THE INCORPORATED OWNERS OF SUN HING BUILDING (新興大廈業主立案法團) v. JOIN PROFIT (HONG KONG) LIMITED (聯耀(香港)有限公司), GLORY RIVER DEVELOPMENT LIMITED (濠江發展有限公司)

FAMV Nos. 160 and 161 of 2024

[2025] HKCFA 5

FAMV No. 160 of 2024

IN THE COURT OF FINAL APPEAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MISCELLANEOUS PROCEEDINGS NO. 160 OF 2024 (CIVIL)

(ON APPLICATION FOR LEAVE TO APPEAL

FROM CACV NO. 102 OF 2023)

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FAMV No. 161 of 2024

IN THE COURT OF FINAL APPEAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MISCELLANEOUS PROCEEDINGS NO. 161 OF 2024 (CIVIL)

(ON APPLICATION FOR LEAVE TO APPEAL

FROM CACV NO. 106 OF 2023)

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(HEARD TOGETHER)

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REASONS FOR DETERMINATION

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Mr Justice Fok PJ:

1.  We dismissed these applications for leave to appeal at the conclusion of the hearing, indicating that we would hand down our reasons for doing so in due course, which we now do.

2.  This action arose out of a claim by the Incorporated Owners of Sun Hing Building (“the IOs” and “Building” respectively) against Join Profit (Hong Kong) Limited (“R1”) and Glory River Development Limited (“R2”), the current owner and tenant respectively of certain shops on the ground floor of the Building. The IOs claimed that R1 and R2 were occupying a common corridor on the ground floor of the Building pursuant to a licence terminable on reasonable notice and that, despite the IOs having given such notice, R1 and R2 had not vacated and reinstated the premises to their original state.

3.  The common corridor had been part of the original shop spaces on the ground floor but a previous owner had entered into an agreement with the IOs dated 28 June 2002 (“the Agreement”) whereby a swap was effected so that the common corridor became part of the ground floor shop spaces and a new common corridor was created that ran through a different part of the ground floor shop spaces. The exchange is shown in the plans appended to the Court of Appeal’s judgment sought to be appealed.[1] The Agreement was expressly made pursuant to the resolution of the owners’ meeting dated 17 December 2001, which recorded that the owner of the shops was “willing to bear all the costs of altering and, if necessary in future, reinstating the corridor”.[2]  However, the Agreement said nothing about when such reinstatement might be necessary or in what circumstances.

4.  The IOs succeeded in the Lands Tribunal.[3] The Judge held that the Agreement constituted a licence subject to an implied term that it was terminable on reasonable notice and that such notice had been given. He therefore ordered R1 and R2 to vacate and reinstate the original corridor.

5.  The Court of Appeal disagreed and overturned the Judge’s decision. The Court of Appeal held that the true legal nature and effect of the Agreement was not a licence but a mutual exchange giving the owner of the shops the right to enclose the original corridor, incorporate it as part of the combined shop unit and thereafter use it to the exclusion of all the other owners.[4] Correspondingly, the new corridor became part of the Building to which all owners, as tenants in common, had a right of possession.[5] 

6.  The Court of Appeal therefore concluded that, on its true construction, the Agreement is terminable by reasonable notice if either party has a legitimate need for the original configuration to be restored but it is not subject to an implied term that it is terminable at will on reasonable notice.[6] It held that “[t]he notion that the IO (or indeed the Shops owner) could give notice at will the day after completion of the initial alteration works, and thereby require them to be reversed, also seems … repugnant to the whole purpose and background of the Agreement.”[7]  Accordingly, it allowed the appeal by R1 and R2, set aside the Judge’s order and dismissed the IOs’ claim.[8]

7.  By Notices of Motion dated 15 November 2024, the IOs apply for leave to appeal to the Court of Final Appeal against the CA Judgment. It is contended that the appeals involve the five questions of great general or public importance set out in the Appendix to these Reasons. It is also contended that leave should be granted on the “or otherwise” basis.

8.  The questions of law sought to be posed and the “or otherwise” grounds relied upon are, in substance, the same as those which formed the basis of the IOs’ application to the Court of Appeal for leave to appeal. That application was dismissed by the Court of Appeal by its Judgment dated 18 October 2024.[9]

9.  As they did in that application before the Court of Appeal, the IOs contended before us that the Court of Appeal had adopted a “most unorthodox approach” in that it permitted new points to be raised in the substantive appeals and made primary findings of fact for the first time in the CA Judgment.[10] Those criticisms provide the context for the questions of law posed and the application for leave to appeal on the “or otherwise” basis.

10.  However, we do not agree with the underlying premise of the IOs’ submissions before us that the Court of Appeal’s approach in analysing the true nature and effect of the Agreement was a new point or otherwise inappropriate. Nor did it entail the making of any primary finding of fact for the first time in the Court of Appeal. Whilst Mr Lawrence Ng, for the IOs, has fairly and properly said all that can be said on their behalf in persevering with those criticisms, we do not find it necessary to expand upon the reasons given by the Court of Appeal in rejecting them[11] with which we agree.

11.  Once it is understood that the criticisms levelled at the Court of Appeal for its approach in determining the true legal nature and effect of the Agreement are without substance, the questions of law said to be of great general or public importance simply either do not arise for consideration or are fact-specific or are not reasonably arguable.

12.  Likewise, the “or otherwise” bases on which leave to appeal is alternatively sought are founded on the premises underlying the three complaints about the allegedly unorthodox approach adopted by the Court of Appeal. Since we have rejected that criticism as being without substance, the foundation for the contentions addressed to us on the “or otherwise” bases falls away.

13.  Accordingly, for these reasons, we dismissed the applications for leave to appeal with costs.

APPENDIX

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” (CA Judgment §41), when s.16 of the Building Management Ordinance (Cap. 344) (“BMO”) 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:

(1)  Whether it is wrong in principle to hold that a license, 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” (CA Judgment §67) or “cause” for recovering the licenced land (CA Judgment §91), especially when the requirement to give reasonable notice for termination already protects the licensee?

(2)  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 licenses the court usually implies a term that reasonable notice shall be given (Megarry & Wade, The Law of Real Property, 9^th Ed., §§33-007 & 33-008)?

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” (CA Judgment §67) or “cause” for doing so (CA Judgment §91), especially when the requirement to give reasonable notice for termination already protects the other party?

4.  Question 4: Whether it is open to the CA to hold that the Agreement could only be terminated by a party by demonstrating a “legitimate need” (CA Judgment §67) or “cause” for doing so (CA Judgment §91), when the point was never but should have been canvassed at trial with proper evidence adduced and legal arguments advanced (Flywin at §§37-39; Lehmanbrown Ltd v Union Trade Holdings Inc, HCMP 977/2015 (unrep., 17 June 2015 at §10), and when the point was never but should have been pleaded (Grand Power at §§41-42)?

5.  Question 5: To what extent can (or should) CA make its own primary findings of fact which are determinative of the outcome of the proceedings and which the trial judge had not made and/or was never asked to make at trial? Specifically, IO invites the CFA to give definitive guidance as to the parameters in which CA (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?