JADE CITY INTERNATIONAL LTD. v. DIRECTOR OF LANDS

CACV 2631/2001

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 2631 OF 2001

(ON APPEAL FROM LDMR 45 OF 2000)

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J U D G M E N T

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Hon Mayo VP (giving the judgment of the Court):

1. This is an appeal from a Decision of H.H. Judge Chow who was sitting as a Presiding Officer of the Lands Tribunal. The Presiding Judge was deciding a point of law at a preliminary hearing pursuant to Rule 18 of the Lands Tribunal Rules Cap 17.

2. The Hong Kong Government (the Government) carried out works at Tseung Kwan O constructing an underground sewage tunnel over a strip of land 15 metres wide. The area of this land was delineated on plans contained in Gazette Notice 30/1994.

3. The statutory authority for the Government to proceed with the tunnelling operations is contained in the Sewage Tunnels (Statutory Easements) Ordinance Cap 438 (the Ordinance).

4. Jade City International Ltd (Jade City) was the applicant in the Lands Tribunal.

5. It owns land situate less than 1 kilometre away from the land which was referred to in the said Gazette Notice. This being Tseung Kwan O Town Lot No. 62 Area 62A.

6. Jade City claims that it suffered loss and damage to its land or the buildings on it consequential upon the building works which were undertaken by the Government.

7. It accordingly lodged a claim for compensation pursuant to the provisions contained in section 12 of the Ordinance.

8. The respondent in the Lands Tribunal, the Director of Lands (DOL), filed a Notice of Opposition to Jade City's claim. Ground 1 of the Notice was in this form:

"(1) Section 12 of the Ordinance, properly construed, entitles a person to claim statutory compensation only if that person has an interest in any of those pieces of land specifically identified in the notice published in the Gazette on 11 March 1994 (GN 822, Gazette No. 10/1994) pursuant to section 4 of the Ordinance and the notice published in the Gazette on 29 July 1994 (GN 2782, Gazette No. 30/1994) pursuant to section 6 of the Ordinance whereby section 10 of the Ordinance is ordered to be applicable in granting certain rights to the Government under the Ordinance. The Land of the Applicant is not one of those pieces of land specifically identified in the aforesaid notices published in the Gazette and no statutory rights have been created or exercised over the Land in accordance with section 10 of the Ordinance by the Government. The Applicant is thus not entitled to claim compensation under section 12 of the Ordinance."

9. The preliminary point of law which was decided by the Presiding Officer of the Lands Tribunal was framed in this way:

"In my judgment, if a preliminary hearing is to be held the preliminary point of law to be decided will be: is the 'land' referred to in section 12 confined to the 'land' identified in the plans referred to in the schedule attached to the Gazette notice in question, or is the 'land' referred to in section 12 any piece or parcel of land, irrespective of whether it has been referred to in the schedule attached to the Gazette notice in question?"

10. It is however apparent from the formal court order which was drawn up that reference was made to ground 1 of the notice of objection. Nothing however would appear to turn on this.

11. The Presiding Officer held that "the land" was not limited to the area of land identified in the plans gazetted.

12. We are concerned with DOL's appeal from this decision.

13. Section 12 is as follows:

"12. Compensation

(1) Subject to this section, the Government shall be liable to pay compensation to any person who has suffered loss or damage to land (including any diminution in the value of the land) or property situated on land as a result of the creation of rights, or the exercise of rights created, under this Ordinance.

(2) For the avoidance of doubt, 'loss or damage as a result of the creation of rights under this Ordinance' in subsection (1) includes, where such rights have been created, any loss or damage as a result of a decision of the Building Authority under section 17A of the Buildings Ordinance (Cap 123).

(3) A claim for compensation under this section shall be made by delivering notice of the claim in writing to the Director of Lands within the following period, that is-

(a) where the claim is for compensation for diminution in the value of the land arising from the creation of an easement or right, within 12 months after the date on which the easement or right is created;

(b) where the claim is for loss sustained on account of any decision by the Building Authority under section 17A of the Buildings Ordinance (Cap 123), being loss not foreseen and not reasonably foreseeable at the expiry of the period referred to in paragraph (a), within 12 months after the date of the decision;

(c) in any other case, within 12 months after the date on which the loss or damage is discovered.

