the alignment of the way was yet to be approved by the Director of Public Works. If the Layout Plan was implemented, there would be, it seems to us, nothing to prevent the Government from devising a line for the right of way that ran from the Lot to the one of the new roads nearby (such as the Proposed Road) and then along it to Pokfulam Road, instead of an entirely separate and distinct route from the Lot to Pokfulam Road. As to why the western boundary of the Lot was fixed, as it was, at a distance from, rather than abutting, the Proposed Road, this could have been due to various reasons including the existence of slopes between the Lot and the Proposed Road and consequent structural needs. As a matter of fact, within the Government it was the Chief Engineer, Road Works who suggested that the western boundary of the Lot should be 30 feet from the Proposed Road and parallel to it.[10] It is not helpful to speculate why the parties had not acted in some other way in this regard. In our view no relevant inference can be drawn from the fact that the Lot did not abut the Proposed Road but ran parallel to it a short distance apart.

42.The Layout Plan was known to both the plaintiff and the Government. Indeed an extract from it formed Plan 1 of the Land Grant. The area of the rural building lot to be granted had been increased “to conform as far as possible with the layout plan of the area”. SC 10 also referred to “the new road” which, as is common ground, meant the Proposed Road, which was shown in the Layout Plan as the road closest to the Lot and marked “To Pokfulam Reservoir” and “Access Road”. All this shows that, although the Layout Plan was eventually not implemented, at the time of the Land Grant it was contemplated that the area would be re-developed with a network of roads and streets. The Lot fell in part within an area marked on the Layout Plan as “Selected Sites to be used for High Density Housing”.

43.It is also to be noted that the grant was of a lease with over 73 years to run. Throughout the term the lessee had an obligation under GC 5 to maintain all the buildings on the Lot in good and substantial repair and condition and, in the event of redevelopment, to replace them by equally substantial buildings. The judge said that a reasonable person would have taken the parties to intend to stipulate for a general right of way exercisable by the use of vehicles at some point in future, given the likely continued development of both the Pokfulam neighbourhood and the prevalence of vehicular modes of transport generally and in that area.[11] We agree.

44.The defendant places much reliance on the Existing Building which was newly erected without the benefit of any vehicular access and was of a basic design intended for occupation by workmen. Relying on Fully Profit (Asia) Ltd v Secretary for Justice (2013) 16 HKCFAR 351, it is submitted that the factual matrix includes the features of the buildings standing on the Lot at the time, and in particular the Existing Building which only enjoyed pedestrian access to Pokfulam Road, and that this is a matter “of paramount importance” indicating that the right of way in SC 20 does not envisage vehicular passage.

45.In our view the defendant’s reasoning is flawed. That building was erected under the terms of the then existing Farm Lease, where the only buildings permitted were those required for the maintenance, care and enjoyment of the land as a farm or gardens. It is not surprising, therefore, that the building was built as quarters for “farm hands”. The Land Grant, however, involved a change of terms. The permitted user of the Lot is no longer farm-related, but staff quarters, from which no intention could be inferred that the right of way is confined to pedestrian use. On the contrary, staff quarters with accommodation for the staff’s domestic servants could be built, which suggests that at least middle-class domestic residences were within the parties’ contemplation. Even on the basis that there is no provision for garage on the Lot, reasonable purposes connected with such residential user would include the use of vehicles for setting down or picking up passengers and for loading or unloading goods.[12] The fact that the Existing Building was designed and appointed to a fairly basic standard is beside the point. The applicable principle here is that where a right of way is granted in general terms, the owner of the dominant tenement is entitled to exercise the right not only for the purposes for which the tenement is then being used, but also for any other lawful purposes to which it may subsequently be put: Billion Star Development Ltd v Wong Tak Chuen [2012] 2 HKLRD 85, §§28 & 33; Sara and Dovar, Boundaries and Easements (7^th ed), §18-19; Gale on Easements, §9-64; Hotchkin v McDonald [2005] 1 P & CR 7. Accordingly, the right of way is not to be restricted to access to the Lot merely for the purposes of using the Existing Building, but is one that may be used to serve any lawful purpose to which the Lot may be put. Under the terms of the Land Grant, the plaintiff was entitled to erect on the remainder of the Lot or replace the Existing Building, upon redevelopment, with staff quarters of a higher grade.

