LOYAL LUCK TRADING LTD v. TAM CHUN WAH

CACV 217/2007

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 217 OF 2007

(ON APPEAL FROM HCMP NO. 444 OF 2006)

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JUDGMENT

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Hon Tang VP:

Introduction

1.  The plaintiff and the defendant own adjoining properties.  The plaintiff is the owner of Lots 422A, 422B, 433A, 434, 435, 1736A1, and 1736C2 in D.D. 107, near Mo Fan Heung in Yuen Long (“the plaintiff’s land”).  The defendant is the owner of Lots 430A and 430B, also in D.D. 107, Yuen Long (“the defendant’s land”).

2.  The defendant’s land lies just to the west of the plaintiff’s land, sharing a common boundary with the plaintiff’s land on the east side of Lot 435.  The defendant’s land also lies between the plaintiff’s land and San Tam Road, a local access road with a dual carriageway.  There is an open V-shape nullah between the pedestrian pavement on San Tam Road and the defendant’s land.

3.  Both the plaintiff's land and defendant's land came under the common ownership of Widecorp Development Limited (“Widecorp”) in about 1993.  Widecorp used the plaintiff’s land for the parking of container lorries as well as for vehicle maintenance and repair until 1999 or 2000.

4.  Since about 1993, a vehicular access from San Tam Road has run through part of Lot 430A and 430B, as well as other lands not the subject of this action and which enters the plaintiff’s land at Lot 435 over a made road the surface of which is either concreted over or gravelled, thus forming a continuous and apparent means of communication.  In about 1994/1995, steel sheets have been placed over the open nullah forming a bridge, thus linking the access road with San Tam Road.

5.  The plaintiff claims to be entitled to a right of way over the access road within the defendant’s land for the purpose of vehicular access to its property.  The plaintiff’s claim to the right of way is based on the rule in Wheeldon v Burrows [1879] 12 Ch D 31, as well as section 16 of the Conveyancing and Property Ordinance, Cap. 219 (“section 16”).  That right is disputed by the defendant.  As a result of steps taken by the defendant in February 2006 to block vehicles from passing over his land to the plaintiff’s land, the plaintiff issued these proceedings, seeking a declaration that the plaintiff was entitled to a right of way over the defendant’s land, and an injunction to prevent the defendant from blocking the right of way, or otherwise interfering with the plaintiff’s use of it.

6.  Barma J, after trial, made a declaration in the plaintiff’s favour.  He also granted an injunction restraining the Defendant by himself, or his servants or agents or otherwise howsoever from placing or allowing to be placed on the said way anything substantially restricting, preventing or otherwise interfering with the reasonable enjoyment of the said way by the Plaintiff, his servants and licensees whether on foot or by motor vehicles and other conveyances at all times and for all purposes and from doing any act whereby the Plaintiff, his servants and licensees may be hindered or obstructed in the free use thereof.

The appeal

7.  This is the defendant’s appeal.

8.  The principal issues are whether and if so when any right of way over the access road has arisen under the rule in Wheeldon v Burrows or section 16.  Also whether having regard to the zoning of the plaintiff's land, a right of way could have been acquired because the user on the plaintiff's land for the parking of container lorries was illegal under the Town Planning Ordinance, Cap. 131.

Background

9.  As the learned judge had noted the ownership history of the lands in some detail in his judgment, it is only necessary for me to note the following.

10.  On 26 April 1990, the plaintiff’s land was assigned to Widecorp.  At that time, Widecorp intended to use the plaintiff’s land for the parking of container lorries.  In 1993, Widecorp purchased the defendant’s land to provide access to the plaintiff’s land from San Tam Road.  Widecorp had begun to build a road on what was to become the defendant’s land with the consent of the then owner even before it was assigned to Widecorp on 18 January 1993, but there is no evidence that the road was used prior to the assignment.

11.  From 18 January 1993, Widecorp owned both the plaintiff’s land and the defendant’s land.  It appeared that although there was a change in the management or ownership of Widecorp, the plaintiff's land had been used for the parking of container lorries, as well as, for example, vehicle maintenance and repair until around 1999 or 2000.

