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

CACV 102 & 106/2023
CAMP 188 & 189/2023
(Heard together)

[2024] HKCA 589

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)

____________

____________

CAMP 188/2023

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

MISCELLANEOUS PROCEEDINGS NO 188 OF 2023

(ON AN INTENDED APPEAL FROM LDBM NO 103 OF 2019)

____________

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CAMP 189/2023

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

MISCELLANEOUS PROCEEDINGS NO 189 OF 2023

(ON AN INTENDED APPEAL FROM LDBM NO 103 OF 2019)

____________

____________

(Heard together)

_________________

J U D G M E N T

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Hon Kwan VP:

1.  I agree with the judgment of G Lam JA.

Hon Cheung JA:

2.  I agree with the judgment of G Lam JA.

Hon G Lam JA:

A.  Introduction

3.  There are two appeals[1] before the court lodged by the 1^st respondent, Join Profit (Hong Kong) Ltd (“Join Profit”), and the 2^nd respondent, Glory River Development Ltd (“Glory River”), respectively (collectively the “respondents”), against the judgment of the Lands Tribunal dated 21 October 2022 (“Judgment”).[2]  Leave to appeal was granted by this court with a stay of execution[3] after the Tribunal’s refusal of leave.[4]

4.  The dispute has arisen from an agreement dated 28 June 2002 whereby the owner of a number of shops on the G/F of Sun Hing Building (“Building”) agreed with the Incorporated Owners of the Building (“IO”) in effect to “swap” certain shop space with a common corridor.  The principal question arising is whether the IO may by notice unilaterally terminate that agreement without cause and require reinstatement of the premises. 

5.  Join Profit is the current owner of the shops concerned and Glory River its tenant.  The IO brought proceedings against them to require them to vacate from the original common corridor, and to reinstate the premises to their original state.  By the Judgment, Deputy District Judge Roy Yu (“judge”), sitting as the Presiding Officer of the Lands Tribunal, held against the respondents and ordered them to reinstate the premises within 28 days.

B.  Background

6.  The Building, located in Nos. 603-609 Nathan Road, Kowloon, is a two-towered building comprising a theatre block (formerly the Nam Wah Cinema) which is now a shopping arcade, and a connected composite tower comprising two basement floors, shops on the G/F, and 26 floors above ground.

7.  In the original configuration of the G/F, Shops 11-17 and Shops 18-23 respectively (“Shops”) formed two continuous rows of shops, with a corridor between them (“original corridor”), which was a common part leading to an entrance to the Building (as shown in the plan mentioned below).  In 1998 Concord Star Trading Ltd (“Concord Star”) purchased the Shops, which were let at the time and operated as a fast food restaurant.  Customers would walk with food and drinks between the two rows, crossing the original corridor and creating safety hazards as food and drinks were occasionally dropped onto the floor.  In May 2001, Concord Star let the Shops to a partnership, Fuk Chan Tai Lee Mahjong Company (“Fuk Chan”), to be run as a mahjong parlour, but the requisite licence could not be obtained because the Shops did not form a single continuous area but were separated by the original corridor.

8.  Concord Star therefore proposed a scheme to the IO, whereby part of the area within Shops 18-23 would be converted into a new corridor for common use (“new corridor”) and, in exchange, Concord Star would have the right exclusively to use the original corridor.  This would enable Concord Star to use (i) the remaining areas of Shops 18-23, (ii) the original corridor, and (iii) Shops 11-17, together as a combined unit.  The original configuration and the proposed altered configuration are shown in the plans appended to this judgment.

9.  On 30 October 2001, the Management Committee of the IO approved the proposal.  The minutes recorded:[5]

“ Regarding the written application submitted to the incorporated owners (IO) by the owner of Shops G11-23 for altering the common corridor in between Shops G11-23, the IO has examined the plan submitted by the owner concerned and unanimously approved the application. The cost of the alteration will be borne by the owner in question. When the alteration work is completed, there will be space along the corridor for advertisement boxes to be used by the IO. If reinstatement of the corridor becomes necessary, the owner in question will be responsible for the reinstatement. The details are to be negotiated between the management office and the relevant owner. The management company suggested that professional opinion on the alteration of the common area should be sought from both the legal consultant and the real estate consultant engaged by the IO, the latter being Akin Property Consultancy Ltd.”

10.  On 17 December 2001, an owners’ meeting was held at which the proposal was approved.  The proposal document is not in the evidence but the minutes of the meeting are available and read as follows (in English translation):[6]

“ 4.1 Chairman of the IO informed owners at the meeting that an application in writing had been received from the owner of Shops G11-23, proposing to alter the location of the existing common corridor between Shops G11-17 and Shops G18-23; in exchange, part of the interior of Shops G18-23 next to Nam Wah Cinema near Soy Street with the same area would be the new common corridor.

4.2 The owner of the shops mentioned above expressed that if the application was approved, the IO would have the right to use the wall at the new corridor near Nam Wah Cinema as advertising space and rent them out to commercial tenants, increasing the revenue of the IO.

4.3 The owner concerned was willing to bear the entire cost of altering the corridor and, if necessary in future, reinstating the corridor.

4.4 The IO sought professional advice from Akin Property Consultancy Ltd in relation to the alteration of the common corridor. Mr Lau, the representative of Akin Property Consultancy Ltd, found the proposal to be feasible and compliant with the requirements of the law.

4.5 [Resolution #4] on the alteration of the common corridor between Shops G11-23.

Voting result:

In favour: 30,979.33 shares

Against: 0 share

Abstention: 1,496 shares

Invalid vote: 0 share

Resolution was passed by the meeting.  The cost of the alteration and reinstatement of the common corridor between Shops G11-23 are to be wholly borne by the owner concerned, and an agreement with the IO has to be signed.  The management company will be responsible for follow-up.”

11.  Between December 2001 and April 2002, the manager of the Building at the time communicated with the IO’s insurance broker and insurer and received confirmation to the IO’s satisfaction that the insurance policies (fire & perils, public liability) in respect of the Building would cover the new corridor. 

12.  On 28 June 2002, the IO and Concord Star entered into a one-page agreement written in Chinese[7] (with two plans attached, showing the configuration before and after the contemplated alteration respectively – being the plans appended to this judgment) (“Agreement”) which provides (in English translation) as follows:

“ Agreement for relocating the common corridor

According to ‘Resolution 4’ passed at the owners’ meeting held on 17 December 2001, approving the relocation of the common corridor between Shops G11 and G23 on the G/F, [the corridor] will be altered and moved from its original location to a location next to Nam Wah Cinema (see attached Plans 1 and 2). The resolution was passed unanimously on that day with 30,979.33 shares in favour and 0 share against.

The conditions are:

(1) In exchange for the relocation of the original common corridor, the owner shall convert an equivalent area inside Shops G18 to G23 to a new common corridor. After such exchange and relocation, the IO shall have the right to use the corridor near Nam Wah Cinema, while the owner of Shops G18 to G23 shall have the right to use the area of the original corridor.

(2) The cost of the alteration and the reinstatement of the corridor shall be wholly borne by the owner.

(3) The IO shall have the unconditional right to use the wall next to Nam Wah Cinema as advertising space.

(4)  The owner shall have the unconditional right to use the wall next to the owner’s rental property.”

13.  It will be noted that although condition (2) places the burden of the cost of reinstatement on the Shops owner, there is no express provision in the Agreement as to how the arrangement may be terminated and reinstatement required.

14.  By a letter dated 8 July 2002, Concord Star informed its then tenant, Fuk Chan, of the Agreement, and transferred to Fuk Chan the right to the original corridor for its use during the term of the tenancy.  On 31 July 2002, Concord Star entered into a new lease with Fuk Chan for a term of 42 months from 1 September 2001 to 28 February 2005. 

15.  It is common ground that works were done to create the new corridor and to integrate the remainder of the Shops and the original corridor into a single unit.  The combined unit has since been used as a mahjong parlour.  There is evidence that the alterations did not contravene any building or fire regulations.

