CHATHAM INDUSTRIES LTD v. THE INCORPORATED OWNERS OF GOLD KING INDUSTRIAL BUILDING AND ANOTHER

CACV 252/2010

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 252 OF 2010

(ON APPEAL FROM HCA No. 1603 OF 2007)

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Hon Cheung JA :

1.  This appeal is concerned with a dispute over the use of a private road situated between two industrial buildings in Kwai Chung, Tsuen Wan. The incorporated owners of Gold King Industrial Building (‘Gold King Industrial Building’) are the owners of the private road over which a right of way has been granted to the owners of South China Cold Storage Building (‘South China Cold Storage Building’).

The background

2.  In 1965, South China Building Materials Limited (‘SCBM’) and Pickford Development Limited (‘Pickford’) were the registered owners of the land known as Lot 702 in DD 445 located in Tsuen Wan, New Territories.  Lot 702 was subsequently sub-divided into three smaller lots, namely Lot 702A, Lot 702B and Lot 702RP but they remained in the ownership of SCBM and Pickford.  On 14 August 1969 they surrendered Lot 702B to the authorities in exchange for KCTL Lot No. 111 (‘Lot 111’). It is not challenged that Lot 111 is situated in the same location as Lot 702B.

South China Cold Storage Building

3.  The owners sub-divided Lot 111 into two parts, namely Lot 111 SA and Lot 111 RP.  By 5 February 1970, South China Cold Storage Building, was constructed on Lot 111 SA.  The building consisted of six levels, namely, the basement, lower ground floor, ground floor, first, second and third floors.  There are :

(1) five cold storage rooms in the basement;

(2) five cold storage rooms, a store and a plant room on the lower ground floor;

(3) two factory working areas each on the ground, first and second floor; and

(4) a factory working area on the third floor. 

4.  The building is built on a slope.  The main entrance (‘the Entrance’) to the building is on the ground floor.  Vehicles have to use Lot 111 RP in order to reach the Entrance. Lot 111 RP is in the shape of an inverted T.  This is the private road in dispute and is described in the judgment below as the Road.  The building is located on one side of the vertical leg of the T and on the other side of the vertical leg is Lot 702A.  The horizontal part of the inverted T leads to two main roads, namely, Wah Sing Street and Dai Lin Pai Road.  The parties agreed that at the time of the action, vehicular access can no longer be gained from Wah Sing Street to the Road.

5.  At the basement of the building, there is a car port (‘the Car Port’) consisting of six car parks. There is also a loading and unloading area in the basement.  The Car Port has its own separate entrance.  Due to the gradient of the slope, one reaches the Car Port entrance first and then the Entrance which is located higher on the slope.

6.  The Entrance faces directly towards the end of the vertical leg of the T.  Vehicles cannot enter the building through the Entrance.  Inside the Entrance is a lift (‘the Lift’). This is the only lift which serves all the floors of the building from the ground floor onwards.

7.  In order to access the Lift from the Car Port in the basement, one would have to either walk out of the Car Port, up the Road and re-enter the Entrance.  The alternative is to walk up two flights of stairs within the building to reach the lower ground floor and enter the Entrance from the back.

8.  There are two other entrances to the building at its back and eastern side respectively.  They are served by two flights of staircase to the various floors of the building.  However they are not normally in use because there are no lifts for cargo and passenger on these two sides of the building and these two entrances are used merely for the purpose of fire escape.  The layout of the building I have just described has been the same since the building was first constructed.

The creation of the right of way

9.  By an assignment dated 5 February 1970 (Memorial No. 84663) SCBM and Pickford assigned the basement, lower ground floor and part of flat roof of the third floor to South China Cold Storage and Industrial Company Limited (‘SCCS’).  They also assigned Lot 111 RP to SCCS.  This assignment is subject to a right of way of the owners and other occupiers of the other floors of the building to ‘pass and repass over and along the lift lobby, staircases and landings and car ports’ of the parts assigned to SCCS and further subject to a right of way for the owners of Lot 111 SA and their ‘tenants, visitors, workmen and other persons authorised by them… to pass and repass over along and upon’ Lot 111 RP.  The latter is the right of way in question.