(4) No compensation shall be payable for any loss as is referred to in subsection (3)(b) in respect of any land-

(a) where compensation has previously been paid under this section for any loss as is referred in subsection (3)(b) in respect of such land; or

(b) after the expiration of 10 years from completion of the construction of the tunnel under such land.

(5) A notice of a claim for compensation under this section shall contain particulars of-

(a) the loss or damage sustained;

(b) the amount of the claim; and

(c) how the amount claimed is calculated.

(6) The Director of Lands may request any person claiming compensation under this section to furnish further particulars of and in support of his claim or any item of his claim, and if any such particulars are not furnished to the Director within a period of 1 month from the date of the notice, or within such further period as the Director may in writing allow, the claim or the item of the claim concerning which the particulars are requested shall be deemed to be rejected and subsection (7) shall not apply to such claim or item of the claim.

(7) The Director of Lands shall, within 3 months of the service of a claim on him or, if he has requested further particulars under subsection (6) within 3 months of the day on which the particulars are furnished in accordance with that subsection, notify the claimant in writing that he-

(a) admits the entire claim; or

(b) rejects the entire claim; or

(c) admits a specified part of the claim and rejects the remainder,

and shall briefly state his reasons for rejection.

(8) Where the Director of Lands has rejected a claim or any part of a claim under subsection (7), or where a claim or any part of a claim is deemed to have been rejected under subsection (6), the Director may-

(a) by notice in writing offer to the claimant such sum, including costs as agreed, as the Government is willing to pay in full and final settlement of the claim or any part of the claim;

(b) commence proceedings in the Lands Tribunal, to have the claim or any part of the claim in respect of which no offer is made heard and determined by it in accordance with this Ordinance; or

(c) commence such proceedings in the Lands Tribunal where any offer under paragraph (a) is not accepted by the claimant within 1 month of the date of the offer.

(9) If, after the expiry of 6 months from the receipt of a claim by the Director of Lands, the claim has not been settled by agreement, either the claimant or the Director may commence proceedings in the Lands Tribunal to have the claim, or so much of the claim as is still then in dispute, heard and determined by it under this Ordinance.

(10) If any claimant is not satisfied with the decision of the Director of Lands to reject the claim or any part of the claim, he may, not later than 1 month after the Director has notified him of his decision, submit the claim to the Lands Tribunal for determination in accordance with this Ordinance.

(11) Interest shall be payable on any amount of compensation payable under this Ordinance in respect of loss or damage as is referred to in subsection (3)(b) or (c), and such interest shall be payable-

(a) for the period from the date on which a claim is made under this Ordinance to the date of payment;

(b) at the rate payable on judgment debts pursuant to section 49 of the High Court Ordinance (Cap 4).

(12) All sums of money agreed or determined as compensation, and any interest payable, under this Ordinance shall be a charge on the general revenue.

(13) No action, claim or proceedings shall lie or be brought against the Government or any other person to recover damages or compensation for loss or damage to land or any property situated on land as a result of the creation of rights, or the exercise of rights created, under this Ordinance except in pursuance of the rights to compensation provided for in this section."

14. On the face of these subsections there would appear to be some merit in the contentions which were advanced by Mr Thomas SC, who represented Jade City. Where land is referred to it is not restricted to the land which was gazetted in accordance with the provisions contained in the Ordinance.

15. Mr Yu SC for the DOL submitted that what was required was to consider the subsections in their proper context and then attempt to determine what had been the intention of the Legislature when the Ordinance had been enacted.

16. His authority for this was contained in the commentary in paras. 1372 and 1373 of Vol. 44(1) of Halsbury's Laws of England 4th Edition:

"1372. Ascertaining the legislator's intention. The object of all interpretation of a written instrument is to discover the intention of its author as expressed in the instrument. Therefore the object in construing an Act is to ascertain the intention of Parliament as expressed in the Act, considering it as a whole and in its context, and acting on behalf of the people. The meaning of an enactment that corresponds to this intention is known as its legal meaning. The legal meaning may or may not correspond to the grammatical or literal meaning.