16.  By an assignment dated 23 April 2004, Concord Star assigned the Shops, subject to Fuk Chan’s tenancy, to Join Profit.  It was and is common ground that all the rights and interests Concord Star had under the Agreement were also transferred to Join Profit, and that since then the Agreement has had effect between the IO and Join Profit.

17.  It appears that starting from late 2009, certain owner(s) of the Building had proposed reinstating the original corridor.  Eventually, an owners’ meeting on 30 August 2011 resolved that the original corridor should be reinstated.  On 17 May 2012, solicitors acting for the IO wrote to Join Profit demanding that the original configuration be reinstated.  On 8 June 2012, Join Profit replied that the IO could not cancel or vary the Agreement without its consent.  In addition, Join Profit pointed out that the area had been leased out for a term to 30 September 2019, and stated that even if it consented, the reinstatement should only be implemented after the tenancy came to an end. Further correspondence was exchanged in 2012, but no steps were taken to make any alterations to the G/F.

18.  Meanwhile, Fuk Chan’s tenancy was extended by subsequent agreements, with the last one being for a term of 10 years to 30 September 2019.  Due apparently to changes in its partnership, on 16 August 2017, Fuk Chan surrendered its lease and, in its place, a company, namely Glory River, entered into a new tenancy with Join Profit for a term of 20 years to 30 September 2037.  The same mahjong parlour business continued to be run from the combined unit.

19.  On 25 April 2018, the management company wrote to remind Join Profit of the owners’ resolution of 30 August 2011 for reinstatement.  It said that pursuant to Join Profit’s statement in its letter of 8 June 2012 that its premises had been leased until 30 September 2019, the IO had decided not to require reinstatement until the lease came to an end.

20.  On 28 June 2018, solicitors wrote on behalf of the IO to Join Profit, stating that the Agreement was an agreement for the mutual grant of licence and terminable by reasonable notice.  They gave notice that the Agreement and the licence to use and occupy the original corridor would be terminated on 31 December 2018 and that Join Profit was required to vacate and reinstate the original corridor at its own cost.  

C.  The DMC

21.  Like many other multi-storey buildings in Hong Kong, there is a Deed of Mutual Covenants (“DMC”) regulating the right and obligations of the co-owners of the Building inter se.  The DMC in respect of the Building contains the following provisions on common areas.

(1)  Clause 2 provides:

“ No owner shall use or permit or suffer to be used any of the staircases, entrances, landings, or passages used in common with any other owner for any form of residential or business occupation or so as to cause nuisance or annoyance to any other owner or the occupiers of any other portion of the said building.”

(2)  Clause 8 provides that the undivided shares in the Building and the full and exclusive right and privilege to hold use occupy and enjoy the respective portions of the Building shall be held “subject to and with the benefit of the easements rights privileges and obligations set out in the First Schedule hereto”.  Clause 1 of Part I of the First Schedule reads:

“ … full right and liberty for the owner or occupier for the time being and all persons authorised by him (in common with all other persons having the like right) to go pass and repass over and along the entrances, staircases, landings and passages and to use the lifts … and other common areas intended for common use common services and common amenities and in so far as the same are necessary for the proper enjoyment of such portion and the roof subject, however, to compliance with House Rules, if any relating thereto.”

(3)  Clause 9 provides that each of the parties to the DMC covenants with the other of them “at all times … to observe and perform the covenants provisions and restrictions set out in the Second Schedule …”  Clause 8 of Schedule 2 provides:

“ Not to make any structural alteration to any portion of the said building of which he is the owner which would in any way interfere with or affect the use and enjoyment of any other portion of the said building, nor cut, main injure, damage, alter or interfere with any part or parts of the said premises or building in common use …”

D.  The proceedings below

22.  When Join Profit and its tenant, Glory River, failed to vacate the area as demanded, the IO issued an application in the Lands Tribunal on 27 May 2019 against them for orders for possession and reinstatement.  The IO’s Notice of Application stated that the Agreement is in substance an agreement whereby the IO agreed to grant to Concord Star a licence to use and occupy the original corridor together with Shops 11-17 as a single large shop, while Concord Star agreed to grant to the IO a licence to use and occupy the new corridor (to be used by all the owners and occupiers of the Building as a passageway for access to and egress from their flats or units in the Building).  The Notice of Application went on to state:

“ There is no duration or term for the licence granted as specified in the … Agreement. Accordingly, there is an implied term in the … Agreement that the same and the licence granted can be terminated/revoked by reasonable notice being given by the [IO].”[8]

23.  On 6 and 7 July 2020, the respondents each filed a Notice of Opposition.  Join Profit’s pleaded case was that:

(1)  the Agreement constituted an “absolute equitable assignment” of the original corridor to Concord Star as the registered owner of the Shops, with an option exercisable by the registered owner of the Shops (alternatively, with mutual consent) to reverse the arrangements at its own cost;[9]

(2)  alternatively, the Agreement constituted a specifically enforceable contract under which Concord Star, as the registered owner of the Shops, obtained an immediate equitable interest in the original corridor, with the same option;[10]

(3)  in the further alternative, if only a licence to use and occupy the original corridor was granted to Concord Star, it is, as a matter of law and/or on the true construction of the Agreement, assignable by Concord Star to its successor-in-title and irrevocable by the IO without the consent of the registered owner of the Shops;[11]

(4)  the IO had by words and/or by conduct represented to Concord Star that it shall be assigned the original corridor and shall acquire the right to exclusive use, possession and enjoyment over the same; there was detrimental reliance on such representation; the IO is estopped from denying that Concord Star had been absolutely assigned the original corridor and acquired the right to its exclusive use, possession and enjoyment and that Join Profit has the same rights;[12] and

(5)  by its inactivity from 2012 to June 2018, the IO had by conduct represented to or led Join Profit to believe that the IO had accepted Join Profit’s position that it was entitled to the exclusive use, possession and enjoyment of the original corridor and the IO was not entitled unilaterally to demand reinstatement; there was detrimental reliance on such representation; it is unconscionable for the IO to defeat Join Profit’s expectation.[13]

24.  Based on these arguments, Join Profit also counterclaimed for declarations that, among other things, it had an equitable interest in the original corridor or an irrevocable licence in aid of an interest in the original corridor, or that it was entitled to the exclusive use of the original corridor by virtue of the operation of an estoppel.

25.  It is unnecessary to describe Glory River’s pleaded defence since it was accepted that its case was similar to and stood or fell with the position of Join Profit.[14]

26.  At trial, Join Profit abandoned the contentions in (1) and (4) above.[15]  The judge ruled against the contention in (2) above.[16] The judge held that the Agreement constituted a mutual grant of licence,[17] rejected the contention that there was a licence coupled with an interest,[18] and held that there was an implied term that each licence may be terminated by reasonable notice,[19] thus rejecting Join Profit’s contention in (3) above.  Finally, the judge also rejected the estoppel argument in (5) above.[20] 

27.  In the result, the judge ordered the respondents to demolish and remove all the existing structures at and vacate and reinstate the original corridor within 28 days, and granted an injunction to restrain them from using and occupying the original corridor to the exclusion of the other owners and occupiers of the Building.  The judge also dismissed Join Profit’s counterclaim.

E.  The appeals

28.  Under section 11(2) of the Lands Tribunal Ordinance (Cap 17), an appeal against a judgment of the Lands Tribunal lies to this court only on the ground that it is erroneous in point of law. 

29.  On appeal, Join Profit has not sought to raise the contentions in (1), (2) and (4) again.  The three grounds of appeal advanced are:

(1)  the judge erred in holding there is an implied term in the Agreement that the licence to use the original corridor may be terminated by the IO by reasonable notice;

(2)  the judge erred in holding that the 6 months’ notice served by the IO was reasonable notice; and

(3)  the judge erred in rejecting the estoppel defence.

30.  Join Profit seeks an order that the IO’s application be dismissed and declarations that its use and occupation of the original corridor was not in breach of section 34I of the BMO or clause 8 of Schedule 2 to the DMC, and that it is entitled to the exclusive right to use the original corridor under the Agreement or alternatively by virtue of estoppel.

