FANTASTIC STATE LTD v. TIEN'S ORGANIC FARM AND OTHERS

HCA 99/2018

[2018] HKCFI 1241

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 99 OF 2018

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D E C I S I O N

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I.   BACKGROUND

1.  This is a dispute in respect of the right of way over an access road in the New Territories (“the Access Road”) which connects Fung Yuen Road and Lot 813 in Demarcation District 11 of Tai Po (“Lot 813”).  Fung Yuen Road ends at the back of a valley called Fung Yuen which has been designated by the Government as a “Site of Special Scientific Interest” whereas the front part of the road joins with Ting Kok Road which leads out to the town centre of Tai Po and other areas.

2.  The Access Road runs through Section A of Tai Po Town Lot No 183 (“Section A of 183”) which is owned by the Plaintiff. Over the past few decades, many lots of land around Fung Yuen have been purchased by (or on behalf of) Cheung Kong (Holdings) Limited for development. Lot 183 was a new lot granted by the Government in exchange for the surrender of more than 300 old lots.  A New Grant No 20412 with Conditions of Exchange was approved by the Government on 9 August 2007 (“the New Grant”).

3.  The Defendants are the occupiers of Lot 813 and according to their case, Lot 813 was, from 1980 to 2016, occupied by one Granny Wu, from whom the Defendants subsequently acquired the land.  In about mid-October 2017, the Defendants started carrying on the businesses of running car parking lots, an organic farm and also small eateries on Lot 813.

4.  On 15 January 2018, the Plaintiff issued a Writ of Summons together with a General Indorsement of Claim whereby the Plaintiff alleged that on or about 1 December 2017, it came to its attention that the Defendants had trespassed on Section A of 183 and also caused an area of the Access Road near the car parking area to be paved through unauthorised construction works.  The Plaintiff also complained that, without its licence or permission, the Defendants and their visitors had used or caused to be used various parts of Section A of 183.

5.  On 8 February 2018, the Plaintiff’s contractors informed the Defendants that they were going to erect a permanent barrier (“the barrier”) at the entrance of the Access Road so as to prevent them and other visitors from using the Access Road to enter Lot 813.

6.  On 27 February 2018, upon learning that the Plaintiff was in the process of constructing the barrier, the Defendants instructed their solicitors to write to the Plaintiff’s solicitors on an urgent basis.  In the letter, the Plaintiff’s solicitors stated that the Access Road formed the only means by which the Defendants (who were running a business on Lot 813) were able to have access to Lot 813 from Fung Yuen Road and that “[blockage of the Access Road would therefore gravely affect not just the Defendants but … third party users as well”.  The letter went on to say, amongst others things:-

“We are therefore writing to clarify whether in constructing the aforementioned gate or barrier of some form, the Plaintiff intends to deprive the Defendants and other uses of Lot Nos 813 from [sic] the use of the Access Road completely or whether the Plaintiff would be amendable to allowing the continued use thereof subject to some sensible system of regulation that is mutually agreed between the Plaintiff and the Defendants. The Defendants would appreciate the opportunity to discuss the matter sensibly with the Plaintiff.

In the meantime, we would ask that the process of construction of the aforesaid gate or a barrier of some form if so intended be temporarily halted to facilitate such discussions and an amicable resolution on the matter.”

7.  The Defendants’ request for further discussions was rejected by the Plaintiff’s solicitors who, by a letter dated 7 March 2018, replied as follows:-

“(1)   As the owner of Section A of Tai Po Town Lot No. 183, Tai Po,New Territories, Hong Kong (“TPTL 183A”), our client is perfectly entitled to carry out any lawful activities thereon and take whatever measures as they may see fit to safeguard their rights and protect their interests in its property.

(2)   Your reference to the business allegedly conducted by your clients on Lot No. 813 (as defined in your said letter) does not advance your clients’ position at all.  Our client is not under any duty to cater for the needs of your clients.

(3)   Furthermore, the illegal operations of your clients’ business and activities conducted on Lot 813, including but not limited to operating a carpark, selling processed food, holding BBQ and hot port [sic] parties and private kitchen dining without obtaining the necessary license(s), have caused nuisance to the neighbourhood, including TPTL 183A.

(4)   Our client does not see how there can be any sensible discussion with your clients who damage and forcibly trespass our client’s property high handedly and show no remorsefulness at all.”