12.  The plaintiff’s land was mortgaged to Kenney Finance Company Limited (“Kenney”) by a mortgage dated 12 August 1994 (“the Kenney Mortgage”).

13.  On 20 August 1996, Widecorp mortgaged the defendant’s land to GE Capital Finance Limited (“GE”).  It appeared that Widecorp also granted to GE a second mortgage over the plaintiff’s land.

14.  Some time in 1999, probably on 3 May 1999, what appeared to have been an order for possession was granted to Kenney in proceedings by Kenney against Widecorp.  On 4 December 1999, Kenney entered into a sale and purchase agreement in respect of the plaintiff’s land with Mr Mok Chung-sum (“Mr Mok”) and assigned the property to Mr Mok on 31 January 2000 (“the 2000 Assignment”).

15.  Mr Mok then granted a licence to Mr Lau Ming-wah (“Mr Lau”) to use the plaintiff’s land in November 2002.  Mr Lau granted a sub-licence to a company in which he was interested, and from around that time, the plaintiff’s land was again used for the parking of container lorries.  According to the learned judge:

“4 (11).    … At present, however, the land is not being used for the parking of container lorries, although it is being used for the parking of other, smaller, vehicles and trucks.  This change appears to have been due to the fact that the use of the land for parking of container lorries is not permitted under the present town planning zoning in respect of the land, and a recent application for permission to use it for this purpose was unsuccessful.”

16.  On 7 July 2005, Mr Mok assigned the plaintiff’s land to the plaintiff.  The sale was made subject to Mr Lau’s rights under the licence granted to him by Mr Mok.

17.  Meanwhile, earlier in 2005, GE had obtained possession of the defendant’s land.  On 20 January 2006, GE entered into a sale and purchase agreement with the defendant, by which it sold the defendant’s land to him.  Clause 28 of the sale and purchase agreement expressly referred to the plaintiff’s claim to an easement, and provided that the defendant, as purchaser from GE, purchased the land with full knowledge of that claim.

18.  At all material times, the plaintiff’s land fell within Draft Kam Tin North Outline Zoning Plan No. S/YL-KTN/6 (“the Draft Zoning Plan”).  Under the Draft Zoning Plan, 76% of the plaintiff's land has been zoned ‘Other Specific Uses’ (‘OU’) annotated ‘Railway Reserve’, and 24% of the site, ‘Industrial (Group D)’ (‘I(D)’).

19.  It is common ground that use of the plaintiff's land for the parking of container lorries was not permitted under the Draft Zoning Plan and such use would have involved a breach of the provisions of the Town Planning Ordinance.  However, it appeared that for a period of 18 months between about May 1995 and November 1996, a temporary permission to use the plaintiff's land for the parking of container lorries subject to conditions had been granted by the relevant authorities.

20.  The plaintiff no longer wishes to use its land for the purpose of the parking of container lorries although, according to the learned judge:

“10.   It has, however, applied for planning permission to use part of its land for the purpose of parking other, smaller, vehicles and trucks.  The reason why this latest application is in relation to part of the land only is because the Plaintiff is entitled to use the remainder of its land (consisting of a portion of the land at its southern end) for this more limited purpose under the existing zoning.  This is because that part of the land is zoned as ‘Industrial (Group D)’, under which open storage of vehicles (other than container vehicles) is permitted.  Planning permission is, however, required for the other part of the Plaintiff’s land.  At the date of the hearing, the outcome of this latest application was not known, but this is not a matter which affects the outcome of these proceedings.”

21.  Mr Pang, who appeared before the learned judge as well as in this court, submitted that a right of way over the access road arose in favour of the plaintiff’s land as the dominant tenement, either on the making of the Kenney Mortgage, or when Kenney obtained possession in 1999, or on the making of the 2000 Assignment.