1373. Nature of the legal meaning. The legal meaning of an enactment, that is the meaning that corresponds to the legislator's intention, is the meaning arrived at by applying to the enactment, taken with any other relevant and admissible material, the rules, principles, presumptions and canons which govern statutory interpretation. These may be referred to as the interpretative criteria, or guides to legislative intention."

17. Further assistance on the approach to be adopted can be found from the judgment of Bokhary PJ in Medical Council of Hong Kong v Chow Siu-shek [2000] 2 HKC 428.

18. He was satisfied that the modern tendency was to give statutes a purposive construction. This approach was consistent with section 19 of the Interpretation and General Clauses Ordinance Cap. 1:

"19. General principles of interpretation

An Ordinance shall be deemed to be remedial and shall receive such fair, large and liberal construction and interpretation as will best ensure the attainment of the object of the Ordinance according to its true intent, meaning and spirit."

19. In adhering to these principles Mr Yu contended that there were five interpretative rules and criteria which governed the situation. They were:

1. The intention of the Ordinance as a whole.

2. The presumption favouring consequential construction.

3. The presumption against absurdity.

4. Interpretation in the context of other similar statutes.

5. The presumption that the law should not be subject to change by a side wind.

20. The first issue which has to be determined on this appeal is whether the approach contended for by Mr Thomas is correct or whether it is necessary to resort to the interpretative criteria referred to by Mr Yu.

21. Mr Thomas submitted that it had to be clearly demonstrated that there was some doubt or ambiguity before it was permissible to call in aid the rules of construction.

22. There was a commentary on these guiding principles in paras. 1391 and 1470 of Halsbury:

"1391. Plain meaning rule. It is a rule of the common law, which may be called the plain meaning rule, that where, in relation to the facts of the instant case, the enactment under inquiry is grammatically capable of one meaning only and, on an informed interpretation of that enactment, the interpretative criteria raise no real doubt as to whether that meaning is the one intended by the legislator, then the legal meaning of the enactment is taken to correspond to that grammatical meaning; but that in any other case the basic rule of statutory interpretation is to be applied."

"1470. Presumption favouring literal meaning. Prima facie, the legal meaning of an enactment as it applies to particular facts is presumed to be that which corresponds to the literal meaning of the enactment in relation to those facts.

The literal meaning of an enactment in relation to particular facts is determined as follows. The starting point is the grammatical meaning of the enactment taken in isolation, that is the meaning it bears in relation to those facts when, as a piece of English prose, it is construed, without reference to any other text, according to the rules and usages of grammar, syntax and punctuation, including the accepted linguistic canons of construction. This grammatical meaning may be clear or ambiguous or obscure. If the enactment is found to be obscure, it is first necessary for the court to work out if possible what is the intended grammatical version, which may be referred to as the corrected version. When found, the corrected version may be clear or ambiguous."

23. These paragraphs appear to correctly state the law.

24. Mr Thomas then took us through section 12 of the Ordinance and submitted that adopting the criteria referred to it had been demonstrated that the meaning of the section was plain and obvious and that there was no need to take matters further.

25. The way he set about this was to point out that in section 12(1) any person was entitled to receive compensation from the Government and there was no qualification so far as the land was referred to.

26. This situation was to be contrasted with the way in which the Law Draftsman had approached the drafting of the earlier sections in the Ordinance where on every occasion the Draftsman had defined the land being referred to.

27. We are satisfied that in order to ascertain what is the correct construction of section 12 it is necessary to have regard to its context and in particular the approach which is adopted in the drafting of the other sections in the Ordinance.

28. What becomes immediately apparent is that the Draftsman has adopted what might be described as a progressive approach to the drafting.

29. In sections 3, 4 and 5 the land the subject matter of the Ordinance are carefully defined and it is clear that reference is being made to the proposed servient tenement.

30. Sections 6 and 7 provide for the situation where appropriate orders can be made under section 8.

31. Section 10 which clearly creates the involuntary easements refers back to the land the subject of an order made by virtue of sections 6 and 7.

32. Section 10 is as follows:

"10. Statutory easements.

