The Hong Kong Polytechnic University v. Rehabaid Society

[2022] HKCFI 2830

HCA 1789/2017

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 1789 OF 2017

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Before:  Deputy High Court Judge Richard Khaw SC in Court

Dates of Hearing:  24-27 August 2021 and 1 September 2021

Date of Judgment:  9 September 2022

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J U D G M E N T

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A.  INTRODUCTION

1.This is an action by The Hong Kong Polytechnic University, formerly known as The Hong Kong Polytechnic (“the Plaintiff”) to recover some 576.5 m² (6,205 ft²) of the spaces on campus (“the Spaces”) which have been and are still occupied by a charitable organisation known as Rehabaid Society (“the Defendant”). The Spaces have been used by the Defendant to operate the Rehabaid Centre (“the RC”), an outpatient clinical centre providing community-wide services to persons with disabilities and chronic illnesses.

2.The original idea of housing the RC on the Plaintiff’s campus arose in about 1986. At that time, the Plaintiff applied to Hong Kong Jockey Club (formerly known as the Royal Hong Kong Jockey Club) (“HKJC”) for funding to support the establishment of a Rehabilitation Engineering Centre (“the REC”). Prior to that, the Plaintiff approached the Hong Kong Society of Rehabilitation (“HKSR”) and they reached an understanding to the effect that part of the fund sought from HKJC would be used for the purpose of accommodating the RC on campus by way of additional spaces to be constructed. HKJC eventually approved the funding for, amongst others, the costs of building the additional spaces to house both the RC and the REC and the future operating costs of the REC. The RC and the REC have been physically adjacent to each other in the new spaces created. However, in this action, there is a question as to whether the RC’s right to continue to occupy the Spaces should depend on the subsistence or continuation of a collaboration or cooperation between the RC and the REC.

3.To give effect to and implement the above arrangement, a Memorandum of Agreement (“the MoA”) was entered into in 1988 between the Plaintiff and HKSR. The parties accept that the MoA gave rise to a contractual licence (“the Licence”), which governed the terms of the RC’s occupation of the Spaces. It should be noted that the rights and obligations of HKSR under the MoA were subsequently transferred to the Defendant through a novation agreement made in 1992.

4.In about November 2015, the Plaintiff through its then solicitors issued a letter to the Defendant purporting to terminate the Licence. The Plaintiff’s case, as the matter now stands, is that by reason of the construction of the MoA, or alternatively, an implied term therein, it was entitled to terminate the Licence upon the cessation of the collaboration between the RC and the REC and upon reasonable notice having been given. The Defendant denies the construction or the implied term as alleged by the Plaintiff. The Defendant asserts in its pleaded case that the Licence is a perpetual one which cannot be unilaterally revoked by the Plaintiff. As a fallback, the Defendant also relies on proprietary estoppel.

5.The primary dispute lies in whether the Plaintiff was entitled to terminate the licence on the alleged grounds and have vacant possession of the Spaces. If the Plaintiff fails to prove that the Licence was terminable according to its case, this will essentially be the end of the matter. Whilst, as mentioned above, the Defendant alleges that the Licence is perpetual, it is noteworthy that the Defendant is not seeking any relief declaring that the Licence is perpetual and/or indeterminable. In the circumstances, the outcome of this dispute largely hinges upon whether the Plaintiff’s case on termination stands or otherwise.

B.  BACKGROUND

B1.  The Plaintiff

6.The Plaintiff was established and incorporated through the Council of The Hong Kong Polytechnic on 24 March 1972 pursuant to the Hong Kong Polytechnic Ordinance (Cap. 1075) and has since 25 November 1994 been accredited and promoted to the full status of a university. By the Hong Kong Polytechnic (Amendment) Ordinance 1994, the long title of Cap. 1075 was amended which provided for the establishment of the Plaintiff “as a body corporate with perpetual succession and capable of suing and being sued”, under section 3 thereof.

7.The Plaintiff’s campus has been situated at Kowloon Inland Lot No. 9853 which was held by the Plaintiff as a lessee from the Government under Conditions of Grant No. 11351, lying and situating at Hunghom, Kowloon. By virtue of the Government Lease as comprised in the Conditions of Grant, the Plaintiff has been the registered owner of the said Lot and such messuages and buildings erected thereon in the Plaintiff’s campus (“the Campus”) (registered vide Memorial No. UB6300649 dated 17 November 1994).

8.The Campus consists of two major parts, i.e. the northern part and the southern part. The Spaces are within the southern part of the Campus, which is bounded by Chatham Road South to its north and west, Cheong Wan Road and Hong Tai Path to its south, Hong Chong Road to its east.

B2.  The RC

9.The RC was established in 1979 by HKSR, under the direction of Mrs. Anne Marden, whose husband was Mr. John Marden (the then Chairman of Wheelock Marden). Both Mr. and Mrs. Marden were well respected and widely recognized in Hong Kong.

10.For several years following its inception up to around 1987, the RC was housed in a prefabricated steel structure located at Science Museum Road in Tsim Sha Tsui East. Since 1984, the RC’s daily operations have been overseen and managed by Ms Cecilia Lam.

B3.  The REC and the Hong Kong Jockey Club Funding Application

11.Around late 1985, the RC and HKSR (which was at that time running the RC) entered into discussions and subsequently an understanding in respect of a plan to have the RC relocated to premises within the Campus. Mr. John Marden was then the President and Sir Harry Fan was a member of the executive committee of HKSR. Sir Harry Fan made numerous contributions to the field of rehabilitation and was also very well-connected in Hong Kong.

12.In March 1986, an application was made by the Plaintiff to HKJC (“the HKJC Application”).

13.The HKJC Application provides a first glimpse of the intended purposes behind the creation of the REC. Sections 1.1 and 1.2 of the HKJC Application provided that the REC would be “devoted to acquiring, adapting and developing the appropriate technologies to meet local rehabilitation needs”. It would “not [be] directly concerned with the medical aspects of disability, but with the design and technology of aids and devices of all kinds to assist the rehabilitation process.”

14.On the relationship between the RC and the REC, regard may be had to the following passage extracted from the HKJC Application:-

“[§1.2] … Initial discussions have been held with officials of the Hong Kong Society for Rehabilitation, which is responsible for the Rehabaid Centre, on the prospects of locating this Centre in shared accommodation with the proposed Rehabilitation Engineering Centre. The Rehabaid Centre currently occupies short-term accommodation in Science Museum Road, Kowloon, and is anxious to secure a permanent base. The approach was made on the grounds that the functions of the two Centres are directly complementary, and that the Rehabaid Centre would derive considerable benefit through its proximity to the technological support of the Rehabilitation Engineering Centre and its presence on the Polytechnic campus.” [Emphasis added]

15.In view of the above, the Plaintiff places emphasis on the complementarity of the functions of the RC and the REC and also on the benefits which the RC would be able to derive from the REC through such complementary functions. On this basis, the Plaintiff argues that the primary purpose of the HKJC Application was to facilitate collaboration or cooperation between the RC and the REC. In contrast, the Defendant contends that the primary purpose was to secure a permanent base for the RC. As I will elaborate below, the purpose behind the HKJC Application would be relevant to the determination of the Plaintiff’s case on the construction of the MoA and also the alleged implied term.