22.  The principal submissions of Mr Andy Hung, who appeared before us as well as at trial were:

(1)	neither section 16 nor the rule in Wheeldon v Burrows could apply until the 2000 Assignment, but at the time of the 2000 Assignment, the right of way was not in use;
(2)	that section 16 could not apply because there was no diversity of occupation prior to either the Kenney Mortgage or the 2000 Assignment;
(3)	the right of way was not necessary for the reasonable enjoyment of the plaintiff's land since it was described as Padi in the Block Crown Lease, thus Wheeldon v Burrows does not apply;
(4)	in any event, no right of way could have been acquired because of the illegal user of the plaintiff's land contrary to Town Planning Ordinance;
(5)	the right of way claimed was so excessive as to leave the Defendant with no reasonable use for his land,
(6)	in any event, the court should in its discretion refused an injunction because:
	"(a)	it would enable the illegality involved in the use of the Plaintiff’s land as a container park to continue;
	(b)	the Plaintiff appeared to be trespassing on Government Land (by the bridge which it constructed over the drainage channel) and also on neighbouring lots;
	(c)	the injunction claimed is too wide, in that it seeks to restrain the Defendant from interfering with the Plaintiff’s use of the right of way ‘at all times and for all purposes’; and
	(d)	the Plaintiff could in any event terminate the licence granted to Mr Lau (who could in turn terminate the sub-licence which he had granted) because of the illegal use to which its land was being put.”

The judgment

23.  The learned judge had not found it necessary to express a concluded view as to whether or not the rule in Wheeldon v Burrows operated so as to create easements by implication when the Kenney Mortgage was made because “this argument was not fully developed”.

24.  The learned judge held that the rule in Wheeldon v Burrows applied to the 2000 Assignment and that being the case it was not strictly necessarily to determine whether the easement claimed arose by virtue of section 16 as well.  However, he went on to say that had it been necessary, he would have come to the conclusion that the easement claimed also arose on the Kenney Mortgage or the 2000 Assignment.  I agree.  Moreover, I prefer to reverse the order and deal with section 16 first.

Section 16

25.  Section 16(1) is in the following terms:

“‘Unless the contrary intention is expressed in the assignment, an assignment shall operate to assign, with the land, all rights, interests, privileges, easements or appurtenances in, over, belonging or appertaining to that land or at the time of the assignment used, held occupied or enjoyed with that land and things attached to the land or permanently fastened to anything attached to the land.’

26.  An assignment includes a legal charge (section 2(1) of the Conveyancing and Property Ordinance).  Section 16 is modelled on section 62 of the Law of Property Act 1925, which replaced section 6 of the 1881 Conveyancing Act.

27.  Mr Hung submitted that because prior to the Kenny Mortgage and the 2000 Assignment, the two pieces of land were in common ownership of Widecorp, no easement could arise under section 16.  He relied on Sovmots Investments Ltd v Secretary of State for the Environment and Ors [1979] AC 144, in particular, the following passage from the judgment of Lord Wilberforce at 169:

“Equally, section 62 does not fit this case. The reason is that when land is under one ownership one cannot speak in any intelligible sense of rights, or privileges, or easements being exercised over one part for the benefit of another.  Whatever the owner does, he does as owner and, until a separation occurs, of ownership or at least of occupation, the condition for the existence of rights, etc., does not exist: see Bolton v. Bolton (1879) 11 Ch.D. 968, 970 per Fry J. and Long v. Gowlett [1923] 2 Ch. 177, 189, 198, in my opinion a correct decision.”

28.  According to Megarry and Wade: The Law of Real Property, 6th ed (2000) at para. 18-114, the requirement of prior diversity of occupation of the dominant and subservient tenements, is apparently subject to two important exceptions and that:

“… continuous and apparent quasi-easements (such as a watercourse which runs through a man-made culvert, or a made up road) will pass under the general words.”