(1) Subject to this Ordinance, the Government may exercise from time to time all or any of the following rights over any land identified in an order made under section 6 or 7, that is to say the right-

(a) to place and keep any sewage tunnel under such land and to transfer sewage through such tunnel; and

(b) to carry out tunnel works required for the purposes of paragraph (a).

(2) Rights shall only be exercisable under subsection (1) where there is a cover to the sewage tunnel or tunnel works, as the case may be, of not less than 30 metres of bedrock.

(3) The rights conferred by this section on the Government may be exercised by any employee, servant or agent of the Government authorized for the purpose or by any other person authorized on the Government's behalf for the purpose."

33. Section 12 refers to "land or property situated on land as a result of the creation of rights, or the exercise of rights created, under the Ordinance."

34. There is thus a linkage between section 10 and section 12 and it would appear to be perfectly logical for the Draftsman to draft section 12 in the way he did.

35. What can be gleaned from this is that if these sections are considered as a whole it is by no means plain and obvious that the contentions being advanced by Mr Thomas can be sustained.

36. It is however possible that the position is not entirely clear and free from ambiguity and this being the case it is in order to call in aid the interpretative criteria referred to by Mr Yu.

1. The intention of the Ordinance.

37. The short title to the Ordinance is Sewage Tunnels (Statutory Easements) Ordinance. The long title is "An Ordinance to provide for the creation of easements and other rights over land in favour of the Government for the purpose of the construction, maintenance and operation of sewage tunnels, and for connected matters."

38. The primary purpose of the legislation is to enable the Government to obtain an involuntary easement over land in private ownership which will enable the Government to install sewage tunnels and maintain them as may be necessary.

39. A reading of the relevant sections of the Ordinance makes it manifest that the long title to the Ordinance accurately describes what it attempts to achieve.

40. Section 12 is an example of a connected matter.

41. The Legislature enables the Government to acquire an involuntary easement and accordingly provision is made for compensation to be payable in the event that the persons whose rights are affected can make out a claim that they have suffered a loss or a diminution in the value of their property.

42. Mr Thomas submitted that the objects of the Ordinance were more consistent with the interpretation of section 12 which he was contending for.

43. He argued that the owner of neighbouring land was equally likely to suffer damage as a consequence of the operation of the Ordinance as the owner of the servient tenement.

44. It was also the case that by virtue of the provisions contained in section 12(13) of the Ordinance they would be precluded from pursuing their common law rights to sue the Government in tort for damage they suffered as a result of tunnelling operations.

45. This is not correct.

46. As was pointed out by Mr Yu, section 12(13) is the corollary of section 12(1). In other words if a party did not come within the ambit of section 12(1) they likewise would not come within the scope of section 12(13).

47. We are satisfied that the primary purpose of the Ordinance is to enable the Government to obtain an involuntary easement over land and that the question of compensation is just a "connected matter".

48. There is every reason to suppose that what is intended in the Ordinance is that section 12 provides for compensation to be payable to the owners of the servient tenements involved and there is no remit for the submission that it was intended that compensation should be payable to any owner of land adversely affected by tunnelling operations.

2. The presumption favouring consequential construction.

3. The presumption against absurdity.

49. It is convenient to deal with these two presumptions together.

50. The guiding principles relating to these presumptions are helpfully commented upon in paras 1471 and 1480 of Halsbury:

"1471. Presumption favouring consequential construction. It is presumed to be the legislator's intention that the court, when considering, in relation to the facts of the instant case, which of the opposing constructions of the enactment corresponds to its legal meaning, should assess the likely consequences of adopting each construction, both to the parties in the case and (if and when similar facts arise in future cases) for the law generally. If on balance the consequences of a particular construction are more likely to be adverse than beneficent this is a factor telling against that construction and may call for a strained interpretation.

Where the application of an enactment yields an adverse result, the interpretative factors may on balance indicate that the court should curtail its application. This is known as strict construction. Equally, where the application of an enactment yields a beneficent result the interpretative factors may on balance indicate that the court should widen its application. This is known as liberal construction."