46.The defendant has also referred to the features of the Extension (built in 1961) and of Block A (built in 1965), but reliance on the standards of these buildings is illegitimate, as they represent the subsequent conduct of one party, which is not admissible for the interpretation of the Land Grant.

47.With respect, Fully Profit is a case involving a wholly different question, namely, the meaning of the word “house” in certain Government leases granted in the 1960s. The Court of Final Appeal said in that context that the meaning must have reference to the characteristics of the houses which were actually standing on the land at the time when the leases were entered into.[13] In our view this provides no assistance to the defendant in the present case. We are not concerned here with the meaning of a particular word used in a clause, but the scope of a right of way.

48.The defendant submits that SC 20 should be read with SC 10. Together, they ensure that notwithstanding the formation of the Proposed Road with any necessary slope-cutting, the lessee would continue to enjoy a pedestrian right of way via the Proposed Stepped Access. It is said that, if the lessee would enjoy a general right of way under SC 20, then SC 10 would be superfluous. In the scenario where the planned development materialised, all that was intended was the construction of the Proposed Stepped Access under SC 10, which gave pedestrian access from the Lot to the Proposed Road without the need to invoke SC 20. It is submitted that SC 10 and SC 20 complement each other, and that SC 20 gives the plaintiff a guarantee to be invoked if necessary, such as where the Footpath is altered or extinguished upon redevelopment of the area.

49.We accept that regard must be paid to SC 10 and indeed other provisions of the Land Grant, which has to be construed as a whole. But as the judge pointed out,[14] SC 10 and SC 20 are distinct and make very different provisions. Whereas SC 10 obliges the Government to build a “stepped access” at a fixed location at the lessee’s cost as and when the Proposed Road is formed, SC 20 confers a right of way to Pokfulam Road on a line to be determined and requires the lessee to construct a “road or path” along that line. SC 10 imposes the cost of construction of the Proposed Stepped Access on the lessee, but under SC 20 the lessee has to shoulder not only the exercise of construction but also the cost of future maintenance and repairs for the term of the lease.

50.In our view the meaning of SC 20 is clear and it is unnecessary to deal with Mr Ho’s argument, relying on Earl of Lonsdale v Attorney General [1982] 1 WLR 887, that where the wording of a grant is obscure or equivocal, the court should lean towards the construction most favourable to the Government.

Ground 2 – the construction of SC 21

51.The defendant submits that the Government’s control imposed by SC 21 over the “form” and “conditions” is wide enough to cover the mode or quality of user of the right of way. It is submitted that the judge was wrong in saying that SC 21 is concerned with the legal form and conditions for the grant of the right, and that the judge’s construction deprives SC 21 of any substantive meaning.

52.In our view, the judge’s construction is correct. It is plain that SC 21 is concerned with the form and conditions of the grant of the right of way. The right of way is that referred to in SC 20. SC 21 is needed because SC 20 is only an agreement to grant the easement on a line to be decided, and a formal grant remains necessary after the alignment is fixed. We agree with the judge that the reference to “Land Officer”, who is also responsible under SC 1 for approval of the form of document in case of a disposition by the lessee of an interest in the Lot, reinforces this interpretation. Read in context, we do not think that the Land Officer’s power to determine the form in which and the conditions on which the grant of the right of way is to be made includes the power to decide that the way shall be a footway not for vehicular use. With respect, the judge’s construction does not deprive SC 21 of substantive effect, but gives the Land Officer such power as is intended by the parties.

Ground 3 – exercise of discretion

53.As we understand it, this ground only arises if it is held that the Government, as lessor, has a discretion under the Land Grant to grant a vehicular or pedestrian right of way at its choice. Mr Ho has confirmed that the arguments on laches and acquiescence are not raised as a self-standing bar to specific performance. On that basis, in the light of our conclusions above, it is unnecessary to deal with this ground.

Conclusion

54.For the above reasons, the defendant has failed to show that the judge’s construction of the Land Grant was erroneous. The defendant has not advanced any reasons why relief should not be granted in terms ordered by the judge. Accordingly, we dismiss the appeal, and order the defendant to pay the plaintiff’s costs of the appeal, with a certificate for two counsel.

Mr Benjamin Yu SC, Mr Abraham Chan SC & Mr John Cheung, instructed by Messrs. Mayer Brown, for the Plaintiff (Respondent)

Mr Ambrose Ho SC & Mr Jenkin Suen SC, instructed by Department of Justice, for the Defendant (Appellant)