29.  This exception is well established as can be seen from the judgment of Fry LJ in Bayley v Great Western Railway Co. [1884] 26 Ch D 434 at 456 - 457:

“… It appears to me that the cases of Watts v. Kelson [Law Rep. 6 Ch. 166] and Kay v. Oxley [3 Q.B. 258; 5 App Cas 1] have laid down a general principle of construction which I think may be stated in this way, that if one person owns both Whiteacre and Blackacre, and if there be a made and visible road over Whiteacre, and that has been used for the purpose of Blackacre in such a way that if two tenements belonged to several owners there would have been an easement in favour of Blackacre over Whiteacre, and the owner aliened Blackacre to a purchaser, retaining Whiteacre, then the grant of Blackacre either ‘with all rights usually enjoyed with it’ or ‘with all rights appertaining to Blackacre,’ or probably the mere grant of Blackacre itself without general words, carries a right of way over Whiteacre. That appears to me to be the result of those cases.”

30.  In Long v Gowlett [1923] 2 Ch 177, which was expressly approved by Lord Wilberforce, it is clear that a made road forming a continuous and apparent means of communication is an exception to this rule.  Sargant J said at page 200:

“... No doubt the common owner and occupier did in fact repair the bank of Lot 2, and cut the weeds there; and no doubt also this repair and cutting would enure not solely for the benefit of Lot 2 ... so as to prevent its being flooded, but also and very likely to a greater extend for the benefit of Lot 1.  But there is nothing to indicate that the acts done on Lot 2 were done otherwise than in the course of the ownership and occupation of Lot 2, or that they were by way of using a ‘privilege, easement or advantage’ over Lot 2 in connection with Lot 1.  The common owner and occupier of Whiteacre and Blackacre may in fact use Blackacre as an alternative and more convenient method of communication between Whiteacre and a neighbouring village.  But it has never been held, and would I think be contrary to principle to hold, that (in default of there being a made road over Blackacre forming a continuous and apparent means of communication) a sale and conveyance of Whiteacre alone would carry a right to pass over Blackacre in the same way in which the common owner had been accustomed to pass.  As it seems to me, in order that there may be a ‘privilege, easement or advantage’ enjoyed with Whiteacre over Blackacre so as to pass under the statute, there must be something done on Blackacre not due to or comprehended within the general rights of an occupying owner of Blackacre, but of such a nature that it is attributable to a privilege, easement, right or advantage, however precarious, which arises out of the ownership or occupation of Whiteacre, altogether apart from the ownership or occupation of Blackacre.  And it is difficult to see how, when there is a common ownership of both Whiteacre and Blackacre, there can be any such relationship between the two closes as (apart from the case of continuous and apparent easements or that of a way of necessity) would be necessary to create a ‘privilege, easement, right or advantage’ within the words [of the section]” (emphasis added).

31.  As the learned judge pointed out:

“29.   … Although in the Sovmots case, it was held that no easement could arise under the English equivalent of section 16 where there had been no prior diversity of ownership and occupation, Long v Gowlett was cited with apparent approval, and without qualification.  Moreover, in the Sovmots case what was being claimed would appear to have been rights or advantages which were neither continuous nor apparent, and which would not appear in fact to have been enjoyed at the material time (which was the time of making of a compulsory purchase order in that case).”

32.  With respect, I agree.

33.  Mr Hung also argued that section 16 did not apply to the Kenney Mortgage.  He said it could only apply to the 2000 Assignment.  I do not agree.  As noted an assignment includes a legal charge, and I can see no reason why the chargee should not have the benefit of section 16.  If Mr Hung is correct Kenny would not have been entitled to the right of way on obtaining possession under the mortgage.  I do not see why that should be so.

34.  But even if section 16 only operated on the 2000 Assignment it does not matter that at the time the right of way was not being used.  Mr Hung submitted that subject to de minimis, the right of way must be in actual use at the time of the assignment.

35.  In the case of a made access road, especially one which provided the only vehicular access, I see no reason why if the plaintiff's land happened to have been untenanted or unoccupied even for a number of years before the assignment, the right should not have passed under section 16.  It is important to note that section 16 covers “rights … used, … or enjoyed with the land”.  A right could be enjoyed, in the sense of one having the benefit of it, even if it was not actually in use.  Suppose we are concerned with a vehicular access road to a house, the passing of the access under section 16 cannot depend on whether the house happened to be vacant at the time of the assignment.  I am of the view that unless the quasi easement had been abandoned or there was an express contrary provision, it would pass under section 16.