"1480. Presumption against anomalous or illogical result. It is presumed that Parliament intends that the court, when considering, in relation to the facts of the instant case, which of the opposing constructions of an enactment corresponds to its legal meaning, should find against a construction that creates an anomaly or otherwise produces an irrational or illogical result. The presumption may be applicable where on one construction a benefit is not available in like cases, or a detriment is not imposed in like cases, or the decision would turn on an immaterial distinction or an anomaly would be created in legal doctrine. Where each of the constructions contended for involves some anomaly then, in so far as the court uses anomaly as a test, it has to balance the effect of each construction and determine which anomaly is greater. It may be possible to avoid the anomaly by the exercise of a discretion. It may be, however, that the anomaly is clearly intended, when effect must be given to the intention. The court will pay little attention to a proclaimed anomaly if it is purely hypothetical, and unlikely to arise in practice."

51. Bearing in mind that the purpose of the Ordinance is primarily to enable the Government to install and maintain sewage tunnels it is only to be expected that the class of persons who should be eligible for compensation should be limited to those directly affected by the Government's activities.

52. On the face of it there would be no logical justification to provide a benefit to the world at large the effect of which would be to make the Government assume the role of an insurer in respect of any liability which might arise consequential upon any damage being suffered as a result of the sewage tunnels being installed.

53. This then leads to the anomalous situation outlined by Mr Yu.

54. He submitted that it was clear that the legislation need only be invoked where the tunnels had to be installed under land in private ownership. It would not be necessary to have resort to the legislation where Government itself owned the land.

55. The result of this was that if Mr Thomas' contentions were well founded an adjoining owner would be able to claim compensation where the tunnel was laid under privately owned land but not where it was under Government land. This would be a most surprising result.

56. Mr Thomas' answer to this was that this situation could not arise. This was because section 3 of the Ordinance was framed in mandatory terms and this being the case even if the Government owned the land in question it was necessary for it to invoke the provisions contained in the Ordinance.

57. We do not think this right. The Government would clearly not need the benefit of the Ordinance and there is no reason why its provisions should apply. Section 3 is in these terms:

"3. Plans relating to sewage tunnels

Where the Government proposes to construct any sewage tunnel, the Secretary shall cause to be prepared a plan-

(a) showing the route of the proposed tunnel; and

(b) identifying the land situated on the route of the proposed tunnel."

58. This section must be predicated upon a premise that part or all of the land under which the tunnel is to be constructed will be privately owned land.

59. Mr Thomas referred to anomalies which would arise if Mr Yu's contentions were well founded.

60. He referred to the illogical and unsatisfactory situation which would arise if the only persons entitled to claim compensation were the owners of the servient tenement.

61. What would the situation be if a building on the land partly came within the strip which has been demarked and partly on the remainder of land owned by him?

62. Would it be the case that someone whose land immediately adjoined the said strip would be precluded from making a claim whereas his neighbour whose land happened to include a small slice of the demarked land would be able to lodge a claim?

63. These are the sorts of situations which often have to be resolved by the courts. An example of this is Yicon Ltd v China Light & Power Co. Ltd [1995] 3 HKC 547.

64. The anomaly referred to by Mr Yu is far more serious than that posed by Mr Thomas.

65. It is also the case that when trying to follow the guidelines indicated in Halsbury the construction of the section prayed for by Mr Yu appears to be much more probable.

4. Interpretation in the context of other similar statutes.

66. Guidance as to the approach to be adopted in considering similar statutes can be obtained from the judgment of Bokhary PJ at p. 440G in Medical Council of Hong Kong v. Chow Siu-shek (supra):

"It is well-established that the context in which a statute is to be interpreted includes other statutes in pari materia ie other statutes dealing with comparable matters."

67. Both counsel called in aid the approaches adopted in the Roads (Works, Use and Compensation) Ordinance Cap. 370, the Railways Ordinance Cap. 519 and the Mass Transit Railway (Land Resumption and Related Provisions) Ordinance Cap. 276.

68. All these Ordinances adopted a similar approach which was different to that adopted by section 12 of the Ordinance.

69. They all provide for compensation to be payable in the different circumstances referred to.

70. Mr Thomas argued that this provided powerful support for his submissions that there was nothing inherently wrong in the concept of the Government agreeing to compensate parties who have suffered damage consequential upon the exercise by the Government or like bodies of statutory powers.