16.I have also been referred to Appendix A to the HKJC Application entitled “Objectives and functions of PREC”. My attention was specifically drawn to §3(e), which sets out the functions of the Pilot REC , with the RC “taking the lead and the participation of other agencies”, “[t]o provide a consultancy and advisory service for rehabilitation personnel on aspects related to the use of aids” and “[t]o disseminate information on rehabilitation aids to disabled persons and rehabilitation workers”.

17.The parties have made their respective submissions on the provenance and relevance of the above documents, details of which will be discussed below.

18.Moreover, sections 4 and 5 of the HKJC Application provide that:

(1)  In respect of capital expenditure, 600 m² (6458 ft²) of space would be occupied by the REC within an extension to a new building on the Campus, known as the New Annex to the Communal Building (“New Annex”). An additional space of 300 m² (3229 ft²) of space would also be constructed in the same complex to accommodate the RC. Some of the additional spaces would be shared between the REC and the RC.

(2)  The funding sought would consist of: (a) a sum of HK$7.64m for construction costs for the spaces to house the REC; (b) HK$31.54m for an endowment fund for the future operating costs of the REC; and (c) HK$1.91m for the construction costs for the additional spaces to house the RC.

(3)  The annual recurrent expenditure for the RC would continue to be provided by the Medical and Health Department.

19.Shortly afterwards, HKJC approved HK$41.9m of funding, with HK$2.2m of the total sum earmarked for the RC. Part of this funding was used to construct the New Annex.

B4.  Campus Areas Occupied by the RC and the Spaces

20.The HKJC Application also contained plans for the construction of “short/medium term accommodation” pending the completion of the New Annex. In 1987, the RC and the REC were allocated some temporary campus spaces. As explained by Ms. Cecilia Lam (for the Defendant) in court, the RC was required to move into such temporary building because it was asked by the Government to vacate its premises on Science Museum Road. The New Annex was completed in July 1990, and the RC moved into the New Annex on 5 September 1990, in areas adjacent to the REC.

21.Both parties accept that the areas occupied by the RC have grown over the years.

22.When the RC first moved into the New Annex in the 1990, the area occupied by the RC was 476 m². By the time in 1999, the RC occupied 519 m². At present, the spaces occupied by the RC amounted to 576 m².

23.Since 5 May 2000, the Spaces occupied by the RC have comprised the following rooms:-

(1)  SS01, SS02, SS05.

(2)  S001, S002, S002a, S002b, S002c, S003, S003a, S003b, S003c, S003d, S004, S004a, S005, and S005a.

(3)  W201.

B5.  Pre-contractual discussions and documents

24.Before the MoA was entered into, there had been discussions pertaining to the arrangement for the RC’s occupation of the Spaces, which were recorded in a number of documents referred to by the Plaintiff, in support of its proposition that the primary purpose of the HKJC Application was to facilitate collaboration or cooperation between the RC and the REC.

25.One of the documents is entitled “Points from meeting with Derek Lindsay 7^th July 1986” prepared by Mrs. Anne Marden (“the July 1986 Memo”).

26.The July 1986 Memo recorded the discussion between Mrs. Anne Marden and Mr. Derek Lindsay (the Deputy President (Director) of the Plaintiff who represented the Plaintiff to liaise with HKSR in relation to the arrangement for the RC). The material part relied upon by the Plaintiff reads:

“Activities of [the RC] were to be unrestricted, but certain aspects of its work would entail close co-operation with the REC.

a) When a client or an institution needs a new aid, the first contact should be with [the RC]. If an aid already exists, [the RC] will inform the client. If no suitable aid is available a consultation will be held with REC and therapists and engineers will work together to design the aid which will be produced as a prototype by REC. The prototype will be offered to a commercial factory for general production...” [Emphasis added]

27.In another document entitled “Proposed Plan for Rehabaid Centre to Re-Provision in [P] September 1986” prepared by Mrs. Anne Marden (“the Sept 1986 Memo”), it was noted that, as regards working arrangements:-

a)  All Rehabaid Centre’s present activities will continue, but there will be extra work involving close cooperation with the REC.

b)  When the research of either Rehabaid Centre or the REC identify a need for a specific aid appropriate to Hong Kong people the design process will involve both therapists and engineers [Emphasis added]

28.The parties have addressed the court on whether and how the above documents would have an impact on the Plaintiff’s case relating to the alleged termination of the Licence. I will provide my analysis later.

B6.  The MoA

29.On 10 May 1988, the Plaintiff and the HKSR entered into the MoA entitled “Agreement Governing the Presence of Rehabaid on the Hong Kong Polytechnic Site”. The material terms of the MoA are now set out as follows.

(1)  Clause 1 provides that:

“The purpose of this memorandum is to set out the arrangements associated with Rehabaid being established on the Polytechnic site in adjacent accommodation to the Rehabilitation Engineering Centre. The possible move of Rehabaid to the Polytechnic site was agreed by the Hong Kong Society for Rehabilitation and the Polytechnic, and became part of the proposal [i.e. the HKJC Application] made by the Polytechnic to the Jockey Club for funding to support the establishment and operation of the Rehabilitation Engineering Centre. The total donation of $41.9M from the Jockey Club covered not only the capital and recurrent costs of the Centre but also the building cost of additional accommodation required to house Rehabaid with the Centre [i.e. the REC]. Until the permanent building is available both the Centre and Rehabaid will share a temporary accommodation on the Polytechnic site.

It is necessary to define the arrangements which will apply to the operation of Rehabaid on the Polytechnic site. This agreement may be changed in future if both parties (the Hong Kong Polytechnic and the Hong Kong Society for Rehabilitation) so decide and sign a new memorandum of agreement.”

(2)  Clause 2.1 provides that “Rehabaid Centre will not pay any rental charges for the accommodation provided”.

(3)  Clause 2.2 requires the RC to pay “a token charge” to cover “water, electricity, periodic cleaning service, including windows and floors, building maintenance, remedial minor works and internal redecoration when necessary, security”. “The token charge at 1988 costs will be $10,000 annually. This charge will be subject to annual review to keep its level in line with cost inflation”.

(4)  Clause 6 provides that the RC’s staff are entitled to the use of a variety of the Plaintiff’s facilities, such as the staff canteen, staff club, car park and library.

(5)  In a similar vein, Clause 7 enables the RC to book and use Polytechnic rooms pursuant to the same conditions as Polytechnic departments and without charge.

30.While it is important to consider the terms embodied in the MoA, it is also important, for present purposes, to note what are absent therein.

31.First and foremost, the MoA is silent on the duration of the licence, as well as to when and how the MoA can be terminated.

32.Moreover, the areas to be occupied by the RC were not specified in the MoA. It was probably contemplated that the areas would be further extended, which turned out to be the case.

B7.  Deed of Agreement with the Hospital Authority

33.On 1 December 1991, HKSR entered into a Deed of Agreement with the Hospital Authority (“HA”) which handed over the powers of management to HA (“Deed of Agreement”). The material terms are as follows:-

(1)  Recital 1 provides that hospital services which receive direct financial assistance from the Government would be integrated into a new system of management and control under HA.

(2)  Recital 3 states, amongst other things, that “the hospital services should be allowed to retain as many of their present characteristics and traditions as possible” and there should be a “high degree of autonomy in management, subject to their accepting the broad policies and guidelines” of HA.