10.  By another assignment of the same date (Memorial No. 84390) SCBM and Pickford assigned the second floor of the building to Florist Design Corporation Limited (‘FDCL’) who was the predecessor in title of the plaintiff.  It was also given, first, the right to use the Car Port and any one of the four parking spaces marked on the Basement Plan as 1, 2, 3, 4 and, second, the right of way to ‘pass and repass over along and upon’ Lot 111 RP.  This right is granted to FDCL ‘or the owner or owners for the time being of the premises hereby assigned their tenants, visitors, servants, workmen and all other persons authorised by them’.

11.  By a further assignment of the same date (Memorial No. 84413), SCBM and Pickford assigned the ground and the first floor of the building to Him Wo Paper Products Factory Limited (‘Him Wo’) together with the use of the Car Port and car parking spaces no. 1, 2, 3 and 4.  Him Wo was further granted the rights ‘to pass and repass over along and upon’ Lot 111 RP.

12.  Of the four Car Parking Spaces, two of them i.e. Numbers 1 and 2 are located inside the Car Port area of the basement which was assigned to SCCS.  The other two are located on Lot 111 RP.  No. 3 is on the horizontal leg of the T while No. 4 is on the vertical leg near the Entrance.

Gold King Industrial Building

The parties

13.  The plaintiff is currently the registered owner and occupier of the premises (‘the Premises’) known as Unit A of the second floor of South China Cold Storage Building.  It became the owner in 1989 by an assignment dated 24 May 1989 (Memorial No. 591291).  The assignment to the plaintiff was subject to and with the benefit of ‘all rights of way (if any) And other rights privileges easements and appurtenances belonging to the [plaintiff’s] property and those as are more particularly defined and described in the Crown Lease and the Assignment Memorial No. 84390’.  The Premises is one of the two units on the second floor. The plaintiff has been carrying on a leather processing business there.

14.  By a development agreement dated 16 July 1979, SCBM, Pickford and SCCS agreed with Great Eagle Company Limited to jointly redevelop Lots 702A and Lot 111 RP by demolishing the then existing building on Lot 702A and constructing a new industrial building on both Lots 702A and part of Lot 111 RP.  Pursuant to the development agreement, Gold King Industrial Building was subsequently erected in 1987 as evidenced by an occupation permit dated 1 April 1987.  Hence the vertical leg of the Road is now sandwiched between South China Cold Storage Building and Gold King Industrial Building.  It is not disputed that only the upper part of the Gold King Building overhangs on Lot 111 RP.

15.  The 1^st defendant is the incorporated owners of Gold King Industrial Building while the 2^nd Defendant is its manager.

The dispute

16.  Dispute arose between the parties on the use of the Road.  Au J who tried this case below summarised the dispute as follows :

(1) In July 2006, the 2^nd defendant closed the gate situated at the left limb of the horizontal side of the Road after a metal scrap had fallen from a tall chimney of a nearby building.  [Two gates had been installed at the horizontal side of the Road leading towards Wah Sing Street.]

(2) Later, in April 2007, the 2^nd defendant sent a letter to the owners and occupiers of the South China Cold Storage Building saying that it would not allow vehicular access to the Road due to a safety concern of concrete falling off from South China Cold Storage Building.

(3) The plaintiff then wrote to the defendants stating that the stopping of vehicular access to the Road would affect the plaintiff’s operation and business.

(4) In June 2007, pursuant to a resolution passed by the 1^st defendant, the 2^nd defendant issued a notice to the owners of South China Cold Storage Building stating that with effect from 15 July 2007, all vehicles would be prohibited from stopping or loading and unloading goods on the Road.  The 2^nd defendant also wrote to the owners and occupiers of the South China Cold Storage Building stating that, pursuant to legal advice, they only had the right to pass and repass over the Road and thus any vehicles breaching this limited right would be locked and towed away.

(5) Thereafter, various tenants and owners of South China Cold Storage Building, including SCCS, SCBM and Pickford, also wrote to the defendants objecting to the restrictions on the use of the Road.