8.  On 22 March 2018, a chain was put in place connecting the two posts installed on the two sides of the entrance of the Access Road.

9.  On 27 March 2018, a security guard was stationed at the entrance of the Access Road and he told the Defendants that he had received instructions from his superior that no vehicular entrance would be allowed.  On the same day, the Defendants made an urgent ex parte application (on notice) for an injunction, which, according to the Defendants’ Skeleton Submission provided for that application, was based on the following grounds:-

(1)   Special Condition 30(a) of the Conditions of Exchange under the New Grant gives rise to the question as to whether there has been an express right of way for the Defendants to have access to Lot 813 through the Plaintiff’s land.

(2)   Further, Lot 813 had been occupied by Granny Wu since about 1980.  Since the Access Road was the only means of access to Lot 813, there has been a right of way to access to Lot 813 by prescription on the basis of a long use of the Access Road to and from Lot 813. 

(3)   The right of way should, prima facie, include vehicular access, in the absence of any express prohibition or extension to allow such access.

(4)   The restrictions imposed by the Plaintiff on the Access Road prevented the Defendants and their visitors from having access to Lot 813 from Fung Yuen Road, thereby causing irreparable damage to the Defendants’ business.  Further, such negative impact, according to the Defendants, would be aggravated by the expected increase in the number of visitors to Lot 813 over the Easter Holidays.

10.  Upon hearing the Defendants’ submissions, L Chan J granted an injunction order (“the Injunction Order”) which restrained the Plaintiff until 13 April 2018 or until further order from interfering with the reasonable use of the right of way (vehicular or otherwise) by the Defendants, their servants, agents, licensees, or visitors, over the Access Road, including but not limited to:-

“(1) Blocking up or obstructing or permitting or encouraging the blocking up or obstructing of the entrance of the Access Road at Fung Yuen Road.

(2) Commencing or continuing with any construction works at the Fung Yuen Road entrance to the Access Road which prevents the Defendants, their servants, agents, licensees, or visitors, from reasonable use and enjoyment (vehicular or otherwise) of the right of way over the Access Road.”

II. THE APPLICATIONS

11.   There are two summonses for determination:-

(1)   The Plaintiff’s application (by Summons dated 10 April 2018) to discharge the Injunction Order (“the Plaintiff’s Discharge Application”).

(2)   The Defendants’ application (by Summons dated 10 April 2018) to continue the Injunction Order until final judgment or further order (“the Defendants’ Continuation Application”).

12.   Since the fate of the Defendants’ Continuation Application will largely hinge upon the outcome of the Plaintiff’s Discharge Application, I will deal with the latter first.

III.   DISCUSSION

III(A): Material non-disclosure & serious issues to be tried

13.   Whilst the Plaintiff, according to its Summons and Skeleton  Submissions for its Discharge Application, sought to discharge the Injunction Order in its entirety without any qualification, Mr Benjamin Yu SC (appearing for the Plaintiff) stated at the hearing that the main dispute centred upon the part of the Injunction Order relating to vehicular access (as opposed to access on foot).  The reasons for the Plaintiff’s Discharge Application can be summarised as follows:

(1)   The Defendants were guilty of material non-disclosure in that they failed to inform the Court at the ex parte application of the following matters:-

(a)   Special Condition 30(a) of the New Grant, on a proper construction, did not provide any express right of way to access Lot 813 in favour of the Defendants.

(b)   The Defendants’ own evidence in relation to the alleged use of the Access Road was confined to such use on foot and did not relate to access by vehicle.  The Plaintiff contends that it only started to construct an emergency vehicular access (“the EVA”) on the access road for its own use in 2012 and prior to that, there had been no vehicular access road.  The only reason why vehicles could have access to Lot 813, according to the Plaintiff, was because the Defendants carried out unauthorised construction works on the Plaintiff’s land which connected the EVA (built by the Plaintiff) to Lot 813.  In other words, the Defendants’ alleged right of way by prescription could not have covered vehicular access.

(c)   Further, any user under the alleged right of way by prescription, according to the Defendants’ case, could only be limited to private agricultural purposes instead of commercial purposes such as car parking, hobby farming and the operation of small eateries.