(3)  Clause 11 provides that the primary function of the RC would be the provision of “hospital services ... performed to such scope and standard as is approved” by HA.

34.It is apparently not disputed that while the rights or powers of management of the RC were bought under HA, the actual management and operations of the RC continued to be handled by existing personnel, including Ms. Cecilia Lam. The Deed of Agreement did not affect the rights of HKSR under the MoA, which remained vested in HKSR.

35.On 8 April 2015, the Defendant served on HA a 12-month Notice of Termination of the Deed of Agreement with effect from 8 April 2016. Thereafter, the Defendant resumed management and control of the RC.

B8.  Establishment of the Defendant and Novation Agreement

36.In 1992, the Defendant was incorporated as a separate entity from HKSR to take over the operation of the RC and to separate its management from HKSR.

37.On 1 November 1992, the Plaintiff entered into an agreement with the Defendant and HKSR, confirming that the Defendant would take over HKSR’s rights and obligations under the MoA as if it were a party therein in lieu of HKSR (“Novation Agreement”)

38.On 25 March 1995, HA and the Defendant entered into an agreement to confirm that the transfer of management of the RC from HKSR to the Defendant was subject to the Deed of Agreement.

39.On 1 April 1995, HKSR and the Defendant also entered into a Deed to confirm that the transfer of the management and control of the RC from HKSR to the Defendant was subject to the Deed of Agreement.

B9.  Declining collaboration between the RC and the REC

40.Naturally, the collaboration and cooperation between the RC and the REC substantially decreased after HA took over the RC’s operation from HKSR in 1991.

41.It is accepted by both parties that since about 1994, there has no longer been any collaboration or meaningful collaboration between the RC and the REC, primarily due to the lack of referrals by the RC to the REC.

42.The last referral retrievable from the REC’s records appears to be contained in a letter dated 4 October 1993 from Mr. Eric Tam (on behalf of the Plaintiff), n which he liaised with the RC in respect of a modification request for a wheelchair.

43.Despite the lack of referrals from the RC, the REC has continued to perform its role as a developer of rehabilitation engineering devices; and the RC has also continued to occupy the Spaces.

B10.  Occupation of the RC under the MoA

44.Throughout its occupation of the Spaces, the RC paid a token charge annually (which was initially fixed in the sum of HK$10,000 and was subsequently subject to various adjustments in accordance with inflation over the years) pursuant to Clause 2.2 of the MoA. During the entire period of occupation, the Plaintiff has received HK$583,245 as token charge from the RC.

45.From 1987 up to 30 June 2017, the Plaintiff has incurred expenses of about HK$12 million in providing water, electricity and cleaning services to the RC.

46.According to the Plaintiff’s record from January 2017 onwards, there have been five or six visitors to the RC per day.

B11.  Post-MoA correspondence

47.The Plaintiff has referred the court to some correspondence subsequent to the MoA in support of its argument on the construction of the MoA and also the alleged implied term.

48.The first is a letter from Mr. Derek Lindsay to Ms. Cecilia Lam dated 2 June 1999. He stated that “the arrangement was for these two bodies to be interactive and in a sense inseparable with the work of one [the RC] leading naturally to the work of the other [the REC]”.

49.The Plaintiff also relies on a letter from the Defendant’s solicitors to the Plaintiff’s solicitors dated 9 December 2015, in which it was stated that: (1) “[t]he [HKJC Application] envisages that in order for REC to carry out such functions, it would require close cooperation with a range of medical and paramedic specialists - to which the RC provides such input”; and (2) “[i]n the early years of cooperation, the RC had referred many clients to the REC and the collaboration between the two was successful”.

50.The Defendant argues that these statements are neither here nor there because they fail to show that the purpose of the arrangement was to facilitate and continue the collaboration between the RC and the REC. Further details in this regard will be provided below.

51.The Defendant also contends that such correspondence which was made subsequent to the MoA shall be accorded less weight as compared with the contemporaneous circumstances.

B12.  Shortage of space at the Campus

52.Shortage of space at the Campus has been an increasingly perennial problem faced by the Plaintiff. As early as in 1998, there was already ongoing correspondence between the Plaintiff and HA as regards the exploration of possible relocation options for the RC.

53.In the minutes of meeting of the Plaintiff’s Campus Development and Space Allocation Committee (“CDSAC”) on 16 March 2007, it was noted that the Plaintiff had to lease an area of 20,000 ft² in the nearby New East Ocean RC to accommodate research staff.

54.In the minutes of meeting of the Plaintiff’s CDSAC on 5 October 2007, it was recorded that the Plaintiff needed to rent off-campus storage to help relieve the shortage of space, and office space to accommodate research personnel.

55.The same problem with off-campus offices for research personnel was also highlighted in the minutes of meeting of the Plaintiff’s CDSAC on 29 July 2015, which considered various proposed measures to increase space provision, one of which was “to claw back the space previously allocated to non-PolyU units such as [the RC]”.

56.The minutes of meeting of the Plaintiff’s CDSAC on 26 April 2016 stated that the Plaintiff had an overall space shortfall of 9,108 m² . By 30 October 2018, the shortfall already reached 42,224 m² .

B13.  Notice to quit

57.By a letter dated 19 November 2015, Messrs. Deacons (the Plaintiff’s former solicitors) on behalf of the Plaintiff purported to terminate the RC’s occupation of the Spaces and demanded the same to vacate and deliver up the Spaces to the Plaintiff on 1 June 2016. It was stated in the letter that the “mutually beneficial collaboration…between REC and RC, does not exist and that there is a critical shortage of space at PolyU”.

58.By a letter dated 9 December 2015, Messrs. Pinsent Masons (“PM”) on behalf of the Defendant refused to vacate and deliver up occupation of the Spaces to the Plaintiff and stated that “since mid-1990s the REC started to shift its focus to academic research and education”, thus the cooperation between REC and the RC “has been thwarted by PolyU, who have appeared more concerned with obtaining the space that the RC and our client occupies than ensuring that the much needed care that our client provides to its patients continues”.

59.By a letter dated 12 April 2016, Messrs. Woo Kwan Lee & Lo (the Plaintiff’s current solicitors) on behalf of the Plaintiff reiterated the demand for the Defendant to vacate the Spaces by 1 June 2016.

60.By a letter dated 22 April 2016, PM repeated the Defendant’s position that it would not vacate and deliver up occupation of the Spaces to the Plaintiff, on the ground that the Plaintiff had granted the Defendant “an irrevocable contractual licence” to occupy the Spaces. Alternatively, as alleged by PM, the Plaintiff should not be allowed to revoke the Licence by reason of the doctrine of proprietary estoppel.

61.On 1 August 2017, the Plaintiff commenced the present action.

C.  PARTIES’ POSITIONS

62.As mentioned at the outset of this Judgment, it is the Plaintiff’s case that it was entitled, either as a matter of interpretation of the MoA, or, alternatively, on the basis of a term implied by reason of business efficacy and/or obvious intention of the parties, to terminate the Licence upon the cessation of collaboration between the RC and REC and upon the giving of reasonable notice. What follows, according to the Plaintiff’s case, is that the Defendant shall deliver up vacant possession of the Spaces as occupied by the RC with full reinstatement. Moreover, the Plaintiff claims that it shall be fully indemnified against such loss and damage that the Plaintiff may suffer by reason of the Defendant’s failure to comply with the MoA.