Wheeldon v Burrows

36.  The rule in Wheeldon v Burrows is an aspect of the general rule against derogation from grant.  Easements over the retained land would be implied where they are:-

“(1)	continuous and apparent; and
(2)	necessary for the reasonable enjoyment of the land granted; and
(3)	which have been and are at the time of the grant used by the owners of the entirety for the benefit of the part granted.
	(See Wheeldon v Burrows (supra) at p.49, per Thesiger L.J.)”

37.  It is necessary only to note Megarry and Wade: The Law of Real Property, 6th ed (2000) at para. 18-105:

“Thus a right of way over a made road, or one which betrays its presence by some indication such as a worn track or its obvious use in connection with the land granted, will pass under the rule in Wheeldon v Burrows;”

38.  As the learned judge pointed out in his judgment:

“17.   In this case, the right of way claimed relates to the access road which was constructed over the Defendant’s land.  The photographs of the parties land clearly show that the road in question is one which was constructed, consisting as it does of a well defined roadway the surface of which is made up, in that it is either concreted over, or gravelled.  The right of way claimed is therefore both permanent in nature, and readily apparent on the Defendant’s land, and I am therefore satisfied that it was continuous and apparent for the purposes of the rule in Wheeldon v Burrows.

18.    So far as being necessary for the reasonable use of the Plaintiff’s land is concerned, it seems to me that the fact that Widecorp felt it necessary to have this means of access over what has become the Defendant’s land is good evidence of this fact.  Moreover, without the right of way that is claimed, the Plaintiff’s land is essentially inaccessible by vehicle.  This would severely restrict the uses to which the land could viably be put, and I am therefore of the view that the easement claimed also satisfies this test.”

39.  As for Mr Hung’s submission that in 2000, the access road was not being used at all, with respect, I agree with the learned judge that non-use of a right of way for a relatively short period of time prior to the sale is not critical.  As he said:

“19.   … Further, it seems to me that another purpose of this requirement is to prevent easements arising in cases where the right claimed has been long disused, and I do not think that this can be said to be the case here.”

40.  I have no doubt that vehicular access was necessary for the reasonable enjoyment of the plaintiff's land.  The description of the land as padi land in the Block Crown Lease was descriptive only.  It cannot be said that because of such description, the land could not be put to any other use, such that vehicular access was not necessary for its reasonable enjoyment.  Attorney General v Melhado Investment Limited [1983] HKLR 327.

41.  Mr Hung also submitted that the easement would have amounted to an excessive use because it rendered the defendant’s land practically unusable.  Mr Hung relied on the case of Batchelor v Marlow and Anor [2003] 1 WLR 764.  I agree with the learned judge that the authority does not help Mr Hung.  Batchelor v Marlow and Anor was concerned with a claim to a prescriptive right over the servient tenement to park up to six cars on Mondays to Fridays between 8:30 a.m. and 6:00 p.m.  The English Court of Appeal held that whether such a right was capable of subsisting as an easement was a matter of degree and therefore depended on the facts of each case.  In that case, an exclusive right to park six cars for 9½ hours every day of the working week would leave the plaintiff without reasonable use of his land either for parking or for any other purpose, and therefore the right was not capable of being an easement, and so could not have been acquired by prescription.

42.  Here, we are concerned with the use of a right of way over the access road.  On the facts, it is quite clear the access road was meant to be used as an access road.  Thus, on the facts it is difficult to see how it could be said that the easement could not arise.  Furthermore, as the learned judge said:

“37.   … the same cannot be said of a right of way - which by its nature is unlikely to be used continuously, so that the Defendant here will still be able to travel along that part of his land if necessary.  He will not be deprived of it altogether for a substantial part of the day as would have been the case in Batchelor v Marlow.”

Illegality

43.  I turn then to deal with the question of illegality.  It is clear that use of the plaintiff’s land for the storage of containers is contrary to the criminal provisions of the Town Planning Ordinance.

