HONG KONG INTERNATIONAL TERMINALS LTD v. DIRECTOR OF LANDS

LDMR 1 OF 2003

 IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

Miscellaneous Reference APPLICATION No. 1 of 2003

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Ruling

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Background

1.  The Applicant (“HIT”) is the owner of two lots of land under which the Government was to route a sewage tunnel. To do this it has to acquire the essential easement. For this purpose the Government resorts to the creation of easement under the Sewage Tunnels (Statutory Easements) Ordinance (“the Ordinance”). To create the easement, sections 3 and 4 of the Ordinance require the Government to publish in the Gazette a plan showing the route of the tunnel and identifying the land situated on the route of the proposed tunnel and which course the Government has taken.  There are provisions for objection and for subsequent rectifications of plans but nothing turns on these provisions in so far as the instant case is concerned. The Government eventually made the Order that section 10 of the Ordinance applies to the identified land in the notices whereby creating the statutory easement and had the Order gazetted as required under the Ordinance.

2.  It is not in dispute that the Government is required to identify in the Order the land over which statutory easement is created and that the identified land in the instant case is the narrow strip of land shown in the relevant plans. This narrow strip of land forms only a small part of whole of the two lots of land owned by HIT.  Apart form the two-dimension geographical limit mentioned, section 10 of the Ordinance also imposes another limit on the ambit of the easement providing that:

(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---
	(a)	to place and keep any sewage tunnel under such land---
	(b)	to carry out tunnel works---
(2)	Rights shall only be exercisable---where there is a cover to--- tunnel work---of not less than 30 metres of bedrock.

3.  HIT alleges it has suffered loss and damage to its land. This loss and damage occurred outside the strip of land identified in the Order. HIT is seeking compensation in respect of that loss and damage under section 12 of the Ordinance.  Section 12 provides that:

“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.”

4.  The Government contends that term “land” used in section 12 means land identified in the Order and that, for this reason, HIT is not entitled to compensation under section 12. On the other hand HIT contends that the “land” in section means the whole lot or lots of land of which the land so identified in the Order forms part.

5.  Therefore the parties ask for the following preliminary point to be determined.

“Whether the Applicant’s claim for compensation pursuant to section 12 of the Sewage Tunnels (Statutory Easements) Ordinance (Cap.438) (“the Ordinance”) should be dismissed on the followings grounds alleged by the Respondent:
	(a)	Under section 12 of the Ordinance, whether the Government is liable to pay compensation only where (i) there is loss or damage to the land described in an order made under section 6 or 7 of the Ordinance, and more specifically identified in the relevant plans and described in the notice of the plans published under section 4 of the Ordinance, as the area over which the statutory easements as provided for in section 10 of the Ordinance are created or exercised (“the easement area”), and (ii) the person claiming compensation has a sufficient interest over the easement area, but not where the loss or damage occurred to the land outside the easement area albeit within the same lot of land where the easement area is.
	(b)	In the present case, the easement area was described in an order under section 6----
	(c)	The alleged loss or damage for which compensation is claimed by the Applicant occurred outside the easement area but within the same lot of land where the easement area is.”

Meaning of “land” in section 12 

6.  The sole issue of the preliminary point is the meaning of the term “land” in section 12.  Mr. Wong, counsel for the Government relies heavily on the Court of Appeal case of Jade City International Limited V The Director of Lands [2003] 3 HKC 36.  That case deals directly with the interpretation of meaning of “land” in section 12. Mr. Clay, counsel for HIT seeks to distinguish the case of Jade City on facts of the instant case. He further relies on other decisions of this Tribunal. Those cases deals with interpretation of the term “land” in the respective similar sections concerning right to compensation.

Effect of Jade City 

7.  Mr. Wong goes so far as to submit that the Jade City has decided conclusively the point in favour of the Government. The point of law the Court of Appeal framed and determined as follows:

“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---purusant to section 6 of the Ordinance whereby section 10 of the Ordinance is ordered to be applicable…. The land of the Applicant is not one those pieces of land specifically identified in the aforesaid notices---and no statutory rights have been created or exercised over the Land in accordance with section 10…. The Applicant is thus not entitled to claim compensation under section 12 of the Ordinance.”

The Court of Appeal determined the point in favour of the Government and ruled that the Applicant was not entitled to claim compensation under section 12. The Applicant in Jade City did not own the land identified in the Order. The Court did not rule in so many words that an owner in the similar situation as HIT can or cannot claim compensation under section 12. The Court deliberately refrained from doing so and was content in stating that section 12 was sufficiently clear for the requirement of the case. (see paragraphs 92 and 93).   I do not agree that the case has decided conclusively the point in the instant case in favour of the Government.  Mr. Clay is justified in attempting to distinguish Jade City on the particular facts of the present case.

8.  Alternatively Mr. Wong submits in effect that the reasoning of the Court of Appeal in arriving at its conclusion can throws lights on the true meaning of the term “land” in section 12.  He adopts and expands the approach of the Court of Appeal in interpreting section 12 in his submission.  Mr. Clay uses the same similar approach but argues for a different conclusion.  I have no reason not to follow the reasoning or views of the Court of Appeal in so far as these views can be ascertained despite that they might be obiter. 