63.In mounting the above argument, the Plaintiff alleges that under the HKJC Application, the reason why the Plaintiff approached HKSR for the purpose of relocating the RC to the additional spaces to be built on the Campus was to facilitate the close cooperation between the RC and the REC. According to the Plaintiff, an understanding was reached between the Plaintiff and HKSR for part of the grant sought from HKJC to be applied for the accommodation of an out-patient service centre of HKSR, which could derive benefit through its proximity to and collaboration with the REC.

64.As alleged by the Plaintiff, the primary method of collaboration between the RC and the REC involved referrals made by the RC to the REC to the effect that once the RC identified a need to develop new rehabilitative equipment for its patients, the REC would work to design such equipment as a prototype for production accordingly.

65.The Plaintiff seeks primarily for the following relief:-

(1)  an order from this court that the Defendant do forthwith deliver vacant possession of the Spaces to the Plaintiff;

(2)  an injunction restraining the Defendant, whether by itself its servants or agents, from remaining on or re-entering the Spaces;

(3)  damages in relation to trespass by the Defendant and as a result the Plaintiff being deprived of the use and enjoyment of the Space (to be assessed); and the outgoings incurred and payable for the use of the Spaces from 1 June 2016 onward and reinstatement of the Spaces; and

(4)  the outgoings incurred and payable for the use of the Spaces from 1 June 2016 onward and reinstatement of the Spaces.

66.The Plaintiff’s case is denied by the Defendant, which alleges that the RC’s occupation of the Spaces is neither contingent nor dependent upon any collaboration with the REC. Hence, the Plaintiff alleges that the cessation of such collaboration did not entitle the Plaintiff to terminate the contractual licence.

67.The Defendant submits that in view of the circumstances of the HKJC Application leading to the formation of the MoA, the primary purpose of the arrangement was to secure a permanent base for the RC to be housed in the additional spaces for which funding was sought from HKJC. It is also the Defendant’s case that it has been denied access to the services and facilities on the Campus since around June 2016. In this regard, the Defendant asks for specific performance of the MoA on the basis that the Licence had been wrongfully terminated. As a matter of logic, if the court rules that the Plaintiff did not have the right to terminate the Licence at the material time, there is no reason why the MoA shall not continue to be enforced.

68.The Defendant also asserts that, as a matter of proper interpretation or implication of terms, the MoA has given rise to a perpetual licence, such that HKSR/ the Defendant would be allowed to occupy the Spaces indefinitely for the operation of the RC. In other words, the Licence was irrevocable.

69.Notwithstanding the above assertion, the Defendant is, however, not seeking any relief declaring that the Licence was perpetual or indeterminable. Therefore, it may not be necessary to rule on the Defendant’s argument on perpetuality. As mentioned above, the outcome of this dispute shall ultimately depend on whether the Plaintiff’s case can be established or not.

70.Finally, it should be pointed out that the Defendant relies on the doctrine of proprietary estoppel as a “fallback”. The utility of this “fallback” position is, nonetheless, in question. Obviously, if the Defendant succeeds in defending the Plaintiff’s claim on the basis of its primary case i.e. denial of the Plaintiff’s right to terminate, it will not be necessary to invoke the doctrine of proprietary estoppel. On the contrary, if the Defendant fails on its primary case, it would mean that the court accepts that the Licence was terminable as alleged by the Plaintiff (i.e. not perpetual). It would be difficult for the Defendant to pray in aid proprietary estoppel which is based on assurances relating to its perpetual or indefinite use or occupation of the Spaces as alleged. As a matter of evidence, the assurances alleged by the Defendant in support of proprietary estoppel appear to stem from the same materials that the court is required to examine for the purpose of ruling on the Plaintiff’s case on termination and not beyond.

D.  ISSUES IN DISPUTE

71.The parties have reached agreement on all, except issue 2(c), issues that need to be addressed by this court for the resolution of this dispute. They are as follows:-

“1. Whether, on the proper interpretation of the MoA and/or alternatively by way of an implied term by reason of business efficacy and/or obvious intention of the parties:

(a) As contended by P:

(i) P would be entitled to terminate HKSR/D’s occupation of the Spaces at P’s campus upon the cessation of collaboration or cooperation between Rehabaid Centre and REC and upon giving reasonable notice. In such event, HKSR/D must quit and deliver up vacant possession of the Spaces as occupied by Rehabaid Centre with full reinstatement;

(ii) HKSR/D would keep P fully indemnified against such losses and damage that P may suffer by reason of HKSR/D’s failure to comply with the MoA; or

(b) As contended by D:

(i) HKSR/D would be allowed to occupy the Spaces as agreed from time to time on P’s campus indefinitely for the operation of Rehabaid Centre;

(ii) The MoA would be irrevocable except with the mutual agreement of P and HKSR/D and shall operate to govern and manage Rehabaid Centre’s presence on P’s campus.

2. In respect of D’s claim for proprietary estoppel:

(a) Whether or not the requirements for proprietary estoppel are established;

(b) Whether or not D (as a separate legal entity from HKSR) can rely on such proprietary estoppel;

(c) If the answers to (a) and (b) above are in the affirmative, what remedy (if any) should the Court grant in favour of D in the exercise of its discretion.

3. If the MoA can be terminated (as contended by P), whether D is liable in trespass for occupation of the Spaces from 1 June 2016 onwards and, if so, the quantification of such damages.

4. If the MoA has not been validly terminated (as contended by D), whether D is entitled to specific performance of the MoA against P.”

72.The parties are divided as to whether issue 2(c) ought to be included. The Plaintiff argues that it should be included, because the issue of remedy constitutes a necessary element of the Defendant’s case on proprietary estoppel. However, the doctrine of proprietary estoppel is obviously used by the Defendant as a shield instead of a sword, and the Defendant’s response in this regard is that no further remedy would be necessary. This seems consistent with the fact, as mentioned above, that the Defendant is not seeking any relief in respective of the alleged perpetual or indeterminable licence.

E.  ANALYSIS OF THE ISSUES

E1.  Revocability of Contractual Licences

73.It is not unreasonable to think that a contractual licence is normally capable of being terminated by either party. It is incumbent upon the contracting parties to propose and, if possible, agree on the duration of the licence and the ways in which it could be terminated. In some cases where a contractual licence aims to serve a long-term or permanent objective but its provisions are silent on its expected term or the termination mechanism, there may be debates on whether it is terminable at will or even terminable at all. Ultimately, the question of revocability turns upon the terms of the document giving rise to the licence in question and also the construction of the same. As stated in Megarry & Wade, The Law of Real Property (9^th ed) at 33-008:-

“Revocability [is] a matter of construction. Except in those cases which are governed by statue, then 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...”

74.The Plaintiff contends that there is a presumption that licences are generally revocable, in view of the following statements made by Lord Porter and Lord Uthwatt in Winter Garden Theatre (London) Limited v Millennium Productions Limited [1948] AC 173 where there was a contract which granted a licence for the licensee to use a theatre and the dispute centred upon whether the licence was revocable (and if so, on what conditions):-

(1)  Lord Porter at p.194 stated:-

“It is one thing to say that a limited and temporal licence remains in force until the particular object for which it is given is fulfilled or the definite period of time has elapsed, it is quite a different matter to allege that a licence once given in general terms can never be terminated. To my mind the whole historical development of the law is against such a contention”

(2)  Lord Porter then went on to say at p.195:-

“The rule of law applicable to the licence granted to the respondents in the present case, is I think, that prima facie licences are revocable …”

(3)  Moreover, the following can be found in the speech of Lord Uthwatt at p.198:-

“ … a right to continue without more does not mean anything except a right to continue for a period which is left at large. The language of the letter is consistent with the implication of the term for which the licensees contend, namely, that the licence was to continue for ever subject only to the right of determination given to them. But unless that term can be implied – it is in effect a stipulation that the licensors will not revoke the licence – it is to my mind an inevitable consequence that the licensors might determine the licence by notice given at any time.”