(6) On 15 July 2007, the 2^nd defendant, put up various notices on the Road prohibiting vehicles from stopping or loading and unloading goods on the Road.  They also gave warning that the 2^nd defendant would lock and tow away any vehicles in contravention of the prohibition.  The 2^nd defendant further placed three fibre-glass water-filled barriers immediately outside the Entrance which effectively stopped the plaintiff’s vehicles from stopping, loading and unloading on the Road, including at the space which represented the space of car park 4.

(7) Thereafter, the defendants had been putting measures to restrict the use of the Road for vehicles to stop, park, load and unload goods.

The claim and counterclaim

17.  On 24 July 2007, the plaintiff issued the present action against the defendants claiming that they had interfered with its enjoyment of the easement of right of way on the Road.  On 27 July 2007, an injunction was obtained by the plaintiff to restrain the defendants from, amongst others, interfering with the plaintiff’s use of the Road to park vehicles on it for loading and unloading goods.

18.  The defendants sought in their counterclaim that they were entitled to prevent the plaintiff from parking any vehicles along the entirety of the Road.

The trial

19.  Au J, at the end of the trial, refused to grant a permanent injunction to the plaintiff.  He dismissed both the plaintiff’s claim and the defendants’ counterclaim. 

The appeal

20.  The plaintiff now appeals.  The defendants did not file any respondent’s notice seeking to affirm the judgment on other grounds or file a cross appeal against the dismissal of their counterclaim.

The principles

21.  Lot 100 RP is the servient tenement over which a right of way has been granted to the owners of the dominant tenement in South China Cold Storage Building.  The right was created in favour of the owners of Lot 111 SA by a written instrument, namely, Memorial No. 84663.  The plaintiff’s predecessor in title specifically acquired the right by Memorial No. 84390.  The core issue in this appeal is the ambit of the right of way.  In construing the ambit, the following principles are relevant :

(1) The construction of the written instrument which created the right of way is always for the Court; but, in order to apply its provisions, evidence is in every case admissible of all material facts existing at the time of the execution of the instrument, so as to place the Court in the situation of the grantor, see Lord Waterpark v. Fennell (1859) 7 H.L.C. 650 at 684 per Lord Wensleydale.  A modern affirmation of the principle that one construes the terms of a grant at the time of its execution is Moncrieff and another v Jamieson and others [2007] 1 W.L.R. 2620 at 2630.

(2) The Court will need to consider the location of the right of way (locus in quo), the nature of the terminal point of the right of way (terminus ad quem) and the purpose for which the right of way is to be used, see Upjohn J in Bulstrode v. Lambert [1953] 1 W.L.R. 1064 at 1067.

(3) Apart from the rights that are expressly granted, there are also implied rights which are reasonably necessary for the enjoyment of the rights.  The implied rights are described in the authorities as ancillary rights.  This principle is grounded on two legal bases.  First, the right under the grant will include all those easements which are necessary to the reasonable enjoyment of the property granted (Wheeldon v Burrows (1879) 12 Ch D 31 at 49).  Second, the grant of an easement is prima facie also the grant of such ancillary rights as are reasonably necessary to its exercise or enjoyment (per Parker J in Jones v Pritchard [1908] 1 Ch 630 at 638). 

(4) Lord Neuberger of Abbotsbury in Moncrieff at 2656 identified these two bases of the implied rights.  He held at 2657 that the underlining principle is that the law will imply a term into a contract, where, in the light of the terms of the contract and the facts known to the parties at the time of the contract, such a term would have been regarded as reasonably necessary or obvious to the parties.  He emphasised the importance of focusing on the dual nature of the requirement that the implied right must be ‘reasonably necessary’.  He stated that,

‘ Without the necessity, there would be the danger of imposing an uncovenanted burden on the servient owner, based on little more than sympathy for the dominant owner; without the reasonableness, there would be a danger of imposing an unrealistically high hurdle for the dominant owner.’

