HONG KONG ISLAND DEVELOPMENT LTD v. THE WORLD FOOD FAIR LTD AND ANOTHER

FAMV No. 38 of 2005

IN THE COURT OF FINAL APPEAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MISCELLANEOUS PROCEEDINGS NO. 38 OF 2005 (Civil)

(ON APPLICATION FOR LEAVE TO APPEAL FROM
CACV No. 398 of 2003)

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Appeal Committee:  Mr Justice Bokhary PJ, Mr Justice Chan PJ and Mr Justice Ribeiro PJ

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D E T E R M I N A T I O N

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Mr Justice Ribeiro PJ:

1.  The central question at the trial was whether the parties had reached a concluded contract for the letting of space in a shopping mall.  The defendant (the present applicant for leave to appeal) owns the property and the plaintiffs (the respondents) – differences between them not being material for present purposes – were the intending tenants. 

2.  In the course of negotiations, the plaintiffs, with the defendant’s consent, were let onto the property and spent significant sums of money on fitting out works and on other preparatory steps towards establishing a restaurant and food court on the premises.  This was done in anticipation of their taking up a tenancy in the mall.  However, no lease or tenancy agreement was ever signed.  The defendant changed its policy regarding the desired composition of its tenants and, in consequence, the parties fell out and the plaintiffs eventually withdrew.  They sued the defendant, alleging that the parties had entered into an oral contract for the grant of a lease of the premises which the defendant had repudiated by insisting on terms inconsistent with what had been agreed.  They claimed damages for breach of contract and the return of $200,000 (the legal status of which was controversial) paid by them to the defendant.

3.  After a 14 day trial, Deputy High Court Judge Carlson dismissed the plaintiffs’ claim (HCA 4602/2000, 11 November 2003), holding that there was no concluded contract, that the parties had never proceeded beyond the stage of “subject to contract” negotiations and that significant terms had not been agreed.

4.  The Court of Appeal (CACV 398/2003, Ma CJHC, Cheung JA and Burrell J; 23 March 2005) reversed the Judge, holding that there was indeed a concluded contract, that it had been repudiated by the defendant and that such repudiation had been accepted by the plaintiffs.  The objection that such an oral contract was unenforceable for lack of a written memorandum as required by the Conveyancing and Property Ordinance, Cap 219, was met by the Court of Appeal finding that part performance was established.  Damages in the sum of $2,914,492.00 were awarded to the plaintiffs together with an order for the return of the $200,000 sum, referred to by the Court of Appeal as a deposit.  The defendant’s counterclaim for rent or mesne profits was dismissed.

Application to the Court of Appeal for leave to appeal

5.  An unusual situation has arisen on this application.  Before taking out the motion which is before us, the defendant had in fact applied to the Court of Appeal for leave to appeal and had been granted leave.  However, the grant of leave was on a ground which Mr Edward Chan SC (who did not appear below but now appears with Mr Kenny C P Lin for the defendant) wishes to abandon in favour of other questions which he seeks to raise.

6.  The order of the Court of Appeal granting leave to appeal is in the following terms:

“...... the  Defendant  do  have leave to appeal to the Court of Final Appeal ...... in respect of the following question of great general and public importance:- 

‘whether  the  doctrine of part performance is applicable to an agreement,  created  by  parol  with  no  note or memorandum in writing  thereof  and  covered by Section 3 of the Conveyancing and Property Ordinance, Cap. 219, where specific performance is simply not available as a remedy......’”  

The questions now sought to be raised

7.  Mr Chan disowns that question and now seeks leave to appeal on three grounds, namely: 

(a) that an appeal is as of right in that “the matter in dispute on the appeal, namely, a 3-year lease at a monthly rent of $236,790.00, amounts to or is of the value of $1,000,000.00 or more and comes within section 22(1)(a) of the Hong Kong Court of Final Appeal Ordinance, Cap 484” (“the as of right ground”);

(b) that, assuming existence of a concluded contract, the Court of Appeal erred in holding that the tenancy could in law be terminated by the purported acceptance by the plaintiffs of a repudiation of the agreement by the defendant, contrary to the decision in Total Oil Great Britain Limited v Thompson Garages (Biggin Hill) Ltd [1972] 1 QB 318 at 324, the correctness of that decision being a question of the requisite importance (“the Total point”); and/or,

(c) that, on the evidence, the Court of Appeal was not entitled to substitute its own conclusions for the Judge’s view that there was no concluded contract, that the parties had never gone beyond “subject to contract” negotiations and that significant terms had not been agreed (“the concluded contract issue”).