75.I do not think that the above statements made by the two Law Lords could be taken to mean that a general rule or principle has been laid down in support of the presumption alleged by the Plaintiff.

76.What Lord Porter said at p.194 is obviously that one should look at the nature and purpose of the licence and also its duration in order to ascertain if and how it could be terminated. No doubt, it can hardly be said that “a licence once given in general terms can never be terminated” unless the terms of the document or the circumstances of the case so warrant.

77.Lord Porter’s proposition at p.195, that “licences are prima facie revocable” was said to be “[t]he rule of law applicable to the licence granted to the respondents in the present case” as opposed to any rule of law in general. In fact, in Winter Garden, the licence to use the theatre was stated to be for 6 months with an option to continue for a further 6 months at an increased rent. The licence also provided that “[o]n the expiration of the two periods of six months before mentioned you [i.e. the licensee] are to have the option of further continuing the licence of the theatre on the payment each week of a flat rental of 300l. per week and you will give us one month’s notice of your intention of then terminating the licence”. There was however no express provision for the termination of the licence by the licensors. It was against such background and also the relevant terms of the licence that Lord Porter expressed his view that licences are prima facie revocable.

78.Moreover, immediately after his Lordship stated at p.195 that “[t]he rule of law applicable to the licence granted to the respondents in the present case is … that prima facie licences are recoverable”, Lord Porter highlighted that “the circumstances of the case are (1.) that this was a licence to use a theatre and (2.) are to be found in the terms of the document itself”. This further explains that Lord Porter’s statement took into account the particular facts of the case. Also, Lord Porter at p.196 reiterated that “the question whether the respondent’s licence is revocable or irrevocable must depend on the language of the document”.

79.Lord Uthwatt at p.198 referred to “the language of the letter” (containing the licence) in considering the issue of revocability. Plainly, the view taken by Lord Uthwatt was that the circumstances of the case could not justify any implied term that “the licensors will not revoke the licence” without laying down any general principle or presumption. Lord Uttwatt also emphasised at p.198 that the question of implied term would “purely” be a question of construction (although the modern view, which will be explained below, appears to be that implication of a term into an agreement is conceptually different from construction or interpretation of the agreement).

80.It is noteworthy that in Winter Garden, Lord MacDermott also expressed the view at p.203 that the question of revocability would “solely” depend on the true construction of the contractual document. Lord MacDermott’s judgment has been endorsed by Viscount Simon at p.191 and Lord Simonds at p.208.

81.Finally, the following passage of the decision of Buckley J (as he then was) in Re Spenborough UBC’s Agreement [1968] 1 Ch 139 at 147D-F supports that the question of revocability should be determined by the particular facts of each case, instead of any presumption one way or the other:-

“It is of the nature of this problem that he who asserts that the parties intended something which they omitted to state expressly must demonstrate that this was so … The court does not, however, in my judgment, lean one way or the other … An agreement which is silent about determination will not be determinable unless the facts of the case, such as the subject-matter of the agreement, the nature of the contract or the circumstances in which the agreement was made, support a finding that the parties intended that it should be determinable, but there is, in my judgment, no presumption one way or the other.” [emphasis added]

82.Hence, I agree with the Defendant and take the view that in the absence of any established presumption, the party who seeks to terminate the licence should bear the burden of proving its right to do so.

83.Before I complete the discussion on the topic of revocability, I wish to briefly comment on the House of Lords’ decision of Llanelly Railway & Dock Co v London & North Western Railway (1875) LR 7 550 cited by the Defendant. In Llandelly, two railway companies entered into an agreement whereby one of them, upon providing loans, would obtain running powers over the lines operated by the other. The agreement however did not specify the duration of the licence or how it could be terminated. The House of Lords held that the licence was “permanent” and “not determinable”. Apart from the nature of the subject matter of the licence, the House of Lords also took into account the fact that there were statutory provisions in railway legislation which would have allowed the licensee to apply to statutory tribunal to obtain the same running powers “on continuing terms” which “could not have been terminated” had there been no agreement of the duration of the same (see per Lord Cairns LC at p.559, per Lord Hatherley at 562, and per Lord Selborne at p.567). Lord Chelmsford, on the other hand, placed emphasis on the terms of the agreement being “expressive of permanence” at pp. 561-562.

84.In Llanelly, Lord Selborne at p.550 seemed to have suggested that an agreement extending over a tract of time which, on the face of the instrument, is indefinite and limited would generally place the burden of proof on the party who alleges that it is not perpetual to prove that it is so. However, as Lord MacDermott observed in Winter Garden at p.203, Lord Selborne’s dictum, albeit cast in wide terms, was qualified by the cautionary words “in general” and was thus not expressed as a universal rule of construction or any established presumption. Moreover, Lord Selborne’s remarks must be read in the light of his Lordship’s own emphasis on “the legal character and use of the subject matter, the railway” and also the particular statutory background, which underpinned his reasoning as well as those of the other Law Lords.

85.Llandelly demonstrates that a contractual licence can sometimes be indeterminable, in the light of, in particular, the subject matter of the agreement and the nature of the licence. It was again a decision on the particular facts of the case. Llandelly cannot be taken as an authority to the effect whenever there is no provision on the duration or termination of the licence in the agreement, the licence should be regarded as irrevocable; and I do not think this is so contended by the Defendant.

86.In relation to the Defendant’s argument (on the basis of Llandelly) that the “starting” position is a licence is “either terminable at will (or with reasonable notice) immediately after it was entered or not terminable at all”. I tend to think that the starting point is perhaps to first ascertain if the Licence is terminable at will. But once the Licence is not regarded as “terminable at will”, it does not necessarily follow that the Licence is not terminable at all. There could be scenarios between the two ends of the spectrum. For example, a licence may not be terminable just at will, but upon certain conditions being fulfilled, as now alleged by the Plaintiff in the present case.

E2.  Conditions on which the Licence should be terminated

87.It is important to bear in mind that in the present case, the Plaintiff’s case is not that the Licence was terminable at will upon reasonable notice being given (although the Plaintiff did once seek to describe its case as such in paragraph 2 of its Opening Submissions). However, according to its pleaded case and also further submissions made by its leading counsel at trial, the Plaintiff confirms its case is that it was entitled to terminate the licence (1) upon cessation of collaboration between the RC and the REC (2) upon giving reasonable notice. In other words, the Plaintiff accepts that the Licence was not terminable at will or simply with notice. As stated in the Plaintiff’s Closing Submissions (§34), “[i]t is not P’s case that P is entitled to terminate the MoA simply by giving notice [and] P’s case is that it can only do so if the collaboration between REC and [RC] ceased”.