22.  In Bulstrode, a vendor conveyed to the purchaser a house but reserved to himself, his tenants, workmen and persons authorised by him the right ‘to pass and repass with or without vehicles over and along’ a passageway at the side of the house for the purpose of obtaining access to the building known as the auction mart at the rear of the house.  Upjohn J held that those deriving title from the vendor were entitled to drive vehicles on the passageway and halt the vehicles for the purpose of loading or unloading goods.  He held that,

‘In my Judgment, therefore, the vehicles must be entitled to remain in the yard for such time as is necessary to enable the plaintiff to enjoy his easement of bringing vehicles into the yard; that is, for such time as it takes to load or unload the vehicles. It is only an incident of the right of way expressly granted and may be described as ancillary to that easement, because without that right he cannot substantially enjoy that which has been reserved to him.’

The plaintiff’s case

23.  The plaintiff’s case in gist is that, as part of the enjoyment of the right of way, it and its workers and visitors are entitled to stop vehicles on the Road for the purpose of loading and unloading goods and also to pick up and set down passengers.

The Judge’s reasons

24.  The Judge ruled against the plaintiff that it has an ancillary right to park vehicles along the Road which is to be implied into the right of way.  He held that,

‘ 44. With respect to Mr Chong [plaintiff’s counsel], I am unable to accept that an ancillary right to park along the Road has to be implied to the Right of Way.

45. This is so because at the time of the grant, as mentioned above, the owners of the Premises [plaintiff’s premises] had also been granted the Car Parking Right.  According to the plan attached to the Relevant Assignment, car parks 1 and 2 were located within the Car Port while car parks 3 and 4 were located on the Road.  Car park 4 was situated outside the Entrance and car park 3 on the left limb of the head of the “T” next to the South China Building.

46. The Car Parking Right therefore entitled the owners to park vehicles at car park 4, which was situated right outside the Entrance where direct access could be gained to the Lift.

47. Further, under the Relevant Assignment, the Car Parking Right was assigned to “the Purchaser” (i.e., Florist Design), which was a limited company.  The right to use the car parks can therefore only be properly exercised by its authorized agents or servants.  It must be obvious, or by necessary implication, that the right to use these car parks must also apply to the owner’s authorised agents and servants.’

Did the plaintiff seek an ancillary parking right?

25.  Mr. K M Chong and Mr. Lester Lee, counsel for the plaintiff, argued that the Judge misunderstood the plaintiff’s case in that the plaintiff was not asking for an ancillary right to park on the Road but merely the right to stop the vehicles for the purpose of loading and unloading goods and also to pick up and set down passengers.

26.  It is fair to say that the Judge when identifying the issues had stated that the plaintiff’s case is that under the right of way, it has a right to park vehicles along the Road and to load and unload goods therefrom (paragraph 37 of the judgment).  In other parts of the judgment, the Judge had stated that the core issue was whether the right of way over the Road includes a right to park vehicles along it.  He did not consider that there was any serious dispute that if there was such a right to park, it included the right to load and unload goods during parking (paragraph 13).

27.  On that basis it seems that the Judge had understood the plaintiff’s claim was an ancillary right of parking as well as stopping for the purpose as stated. Reading the statement of claim and the plaintiff’s submissions below I do not have the impression that the plaintiff was claiming a parking right for an extended period.  However, I am reluctant to attribute to the Judge that he had misunderstood the plaintiff’s case.  It may be that some confusion had arisen from the plaintiff’s stance when counsel stated in their written closing submission that the plaintiff’s right in respect of Car Parks 3 and 4 was the right to park on them when argument was raised on the nature of the use of these two car parks under the terms of the written instrument.

28.  I accept that the plaintiff’s case in the Court below was the right to stop on the Road for the purpose of loading and unloading goods and picking up and setting down passengers.  It was not seeking a separate right to park on the Road for extended periods.  This being the case, I do not need to address the issue of the right to park.  As such it is also not necessary to analyze the issue of a servitudal right to park ancillary to the right of access which was the sole issue decided in Moncrieff.  It is sufficient to point out that Lord Hope of Craighead in that case at 2631 referred to Kennedy v Macdonald 1988 GWD 40-1653 where Sheriff Principal Caplan drew a distinction between, on the one hand, a right of vehicular access which embraced a right to stop on a lane in the servient tenement to set down persons and goods and, on the other hand, parking vehicles there for extended period. It was held that to park vehicles for extended periods on the servient land would be to deviate from the normal and reasonable incidents of access.  As I have said, the latter point is not one I need to address in this appeal.