(2)   Apart from the issue of non-disclosure as set out above, the Plaintiff’s case, as emphasised by Mr Yu, is that the Defendants have failed to demonstrate any serious issue to be tried in relation to the alleged right of way concerning vehicular access.  In this regard, the Plaintiff is required to demonstrate that the Defendants’ claim is not sustainable and is therefore liable to be struck out.  This is, however, a high threshold to overcome.

14.   As mentioned earlier, the Defendants’ Continuation Application and the Plaintiff’s Discharge Application are, to a large extent, intertwined.  Hence, the issues outlined above are relevant to both applications.

15.   It is trite that a party who applies for an ex parte injunction order is under a duty to give full and frank disclosure of all facts, evidence, issues or any other relevant information to its application (see Hong Kong Civil Procedure 2018, Vol 1, 29/1/51).  The duty of disclosure applies not only to material facts known to the applicant but also to the additional facts which he would have known if he had made proper inquiries (see Tiong King Sing v Sam Boon Peng Yee [2011] 5 HKLRD 651, §14).

16.   It must also be borne in mind that the key question is not whether the ex parte Judge would still have made the ex parte order had he been informed of the non-disclosed matters, but whether such matters ought to be taken into account in the court’s “weighing operation”. The question of materiality involves an objective test to be decided by the court, not by the assessment of the applicant or his legal advisors.

17.   The Plaintiff complains that the Defendants, at the ex parte hearing, provided an incomplete quotation of Special Condition 30(a) of the New Grant which reads as follows:-

“The Grantee shall at his own expense and to the satisfaction of the Director provide, construct and maintain within the lot unobstructed roads, footpaths, stairs and other forms of access (hereinafter referred to as “the said access roads and footpaths”) leading to adjacent private land and burial grounds.  The standards, positions, alignments and levels of the said access roads and footpaths shall be subject to the approval in writing of the Director. The existing roads, footpaths, and stairs leading to the adjacent private land and burial grounds shall not be interrupted or interfered with until the said access roads and footpaths are completed to the satisfaction of the Director and the Grantee shall allow members of the public at all times and for all lawful purposes to pass or repass on foot or by vehicle along, to, from, by, through, over, up and down the said access roads and footpaths free of costs for the purpose of access to and from the adjacent private land and burial grounds”.  (emphasis added)

18.   As contended by the Plaintiff, paragraph 7 of the Defendants’ Skeleton Submissions, which referred to and quoted Special Condition 30(a), omitted the sentence above (which has been underlined in bold) (“the sentence in emphasis”).  The Plaintiff submits that in omitting the sentence in emphasis, the Defendants provided a misleading impression that Special Condition 30(a) provided an unequivocal right of way in favour of all private land adjacent to the Plaintiff’s land.   The Plaintiff argues that in view of the sentence in emphasis, the Plaintiff was only required to provide such access roads and footpaths “as required and approved by the Director of Lands”.  The Plaintiff goes on to say that the approved plans show that there were no access roads or footpaths required to be constructed by the Plaintiff to facilitate access to Lot 813.  

19.   I do not think there is any sufficient basis to find that there has been any material non-disclosure in this respect for the following reasons:-

(1)   In the absence of the transcript of the ex parte hearing, one simply cannot conclude with certainty whether counsel for the Defendants, while referring the ex parte Judge to Special Condition 30(a), drew the Court’s attention only to what was quoted in paragraph 7 of the Defendants’ Skeleton Submissions or to the relevant page of the New Grant showing the entire provision.   If it was the latter, it could not be said that the Judge was provided with an incomplete quotation of Special Condition 30(a).

(2)   Whether Special Condition 30(a) expressly grants an easement or a right of way is, no doubt, a question of construction.  It should therefore be construed according to the natural meaning of the words used, in the light of the surrounding circumstances at the time of its execution.  The provision in question specifically refers to the Grantee’s duty (i.e. the Plaintiff’s duty) to provide footpaths and access roads and also to allow members of the public to use such footpaths and access roads “on foot or by vehicle”.  Hence, it is at least arguable that a right of way has been created or reserved under the New Grant.  At this stage, the information regarding the surrounding circumstances at the time of the execution of the New Grant (including those which may be relevant to Special Condition 30(a)) is limited and the parties are entitled to explore such surrounding circumstances for the future conduct of these proceedings.  At present, it would be premature and inappropriate to come to a definitive view on the construction of Special Condition 30(a).  However, as mentioned above, suffice it to say that the Defendants have demonstrated at least an arguable case that Special Condition 30(a) provides for a right of way to access Lot 813 either on foot or by vehicle and it is not such a plain and obvious case that it is liable to be struck out.