The defendant's stance

8.  Mr Gerard McCoy SC, appearing with Ms Jasmine Yu for the plaintiffs, submits that there is no jurisdiction to entertain the defendant’s present application and that the application is in any event unnecessary. 

9.  Jurisdiction is said to be lacking since, in civil cases, the Court’s statute only allows applications for leave to appeal to be made to the Court if an application for leave has been refused by the Court of Appeal.  Since the Court of Appeal has granted leave, the present application (it is argued) is incompetent.

10.  Secondly, Mr McCoy argues that since the Court of Appeal lacks power to fetter the Court’s discretion to determine for itself the proper scope of the appeal, the Court of Appeal’s identification of the s 22(1)(a) question (now disowned by Mr Chan) cannot confine the appeal to dealing merely with that question.  The defendant (he submits) may argue any other point it may wish to raise on the appeal, including the second and third questions raised in the present motion.  The present application is therefore unnecessary.

11.  Neither of these propositions can be accepted.

The relevant provisions of Cap 484

12.  The relevant provisions of the Court’s statute are as follows:

Section 22(1)(b)

(1) An appeal shall lie to the Court –

(b)  at the discretion of the Court of Appeal or the Court, from any other judgment of the Court of Appeal in any civil cause or matter, whether final or interlocutory, if, in the opinion of the Court of Appeal or the Court, as the case may be, the question involved in the appeal is one which, by reason of its great general or public importance, or otherwise, ought to be submitted to the Court for decision.

Section 23(1)

(1)  No appeal shall be admitted unless either –

(a)  leave to appeal has been granted by the Court of Appeal; or

(b)  in the absence of such leave, leave has been granted by the Court.

Section 24(3)

(3)  If an application for leave is refused by the Court of Appeal ......, an application may be made to the Court for leave and such application shall be made by motion.

Section 25(1)

(1)  Where the Court of Appeal or the Court decides or is required to grant leave to appeal pursuant to an application made under section 24 it may grant leave subject to such conditions as it considers necessary.

13.  These provisions make it clear that in cases falling outside s 22(1)(a), grant of leave to appeal is entirely discretionary, the discretion being vested both in the Court of Appeal and the Court (acting through the Appeal Committee: s 18).  It is a discretion to decide whether the question involved in the appeal is one which, by reason of its great general or public importance, or otherwise, ought to be submitted to the Court for decision.   If no such question arises and if there is no reason “otherwise” to give leave, leave is refused.  There is furthermore a discretion under s 25, again vested in both courts, to impose conditions for granting leave.   This discretion is general and not limited to imposing merely procedural conditions or conditions of any particular type. 

The Appeal Committee’s jurisdiction

14.  Application for leave to appeal is made first to the Court of Appeal and Mr McCoy is quite correct to say that ss 23(1) and 24(3) make it a precondition of an application to the Appeal Committee that there should be an absence or refusal of leave from the Court of Appeal.  However, the concepts of “absence” or “refusal” must be given a broad and flexible interpretation.

15.  Thus in Cathay Pacific Airways Ltd v Wong Sau Lai FAMV 33/2005, 5 January 2006, the Appeal Committee held (adopting the approach of Lord Evershed MR in Hunt & Winterbotham (West of England) Ltd v BRS (Parcels) Ltd [1962] 1 QB 617 at 638) that where leave to appeal is granted subject to conditions unacceptable to the applicant, such conditional grant may be treated as a “refusal” of leave to appeal enabling the applicant to apply to the Appeal Committee which then hears the application entirely afresh, disposing of it by making such orders as it considers appropriate.

16.  Similarly, an applicant may advance say, grounds A, B and C as matters which ought to be submitted to the Court for decision pursuant to s 22(1)(b) and the Court of Appeal may grant leave only in respect of say, ground C.  If the applicant wishes to have grounds A and B – and even an additional or alternative ground D – referred to the Court, the Appeal Committee may entertain a fresh application on the footing that a sufficient refusal or absence of leave has been established (by reason of the Court of Appeal’s rejection of grounds A and B) for the purposes of ss 23(1) and 24(3).   However, the application thus made to the Appeal Committee is an entirely fresh application.  The Appeal Committee has full discretionary powers to deal with it, including the power to reject the entire application either after an oral hearing or, where appropriate, on the papers pursuant to rule 7 of the Court’s Rules.

17.  In the present case, the motion before the Court of Appeal for leave to appeal included as its first ground (properly an “or otherwise ground” although it was wrongly described as raising a point of law) the contention that :

“......on the facts found by the Trial Judge and on the evidence before the court, it was [not] open to the Court of Appeal to overturn the Trial Judge’s findings and [to] conclude that a legally binding agreement existed between the parties.”