My view on the ancillary right to stop to set down goods and persons

29.  I will confine myself to the ancillary right to stop for the purpose of loading and unloading goods and picking up and setting down passengers on the Road.  In my view the Judge’s rationale for rejecting the plaintiff’s case was wrong. 

1) Although the written instruments which conferred the right of way do not refer to access by vehicles, it has not been argued in this case that the right of way does not include vehicular access.  Considering that the right of way was created in 1970 at the height of industrial development in Hong Kong in respect of access to an industrial building, it can hardly be argued otherwise that the right to pass and repass the Road must include access by vehicles to and from South China Cold Storage Building.  In Cannon v. Villars (1878) 8 Ch D 415 cited in Bulstrode it was held that if a road is to a factory or business premises, the grant of right of way would include a right to use it for reasonable purposes, sufficient for the purposes of the business, which would include the right of bringing up carts and wagons at reasonable times for the purpose of the business.

2) Considering the location of the right of way which leads from two main roads (i.e. Wah Sing Road and Dai Lin Pai Road) to its terminal point which is a dead end road where the Entrance to the South China Cold Storage Building is situated close by, access by vehicles must carry with it the implication that the vehicles must also be allowed to stop for the purpose of loading and unloading goods on the Road so that the goods could be delivered to and from the plaintiff’s premises.  It must also include the right to stop in order to pick up and set down passengers.  The Entrance is where the lift is situated.  It is reasonably necessary for the comfortable and convenient enjoyment by the plaintiff of the right of way to be able to stop on the Road near the Entrance in order to carry out the purposes I have mentioned.

3) The Entrance itself is not a vehicular entrance so cars cannot enter and park inside the Entrance.  As the Car Port and the car parks inside belong to SCCS, they may not be available to the plaintiff to park cars and load goods.  In any event the Judge had identified the practical difficulties of transporting goods from the Car Port to the Lift at the Entrance.  Further to require workers to use the staircase at other parts of the building to carry goods to and from the plaintiff’s premises is not practical at all. 

4) The width of the Road near the Entrance is 25 feet.  The Judge had conducted a site visit and he dealt with the location as follows :

‘ 28(5) A pavement of 4 feet wide was constructed on the vertical portion of the junction directly abutting the Entrance. A similar pavement can also be seen directly abutting the east side of the Gold King Industrial Building. There is a dispute by the parties concerning the actual original width of the road in between both pavements, it is undisputed however that even if the narrower version is adopted, and when car park 4 is occupied, there remains, at the very least, a width of 9 feet for other motor vehicles to pass.’

The remaining width of 9 feet on that part of the Road for other vehicles to pass through is a clear indication that that part of the Road is capable of allowing vehicles to stop for the purposes as stated.

5) The presence of car park no. 3 and 4 will not prevent the ancillary right from arising.  In 1970, FDCL, the plaintiff’s predecessor in title did not have exclusive use of these car parks (this remains to be the same position now).  These two car parks were actually assigned to SCCS.  The right of FDCL to use these two car parks must be subject to SCCS’s (and its assignees) right to these two car parks.  SCCS might park two vehicles permanently on these two car parks thereby preventing the plaintiff’s predecessor from using them.  In such a case, it must be allowed to stop the vehicle on the Road to unload the goods.  Furthermore other owners of the South China Cold Storage Building are also allowed to use these two car parks.  This again means that FDCL’s use of the two car parks was limited. The situation was the same as at the time of the proceedings.  In my view, the use by the other owners of these two car parks removes the basis from which the Judge rejected the plaintiff’s claim. The Judge in fact had stated that, if the plaintiff does not have a separate right to park at car park 4, he would have held that there should be an ancillary right to park on the Road implied into the right of way in light of the configuration and intended use of the South China Cold Storage Building.

