THE INCORPORATED OWNERS OF SUN HING BUILDING v. JOIN PROFIT (HONG KONG) LTD AND ANOTHER

CACV 102 & 106/2023

[2024] HKCA 943

On Appeal From [2022] HKLdT 56

CACV 102/2023

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 102 OF 2023

(ON APPEAL FROM LDBM NO 103 OF 2019)

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CACV 106/2023

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 106 OF 2023

(ON APPEAL FROM LDBM NO 103 OF 2019)

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 (Heard together)

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J U D G M E N T

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Hon G Lam JA (giving the Judgment of the Court):

1.  By our judgment dated 3 July 2024 (“CA Judgment”),[1] we allowed the respondents’ appeals from the judgment of the Lands Tribunal and dismissed the applicant’s application brought in the Tribunal. The applicant now seeks leave to appeal to the Court of Final Appeal. We shall continue to use herein the abbreviations defined in the CA Judgment.

2.  The dispute concerns whether the IO (the applicant) had by notice given on 28 June 2018 validly terminated the Agreement dated 28 June 2002 whereby the IO and the then owner of the relevant G/F shops agreed that certain shop space would be vacated and used to form a new public corridor while the original corridor would be used by the owner as shop space.  In the CA Judgment, this court rejected the IO’s case that there was an implied term enabling either party to terminate the Agreement at will by reasonable notice, and held that the Agreement is terminable by reasonable notice if either party has a legitimate need for the original configuration to be restored. 

3.  In its Notice of Motion the IO has advanced 5 questions said to be of great general or public importance, which we set out as follows (omitting the authorities cited):

“ (1)  Question 1: Whether it is wrong in principle to hold that the incorporated owners of a building could not grant a licence to a co-owner over the common parts of the building on the basis of “unity of possession” (see §41, CA Judgment), when section 16 of the Building Management Ordinance (Cap. 344) confers the rights, powers, privileges and duties of the owners in relation to the common parts of the building on the incorporated owners to the exclusion of the owners and takes precedence over the common law notion of unity of possession?

(2)  Question 2: in the event that the Agreement constituted a licence:

(a)  Whether it is wrong in principle to hold that a licence, which is of no duration and does not contain any express provision for termination, could only be terminated by the licensor by demonstrating a “legitimate need” (§67, CA Judgment) or “cause” for recovering the licenced land (§91, CA Judgment), especially when the requirement to give reasonable notice for termination already protects the licensee?

(b)  Whether the holding that the licence, which is of no duration and does not contain any provision for termination, could only be terminated by the licensor by demonstrating a legitimate need or cause for recovering the licensed land is contrary to the principle that at common law, a licence is always revocable and the principle that if the contract makes no express provision for termination, with most contractual licences the court usually implies a term that reasonable notice shall be given?

(3)  Question 3: In the event that the Agreement did not constitute a licence, whether it is wrong in principle to hold that an agreement, which is of no duration and does not contain any express provision for termination, could only be terminated by a party by demonstrating a “legitimate need” (§67, CA Judgment) or “cause” for doing so (§91, CA Judgment), especially when the requirement to give reasonable notice for termination already protects the other party?

(4)  Question 4: Whether it is open to the Court of Appeal to hold that the Agreement could only be terminated by a party by demonstrating a “legitimate need” (§67, CA Judgment) or “cause” for doing so (§91, CA Judgment), when the point was never but should have been canvassed at trial with proper evidence adduced and legal arguments advanced and when the point was never but should have been pleaded?

(5)  Question 5: To what extent can (or should) the Court of Appeal make its own primary findings of fact which are determinative of the outcome of the proceedings and which the judge had not made and/or was never asked to make at trial?  Specifically, the Applicant invites the Court of Final Appeal to give definitive guidance as to the parameters in which the Court of Appeal (in its function as an appellate tribunal as opposed to primary fact finder) can make its own primary findings of fact which are determinative of the outcome of the proceedings in the absence of hearing evidence and in place of ordering a retrial, when the trial judge had not made and/or was never asked to make at trial?”

4.  Before dealing with these questions, we should address three matters complained of by the IO in counsel’s skeleton submissions[2] alleging that this Court adopted a “most unorthodox course”, since most of the questions are premised on the IO’s submissions on these matters. 