18.  Leave was refused on that ground, constituting a sufficient refusal or absence of leave to enable the application to be made afresh before the Appeal Committee.  The defendant seeks leave to put its appeal (inter alia) on that rejected basis, formulated as the concluded contract issue mentioned above.

19.  The Appeal Committee’s jurisdiction to entertain this application is therefore established.

Application not unnecessary

20.  It is implicit from what is said above that we reject the suggestion that, in a civil case, the grant of leave on any single ground entitles the appellant to raise any other matter it may wish as a ground of appeal. 

21.  Where the Court of Appeal grants leave either because it considers that a suitably important question arises to justify its submission to the Court for decision or that some other reason exists for referring a particular ground of appeal to the Court, the appellant is prima facie confined to arguing the appeal on the basis stated by the Court of Appeal when granting leave.  This is part of the intended filtering process to prevent the Court’s time being taken up by having to deal with unmeritorious or trivial points or with a mere re-hearing of points properly dealt with by the intermediate court.

22.  But by this filtering process the Court of Appeal does not in any way “bind the hands” of the Court.  As indicated above, an applicant  dissatisfied with the limited basis on which leave was granted can apply to the Appeal Committee which then exercises its discretion afresh, itself granting leave in limited terms and subject to conditions if so inclined.  Neither are the Court’s hands tied in the more usual case where the applicant is content to argue the appeal on the grounds upon which leave was granted by the Court of Appeal.  The Court can and often does, inform the parties in advance that it will require certain points not mentioned by the Court of Appeal (or indeed not mentioned by the Appeal Committee) to be dealt with at the hearing. 

23.  The Court has all the powers listed in s 17.  Moreover, it necessarily has implicit powers to ensure that the appeal is justly and effectively dealt with.  Accordingly, while the appeal is centred on the questions or other grounds on which leave was given, the Court will decide any issue requiring resolution for the proper disposal of the appeal (obviously bearing in mind the needs of procedural fairness).

The grounds now put forward by the defendant

24.  We do not accept that there is an appeal as of right within s 22(1)(a).  What is in dispute is the entitlement of the plaintiffs to damages for breach of contract and to the return of the $200,000 amount.  Mr Chan sought to argue that this was a claim “respecting property ...... of the value of $1,000,000 or more”, namely respecting the lease.   But this is not apt to describe the defendant’s case on appeal which is that no contract was made and no lease granted. 

25.  The Total point is entirely new, not having been mentioned at all in the courts below.  It is sought to be argued in support of the defendant’s counterclaim, providing a basis for setting off rent payable by the plaintiffs against any damages awarded to them.  We are not prepared to allow it to be introduced at this stage for two reasons. 

26.  First, we are not persuaded that the requirements identified in Flywin Co Ltd v. Strong & Associates Ltd (2002) 5 HKCFAR 356, have been met in this case.  We are, in other words, not satisfied that “there is no reasonable possibility that the state of the evidence relevant to the point would have been materially more favourable to the other side if the point had been taken at the trial.” (at 369)  

27.  Secondly, there is serious legal debate as to whether the Total decision is correct, reflected in a contrary decision by the Supreme Court of Canada (Highway Properties Ltd v Kelly, Douglas & Co Ltd (1971) 17 DLR (3d) 710) and in the refusal of the High Court of Australia to follow it (The Progressive Mailing House Pty Ltd v Tabali Pty Ltd (1985) 157 CLR 17).  The Court is slow to give leave to argue such points where it has not had the benefit of the decisions of the lower courts.

28.  However, while obviously not having had the opportunity to explore the evidence in any detail, the Judge’s summary of the evidence, particularly of the correspondence passing between the parties marked “subject to contract”, from which Mr McCoy does not dissent, persuades us that it is reasonably arguable that the Court of Appeal was not entitled to displace the Judge’s conclusion as to the absence of any concluded contract and to substitute its own view that a binding contract had come into existence.  We accordingly grant leave to appeal to the Court limited to the concluded contract issue. 

29.  Some costs were wasted since the defendant initially sought and then disavowed leave to appeal on the ground accepted by the Court of Appeal.  While it is true that it had to come to the Appeal Committee on account of the absence or refusal of leave on the concluded contract issue, there should nevertheless be some reflection of the wasted costs.  Adopting a broad brush approach, we order that half the costs of this application for leave to appeal should be paid by the defendant to the plaintiffs in any event.