(3)   Hence, assuming that the sentence in emphasis was somehow omitted from the Defendants’ reference to Special Condition 30(a) at the ex parte application, I do not accept that such an omission (which relates to the requirement that the standards, positions, alignments and levels of the said access roads and footpaths “shall be subject to the approval in writing of the Director [of Lands]”) would have excluded or diluted the possible construction of the provision, which  has been discussed in subparagraph (2) above.

(4)   The Plaintiff has referred me to the fact that the approved plans show that there were no access roads or footpaths required to be constructed by the Plaintiff to facilitate access to Lot 813.  But these are events which occurred after the execution of the New Grant and I do not see how they are relevant to the construction of Special Condition 30(a).

(5)   The Plaintiff also argues that the Defendants failed to inform the Court that the provision is merely a personal covenant. But, if it is accepted that it is a matter of construction as to whether Special Condition 30(a) gives rise to a right of way, I do not think this particular argument of the Plaintiff carries any substantial weight.

20.   In respect of the Defendants’ case that there has been a right of way by prescription providing access to Lot 813 on foot and by vehicle, the Plaintiff alleges that the Defendants at the ex parte hearing failed to inform the Court of the following matters:-

(1)   The EVA was completed by the Plaintiff in about 2014 or 2015, which was used for the purpose of servicing the structures and facilities such as the management office and carpark on the Plaintiff’s land.

(2)   The EVA did not provide access all the way to Lot 813.  There was a portion of the Plaintiff’s land which separated the access road from Lot 813.

(3)   In about 2017, the Defendants, through their own trespass on the Plaintiff’s land, carried out unauthorised construction work which eventually connected the EVA to Lot 813, without the consent and/or knowledge of the Plaintiff.  Hence, as submitted by the Plaintiff, there had never been any vehicular access road to Lot 813 before the Defendants carried out such unauthorised construction works.

21.   At the ex parte hearing, the Defendants referred to the Plaintiff’s allegation on the unauthorised construction work on the Plaintiff’s land and denied the same.  Paragraph 38 of the Defendants’ Skeleton Submissions for the ex parte application read:-

“P’s general indorsement and statement of claim contains an allegation to the effect that Ds have been trespassing on SA 183 by creating a vehicular entrance to Lot 813 to be paved on SA 183 presumably near its boundary with Lot 813.”

22.   However, the Defendants’ evidence on the circumstances as to when and how the alleged vehicular access was provided has been rather scant.  For the purpose of the ex parte application, the Defendants adduced evidence on Granny Wu’s activities of growing vegetables. It has been stated in the Affirmation of Wong Chi Pan dated 27 March 2018 (“Wong’s Affirmation”) filed on behalf of the Defendants that “[t]here were lorries driving in and out of the Access Road to deliver agricultural materials to Granny Wu, and to take delivery of her produce.”  At the hearing of the present applications, Mr Hugh Kam for the Defendants (who did not appear at the ex parte hearing) fairly accepted that this particular statement in Wong’s Affirmation (which did not mention any time frame) referred to what happened in or after 2015.  There was no further evidence placed before the Judge at the ex parte hearing on the alleged vehicular access.  Further, I note that the Defendants have never made any substantial response to the Plaintiff’s case that there had never been any vehicular access to Lot 813.  Mr Kam’s submission in this regard is simply that “the weight of the evidence indicates [the Plaintiff’s allegation] is not true.”

23.   Obviously, the circumstances in which the alleged vehicular access was created (and continued to exist) are relevant to the Court’s consideration of the Defendants’ case on the right of way by prescription.  I therefore accept the Plaintiff’s contention that there has been material non-disclosure in this respect.

