LAM PAU HO v. CHEUNG KAM MING and Another

1997, MP No.2026

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H E A D N O T E

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Easement to use staircase, landing and passageway - effect of New Territories Leases (Extension) Ordinance Cap.150 - whether automatically extended by sections 6 and 7 - dominant and servient tenements held under separate Crown leases but for an identical term with an identical right of renewal

"Contrary intent" for the purposes of section 7 of Cap.150 - to be ascertained from the Deed of Grant itself

Held, no such contrary intention is to be found in the Deed of Grant, the period of the grant being coterminous with the then unexpired portions of the terms of both the dominant and servient tenements, it being the intention that the grant would subsist for the period that the leases of the two properties still had to run.

1997, MP No.2026

IN THE HIGH COURT OF HONG KONG

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS

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J U D G M E N T

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1. This is a vendor and purchaser summons affecting the property known as Flat B, 3rd Floor, 36 South Wall Road, Kowloon ("the Property"). The Property is situated on NKIL 2284. The Summons was taken out by the Purchaser and the scheduled completion date has been postponed until after determination of the Originating Summons by the court. The short question which arises is the effect of the New Territories Leases (Extension) Ordinance, Cap.150 in relation to an easement which was granted by a Deed of Grant on 8 April 1980 in favour of NKIL 2284.

2. Before proceeding to deal with the effect of Cap.150, I will shortly describe the layout of the two lots, namely, that of the grantor and grantee respectively. The two lots of land lie adjacent to each other with frontages on South Wall Road. The servient land, namely the land of the grantor, is NKIL 1030. That property is No.34 South Wall Road. A building had been erected on No.34 and access to No.34 is from South Wall Road. Internally, there is a staircase leading to the different floors of the servient property.

3. In 1980, the owners of NKIL 1030 and NKIL 2284 (No.36) entered into a Deed of Grant. A new building was to be erected on No.36 or NKIL 2284. The owners of NKIL 2284 negotiated with the grantor and those negotiations culminated in the Deed of Grant. What was proposed and in fact did happen was that a new building would be erected on No.36 without any direct access from No.36 onto South Wall Road. Rather, access to No.36 was to be gained via the adjacent property, No.34. The net effect of that arrangement was that the owner of No.36 could make full use of the entire plot without wasting any space for common parts such as staircases which would otherwise have had to be erected. This was a somewhat unusual state of affairs, but nonetheless it suited both parties. Under the terms of the Deed of Grant, the grantee paid $400,000 to the grantor for that privilege and the grantee also undertook to pay for the construction costs to be incurred in respect of the openings for access to the staircases landing and passageway.

4. I now turn to the Crown Leases affecting NKIL 1030 and NKIL 2284. By an indenture made on 16 November 1932, the grantor's predecessor-in-title was granted a lease of NKIL 1030 by the Crown from 1 July 1898 for a term of 75 years with "such right of renewal for one further term of 24 years less the last three days thereof". NKIL 2284 was held under a Crown Lease dated 9 October 1934 and that lease also ran from 1 July 1898 for a term of 75 years "with such right of renewal for one further term of 24 years less the last three days thereof". The terms under these two Crown Leases were therefore to expire on 27 June 1997, four days prior to the now historic day of 1 July 1997.

5. Negotiations between the Government of the United Kingdom and the Government of the People's Republic of China culminated in the Joint Declaration signed in December 1984. Cap.150 was passed in 1988. The purport of Cap.150 was to extend leases of land in the New Territories for a period of 50 years until 30 June 2047. The Ordinance applies to every New Territories lease existing at the commencement of section 2 of Cap.150 (i.e. 26 February 1988) and that, but for Cap.150, would expire before 30 June 1997. There were certain exceptions but it is common ground between the parties that those exceptions do not apply to the leases in question. Section 6 of the Ordinance reads :

"6. Extension of leases

The term of a lease to which this Ordinance applies is extended, from the date on which it would, apart from this Ordinance, expire, until the expiry of 30 June 2047, without payment of any additional premium."