5.  First, it is said that this Court raised a new point on appeal which was determinative of the outcome – that the Agreement did not constitute a licence – and analysed the Agreement and dismissed the IO’s claim without regard to the principles on termination of licences, when the point was raised for the first time in the CA Judgment without an opportunity for the IO to make submissions in response.

6.  We reject this criticism.  In the CA Judgment at §§41-44, this Court analysed and explained the true legal nature and effect of the Agreement.  In §41 this Court also noted that the term “licence” had been used in this case before in a very loose sense.  As a matter of fact, that analysis and comment had already been set out in §§24-25 of G Lam JA’s judgment dated 31 March 2023 giving the respondents leave to appeal.[3]  The IO did not at the appeal hearing (and, it seems to us, still does not) dispute the correctness of that analysis. 

7.  It is of little assistance for the IO to refer to judgments in previous cases where the word “licence” was used to describe the rights granted by an owners’ corporation to the owner of a unit in the building.[4] Cases are decided on the substance of the legal relations involved, not on their labels.  In this case whether one calls the arrangement arising from the Agreement a “licence” is not important (provided the true legal relations are borne in mind) and certainly not determinative of the outcome, though this Court preferred to avoid the language of licence in order to avoid the risk of confusion, as explained in §45 of the CA Judgment.

8.  It appears that the IO, whilst not disputing the analysis of the legal nature and effect of the Agreement, insists on keeping the label of “licence” because it thinks, erroneously in our view, that there is a legal rule applicable here that a licence is presumed to be revocable by reasonable notice.  The present case is far removed from the kind of cases in which such presumption was considered.[5] As stated in §60 of the CA Judgment, we consider that there is no such rule even in the case of licences properly so called. 

9.  There is, accordingly, no substance in this complaint.

10.  Secondly, it is complained that this Court raised a new point which was determinative of the outcome, i.e. that the Agreement could only be terminated by the IO by showing cause or a legitimate need, when the point had not been pleaded or canvassed below.

11.  This is, with respect, not a fair criticism. The IO was the applicant in the Tribunal, and based its claim there solely on an implied term that the Agreement could be terminated unilaterally by either side on giving reasonable notice: see CA Judgment §§22 & 33.  On appeal, in light of this Court’s decision in The Hong Kong Polytechnic University v Rehabaid Society [2023] HKCA 956, the IO contended for the same result also through the route of construction as an alternative.  On a minimalist approach, therefore, all that this Court needed to conclude which would lead to the IO’s case being rejected and the appeal being allowed was that the IO failed to establish through either route that the Agreement could be terminated by notice at will.  It was however the IO’s submission that this Court should not reject a party’s interpretation of an agreement without ruling on its true interpretation,[6] which is consistent with Hong Kong Polytechnic University[7] and on which this Court proceeded in this case.

12.  The proper construction of the Agreement being a question of law, this Court has to decide for ourselves what the law is, and is not bound merely to choose between the parties’ rival contentions: see Bahamas International Trust Co Ltd v Threadgold [1974] 1 WLR 1514, 1525; Mariner International Hotels Ltd v Atlas Ltd (2007) 10 HKCFAR 1, §23.  Thus this Court was not confined to holding either the Agreement was perpetual and not terminable except with mutual consent,[8] or it was terminable by either party unilaterally by notice without cause.[9]  This was specifically pointed out by this Court to counsel at the hearing, who had the opportunity to and did address the Court on “intermediate” construction such as that the Agreement would be terminable by unilateral notice, not at will, but only for good or reasonable cause.  The complaint is therefore misconceived.

13.  We should also mention that the respondents had already submitted at trial that the implied term contended for by the IO did not satisfy the condition of necessity for business efficacy because a narrower term, such as a term making the Agreement terminable in circumstances necessitating reinstatement of the original configuration of the premises, would have been sufficient.[10] This Court took the same view: see CA Judgment, §65.  

14.  Thirdly, the IO complains that this Court of its own motion made a primary finding of fact that the IO had failed to show a legitimate need or cause for terminating the Agreement, which was determinative of the outcome, when such finding was incorrect and against the evidence in the witness statements of the IO.