31.  In addition to grounds similar to Join Profit’s first two grounds, Glory River has advanced an additional ground that the judge erred in ruling that even if the original 6 months’ notice was insufficient, as 11 months had passed since the notice when proceedings were begun by the IO in May 2019 and more than 4 years had passed by the time of judgment in October 2022, there was sufficient notice for termination.[21]

32.  I shall deal with these grounds in turn below and, in the course of doing so, deal with the points raised by the IO by its respondent’s notices where appropriate.

F.  Join Profit’s Ground 1 – implied term

F1.  The parties’ cases and the judge’s reasoning

33.  The IO’s pleaded case was that there was an implied term in the Agreement that it could be terminated or revoked by reasonable notice given by the IO.[22]  It was said to be an implied term based on “necessity and/or business efficacy”.[23]  At trial the IO clarified that its position is that the Agreement is terminable unilaterally by reasonable notice given by either side.

34.  Join Profit denied there was such an implied term and denied that the term was necessary to give business efficacy or to give effect to the true intention of the parties to the Agreement.  It averred that the contractual licence granted was irrevocable on the true construction of the Agreement.[24] Its argument advanced at trial was that the Agreement is terminable only by mutual consent or unilaterally by itself as the Shops owner,[25] or pursuant to an implied right to terminate of a narrower scope.[26]

35.  The judge’s reasoning on the IO’s plea of implied term was stated in the Judgment as follows.  At §116 the judge referred to a passage in Megarry & Wade, The Law of Real Property (9^th ed) at §33-008:

“ If the contract makes no express provision for determination, the court will imply a term that is appropriate in the circumstances … With most contractual licences the court usually implies a term that reasonable notice shall be given”.

36.  At §117, His Honour referred to Kensland Realty Ltd v Whale View Investment Ltd & Anor (2001) 4 HKCFAR 381 which in turn referred to the conditions for implying a term in a written contract set out in BP Refinery (Westernport) Pty Ltd v President, Councillors and Ratepayers of the Shire of Hastings (1978) 52 ALJR 20 at 26:

“ (1) it must be reasonable and equitable; (2) it must be necessary to give business efficacy to the contract, so that no term will be implied if the contract is effective without it; (3) it must be so obvious that ‘it goes without saying’; (4) it must be capable of clear expression; (5) it must not contradict any express term of the contract.”

37.  The judge then said at §119:

“ As rightly pointed out by Mr. Ng, Kensland’s case is on the implied terms for completion of a sale and purchase of land. When considering the term that should be implied, the nature of the contract is a starting point. And as stated in Megarry & Wade para. 33-008, ‘… whether or not a contractual licence is revocable is a question of construction of the contract. If the contract makes no express provision for determination, the court will imply a term that is appropriate in the circumstances.’ The above general principle on considering implied terms must be considered in light of the nature of the Chinese Agreement, which I have ruled is a licence, and all relevant facts leading to the signing of the Chinese Agreement between the IO and Concord Star. I consider the position of the parties would be fixed at the time of signing, and the 1^st respondent would only be stepping into the shoe of Concord Star.”

38.  At §120, the judge said the question he would ask is “when the licence was entered, was it contemplated by IO and Concord Star that either the IO or the owners of the Shops may terminate the licence?”, noting that it is a question of the construction of the Agreement.  His Lordship then reasoned as follows:

“122.  Looking this way, there is good reason for Concord Star to reserve the right to terminate the licence.  If for any reason, no one is interested in taking up the lease of the Conjoined Shop, it makes commercial sense to reinstate the Shops to individual units for sale or lease.  And in such situation, the original corridor would be important as it is the shop front of the individual unit of the Shops.  And on reinstatement, there is no reason why the owner of the Shops has to maintain the converted corridor for use by the IO.

123.  Similarly, the IO must cater for the situation that some owners would require the right to use the original corridor and which by law (as analysed above) it is bound to allow.  It makes commercial sense that such terms be implied to the licence to ensure that the IO may comply with its duty under the DMC and the Ordinance.

124.  Mr. A Wong argues that it would create absurdity if the IO is allowed to terminate the licence at any time.  If they serve notice of termination the day following, say the completion of the converted corridor, it would create great injustice as Concord Star and/or Fuk Chan have to return possession of the original corridor after incurring costs to build the converted corridor.

125.  If that is the concern of Concord Star, I would be surprised that the parties have not included a minimum term for the licence.  I accept that there is such risk but the same could be compensated by agreement, and is balanced further by the provision of reasonable notice. …

127.  As analysed above, there is every reason why the 1^st respondent would reserve the right to terminate the licence.  And I see no reason why they should be the only party in this arrangement to terminate the licence.  Hence it is fair and reasonable to imply a term that each licence granted may be terminated by reasonable notice.”

F2.  The parties’ contentions on these appeals

39.  Under Ground 1, Join Profit submits that the judge erred in holding that there was an implied term that the licence granted to it under the Agreement can be terminated unilaterally by the IO by reasonable notice, without finding that such a term is necessary.  There is no necessity for a term to be implied giving the IO an unfettered right unilaterally to terminate the Agreement at any time by reasonable notice.  Given that the cost of both the initial conversion and any subsequent reinstatement is borne by the Shops owner, it would be unreasonable and inequitable for the IO to be able to terminate the Agreement unilaterally at any time.  That would be absurd, as the Shops owner and its tenant would suffer significant financial loss.  The judge’s response that the parties could have included a minimum term for the licence and any loss could be compensated by agreement, when there are no such agreed terms, is erroneous.  The exercise is not a binary choice between the IO having an unfettered right to terminate or no right to terminate at all.  There is no necessity for the IO to have an unfettered and unrestricted right to terminate.  Further, the judge’s conclusion is vitiated by an erroneous understanding of the power of the owners’ committee under section 34I(1)(a) of the Building Management Ordinance (Cap 344) (“BMO”). 

40.  The IO submits that the question turns on the proper construction of the Agreement, alternatively the implication of a term.  The respondents’ interpretation would give rise to a permanent licence, which is not favoured by the law.  Instead, licences are prima facie revocable.  Without the right to terminate unilaterally by reasonable notice, the other owners of the Building would be deprived of the use of the original corridor forever, and Join Profit could be prevented from selling Shops 18-23 separately from Shops 11-17 forever.  This could not have been the parties’ intention.  There was good reason and commercial sense for the parties to reserve the right to terminate the licence.  The IO must cater for the situation where certain owners wish to exercise the right to use the original corridor which by law the IO is bound to allow.  As the original corridor is a common part of the Building co-owned by all owners, it is beyond the IO’s power to allow anyone to convert it permanently to his own use.  Clause 2 of the Agreement which expressly refers to the cost of reinstatement demonstrates the parties’ intention that the licence could be terminated by either party unilaterally. The term “right to use” (使用權) also demonstrates that the Agreement conferred a licence, not an absolute interest.  If the respondents’ interpretation that the Agreement could not be unilaterally terminated or could only be unilaterally terminated by Join Profit are rejected, the only remaining alternative is that it was simply terminable on reasonable notice.

F3.  The nature and effect of the Agreement

41.  Before evaluating the arguments, it is necessary to examine the true legal nature and effect of the Agreement.  It has been referred to as a mutual grant of licence, and it has been debated whether the licence to use the original corridor is terminable. But in this way the term “licence” is used in a very loose sense indeed.  This is not a case where permission is given for a stranger to enter on land which would otherwise be a trespass – the usual context to which the legal meaning of licence refers: Thomas v Sorrell (1673) Vaugh 330, 351.  Here, Concord Star was an owner of undivided shares in the Building and the land on which it stands and, as such, had in common with other owners a right of possession over the original corridor which was a common part, there being unity of possession among tenants in common.  What was granted to it by the Agreement was therefore not a licence to enter the area in question, but 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, which would otherwise be a breach of the DMC and an ouster by one co-owner of the others.  The “right to use” (使用權) the original corridor, as referred to in the Agreement, is to be read accordingly.  As a corollary, it is accepted that under section 34H of the BMO, by virtue of its exclusive right to the use and occupation of the original corridor, the Shops owner is under a duty to maintain it in good repair and condition.