The whole of the Ordinance should be looked at

9.  Both counsels submit that other sections should be looked at. This is also the view of the Court of Appeal.  The wording of section 12 is different from previous sections in that the term “land” is not qualified and not restricted.  The Court of Appeal clearly expressed the view that this difference in wording does not justify the conclusion that any owner of any land affected can claim compensation.   Equally I do not think that the difference in wording make it plain and obvious that land refers to land of the remainder lot which easement area forms part of. Other interpretative criteria must be considered.

The intention of the Ordinance

10.  The primary purpose of the Ordinance is for the creation of statutory easement for the construction of sewage underground. Compensation is only an ancillary matter.  It is clear that compensation under section 12 is for owners of land whose right is affected by the creation of the easement. Such owner is entitled to compensation on proof of loss and damage without proving any fault on the part of the Government.  The Court of Appeal has made it clear that only owner of servient tenement is entitled to claim such statutory compensation. Hence the Court of Appeal ruled that owner of neighbouring land, no matter how close his land is to the easement area, is not entitled to compensation under section 12 (paragraph 48).

11.  Mr. Clay argues that sevient tenement is not restricted to easement area but that servient tenement refers also to the remainder of lot of land. I disagree. In the context the Court of Appeal by this term refers only to easement area. The Court of Appeal accepted that it would indeed be anomaly when a situation similar to the present case was postulated by counsel for Jade City in his argument. The Court of Appeal would not have accepted that it would be anomaly if servient tenement means the easement area.

12.  The Court of Appeal ruled that owner of adjoining land is not entitled to section 12 compensation. The reasoning given at various places supports Mr. Wong’s contention. Jade City had no right to compensation because the loss and damage had not occurred on the easement area. This forms the basis of the various reasoning of the Court of Appeal.  Applying the same reasoning the Court would have arrived at the same conclusion even if Jade City happened to own the easement area as well the adjoining lot where the loss and damage occurred.

13.  If Mr. Clay’s understanding of the case of Jade city and of the intent of the Ordinance is correct, it would mean the Ordinance intended a distinction to be drawn between two cases. An owner has two adjoining lots of land and easement area is on only one of the lots.  If the loss and damage occurs only on the latter lot, he can recover compensation but not if the loss and damage occurs in the other lot. There is no logic or any rationale for such distinction which depends on the demarcation or partitioning of land into lots.  It is not certainly the intent of the Ordinance to compensate owners or not to compensate owners depending demarcation of the land.

14.  The intent of the Ordinance is also clear in its attempt to limit the risk the Government is willing to take. One obvious such attempt is to limit by section 10(2) the ambit of the easement by requiring to the proposed the sewage to be buried deep and safe.  The requirement of meticulous description of the easement area is another attempt to limit the risk which the Government is willing to take.  It is the intention of the Ordinance to limit compensation under section 12 to land specifically identified in the Order, the easement area.

Presumption favouring consequential construction and presumption against inconvenient result

15.  Mr. Clay argues that if loss and damage has to occur in the easement area before an owner can claim compensation it would give rise to multiplicity of proceedings one set of proceedings for statutory compensation and another set for common law damages outside the easement area. This consequence or inconvenience is not serious. The causes of actions would be different and might have arisen at different times. The inconveniency and consequence would more likely increase legal costs and none of other undesirable consequence associated with multiplicity of proceedings.

Presumption against illogical and anomalous result

16.  Mr. Clay argues that it is illogical and anomalous if the contention of the Government is right. The Court of Appeal in Jade City acknowledged this anomaly and refuted this argument on the ground the anomaly advanced by counsel for the Government was more serious. Similarly in the present case, to uphold the contention of HIT would produce greater anomaly.  Mr. Clay argues that another undesirable consequence is the potential dispute over boundary of easement area.  Disputes over boundary can never be prevented and are unusual. The easement area has to be identified in the plans. The dispute over its boundary must be of the same order as that over the demarcation of individual lots of land. 

Interpretation in the context of other statutes

17.  Mr. Clay cited a number of decisions of this Tribunal in support of his contention, in particular Leverson Limited V Secretary for Transport LDMR 32/2000.  In that case the Tribunal adopts the literal meaning rule in interpreting the term “land”. In the instant case the Court of Appeal case clearly stated that this is not an appropriate for interpreting section 12.  In any event if such rule applies the Court of Appeal would have ruled otherwise. Other decisions of Tribunal cited do not give me any assistance if the issues of liability and quantum context are distinct. These cases decide no more than that, when assessing diminution in value of easement area, circumstances respecting the remainder land of the same lot can be taken into account in the particular circumstances of the case.    These cases do not lend support to the contention of HIT.

Conclusion

18.  I follow the view of the Court of Appeal in Jade City that the plain meaning rule is not applicable to interpret section 12.  The Ordinance is intended to enable the Government to limit the risk it would take. The physical loss and damage must occur within the easement area before compensation can be claimed. Loss and damage outside it have to be claimed by common law actions. There is nothing unfair or illogical for the Government to limit the risk. This is obvious if one bears in mind that no compensation under section 12 any compensation without fault can be claimed if the sewage is built under Government land. Statutory compensation is intended and only intended to compensate loss and damage as result of creation of right in favour of the Government over and only over the easement area.

19.  I decide the preliminary point in favour of the Government and make an order nisi for costs in his favour with certificate for counsel on High Court Scale to be taxed if not agreed.