88.As a matter of principle, if a licence is revocable at will, it means that it is terminable by either party immediately after the licence has been made upon giving a reasonable notice. In the present case, given the nature of the project contemplated under the HKJC Application and the MoA, it would be somewhat difficult to argue that the Licence was terminable at will (in the sense that it would be subject to termination immediately after the Licence was granted). In fact, in its Closing Submissions (§7(a)), the Plaintiff confirms that “[i]t was never anticipated that P could ask HKSR to leave shortly after RC was relocated to P’s campus [and] [i]t was intended that the arrangement would be on the long-term basis (at least for 15 years covered by the grant from HKJC)”. This might explain why it is the Plaintiff’s case that the Licence was terminable upon both the cessation of the collaboration between RC and REC and also upon reasonable notice having been given.

89.However, the Plaintiff in its Closing Submissions goes on to say:-

“ … even if P fails to establish its implied term, this does not mean that P’s claim falls to be dismissed immediately. D must still establish that the implied term it contends for (i.e. the HKSR would be allowed to occupy the spaces indefinitely for the operation of [RC] and the MoA would be irrevocable except with mutual agreement as pleaded in AD&CC … Otherwise the default position would be that P could terminate the MoA simply by giving notice”. (Emphasis added)

90.During oral closing submissions, I discussed the above point with Mr. Patrick Fung SC, leading counsel for the Plaintiff and he very fairly acknowledged the above might have “put his case too high”. I take the view that the matter should be approached in the following manner:-

(1)  If the Plaintiff fails to establish that the Licence was terminable upon the alleged conditions, it means that the Plaintiff was not entitled to terminate the Licence (as it did in the present case) and the notice of termination was invalid and had no effect.

(2)  In the circumstances, the Defendant would have the right to continue to occupy and stay on the Spaces until a valid notice of termination is served on behalf of the Plaintiff. This is so, regardless of whether the Defendant can actually prove that the Licence is perpetual or indeterminable.

(3)  Hence, as a matter of logic, even if the Defendant fails to prove that the Licence is perpetual or indeterminable, this should not trigger any “default position” which would then allow the Plaintiff to terminate the Licence, given that its case on termination has already failed on the basis of the above hypothesis.

(4)  In any event, as mentioned above, the Defendant in this action is not seeking any particular relief or declaration which is premised upon a perpetual licence or any other interest in the Spaces although it relies on proprietary estoppel as a “fallback” defence to the Plaintiff’s claim.

E3.  Construction of the MoA vs Implied term

91.The Plaintiff’s case on termination is based on “the proper interpretation of the MoA and/or alternatively by way of an implied term by reason of business efficacy and/or obvious intention of the parties.”.

92.It is submitted on behalf of the Plaintiff that the correct approach to the determination of the issue of revocability of a licence is set out in Chitty on Contracts Vol. 1, 33^rd ed, 2018, 14-029:-

“A contract which contains no express provision for its determination may yet be determined by reasonable notice on the part of one or both of the parties. The question whether a contract can be determined in this way is often said to depend upon the implication of a term, although it is probably better to regard it as depending upon the true construction of the agreement. Nevertheless, 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 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.” (Underline added)

93.The above underlined passage is taken from Buckley J’s judgment in Re Spenborough (above) at p.147.

94.It is the Plaintiff’s submission that in the absence of any express provisions on termination in the agreement, the Court is required “to do the best it can to ascertain the common intention of the parties”, whether the exercise is based on interpretation of the agreement or implication of a term into the same. In this regard, it is necessary to examine the distinction between the two concepts.

95.The controversy arose from the Privy Council’s decision in Attorney General for Belize v Belize Telecom Ltd [2009] 1 WLR 1988, in which Lord Hoffmann expressed the view that “the implication of a term is an exercise in the construction of the instrument as a whole” (§19).

96.In Marks & Spencer plc v BNP Paribas Securities Services Trust Co (Jersey) Ltd and anor [2016] AC 742, Lord Neuberger commented that Lord Hoffmann’s analysis in Belize Telecom “could obscure the fact that construing words used and implying additional words are different processes governed by different rules” (§26). Lord Neuberger took the opportunity to clarify the dichotomy between the two concepts (§§27-29):-

“27. Of course, it is fair to say that the factors to be taken into account on an issue of construction, namely the words used in the contract, the surrounding circumstances known to both parties at the time of the contract, commercial common sense, and the reasonable reader or reasonable parties, are also taken into account on an issue of implication. However, that does not mean that the exercise of implication should be properly classified as part of the exercise of interpretation, let alone that it should be carried out at the same time as interpretation. When one is implying a term or a phrase, one is not construing words, as the words to be implied are ex hypothesi not there to be construed; and to speak of construing the contract as a whole, including the implied terms, is not helpful, not least because it begs the question as to what construction actually means in this context.

28. In most, possibly all, disputes about whether a term should be implied into a contract, it is only after the process of construing the express words is complete that the issue of an implied term falls to be considered. Until one has decided what the parties have expressly agreed, it is difficult to see how one can set about deciding whether a term should be implied and if so what term. This appeal is just such a case. Further, given that it is a cardinal rule that no term can be implied into a contract if it contradicts an express term, it would seem logically to follow that, until the express terms of a contract have been construed, it is, at least normally, not sensibly possible to decide whether a further term should be implied. Having said that, I accept Lord Carnwath JSCs point in para 71 to the extent that in some cases it could conceivably be appropriate to reconsider the interpretation of the express terms of a contract once one has decided whether to imply a term, but, even if that is right, it does not alter the fact that the express terms of a contract must be interpreted before one can consider any question of implication.

29. In any event, the process of implication involves a rather different exercise from that of construction. As Bingham MR trenchantly explained in the Philips case [1995] EMLR 472, 481:

‘The courts usual role in contractual interpretation is, by resolving ambiguities or reconciling apparent inconsistencies, to attribute the true meaning to the language in which the parties themselves have expressed their contract. The implication of contract terms involves a different and altogether more ambitious undertaking: the interpolation of terms to deal with matters for which, ex hypothesi, the parties themselves have made no provision. It is because the implication of terms is so potentially intrusive that the law imposes strict constraints on the exercise of this extraordinary power.’”

97.Lord Neuberger’s above approach was followed by the Court of Appeal in Hong Kong in Lo Yuk Sui v Fubon Bank (Hong Kong) Limited [2019] HKCA 261 at §§25-29.

98.In view of the above, as submitted by Mr. Abraham Chan SC, leading counsel for the Defendant, the process described in the above underlined passage (cited from Chitty which is taken from Buckley J’s decision in Re Spenborough) should properly be understood as one of implication of terms (as opposed to construction of an agreement). I agree and this was not disputed by the Plaintiff in its closing submissions. In the circumstances, in considering the Plaintiff’s case on termination of the Licence in the present case, the main focus should be on implication of terms in the MoA rather than construction of the document.

99.In Marks and Spencer, Lord Neuberger has emphasised that “there has been no dilution of the requirements which have to be satisfied before a term will be implied” (§24) and referred to the following principles laid down by Lord Simon in the Privy Council case of BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266, 283:

“[F]or a term to be implied, the following conditions (which may overlap) must be satisfied: (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.”

100.Lord Neuberger added the following six comments on the above principles (§21):-

(1)  The implication of a term is not “critically dependent on proof of an actual intention of the parties when negotiating the contract”. Such implication is about “what the parties could have agreed”. Hence, one is not strictly concerned with the hypothetical answer of the actual parties, but with that of notional reasonable people in the position of the parties at the time at which they were contracting.