42.  It was not disputed that it was within the power and authority of the IO or owners’ committee to give such permission.  Sections 16 and 34I of the BMO provide:

Section 16

“ 16. When the owners of a building have been incorporated under section 8, the rights, powers, privileges and duties of the owners in relation to the common parts of the building shall be exercised and performed by, and the liabilities of the owners in relation to the common parts of the building shall, subject to the provisions of this Ordinance, be enforceable against, the corporation to the exclusion of the owners, and accordingly—

(a) any notice, order or other document which relates to any of the common parts of the building may be served upon the corporation at its registered office; and

(b) any proceedings in the tribunal in respect of any of the common parts of the building may be brought and pursued by or against the corporation.”

   Section 34I

“ (1) No person may –

(a) convert any part of the common parts of a building to his own use unless such conversion is approved by a resolution of the owners’ committee (if any);

(b) use or permit to be used the common parts of a building in such a manner as –

(i) unreasonably to interfere with the use and enjoyment of those parts by any owner or occupier of the building; or

(ii) to cause a nuisance or hazard to any person lawfully in the building.

(2) Any person who contravenes subsection (1) shall be deemed to be in breach of an obligation imposed on him by the deed of mutual covenant in respect of the building.”

43.  There is no dispute that the management committee of the Building is the owners’ committee for the purposes of section 34I by virtue of section 34K of the BMO, and that the Agreement was entered into in exercise of the power of the owners’ committee under section 34I.

44.  Likewise, the new corridor is part of the Building to which all the owners, as tenants in common, prima facie have a right of possession under the general law.  It is by virtue of the covenants in the DMC made by or binding on the other owners that Concord Star had a right to the exclusive use and possession of that area as part of Shops 18-23 originally.  By the Agreement, Concord Star gave permission for the other owners (and implicitly their licensees) to enter and use that area as a common corridor, which would otherwise be a breach of covenant against Concord Star.  Rather than granting any new right to the IO, in essence Concord Star simply waived or released its own exclusive right of possession under the DMC so that the other owners can resume the exercise of the right of possession they have as tenants in common.  This is how the “right to use” (使用權) the new corridor, as referred to in the Agreement, is to be read.

45.  Whilst the label may not matter much so long as one is mindful what the true position is, for my part I would prefer to avoid using the language of licence in this case lest it may lead to confusion.

46.  The mutual nature of the Agreement sets it apart from many of the cases cited to us.  This is not a case where the IO simply permits an owner to use certain common parts in return for a fee or other consideration; the Agreement involves reconfiguring the G/F, and the mutual grant of rights over specific parts of that floor in the sense explained above.  It would be a mistake to view one half of the arrangement wholly separately and independently from the other half.  Although it would not be entirely accurate to call it a “land exchange”,[27] the word “exchange” does capture the mutuality inherent in the Agreement and its practical effect.  At the same time, it should be noted that there is no symmetry in the Agreement in that the burden of the cost of the alteration and any reinstatement is placed solely on the Shops owner.

F4.  Section 34I of the Building Management Ordinance

47.  Integral to the judge’s reasoning on implied term is his understanding of the effect of section 34I(1)(a) of the BMO and of the rights of the other owners, even though this was set out in an earlier part of the Judgment which dealt with Join Profit’s submission that it had acquired an equitable interest in the original corridor. Thus in §100 of the Judgment, the judge referred to 383HK Limited v The Incorporated Owners of Tak Bo Building [2018] HKCA 164 and in particular §§18-19 of the judgment of Cheung CJHC in that case (with whom Cheung and Yuen JJA agreed), which read as follows:

“ 18. Turning first to the issue of whether the plaintiff has a right, whether subject to the defendant’s consent (and whether any such consent, if required, is itself subject to the requirement of reasonableness), to install connecting pipes over the common parts of the building for the supply of fresh water and drainage purpose, there are, in my view, several interrelated matters. First, there is the common law right of a co‑owner to use and enjoy each and every part of the land under co‑ownership subject to the question of ouster. Secondly, there is clause 3(c) of the DMC, which Mr Chan submitted gives the plaintiff the right to do so. Lastly, there is section 34I(1)(a) of the Ordinance, which essentially prohibits anyone (including a co‑owner) from converting any common parts of a building to his own use without the authorisation by resolution of the owners’ committee or, where there is one, the management committee (as per section 34K of the Ordinance). …

19. The position, as a matter of law, appears to me to be this.  The common law right described above is of course subject to the provisions of the DMC and of the Ordinance.  As between the DMC and the Ordinance, if the DMC provides for a right to do the thing in issue on or over the common parts of the building, the co‑owner may do so accordingly.  Section 34I(1)(a) does not stand in the way because in the scenario under discussion, the management committee would be bound under the DMC (as a contract between all co‑owners for the time being) to give its consent.  There is therefore no contradiction between the DMC and section 34I(1)(a) even though section 34C(2) says that in the event of any inconsistency between provisions contained in Part VIA of the Ordinance (where section 34I is found) and a DMC, that part shall prevail. If the matter is not empowered under the DMC, section 34I(1)(a) is determinative of the issue and everything turns on whether a resolution by the management committee authorising the act in question can be obtained.  To this extent, section 34I(1)(a) modifies the common law on ouster, as a resolution passed by a simple majority of the votes of the members of the management committee present at a meeting (per section 34D(2)) can now approve what under common law cannot be done without unanimous agreement of all co‑owners.”

48.  In §§101-102 of the Judgment, the judge said that whilst section 34I(1)(a) may in some cases have an “overriding power on the right of the co-owners”, that is restricted to rights that are “not empowered by DMC”.  In the present case, the other co-owners have rights under the DMC to use the original corridor.  If they insist on exercising that right, the IO has no choice but to comply.  The power of the IO under section 34I is accordingly restricted and must not conflict with the express provision of the DMC.  Such restriction has to be taken into account in the interpretation of the Agreement.  The judge referred to this “restriction” or “limitation” again in §§104, 111 and 123 of the Judgment as well as in §18 of his decision refusing leave to appeal.

49.  With respect, the judge misunderstood what was said in 383HK.  In that case, the owner of a shop on the G/F of the building wanted to install water and drainage pipes to his shop to be connected with the building’s main water and drainage pipes.  The works would involve running the pipes along the common parts of the building, including the canopy and external walls.  The incorporated owners refused consent.  The owner argued that it had a right to do so under a specific provision of the DMC.  It was in this context that Cheung CJHC said what was stated in §§18-19 of his judgment in relation to a right to do certain things under the DMC.  His Lordship went on to rule that the DMC in that case did not give the plaintiff owner the right to install pipes over the common parts of the building.

50.  Properly understood, I do not think that 383HK means that the power of the owners’ committee under section 34I to permit conversion of common parts by one owner is limited to the situation where the other owners’ rights over the common parts are not provided for by the DMC.  Very often, the DMC provides that all co-owners have rights to use the common parts in common with one another.  The judge’s interpretation would leave little scope for section 34I to operate.  Section 34C(2) provides that in the event of any inconsistency between Part VIA (which contains sections 34C to 34L) and the terms of a DMC, the former shall prevail.  When Cheung CJHC referred to what was or was not “empowered” under the DMC, he was referring to the right of the individual owner to do the act in question (in that case, the installation of pipes) on the common parts, rather than all the co-owners’ rights to use them as common parts.  In fact, Cheung CJHC went on to say in §32 as follows:

“ … Under common law, absent unanimous agreement, a co‑owner cannot dispossess and oust his fellow co‑owners by so using and occupying a particular part of the land in question as to prevent his fellow co‑owners (or any one of them) from using and enjoying it. Section 34I(1)(a) simply codifies that common law position but makes a concession at the same time. At common law, if all other co‑owners consent, there can be no ouster. Section 34I(1)(a) makes life easier in that so long as the action is approved by the management committee by resolution passed by a majority present at a meeting of the committee, what cannot otherwise be done under common law can be done.”