24.   By the same token, since the Defendants’ own evidence fails to sufficiently demonstrate how a vehicular access road came into existence and their case on Granny Wu’s use of Lot 813 was limited to her activities in growing vegetables, I also agree with the Plaintiff that the Defendants failed to, at the ex parte hearing, draw the Court’s attention to the potential arguments on the scope and extent of the user concerning the alleged right of way by prescription, which ought to have been placed on the weighing scales for the consideration of the ex parte application.  The Plaintiff’s reference to Wisename Ltd v The Secretary for Justice [1998] 1 HKLRD 71 before the ex parte Judge plainly did not provide any answer to this issue.

III(B): Serious issues to be tried

25.   Having said the above, apart from the Defendants’ case based on Special Condition 30(a), I cannot completely rule out the Defendants’ case on the alleged right of way by prescription providing access to Lot 813 on foot and by vehicle for the following reasons:-

(1)   Through their counsel, both the Plaintiff and the Defendants have tried to provide their different observations on the aerial photographs which tend to support their respective positions.  However, in the absence of any assistance from experts, I cannot come to any conclusion on whether any vehicular access existed before 2015 purely on the basis of the visual inspections of such photographs.

(2)   The Defendants have adduced evidence that Granny Wu used to grow vegetables on Lot 813 not only for her personal consumption but also for sale (which has not been disputed by the Plaintiff).  Whilst Mr Kam accepted there was little evidence on the actual circumstances in which the alleged vehicular access was created, he submitted that it was more likely than not that vehicles had been used for the transportation in relation to the sale of the vegetables.  I cannot exclude such a likelihood for the time being.

(3)   The Defendants accept that the extent of the right of way is measured by the extent of the user in the context where the right is allegedly acquired by prescription but they deny the Plaintiff’s allegation that the user did not include vehicular access and the purpose of access should be limited to private agricultural use.  The question as to whether the Defendants’ current use of Lot 813 represents a radical change in the character and nature of the use of the land is one of degree and extent, which cannot be fully determined until trial.

III(C): Balance of Convenience

26.   Given the above findings on material non-disclosure, I am required to consider what should be the consequences arising from such non-disclosure.  Before I do so, I would like to provide my views on the issue of balance of convenience because it is relevant to whether the Injunction Order ought to have been granted in any event.

27.   As stated in paragraphs 19(2) and 25 above, I have found, contrary to the Plaintiff’s submissions, that the Defendants have demonstrated that there are serious issues to be tried.  Obviously, given the chain put in place across the entrance of the Access Road and the fact that a security guard was stationed there to prevent vehicles from entering the Access Road, there will inevitably be loss to the Defendants’ business in terms of not only its income but also to its reputation and goodwill.  I cannot agree with the Plaintiff that this is something which can be sufficiently compensated by damages.  Further, as submitted by the Defendants, the court should be more inclined to grant an injunction if a claimant can establish a cause of action to protect a property right recognised by the law (see Smithkline Beecham Plc v Apotex Eurpoe Ltd [2003] EWCA Civ 137 §§13 and 18, per Aldous LJ; and The Principles of Equitable Remedies, Spry, 9^th ed, 397-399).  There is, of course, no hard and fast rule and it cannot be said that once an infringement of some property rights is involved, an injunction should, as a matter of course, be granted.  Each case depends on its individual circumstances.

28.   Here, I wish to add that in view of the sudden implementation of a system with the barrier placed by the Plaintiff coupled with the security guard who was stationed at the entrance of the Access Road, which would prevent vehicular access to Lot 813, there was an element of urgency which could justify the Defendants’ ex parte application (which was made a few days before the Easter Holidays when there would be more visitors seeking to use the Access Road, either on foot or by car).  I do not think that the Plaintiff’s complaint about the use of the ex parte procedure in this regard is well-founded.

29.   According to the Plaintiff, if the injunction is in place to the effect that the Defendants and their visitors will continue to be allowed to use the Access Road (on foot and by vehicle), this will increase the risk of trespassing, vandalism, illegal parking and even illegal dumping. The Plaintiff claims that, as a result of such increased risks, it will be required (1) to erect additional fencing in order to prohibit the Defendants and/or their visitors from trespassing upon the other areas of the Plaintiff’s land, the estimated expenditure of which will amount to the sum of HK$7,400,000; and (2) to undertake further measures to regulate the use of the EVA, for example, by employing more staff and installing CCTV to ensure that there shall be no illegal parking on the EVA etc, the estimated expenditure of which will be approximately HK$4,680,000.