30.  In my view the plaintiff has proved its case on the ancillary right.

Remedy

31.  The Judge held that he would not, in any event, have granted the injunction because it was too wide and too vague in its terms.  In his claim the plaintiff sought an injunction to restrain the defendants from, among other things, preventing the plaintiff from using the Road ‘for any purpose’ connected with the plaintiff’s reasonable and lawful enjoyment of the plaintiff’s factory premises.  The plaintiff in the notice of appeal had sought a declaration instead :

‘ 1. A declaration that ancillary to the Plaintiff’s rights over the disputed right of way is the right for the Plaintiff and their tenants, visitors, servants, workmen and all other persons authorised by them, to stop their vehicles on the disputed right of way to:-

(a) load and unload goods; and

(b) pick up and set down passengers.’

32.  In my view since the plaintiff is entitled to the ancillary right to stop for the purpose as stated, an injunction confining itself to this ancillary right will meet the objection by the Judge.  There is no need to extend the ambit of the injunction to include the words ‘for any purpose’.

33.  Mr. Mak, counsel for the defendants, argued that the granting of an injunction is a matter of discretion which should not be exercised in favour of the plaintiff because there has been change of circumstances since the dispute had first arisen.  I disagree.  The Judge did not refuse the injunction by reason of change of circumstances.  He simply refused it because the ambit of the injunction was too vague.  The defendants have not filed a respondent’s notice seeking to affirm the refusal on the basis of change of circumstances.  Hence it is not something that concerns this appeal.

Conclusion

34.  Accordingly, I will allow the appeal and grant a permanent injunction to restrain the 1^st and 2^nd defendants, whether by their directors, officers, servants or agents, from interfering with the exercise of the easement of right of way by the plaintiff, its servants or agents, to stop vehicles on the Road for the purpose of loading and unloading goods and picking up and setting down passengers connected with the plaintiff’s reasonable and lawful use of its factory premises.

35.  The plaintiff is to have the costs of the appeal and below on a provisional basis.

Hon Fok JA :

36.  I agree with the judgment of Cheung JA.  I wish only to add only a few remarks of my own since we are differing from the learned Judge below.

37.  Just as the court will not lightly imply a term into a contract unless the conditions for such implication exist, the court will not lightly find an ancillary right to an easement exists lest it impose an uncovenanted burden on a servient owner.  Hence, the test for implication of such an ancillary right is the test of reasonable necessity.

38.  In my view, had the plaintiff’s right to use car park 4 been exclusive, I would have shared the Judge's view that it could not be said to be reasonably necessary to the enjoyment of the right of way along the Road to imply a right to stop and set down goods and persons since the Judge found that car park 4 was situated right outside the Entrance to South China Building (Judgment §46).  The plaintiff would, on that basis, have been able to stop and set down goods and persons by its use of car park 4 and there would have been no reasonable necessity to imply a right to stop and set down goods and persons as ancillary to the right of way along the Road.

39.  However, with respect to the Judge below, I do not think he was correct in concluding that the right to park granted to the plaintiff was such as to render it not reasonably necessary for the plaintiff also to have a right to stop and set down goods and persons as an ancillary right to the right of way over the Road. In §48 of the Judgment, the Judge held:

‘In the premises, in my judgment, notwithstanding the physical configuration and industrial use of the South China Building as put forward by the Plaintiff in evidence (which I have accepted above), when the Right of Way is construed (as it should be) together with the Car Parking Right at the time of grant, I am not satisfied that a further ancillary right to park along the Road should be implied into the Right of Way, as (with the existence of the Car Parking Right) this is not reasonably necessary for the exercise of the Right of Way or for the comfortable and reasonable enjoyment of the South China Building.’

40.  The right to park was non-exclusive and, given the number of other owners who were also entitled to park in car parks 1, 2, 3 and 4 at the time of the grant, coupled with the fact that the physical configuration of South China Building meant that only car park 4 provided a proximate location to the Entrance, that non-exclusive right to park did not provide a degree of vehicular accessibility that would prevent the ancillary right claimed from arising.  The ancillary right in question is that based on the passage at p.l071 in Upjohn J’s judgment in Bulstrode v Lambert (quoted by Cheung JA at paragraph 22 above).

41.  Therefore, on the particular facts of this case summarised in paragraph 29 above, I consider that the plaintiff is correct in asserting the existence of the ancillary right reflected in the injunction order proposed by Cheung JA.

Hon Chu J :

42.  I agree.