51.  Section 34I has been considered by this court also in other cases.  In Gallium Development Ltd & others v Winning Properties Management Ltd & others (CACV 186 & 400 of 2003, 17 September 2004), the owner of the shopping arcade in a building was sued by certain co-owners for having converted portions of the common parts for its own use.  The owner defended the claim on the ground that it had the permission of the owners’ committee given by certain written resolutions. The plaintiff co-owners retorted that clause 24(c) of the DMC there provided that no part of the common areas shall be used for any private purpose.  The defendant’s defence failed eventually because there were no valid resolutions compliant with the DMC or section 34I.  What is relevant for present purposes is the court’s discussion of the effect of section 34I, on which Yuen JA said:

“ 87. As I read it, the first part of this subsection (‘no person may convert any part of the common parts of a building to his own use’), as a general rule, prohibits conversion of common parts to private use. However if there is an owners’ committee, then the prohibition may be lifted by the owners’ committee. …

99. As discussed above, s.34I(1)(a) provides that common parts are not to be converted (unless the owners’ committee permits it). The general prohibition is perfectly consistent with Clause 24(c) which also prohibits private use of common parts.

100. Of course if an owners’ committee is formed and if it validly resolves to approve the conversion of common parts for private use, the section would prevail over the general prohibition in Clause 24(c).”

See also per Woo VP at §§20, 22, 24 & 27 and per Le Pichon JA at §83.

52.  Section 34I(1)(a) has also featured in cases where an owner who had converted a common part to his own use argued that the conversion could no longer be objected to because it had been acquiesced in by the incorporated owners.  Thus in Incorporated Owners of Freder Centre v Gringo Ltd [2016] 2 HKLRD 190, Chu JA, giving the judgment of the Court of Appeal,[28] stated:

“ In our view, the core issue in this appeal is whether the applicant has acquiesced in the respondents’ breach. We do not agree with the applicant’s argument in the respondent’s notice that it is not within the applicant’s power to acquiesce in the breach. It is implicit in Clause 14 that the applicant may assign spaces for the owners or occupiers to affix or exhibit their trade names. Similarly, it is also implicit in section 34I(1)(a) of BMO that the applicant can give approval to an owner to convert a common part to his own use: see the Court of Appeal’s judgment in Hollywood Shopping Centre Owners Committee Ltd v. Wing Wah Building Mongkok Kowloon (IO) [2011] 4 HKLRD 623 at §§67-69. It is thus within the applicant’s power to give approval to an owner or occupier to affix his trade name on the Buildings’ external wall. There is also no suggestion that any illegality is involved. The Judge is therefore correct in holding that the respondents’ breach is within the applicant’s power to acquiesce.”

53.  These authorities do not support the IO’s contention that it is beyond the power of an owners’ incorporation to allow an individual owner to permanently convert a common part to his own use.  Nor in any event does the implication of the term contended for by the IO address this perceived problem since the Agreement was for an indefinite duration and the conversion could in effect be permanent unless and until the Agreement was terminated.

F5.  Construction of the Agreement and implication of terms

54.  Where a contract does not contain any express provision for termination, the question of whether it may be terminated unilaterally, and if so, under what conditions, is sometimes approached as a question of implication of terms but is also often said to be a question of construction of the contract.  In Winter Garden Theatre (London) Ltd v Millennium Products Ltd [1947] AC 173, 203, Lord MacDermott, with whom Viscount Simon and Lord Simmonds agreed, said that the question whether the licence was revocable “depends … solely on the true construction of the letters … as ascertained in conformity with the ordinary principles applicable to the interpretation of written instruments.”  In The Hong Kong Polytechnic University v Rehabaid Society [2023] HKCA 956,[29] the question was first dealt with as one of construction,[30] but as an alternative route to the same destination the plaintiff’s case on implied term was also upheld.[31]  Of course, where the approach is characterised as an exercise in construction, what is referred to is construction in a wide sense.  As pointed out by Buckley J in In re Spenborough Urban District Council’s Agreement [1968] 1 Ch 139, 146G-147C:

“ since ex hypothesi the agreement contains no provisions expressly dealing with determination, the question is not one of construction in the narrow sense of putting a meaning on language which the parties have used, but in the wider sense of ascertaining, in the light of all the admissible evidence and in the light of what the parties have said or omitted to say in the agreement, what the common intention of the parties was in the relevant respect when they entered into the agreement.”

Whether the correct juridical classification of the requisite exercise is construction, implication or inference[32] does not matter in the present case.  It is unnecessary for me to deal further with this question.

55.  On behalf of the IO, Mr Ng seeks to draw support from the interpretation reached in four cases, namely, Hong Kong Polytechnic University, Winter Garden, Spenborough Urban District Council and Staffordshire Area Health Authority v South Staffordshire Waterworks Co [1978] 1 WLR 1387, in each of which the licence or agreement concerned was found to be terminable by reasonable notice.  This approach is, with respect, misguided, for the intention of the parties in each case must be deduced from the circumstances of that case rather than from authorities.  Moreover, when these cases are examined, one finds in their facts special features that inclined the court one way or the other in its conclusion. 

(1)  Hong Kong Polytechnic University concerned a licence granted by the University in 1988 for the Rehabaid Society to occupy certain premises on campus free of charge, with all utilities, cleaning, maintenance and security services paid for by the University subject only to a token charge.  The arrangement originated from the intended co-operation between the University’s rehabilitation engineering centre and the Society’s rehabaid centre, which however dwindled to the point that by 1994 there was no longer any meaningful collaboration between the two.  Given that the underlying purpose of collaboration between the parties which was regarded as the substratum of the agreement no longer existed, the court found that it would be “unreasonable, if not absurd” for the Rehabaid Society to have a perpetual licence to occupy the premises in question with utilities and services heavily subsidized by the University.  The construction upheld, alternatively the implied term found, was that after cessation of collaboration between the parties, the licence was terminable unilaterally by reasonable notice.[33]  I do not agree with Mr Ng’s submission that the present case is indistinguishable from Hong Kong Polytechnic University.  It may be noted that the finding that the licence was only revocable by notice after the occurrence of a certain event was also made in Parker v Parker [2003] EWHC 1846 (Ch), a case discussed further below, where the claimant was given a contractual licence to reside in a castle for the purposes of negotiations for his occupation of the property on a more permanent basis.  It was held that the licence was not revocable until negotiations broke down, and then only by reasonable notice.[34] 

(2)  Winter Garden was about a licence for the use of a theatre.  The court took particular note of the fact that the licence was for the purpose of producing stage plays, concerts or ballets; that there was provision for a flat weekly payment to the licensor; that the licensor retained the bars, cloak rooms and the right to sell programmes (with the licensee participating to the extent of 50% in the net profits and losses); that the licensor expressly retained the possession of the theatre; and that the licensor was responsible for payment of all rates, taxes, assessments and theatre and excise licence.[35]  It was considered that these factors pointed away from the notion that the licence was perpetual.