71. Mr Yu's answer to this was to distinguish the types of compensation which were payable under these Ordinances.

72. What was apparent was that in each case where reference was made to damage arising out of the creation of an easement the party entitled to make a claim was limited to the ownership of the servient tenement.

73. It is also necessary to bear in mind the different nature of the work which would be undertaken to achieve the objectives of these Ordinances. It is of a very different nature to the work which would be required to install sewage tunnels at a great depth beneath the surface.

74. This being the case the type of risk being assumed by the Government would be of a different order.

75. Be that as it may the approach of Mr Yu whereby his term of reference was the creation of the easements in question was much more likely to achieve a helpful analogy to the present situation. It also supported the interpretation he was arguing for.

5. The presumption that the law should not be subject to change by a side wind.

76. For the operation of this presumption assistance can be derived from a passage at p. 626 of the 3rd Edition of "A Code of Statutory Interpretation" by F.A.R. Bennion 1997 Butterworths:

"Section 269. Law should not be subject to casual change

(1) It is a principle of legal policy that law should be altered deliberately rather than casually, and that Parliament should not change either common law or statute law by a sidewind, but only by measured and considered provisions. In the case of common law, or Acts embodying common law, the principle is somewhat stronger than in other cases. It is also stronger the more fundamental the change is.

(2) The court, when considering, in relation to the facts of the instant case, which of the opposing constructions of the enactment would give effect to the legislative intention, should presume that the legislator intended to observe this principle. The court should therefore strive to avoid adopting a construction which involves accepting that Parliament contravened the principle."

77. There can be no doubt that if Mr Thomas is correct in his formulation of the law this would involve a drastic change in the law.

78. Prior to the enactment of the Ordinance adjoining owners of property would only be able to proceed with an action to recover damages from the Government for damages suffered consequential upon installing a sewage tunnel by a common law action in Tort.

79. If Mr Thomas is right the adjoining party can now recover compensation under section 12 even if the Government has not been guilty of nuisance negligence or a claim made in accordance with the principles enunciated in Rylands v. Fletcher.

80. When reference is made to a party who owns land adjoining the area where the tunnelling is being installed it needs to be borne in mind that adjoining would not necessarily mean immediately adjoining.

81. All that would be required of the claimant would be to establish some causal connection. This being the case the land might be some very considerable distance away.

82. There is much merit in the submission made by Mr Yu that a change in the law of this order could accurately be described as a radical change.

83. It is highly improbable that a change of this magnitude would simply be introduced into an enactment such as the Ordinance.

84. This lends considerable support for the contentions being advanced in favour of the construction of section 12 argued for by Mr Yu.

85. For the reasons which have been given this appeal must be allowed.

86. There are however several outstanding points which need to be dealt with.

87. The first is that Mr Yu submitted that if there was any doubt concerning the construction of section 12 that he was contending for we should, according to the principles laid down in Pepper v Hart [1993] AC 593, consider the statement made by the Secretary for Planning, Environment and Lands when introducing the Bill into the Legislative Council.

88. Mr Thomas argued that the scope for referring to Pepper v Hart had been considerably circumscribed as a consequence of the observations made by the court in ex parte Spath Holme Ltd [2001] 2 WLR 15.

89. Lord Bingham expressed the view that reference should only be made to the speeches of the promoters of Bills in the most exceptional circumstances.

90. We have no doubt that this is right. We are satisfied that the stringent conditions referred to by Lord Bingham do not apply in the present case.

91. It is however relevant to observe that when we did consider the speech of the Secretary for Planning, Environment and Lands de bene esse in this case it was entirely clear that reference was being made to the owners of the servient tenement.

92. The final matter is whether having regard to the conclusion we have reached it is incumbent upon us to insert words into section 12 to make it altogether clear that compensation can only be claimed by the persons targeted in the earlier sections of the Ordinance.

93. We do not consider that this is necessary. We are satisfied that the Ordinance as drafted satisfactorily provides for the requirements of the case.

94. As indicated this appeal is allowed. The consequence of this is that on the preliminary point of law referred to we are satisfied that ground 1 of the Notice of Opposition is well founded. We make an order nisi that the costs before us and before the Lands Tribunal will be to the DOL.