(2)  A term should not be implied into a detailed commercial contract “merely because it appears fair or merely because one considers that the parties would have agreed it if it had been suggested to them”. These are not sufficient grounds for implying a term.

(3)  It is questionable as to whether the test of “reasonable and equitableness” will usually add anything because if an alleged term satisfies the other requirements for implication, it is “hard to think that it would not be reasonable and equitable”.

(4)  Business necessity and obviousness...can be alternatives in the sense that only one of them needs to be satisfied although in practice, it would be a rare case where only one of the elements would be satisfied.

(5)  If the approach by reference to an officious bystander is taken, it is necessary to formulate the question to be posed by such bystander with the utmost care.

(6)  It is suggested that in relation to the “necessity for business efficacy” which is not one of “absolute necessity” and involves value judgment, a more helpful way of putting this requirement is that “a term can only be implied if, without the term, the contract would lack commercial or practical coherence.”.

E4.  Discussion on the Plaintiff’s alleged implied term

101.In the light of the above principles, I now proceed to consider the Plaintiff’s alleged implied term that it was entitled to terminate the Licence upon (1) the cessation of collaboration or cooperation between the RC and REC; and (2) reasonable notice of termination having been given. Since, as mentioned above, it is not the Plaintiff’s case that the Licence is terminable at will (or simply upon reasonable notice being given), it is only necessary to focus on the implied term relating to the cessation of the collaboration between the RC and the REC. If this implied term cannot be established, the Plaintiff’s case will fail. However, if the Plaintiff can prove that the Licence was terminable upon the cessation of the collaboration between the RC and the REC, it must necessarily follow that a reasonable notice shall be given by the Plaintiff to notify the Defendant of its intention to terminate, subject to the question on the length of such notice.

Purpose of the arrangement under the HKJC Application

102.In determining whether a term should be implied, it is relevant to consider the background, common intentions and/or purposes relating to the subject matter of the agreement in question.

103.In March 1986, the Plaintiff applied to HKJC for funding in support of the establishment of the REC on campus with the intention that the REC would specialise in the design and innovation of technology to support rehabilitation facilities. Before the HKJC Application was made, there was a common understanding between the Plaintiff and HKSR (which was looking for space for the RC) for part of the grant to be applied for the purpose of accommodating the RC also on campus.

104.In these circumstances, the HKJC Application provided that additional spaces would need to be built for the purpose of accommodating the REC and also the RC. It also specified the funds to be provided for both the costs of building the additional spaces to house the REC and the RC and also the future operating costs of the REC. Hence, there can be no dispute that insofar as HKSR is concerned, the main purpose behind the HKJC Application was to secure a “permanent base” for the RC to be housed.

105.According to the Defendant, the Plaintiff was at that time “hoping to – and did successfully – leverage on the established reputation of the RC to boost its HKJC Application for funding for the REC”. According to Ms. Cecilia Lam’s evidence (for the Defendant), Mrs. Anne Marden was informed of this when she had initial discussions with the Plaintiff on the HKJC Application. Further, Mr. John Marden was then the President and Sir Harry Fang was a member of the executive committee of HKSR. Both of them were obviously well-connected in Hong Kong. In fact, Mr. Eric Tam (for the Plaintiff) in his evidence also agreed that the reputation of HKSR (which was running the RC) in the rehabilitation field and also the connections of Sir Harry Fang constituted the reason why the Plaintiff approached HKSR before the HKJC Application.

106.The Plaintiff alleges in its Amended Statement of Claim that the arrangement under the HKJC Application was to “facilitate collaboration and close cooperation in the study and development of rehabilitation equipment for disabled persons between the REC and HKSR”. It should be noted that in the HKJC Application, there was no reference to any requirement of collaboration or cooperation between the RC and the REC. The Plaintiff relies on the reference to the functions of the two centres being “directly complementary”. There is however no explanation in the HKJC Application as to how (or to what extent) the two centres should be complementary to each other.

107.According to the oral testimony of Mr. Eric Tam, what is complementary between the functions of the two centres relates to the different services they provide, namely the RC on the treatment and therapies provided to its clients and the REC on developing and research on the technological aspects of the tools and equipment for rehabilitation purposes.

108.In the circumstances, I take the view that the reference to the RC and the REC being complementary to each other in the HKJC Application cannot be regarded as any condition regarding the collaboration between the two centres, the continuity or cessation of which would govern the RC’s right to occupy the Spaces. It may be said (and it is likely to be the case here) that the parties had contemplated there could be potential mutual benefits which might be derived between the RC and the REC when they were located adjacent to each other. But whether there would actually be collaboration boils down to a question of need. As mentioned above, the HKJC Application simply did not spell out any requirement for such collaboration to be implemented. Hence, the alleged collaboration cannot be taken as a condition or prerequisite which would govern the Defendant’s right to occupy the Spaces.

109.It was stated in Appendix A to the HKJC Application entitled “Objectives and functions of P [which stands for Pilot] REC” (at §3(e)) that Pilot REC would have the function, “[w]ith the RC taking the lead and the participation of other agencies” to “provide a consultancy and advisory service for rehabilitation personnel on the use of aid; and to disseminate information on rehabilitation aids to disabled persons and rehabilitation workers”.

110.The Defendant points out that Appendix A is a paper of the Rehabilitation Division of the Education and Manpower Branch of the government for setting up of a Pilot REC, which was referred to in the HKJC Application with a view to showing that other agencies or committees in the rehabilitation field supported the establishment of the REC. It is Ms. Cecilia Lam’s evidence (which is not contradicted by the Plaintiff) that the RC was never involved in the preparation of such paper.

111.Perhaps, more fundamentally, it bears emphasis that the collaboration which is now alleged by the Plaintiff to be a condition which would trigger its right to terminate, relates to situations (as explained by Mr. Eric Tam) where the RC would need to refer cases to the REC for assistance in providing patients with aids which were not generally available in the market. However, the work which would require joint efforts between the RC and the Pilot REC as contemplated in Appendix A concerned “consultancy and advisory service for rehabilitation personnel on aspects related to the use of aids” and also dissemination of “information on rehabilitation aids to disabled persons and rehabilitation workers”.

112.Hence, there is nothing in the HKJC Application (including Appendix 1) which can help advance the Plaintiff’s case.

Other pre-MoA documents

113.The July 1986 Memo and the Sept 1986 Memo referred to that “certain aspects of its work would entail close co-operation with the REC” and “there will be extra work involving close cooperation with the REC”.

114.However, there was no specific reference in any of the above documents to the areas on which co-operation between the RC and the REC would be required or the actual nature of the co-operation contemplated. Moreover, it has been stated in both the July 1989 Memo and also the Sept 1986 Memo that the activities of the RC “were to be unrestricted” and “will continue”. I also note that there is no indication in any of these documents that the anticipated co-operation between the RC and the REC would have any impact on the RC’s continuous use and occupation of the Spaces.

The MoA

115.As referred to above, Clause 1 of the MoA provides that “the purpose of this memorandum is to set out the arrangements associated with the [RC] being established on the Polytechnic site in adjacent accommodation to the [REC].”. In that case, presumably, the MoA was supposed to set out all the provisions relevant to such arrangements. However, it is of significance to note that there is nothing in the MoA which even remotely refers to the collaboration between the RC and the REC (let alone the substance or details of any collaboration contemplated). The MoA is also completely silent on the duration of the licence or how (and when) the Licence could be terminated.