Section 7 dealt with burdens and covenants. The relevant part reads :

"(1) During the period of the extension of a lease under section 6, the lease and any interest therein created by or under an instrument registered in the Land Registry shall, unless the contrary intention appears from the instrument, be subject to -

(a) the same encumbrances and interests as applied immediately before the period of extension, including -

(i) any mortgage or charge, whether legal or equitable;

(ii) any public rights;

(iii) any mutual covenants, rights, easements, tenancies or other burdens of whatsoever kind or nature;

..." (emphasis added)

6. The question which arises is whether the easement granted in 1980 was also automatically extended by virtue of the provisions of Cap.150. The answer to this question depends on whether any "contrary intention" appears from the Deed of Grant.

7. Counsel for the Plaintiff submitted that there was such a contrary intention. First, it was said that the amount of consideration for this right of way was significant. Under the terms of clause 1 of the Deed of Grant, the owners of the servient tenement in consideration of $400,000 granted the owners of the dominant tenement (the Grantee), a "right of way unto the Grantee for the residue of the said renewed term of 24 years less the last three days thereof created by the said new Crown Lease of [NKIL 1030] subject to payment in contribution by the Grantee of his half share of the cost and expenses for the maintenance and upkeep of the said staircase landing and passageway" thereinafter mentioned. It was submitted that this was the grant of a right of way which was to subsist for only 17 years until 27 June 1997 and no more and that at the expiration of that period, there was a need for a fresh deed and fresh consideration.

8. Whether there was a "contrary intention" is to be ascertained from the entire document. In this context, the recitals to the Deed of Grant are relevant. The first recital deals with the lease under which NKIL 1030 is held and was described as property being "vested in the grantors as tenants in common in equal shares for the residue now to come of the renewed term of 24 years less the last three days thereof from the first day of July 1973, created therein by a new Crown Lease deemed to have been granted by virtue of the Crown Leases Ordinance, Cap.40, Laws of Hong Kong". Recital (2) contained a parallel recital affecting NKIL 2284 and is in identical terms since the term granted was identical to that of NKIL 1030. Therefore when one comes to the reference to "the residue of the said renewed term of 24 years" in Clause 1 of the Deed of Grant, it is plain that it is referable to the residue of the term affecting both the dominant and servient tenements recited in Recitals (1) and (2). In other words, the duration of the right of way was to be coterminous with the then unexpired portion of the terms affecting both NKIL 1030 and 2284.

9. The submission that at the expiration, namely on 27 July 1997, it was incumbent on the parties to re-negotiate fresh rights of way does not make any commercial sense. Consider the implications. If that had been the parties' intention, it would mean that the owners of NKIL 2284 would have to accede to whatever terms the owners of NKIL 1030 then saw fit to extract. The only alternative would be for the owners of NKIL 2284 to demolish the building on NKIL 2284 and create their own separate access to and from South Wall Road. It is highly improbable for such a result to have been intended. When one looks at the state of affairs in 1980, there was then considerable uncertainty as to what was going to happen to leases in the New Territories after 30 June 1997. No reasonable owner would have wanted to exacerbate or compound the potential difficulties with problems of access.

10. Reading the Deed of Grant as a whole, I do not find the contrary intention that Counsel for the Plaintiff contends for. Rather, I construe the Deed as granting a right of way which was to subsist for the period that the leases of the two properties still had to run : they were to be coterminous. The Deed of Grant evidently could not go beyond the term of years that was then vested in the respective owners. The words in section 7 of the Ordinance referring to the existence of a contrary intention requires that contrary intention to appear from the instrument itself. The instrument in question, the Deed of Grant, evinces no such contrary intention. That being the case, in my judgment, during the period of the extension of the lease of NKIL 1030 by virtue of Cap.150 it remains subject to the easement granted in 1980.

11. In these circumstances, the originating summons is dismissed and the parties have agreed that there be no order as to costs.