15.  With respect, this court did not make any such finding of fact as alleged.  The paragraph in the CA Judgment singled out by Mr Ng for his submission for the IO is §68, which reads as follows:

“ At the hearing Mr Ng submitted that the IO’s actual decision to terminate was for cause, due to insurance concerns as referred to in the witness statement of the IO’s chairman. This was however disputed, and Mr Anson Wong SC who appeared for Join Profit pointed to the evidence that the insurance position was entirely regular. The IO’s chairman did not actually say that compliance with insurance requirements made it necessary to restore the original configuration. In fact he stated that the question of insurance was an irrelevant detail which the Tribunal did not need to deal with. There was consequently no relevant investigation at trial and no finding made by the Tribunal. In my view there is no scope for upholding in this court the validity of the IO’s notice on a completely different basis.”

16.  Self-evidently this Court made no finding in that paragraph that the IO failed to show a legitimate need or cause.  What we said was that the IO could not seek to uphold its termination notice on a completely different basis when the facts for that basis had not been investigated at all at trial.

17.  We turn to the 5 questions said to be of great general or public importance.

18.  Question 1 is contrived.  As mentioned in §§6-8 above, this Court did not hold that the incorporated owners of a building could not grant any rights over the common parts to a co-owner. Whether one labels the rights granted in a particular case a “licence” will not usually matter and is not a question of general importance.  What really matter are the substance of the legal relations created and the legal effects and consequences. 

19.  In so far as the IO seems to suggest in this question that section 16 of the BMO has somehow excluded and removed from all building owners their common law rights as co-owners to possession of the common parts, this is not a point raised before and is in any event in our view not reasonably arguable.

20.  Questions 2 and 3 in essence contest the correctness of this Court’s conclusion on the interpretation of the Agreement. Question 2 is premised on the Agreement giving rise to a licence, whereas Question 3 is premised on it not constituting a licence.  On either basis, the proper interpretation of the Agreement, whether through the construction or implication route, depends on the terms of the Agreement and the facts of this case: see CA Judgment, §§55-67.  As counsel submit on behalf of Join Profit, construction and implication are fact-sensitive and context-specific exercises, and do not generally raise questions of great general or public importance: Lo Yuk Sui v Fubon Bank (Hong Kong) Ltd (2020) 23 HKCFAR 138, §§13-14; Norman Guy Donald v Lee Michael Chak Chuen [2024] HKCA 403, §§21 & 29; The Hong Kong Polytechnic University v Rehabaid Society [2024] HKCFA 13, §7. The Agreement in this case is a special, “home-made” contract based on the particular configuration of the G/F of the Building.  Its true construction raises no question of general importance.

21.  The presumptive rule for termination of licences is relied upon by the IO in Question 2 out of its proper context.  The matter has been dealt with in the CA Judgment at §§59-60 and, in our view, the contrary is not reasonably arguable.

22.  Question 4 is self-evidently a fact-specific point based on the circumstances of this case.  It reflects the second complaint mentioned above which we have rejected for the reasons given.

23.  Question 5 reflects the third complaint mentioned above and is, as explained, based on a false premise. 

24.  We do not therefore think that leave to appeal should be given on the basis that there is any question of great general or public importance.

25.  In the Notice of Motion, the IO has put forward a further 10 questions said to be reasons for granting leave to appeal on the “or otherwise” limb of section 22(1)(b) of the Hong Kong Court of Final Appeal Ordinance (Cap 484). Many of these reasons repeat one or more of the three complaints mentioned above or the questions said to be of great general or public importance.  The discretion to grant leave to appeal on the “or otherwise” limb is a residual discretion exercised only in exceptional circumstances.  In keeping with the usual practice of this Court, we shall leave it to the Appeal Committee of the Court of Final Appeal to consider whether to grant leave on this basis.[11]

26.  For these reasons, the IO’s application for leave to appeal is dismissed.

27.  Costs should follow the event.  There will be an order that the IO pay the respondents’ costs of the application.  Based on the statements of costs submitted, we assess the costs payable to Join Profit and Glory River at $300,000 and $160,000 respectively.