Post-MoA Correspondence

116.The letter dated 2 June 1999 from Mr. Derek Linday to Ms Cecilia Lam provided that the arrangement “was for [the RC] and [the REC] to be interactive and in a case inseparable with the work of [the RC] leading naturally to the work of [the REC]. Further, the Defendant’s solicitors’ letter dated 9 December 2015 referred to the actual “co-operation” between the RC and the REC. However, nothing in such correspondence has ever raised the point that the collaboration was supposed to serve as a condition which would determine the subsistence and continuation of the Licence. The reference to the “co-operation” simply states the indisputable fact that there had been successful cooperation whereby the RC referred cases requiring provision of special aids to the REC; but it does not in any way help establish that such cooperation formed the fundamental basis or purpose of the arrangement. Moreover, it is Mr. Eric Tam’s evidence that the cooperation only formed a small part of the REC’s activities.

E5.  Summary of findings on the Defendant’s alleged implied term

117.I conclude that there is no basis for any term to be implied into the MoA to the effect that the Licence would be terminated upon the cessation of the collaboration between the RC and the REC. I reiterate the following reasons:-

118.First, as discussed above, the MoA is completely silent on not only the duration or termination of the Licence, but also any obligation on the part of the RC and/or the REC to have and maintain any collaboration during the subsistence of the Licence.

119.Secondly, there is nothing in the HKJC Application or any of the documents created thereafter leading to the formation of the MoA which has ever specified the nature and substance of the collaboration required between the RC and the REC. No doubt, it was expected that there could be potential cross-fertilisation between the two centres in view of their proximity and also their functions. As a matter of fact, there were incidents of successful cooperation between the two centres over a period of about 6 years (since the date of the MoA) whereby the RC referred cases to the REC for assistance in relation to the provision of special aids which were not readily available in the market. However, there is no inkling in any of those documents of any association between the need for collaboration and the Defendant’s right to occupy the Spaces.

120.Plainly, it cannot be said that in the absence of the implied term as alleged by the Plaintiff, the Defendant’s occupation of the Spaces could not or should not be allowed to continue. Hence, the Plaintiff has failed to establish the implied term as a matter of business efficacy and/or necessity.

121.Thirdly, the post-MoA correspondence only recorded the actual collaboration which had been conducted between the RC and the REC but it failed to point out any nexus between need for such collaboration and the Defendant’s right to occupy the Spaces. Moreover, insofar as the post-MoA events are considered relevant, it is necessary to bear in mind that the RC has been allowed to (and has in fact continued to) occupy the Spaces since 1994 when all the collaborations between the RC and the REC had already ceased.

122.In passing, I would also like to deal with the following:-

(1)  The Plaintiff’s belated allegation that the use of the Spaces might be contrary to the Conditions of Grant has never been pleaded. Hence, the Plaintiff shall not be permitted to run this argument now. In any event, one would assume that if the RC were to occupy the Spaces on campus, the Government’s consent on alienation should have been granted. In any event, there is no evidence that the parties had in mind the Conditions of Grant at the time when they entered into the MoA.

(2)  Insofar as there is any dispute over the scope of the Licence in view of the growth of the size of the Spaces over the years, I agree with the Defendant that the MoA should be construed as applying to the spaces given to the RC from time to time. In other words, at the time of the MoA, it was obviously contemplated by the parties that the spaces would grow in future and there has been previously no dispute in this regard.

123.In the light of the above analysis, the relevant documents and the factual matrix of this case do not support any intention of the parties that the Licence should be conditional or contingent upon the collaboration between the RC and the REC. I am therefore not satisfied that either by way of construction of the MoA or implication of a term, the Licence was terminable upon the conditions as alleged by the Plaintiff.

124.Given the findings I have made, the Plaintiff’s notice of termination is invalid and has no effect. The Defendant is therefore entitled to continue to occupy the Spaces. In the circumstances, I see no reason why the Plaintiff shall not be entitled to specific performance of the MoA.

125.As mentioned above, although the Defendant has asserted that the Licence is perpetual, it is not seeking any relief declaring or relating to the alleged perpetuality. I am therefore not prepared to and it is unnecessary to make any specific ruling on this point. However, I take the opportunity to set out the following observations:-

(1)  Whilst the Defendant relies on the decision of Llanelly, it is important to recognise that the subject matter and the nature/character of the licence in relation to the running powers for railway stations is materially different from those in the present case, particularly when one is considering the issues of duration and sustainability.

(2)  Further, as mentioned above, in Llanelly, there were statutory provisions in the railway legislation to the effect that in the absence of any agreement, the licensee could apply to the statutory tribunal for the purpose of seeking running powers on terms which would be “continuing” and “could not have been terminated”. There is nothing equivalent or similar to such mechanism in the present case.

(3)  The Defendant has placed emphasis on the purpose of securing a “permanent base” for the RC under the arrangement. Nevertheless, the word “permanent” still possesses an element of relativity and it does not necessarily connote any concept of “perpetuality” or “eternity”. Moreover, the term “permanent base” could be understood to relate more to the nature of the structure built rather than the duration or sustainability of the Defendant’s right to occupy such structure.

(4)  Clause 1 of the MoA provides that “[t]his arrangement may be changed in future if both parties … so decide and sign a new memorandum of agreement”. Whilst the Defendant seeks to rely on this provision in support of its allegation of perpetuity, it could also demonstrate the parties’ contemplation and acknowledgment of the possible need for changes in the arrangement which, however, could only be effected by way of a new agreement.

126.I have already expressed doubts on the utility of the doctrine of proprietary estoppel which the Defendant has relied on as a “fallback”. On that basis, I do not find it necessary to rule or comment on this doctrine.

E6.  Witnesses’ evidence

127.Given the nature of this case, little really turns on the quality or credibility of the evidence given by the parties’ witnesses. However, I take note of the fact that none of the witnesses except Ms. Cecilia Lam took part in the discussions and preparation relating to the arrangement made all the way up to (and including) the formation of the MoA. I find that all the witnesses called by both parties are truthful and honest and have tried their best to assist the Court by providing their knowledge and understanding of the relevant matters. Meanwhile, I have reminded myself that I should attach no weight to their subjective interpretation of the relevant documents and/or transactions.

F.  CONCLUSION

128.By reason of the matters discussed above, I conclude that the Plaintiff has failed to prove its case and I make an order that (1) the Plaintiff’s claims shall be dismissed; (2) judgment be entered against the Plaintiff on the Defendant’s counterclaim; and (3) there be an order of specific performance in favour of the Defendant. I also make an order nisi that 85% of the costs of this action (in order to reflect the time and resources spent on the arguments in relation to the issue of proprietary estoppel as raised by the Defendant) be paid by the Plaintiff to the Defendant, to be taxed if not agreed, with certificate for two counsel. The costs order nisi shall become absolute unless an application is made to vary the same within the next 14 days.

Mr Patrick Fung SC and Mr Justin Lam, instructed by Woo, Kwan, Lee & Lo, for the Plaintiff

Mr Abraham Chan SC and Mr Keith Lam, instructed by Pinsent Masons, for the Defendant