(3)  In Spenborough Urban District Council, the agreement whose terminability was in dispute was one for permission for the defendant to discharge effluent into the Council’s sewer.  In finding that the agreement could be terminated by the Council by reasonable notice, the court was influenced by the fact that the defendant was not obliged to treat the effluent discharged and was unrestricted as to the amount it could discharge and, particularly, that the defendant could, by deciding to reduce the amount to nil, unilaterally and at any time suspend or put an end to the agreement.[36]  

(4)  In Staffordshire Area Health Authority, the court found that an agreement made in 1929 for the water company to supply water to a hospital was terminable on reasonable notice.  Goff LJ found it incredible that the agreement bound the water company forever to supply whatever quantity of water the other party required and upon terms fixed once and for all.  The fact that the rate (2.9p per 1,000 gallons) was fixed in 1929 and there was no provision in the agreement for a variation of the charges (even though, after 50 years, the ordinary rate had become 55p per 1,000 gallons) was said to be “of the utmost importance”.[37]

56.  Returning to the present case, the starting point is the Agreement itself.  It is named as an agreement for relocating the common corridor (公共通道改位協議書).  It provides for the alteration of the configuration of the G/F as set out in the two plans attached, requiring the Shops owner to build the new corridor from the area within Shops G18 to G23 (改建為公共通道).  It gives the right to use the new corridor to the IO as a common area, and the (implicitly exclusive) right to use the original corridor to the owner of Shops G11 to G23.  It mentions reinstatement in the context of stipulating that the cost of reinstating the original corridor shall be borne by the Shops owner, but does not provide for how reinstatement may be required.  The Agreement is expressly stated to have been made pursuant to the resolution of the owners’ meeting on 17 December 2001, which recorded the understanding that the Shops owner “is willing to bear all the costs of altering and, if necessary in future, reinstating the corridor” (承擔更改通道及日後如有需要還原通道之全部費用).  Thus the parties had contemplated reversing the alterations and reinstating the original corridor, but clearly what was thought to be important to the IO is that the Shops owner is to bear the entire costs rather than who can decide if reinstatement is necessary.

57.  The court’s task is to construe the Agreement as at the date of its formation: Hong Kong Polytechnic University, §40.  Likewise, the implication of a term is judged at the date of the making of the contract: Leung Wai Ling Isewesg v Success Base Engineering Ltd [2021] HKCA 310, §19.

58.  The background to the Agreement was of course the Shops owner’s desire to combine the areas in question for the purposes of its tenant.  The relocation of the corridor brought no inconvenience to the other owners.  There was no suggestion that the new corridor was perceived by anyone to be inferior to the old one.  The IO would benefit from having a corridor wall which could be let for income.  At the owners’ meeting there was an overwhelming majority in favour and no opposition.  The IO took steps to satisfy itself that its insurance policy would cover the new corridor. 

59.  The nature of the transaction and of the rights granted under the Agreement has been explained above.  The Agreement is in practical terms an agreement to allow a common area to be converted to an owner’s own use, in return for a private area being given up for common use.  In legal terms it is an agreement whereby the Shops owner waives its right under the DMC to the exclusive use of the shop area in question and is granted the right to the exclusive use of the area of the original corridor.  It is far removed from the kind of one-sided licence considered in cases such as Winter Garden.  As such, Mr Ng’s submission that a licence is presumed to be revocable by notice is not to the point.

60.  In any event, it seems to me the better view is that there is no such presumption even in the case of a licence.  Mr Ng relies on a sentence in Lord Porter’s speech in Winter Garden Theatre (London) Ltd v Millennium Products Ltd [1947] AC 173 at 175 that “prima facie, licences are revocable”, and a sentence in Megarry and Wade, The Law of Real Property (9^th ed), §33-007, that at common law, “a licence, unless coupled with an interest, was always revocable”.  However, as pointed out by Buckley J in In re Spenborough Urban District Council’s Agreement at p 149G, Lord Porter was the only judge in Winter Garden to rely on a suggested rule that licences are prima facie terminable.  Lord MacDermott, with whose analysis Viscount Simon and Lord Simonds agreed, said the matter is “solely” a question of construction, eschewing any reliance on presumptive rules.  In Spenborough, Buckley J also approached the question on the footing that there was no presumption either way (see pp 147D-F &150B).  This approach was endorsed by the English Court of Appeal in Staffordshire Area Health Authority, supra, at pp 1399G-1400D & 1406F and in Colchester and East Essex Co-operative Society Ltd v The Kelvedon Labour Club and Institute Ltd [2003] EWCA Civ 1671 at §9.

61.  The Agreement does not require any further collaboration between the parties after the initial alteration works, until its termination.  There was no periodic payments to be made by one side to the other, whether at a fixed flat rate or otherwise. There was no retention of exclusive possession of the original corridor by the IO, or of the new corridor by the Shops owner, in contrast to Winter Garden.

62.  The Shops owner had been letting out the Shops, and it was no doubt envisaged that it would continue to let out the combined unit after the Agreement.  It does not seem likely to have been the intention that the Shops owner was to lease the premises to tenants on the one hand and take the risk of the IO terminating the Agreement with reasonable notice for no cause.

63.  The works required for relocating the corridor, both upon the initial alteration and upon reinstatement, would be substantial, including re-partitioning the space which requires the demolition and erection of brick walls, replacing floor tiles, works on the ceiling, re-arrangement and re-wiring of lights, and re-positioning of fire service installations.  One quotation obtained in 2022 estimated that the reinstatement works alone would take 90 working days and cost $820,000, without taking account of the process of obtaining approvals and appointing contractors. This also does not include the renovations needed for the Shops themselves as a result of the repositioning of the corridor.  When I ask myself whether it could have been intended that the IO could throw upon the Shops owner the burden of all that trouble and expense for no cause at all, I think reason suggests that it could not. 

64.  The 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 to me repugnant to the whole purpose and background of the Agreement.  The judge’s response to this in §125 of the Judgment (i.e. that the parties could have agreed a minimum term and compensation for termination) is, with respect, not to the point.  It is not meaningful in this context to refer to some hypothetical term that the parties could have agreed to which might have redressed such harsh results when there was in fact no such term in the Agreement.  Nor does the requirement of reasonable notice, in my view, neutralise the unreasonableness of such an outcome.

65.  The judge did not really address the question why the implied term contended for by the IO, which made the Agreement terminable unilaterally simply by giving reasonable notice, without any qualification, was necessary.  It does not seem to me that the effect of the Agreement without that implied term can be said to be absurd or to lack commercial or practical coherence.  The judge referred to situations where one side may find it desirable or necessary, because of commercial or legal reasons, to terminate the Agreement.  Thus at §123 of the Judgment, the judge said it would make sense for a term to be implied to ensure that the IO could comply with its duty under the DMC and the BMO.  I would have no difficulty with the notion that the Agreement is terminable by the IO by notice where compliance with its legal duties so requires.  But in my view this does not necessitate and justify an implied power to terminate at will, rather than a more limited avenue for exit based on legitimate needs.  The same consideration arises where the Shops owner needs to revert to the original configuration in order to dispose of the Shops separately.  It does not warrant the implication of a power for the Shops owner to terminate at will and, without cause, turn the G/F area into a construction site for months.

66.  On behalf of the IO, Mr Ng raised an objection that Join Profit did not plead an alternative implied term of a narrower scope, but this does not answer the problem in the IO’s own case – that it is not shown why it is necessary, or that it goes without saying, that either party should have the right, at any time and without cause, to terminate the Agreement by giving reasonable notice.

67.  In my view, the circumstances point to there being no implied provision in the Agreement for termination at will.  Instead, on its proper construction, the Agreement is terminable by reasonable notice if either party has a legitimate need for the original configuration to be restored. 

68.  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.

69.  In conclusion, I have come to the view that Ground 1 is made out.  It follows that I would allow the appeal and substitute an order that the IO’s claim be dismissed.  For completeness, I shall briefly discuss the remaining grounds of appeal below.

G.  Join Profit’s Ground 2 – reasonable notice

70.  On the footing that the Agreement was terminable by reasonable notice given by either side, the judge held that the IO bore the burden to prove that the notice actually given was reasonable, but he noted that neither Join Profit nor Glory River had raised any particular reason why 6 months would not be sufficient for reinstating the original corridor, and held that reasonable notice had been given.[38]

71.  Join Profit contends that the judge erred in law in coming to this conclusion.  Specifically, it is said that the judge was wrong to focus on the question of “why 6 months would not be sufficient for the respondents to reinstate the original corridor” and should have taken into account the circumstances of the actual user and whether the length of notice gave the occupant (i.e. Glory River) a reasonable opportunity to enter into alternative arrangements.