30.   However, according to the Plaintiff’s own case, there was no vehicular access until 2017.  Further, the Defendants’ business on Lot 813 commenced in about October 2017.  Given the Plaintiff’s fear of unlawful activities on its land (should the Defendants and their visitors be allowed to use the Access Road), it should have taken steps to implement some kind of system to guard against the alleged risks.  No good reasons have been provided to explain why no steps have been taken since October 2017 save and except that the Plaintiff, through counsel’s submissions at the hearing of the present applications, sought to justify their inaction by saying that the need to take further measures arose as the state of affairs was in the course of progressing.  But, what remains undisputed is that there is insufficient evidence to indicate that there have been any signs showing such increased risks or that the alleged risks have been caused by the commencement of the Defendants’ business.  I note that the Plaintiff’s evidence has referred to a security report which apparently recorded certain incidents of alleged vandalism but such evidence does not indicate that the Defendants or their visitors were involved in such incidents.  In the circumstances, I take the view that the Plaintiff’s argument on the alleged increased risks is not supported by any cogent evidence.  Alternatively, even assuming that such risks existed, the Plaintiff failed to take any measures to alleviate such risks and it is not entitled to say that the need to take such measures has been (or will be) caused by the grant of an injunction.

31.   In the circumstances, I am of the view that the balance of convenience lies in favour of the grant of the Injunction Order.

III(D): Consequences of material non-disclosure

32.   Finally, I will deal with the consequences of the material non-disclosure.

33.   It is not every omission that will cause an injunction to be automatically discharged.  The court has a discretion, notwithstanding proof of material non-disclosure, to continue the order or to make a new order on terms.  Ultimately, the question boils down to whether the merits of the case and justice warrant the injunction (see Velatel Global Communications Inc & Another v Chinacomm Ltd & Ors, HCA 1978/2011, unrep, 26 October 2012, §§99 & 104, per Deputy High Court Judge Au-Yeung (as she then was)).

34.   In the present case, I do not think there is any sufficient basis for me to come to any view that the omission was intentional or deliberate.  I note that the Defendants’ Skeleton Submissions for the ex parte application did not shy away from mentioning the Plaintiff’s allegations as contained in the Statement of Claim.   In particular, the Defendants highlighted the Plaintiff’s complaints of trespass and also of the Defendants’ unauthorised construction works which allegedly created a vehicular entrance to Lot 813.  I tend to think that the non-disclosure was caused by the Defendants’ failure to conduct adequate inquiries before they took out the ex parte application.

35.   Further, in the above discussion, I have provided my reasons for my rulings on serious issues to be tried and also balance of convenience.  In the circumstances, the Injunction Order ought to have been granted in any event even if all relevant matters had been brought to the Court’s attention.

IV.   ORDER

36.   In the circumstances, I have come to the view that the non-disclosure should not render the Injunction Order liable to be discharged.  If I am wrong on this, I am prepared to re-grant such an order, in view of all the materials now available.  I therefore make an order that the Injunction Order be continued.

37.   On the question of costs, I bear in mind the following factors:-

(1)   The Plaintiff is able to establish material non-disclosure on the part of the Defendants.  There were therefore good and valid grounds for the Plaintiff to take out its Discharge Application.  This should be reflected in the costs order.

(2)   However, the material non-disclosure found is not serious enough to discharge the Injunction Order.  There are proper justifications for the Injunction Order to be continued or, if necessary, re-granted.

(3)   The Defendants’ own case is not without problems but, as I have said above, their case cannot be ruled out at this stage.  One cannot lose sight of the fact that we are now only dealing with matters relating to an interlocutory injunction and much will eventually turn on how all the relevant factual disputes are resolved at trial.

38.   In view of the above, I make the following costs order nisi:-

(1)   Costs of and occasioned by the Plaintiff’s Discharge Application (by Summons dated 10 April 2018), excluding costs of the hearing on 13 April 2018, be the Plaintiff’s costs in the cause.

(2)   Costs of and occasioned by the Defendants’ Continuation Summons (by Summons dated 10 April 2018), excluding costs of the hearing on 13 April 2018, be costs in the cause.

(3)   Half of the costs of the hearing on 13 April 2018 be the Plaintiff’s costs in the cause.

(4)   Half of the costs of the hearing on 13 April 2018 be costs in the cause.