44.  Mr Hung relied in particular on Bakewell Management Ltd v Brandwood (HL(E)) [2004] 2 AC 519.  He submitted a grant by the land owner of the right to use the land in a prohibited way would be an unlawful grant and incapable of vesting any right in the grantee.  He submitted that a grant to do an act or acts which if done would be illegal cannot be made.  Nor could an easement be acquired by conduct, which at the time of the conduct, is prohibited by a public statute.

45.  He submitted that the plaintiff is guilty of:

“a.	Contravention of Section 21 of the Town Planning Ordinance, Cap. 131, in that, whilst a plan of a development permission area was effective, the Plaintiff undertook or continued development in the development area without any permission to do so granted under Section 16;
b.	Contravention of Section 27 of the Land Drainage Ordinance, Cap. 446, in that, the Plaintiff had erected and maintained a structure (the bridge structure) in, or under a main watercourse without the consent of and in accordance with plans approved by the Drainage Authority; and
c.	Contravention of Section 14A of the Buildings Ordinance Cap. 123, in that, the Plaintiff had carried out street works (the bridge structure) without having first obtained from the Building Authority his approval in writing of documents submitted to him in accordance with the regulations;
d.	Trespassing on the adjacent government land and the Defendant’s land (other than the part the Plaintiff claimed to have a right of way).”

46.  But it is important to note that we are concerned with the right of way over the defendant’s land.  The use of that right of way for passing and re-passing of vehicles is not unlawful.  Not even for passing or re-passing of container lorries.  In Bakewell Management Ltd v Brandwood (HL(E)), the claim was over a right of access along tracks or roads over the common.  It is clear from the judgment of Lord Scott of Foscote at para. 32 that an easement cannot be acquired to do something the doing of which is prohibited by a public statute, and that a lawful grant to do an act or acts which if done would be illegal cannot be made.  There, the House of Lords was involved with acts the doing of which was illegal if done without the permission of the owner.  Even so, it held in favour of the claim that:

“… while a lost modern grant could not be presumed where an actual grant by the landowner would have been unlawful, there was no requirement of public policy that prevented the acquisition of an easement by long and uninterrupted user in breach of a statutory prohibition where it would have been lawful for the landowner to make such a grant and where such grant would have removed the criminality of the user.”

47.  Here, the use of the access road as such was not illegal under the Town Planning Ordinance.

48.  Furthermore, the learned judge was of the view that since it was not necessary for the plaintiff to plead the illegal use of the plaintiff's land in support of the easement, public policy would not require the court to refuse to give effect to it.  Tinsley v Milligan [1994] A.C. 340.  Mr Pang has also referred us to Nelson and Anor v Nelson and Anor [1995] 132 ALR 133, a decision of the High Court of Australia, where Tinsley v Milligan was not followed.  The potential conflict between Tinsley v Milligan and Nelson and Anor v Nelson and Anor can only be resolved by the Court of Final Appeal.  On the basis of Tinsley v Milligan, I agree with the learned judge that it is not necessary for the plaintiff to plead or rely on an illegality.  Moreover, as I have said, the use of the access road itself is not unlawful.

49.  Insofar as the other matters referred to in para. 45 above are concerned, they go to the exercise of the learned judge’s discretion.  I can see no reason to interfere.  I note in passing that Mr So said in his report of 21 July 2006 that this kind of access:

“… is very common in the New Territories.  According to my experience in the New Territories as District Lands Officer, Lands Department usually will not take control action on these access roads even if government land is involved because there is such need for access and they are usually just mud trucks or makeshift roads not properly constructed.  Control actions will be taken only if there are illegal excavations of government land, illegal tree felling, damages to government properties, traffic safety issues, or justified public complaints.”

50.  The access road as well as the steel sheets over the nullah have been in existence for over 10 years.  No action has been taken by the authorities.  I cannot agree that the learned judge has wrongly exercised his discretion.

51.  As for the width of the injunction, again I see no reason to interfere.

52.  I would dismiss the appeal with costs.

Hon Cheung JA:

53.  I agree.

Hon Yuen JA:

54.  I agree.