72.  Join Profit submitted that whether reasonable notice has been given is a mixed question of law and fact.  There are of course legal principles involved bearing on the issue of how much notice ought to be given in a particular case, but once the tribunal has properly directed itself on the law, it seems to me that the question whether on the facts in a particular case there was or was not reasonable notice given is generally a question of fact: see, by analogy, Stubbs v Slater [1910] 1 Ch 195, 204;[39] Brighty v Norton (1862) 2 F & F 722.  The scope for challenging the judge’s conclusion in this court is accordingly limited, and any attack must be founded on a defect that can properly be called an error of law.

73.  There is no dispute that what is reasonable notice must be assessed in light of the circumstances prevailing at the time notice was given: Good Earth Agricultural Co Ltd v Novus International Pte Ltd [2007] 1 HKLRD 685, §70.  In that case, Stone J stated that the length of the requisite notice is informed by its chief purpose, which is to enable the parties to end their relationship in an orderly manner and with a reasonable opportunity to enter into alternative arrangements (§§74-75).  Self-evidently this is a fact-sensitive question that depends on the circumstances of each case.

74.  In the present case, it seems there was no real dispute that the length of notice given was sufficient for reinstatement works to be carried out.  Neither Join Profit nor Glory River responded to the notice of 28 June 2018 then to suggest that the time given was not enough.  Nor did they raise in their Notices of Opposition filed in the Tribunal or in opening submissions at trial any positive case that the notice was insufficient due to any particular practical difficulty or otherwise. Their witnesses gave no evidence that the notice was unreasonably short or impracticable. It was only submitted in Join Profit’s closing at trial that the notice was not reasonable as it was not tied to the expiry date of the new lease it granted Glory River on 16 August 2017.  In my view the judge was entitled not to deal with a matter raised so late in the day.  In any event, that 20-year lease was granted in 2017 by Join Profit with full knowledge that the IO had demanded reinstatement of the G/F.  The parties to the lease specifically agreed, as stated in clause 13, that if the IO raised any challenge to the legality of the use of the premises, they would “cooperate to handle the matter”.  In these circumstances the existence of the lease itself, in the absence of any other relevant evidence, did not in my view render the notice given unreasonable.

H.  Join Profit’s Ground 3 – estoppel

75.  Join Profit’s plea is that by its inaction from 2012 to 2018, the IO has by conduct represented or led Join Profit to believe that the IO had accepted that it was not entitled unilaterally to require the reinstatement of the premises, and to believe that Join Profit would continue to be entitled to use and enjoy the original corridor as part of its combined shop space.  It is said that Join Profit relied on such representation to its detriment, including by entering into the lease with Glory River for a term of 20 years from October 2017, and that it would be unconscionable for the IO to defeat Join Profit’s expectation that it could continue to have the exclusive use of the original corridor.

76.  In my view this ground has no merit at all.  Join Profit knew that the IO resolved in August 2011 to terminate the Agreement.  By letter of 17 May 2012 to Join Profit, the IO’s solicitors demanded reinstatement of the original configuration.  On 8 June 2012, Join Profit responded by asserting that the IO could not unilaterally cancel or vary the Agreement.  It also stated that the existing tenancy would last until 30 September 2019 and that even if Join Profit consented to the reinstatement, it should be done after the end of the tenancy.  On 25 July 2012, and again on 20 November 2012, the IO’s solicitors wrote to Join Profit repeating the demand for reinstatement failing which the IO would take legal action without further notice.  On 27 December 2012, Join Profit wrote to the IO reiterating its position and stating that it would be prepared to litigate if the IO maintained its position.

77.  Over five years later, on 25 April 2018, the Manager wrote on behalf of the IO to Join Profit, noting that the IO had given indulgence to Join Profit pending the expiry of the tenancy on 30 September 2019, and reminding Join Profit to carry out the reinstatement.

78.  The facts show that Join Profit well knew that the IO’s stance from 2011 onwards was that the premises should be reinstated.  The inaction on the part of the IO between December 2012 and April 2018, viewed objectively, could have been due to the IO’s decision to let the existing tenancy run its course, and did not amount to a clear and unambiguous representation to Join Profit that the Agreement could only be terminated with its consent.  Nor can it be said in the circumstances that the IO created or encouraged a belief on Join Profit’s part that the Agreement would not be terminated without its consent.  See Attorney General v Humphreys Estate (Queen’s Gardens) Ltd [1986] HKLR 669 (CA) at 709G-H and [1987] HKLR 427 (PC) at 432F.  Join Profit entered into a new lease with knowledge of the stance of the IO, as shown by clause 13 mentioned above. In all the circumstances it cannot in my view be said to be unconscionable for the IO to demand reinstatement again in 2018.

I.  Glory River’s Ground – effect of insufficient notice

79.  Glory River has advanced an additional ground of appeal relating to the length of notice, attacking what the judge said at §144 of the Judgment:

“ Mr. M Wong agrees with me that if the notice is insufficient, it is not defective but the Tribunal would ensure that sufficient time be provided to the respondents to comply with the notice. And in this case, when the action has been instituted in May 2019, 11 months have expired since the notice was served. And as from today, the notice has been served more than 4 years. I fail to see how this could not be reasonable notice.”

80.  I accept the point made by Mr Martin Wong, who appeared on behalf of Glory River, that in so saying the judge had misunderstood his position, which was that the proposition referred to by the judge was supported by Minister of Health v Bellotti [1944] KB 298, but that other cases which go in a different direction should be followed instead.[40] His submission is that where a notice giving a specified date for termination was found to be too short, it should be held to be altogether invalid and that the subsequent passage of time until the commencement of legal proceedings or the trial does not “cure” the lack of sufficient notice.

81.  There are cases both in favour of and against that proposition.  In Canadian Pacific Railway Co v The King [1931] AC 414, telegraph poles had been erected on Crown land without permission.  There were, however, subsequent negotiations between the parties and acquiescence by the Crown by virtue of which, it was held, the telegraph poles should be treated as having been on the land with the licence of the Crown.  In March 1924 the Crown wrote a letter to the occupiers but it was at most “an intimation that the licence will be put an end to at some future time.”  A further letter in January 1926 did no more than “to state the intention of the department at once to proceed with the action outlined in the first letter – namely, fix a date.”  But no date was ever fixed.  The Privy Council held that the licence had not been determined before the action was brought on 15 September 1926.  They went on to hold (at pp 432-433) that, in the circumstances of that case:

“ the licence can only be effectively ended, after notice has been served upon the appellant determining the licence on such a specified date in the future, as will give the appellant and interval of time between the service of the notice and a specified date, sufficient not only to allow the removal of the poles and wires from of the property of the Ground, but also to enable the appellant to make arrangements for the continuance of the telegraph line by the erection of poles and wires elsewhere then on Crown property.”

82.  The trial judge’s rejection of the Crown’s claim for possession and mesne profits for trespass was upheld.  It was therefore a case in which, based on its circumstances, the court held that a valid notice with a specified date of termination was necessary to terminate the licence in that case.  It would however be a mistake to extrapolate from it a general rule that such a notice is always necessary or that an invalid notice would necessarily defeat an action for the recovery of possession.  As Lord Greene MR said in Minister of Health v Bellotti [1944] KB 298, 304, the only general proposition that can be extracted from Canadian Pacific Railway Co v The King is that whether any and what restrictions exist on the power of a licensor to determine a revocable licence must depend upon the circumstances of each case.  The House of Lords was of the same view in Tool Metal Manufacturing Co Ltd v Tungsten Electric Co Ltd [1955] 1 WLR 761, 766, 786, 797.

83.  In Bellotti, the Minister granted licences to evacuees from Gibraltar during the war for them to be accommodated in certain requisitioned blocks of flats.  Some of them, including the defendants, paid for their accommodation under a scheme.  Difficulties having arisen on matters of discipline, the defendants were given notice on 8 June 1943 to vacate the premises within one week.  They did not, and on 11 September 1943 the Minister commenced an action for trespass.  The county court held that reasonable notice had not been given and that the action therefore failed.  Allowing the appeal, Lord Greene MR said (at pp 305-306) that so far as the letter gave instruction for the defendants to vacate within one week, it was inoperative, and:

“ … if the day after this notice expired, proceedings had been taken by the minister to eject the defendants, those proceedings would have failed because the defendants were entitled to a reasonable time, and a week was not a reasonable time, to enable them to find alternative accommodation.”

But then his Lordship added:

“ The circumstance that the threat to remove them before the expiration of what would have been a reasonable time was inserted in the letter does not prevent the letter from being a good notice to determine the licence. That being the position, the county court judge decided that the interval which elapsed between the expiration of the week mentioned in that document and the commencement of these proceedings was a sufficient time to enable alternative accommodation to be found. In view of that finding of fact, the defendants could not complain at the time these proceedings were instituted that they had not been allowed sufficient time in the circumstances to remove themselves and their possessions and find alternative accommodation.”

84.  Bellotti was applied in E & L Berg Homes Ltd v Grey [1980] 1 EGLR 103.  There the defendants had lived on the plaintiff’s land for 24 years but their claim of an equitable right to remain indefinitely on the land was rejected.  The court held that they had but a bare licence revocable by the owner at any time.  The owner gave notice dated 29 July 1977 requiring the defendants to vacate within 7 days – a period so short that the letter was said to be “callous”.  But the owner did not begin the action until September 1978 which was heard in March 1979.  Brandon LJ held that the maximum period for removal required by the law in that case was 12 months and that this period had long expired by the time of the hearing before the judge.  Sir David Cairns, agreeing, held that the time elapsing between the notice and the judgment in the action was such that by the time of that judgment, the defendants had no right to remain.  The order for possession made below was upheld.

85.  In Australian Blue Metal Ltd v Hughes [1963] AC 74, 98-100, it was held that an agreement conferring mining rights was terminable immediately, but the Privy Council held that even if it was terminable only on reasonable notice, there was no breach since there was no requirement for a notice with a specified termination date, and that any time which needed to have been fixed as satisfying the requirement for reasonable notice would have expired before the proceedings commenced.

86.  On the other hand, in Governing Body of the Henrietta Barnett School v Hampstead Garden Suburb Institute (1995) 93 LRG 470, the court followed Canadian Pacific Railway Co in what was regarded as a case with analogous facts.  There a school which had occupied a site for many years was given notice on 18 March 1993 terminating its occupation on or before 31 December 1993.  The school commenced proceedings in July 1993 for declarations to the effect that it could remain on the land.  In his judgment given on 21 March 1995, Carnwath J considered that Canadian Pacific Railway Co, which dealt with the problems where the licence was a matter of public rather than private concern, was of direct assistance.  He held that a valid notice would be one that gave sufficient time to enable practical arrangements to be put in hand to safeguard the public service, and that in that case a notice was needed which gave a fixed date to work to, providing sufficient time for the various alternatives to be properly considered, and the statutory procedures put in hand.  He held that a notice period of 2 years and 3 months would be necessary, and granted a declaration that the notice of 18 March 1993 was of no legal effect and that the school was not obliged to vacate the site under that notice.

87.  Another case where the time elapsed since the expiration of the notice given was not taken into account is Parker v Parker [2003] EWHC 1846 (Ch), which concerned the occupation of a castle.  The claimant moved into the castle in 1993 and notices were served by the owner in 2000, but they only gave the claimant 4 weeks to vacate.  The claimant commenced proceedings, claiming to be entitled to remain indefinitely in the castle based on a proprietary estoppel in his favour.  In his judgment given in July 2003, Lewison J held that there was no such proprietary estoppel, and that any equity the claimant had raised would be satisfied by requiring the owner to give him not less than 2 years’ notice to vacate.  The judge held that the claimant was in law a licensee under a contractual licence, permitted to remain on the property for the purposes of negotiations for a more permanent basis of occupation.  It would take 2 years to catalogue and pack the library, which was owned by the claimant, and to find somewhere else to house it.  The judge held that it would not be sensible or reasonable for the owner to have the right to revoke the claimant’s licence peremptorily, giving him merely an undefined period of grace within which to remove himself and his belongings from the castle.  A notice specifying a date was necessary.  The notices actually given did not give enough time and were bad.  The judge held that the claimant had the right to remain in the castle until he had been given not less than 2 years’ notice to vacate.[41]

88.  There is academic criticism of what has been called the Bellotti principle: see Kerbel, The Licensee’s Period of Grace: Bellotti Reconsidered [1996] CLJ 229, but I do not think the cases suggest there is any fixed rule or principle that the passage of the requisite period of time after the expiry of an insufficient notice will always “cure” the notice.  Rather, they indicate that how a licence or a contract may be terminated and what requirements a termination notice has to satisfy must depend on the circumstances of the case: see e.g. Bellotti at p 304; Tungsten at p 797; Canadian Pacific Railway Co at p 432; Parker at §§272 & 276.  In particular it seems to me necessary to have regard to the nature of the licence or contract, how and for what purpose it came into existence, the nature of the occupation of the premises concerned, what needs to be done in order to bring the occupation to an end, and the reasons for deciding that, as is the present assumption, a longer period of notice than that given is required.

89.  In the present case we are not concerned with a simple revocable licence to occupy premises such as in Bellotti and E & L Berg Homes Ltd or with the incidents of a licence as regards the length of time allowed to the licensee to vacate.  The Agreement is a contract entered into for the creation of contiguous shop space to be let out and used as a single unit through the relocation of the common corridor.  Substantial time, work and expense would be required for restoring the G/F to its original configuration.  If the notice given is judged insufficient, as is assumed for present purposes, it would have been because a longer time is held to have been needed for terminating the arrangement in an orderly manner and giving the tenant a proper opportunity to find and make ready alternative premises before vacating the Shops.  In my view it would not have been the parties’ intention that even though the IO had given insufficient notice, the Shops owner and its tenant should stop all operations there and then, and begin to unwind the Agreement with an undefined period in which to complete it.  I consider that if the Agreement, on its proper construction or by implication, requires termination to be effected by reasonable notice, then it would not have been terminated by an insufficient notice coupled with the passage of sufficient time before proceedings were begun or before judgment was given.

J.  The applications for leave to appeal relating to extension of time for compliance with the order

90.  Lastly, I should mention that both respondents applied to the judge, at the same time as their applications below for leave to appeal and stay of execution, for an order extending the 28 days prescribed in the Judgment for the reinstatement of the premises.  An extension of 210 days was sought on the ground that the reinstatement works would take substantial time.  The judge refused to grant an extension, though the reasoning was unclear.  Both respondents apply to this court for leave to appeal against this refusal.[42]  If my conclusions above are correct, these applications are academic and fall to be dismissed.

K.  Disposition and orders

91.  For the above reasons, I would allow the appeal on the basis that the Tribunal was wrong to find, either as a matter of construction or as an implied term, that the IO could terminate the Agreement unilaterally by reasonable notice without cause.  I would hold that the notice given was not effective to terminate the Agreement and that the IO’s application in the Tribunal should be dismissed.  I would set aside §§1, 2, 3 and 5 of the order below and substitute an order that the IO’s application be dismissed. I would retain §4 of the judge’s order which dismissed Join Profit’s counterclaim since its main basis was the proprietary arguments which had failed below.  I do not think it appropriate to make the declarations sought in Join Profit’s notice of appeal which seem to me unnecessary and ambivalent.

92.  I would propose to make the following orders nisi on costs:

(1)  The IO do pay Join Profit two-thirds of its costs of its appeal (including its application below and in this court in CAMP 68/2023 for leave to appeal), having regard to the fact that Join Profit has failed on Grounds 2 and 3 which are wholly separate grounds from Ground 1 and turn on quite different arguments on fact and law.

(2)  The IO do pay Glory River one-quarter of its costs of its appeal (including its application below and in this court in CAMP 69/2023 for leave to appeal), having regard to the fact that except for a minor separate argument, Glory River simply adopted Join Profit’s position in its appeal.

(3)  There be no order as to the costs of the respondents’ applications for leave to appeal in CAMP 188 & 189 of 2023.

(4)  There be no order as to the costs below, having regard to the fact that the respondents raised many separate arguments including in Join Profit’s case a counterclaim which failed.