The Incorporated Owners of Sun Hing Building v. Join Profit (Hong Kong) Ltd and Another

LDBM 103/2019

[2023] HKLdT 8

IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

BUILDING MANAGEMENT APPLICATION NO. 103 OF 2019

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Before:  Deputy District Judge Roy YU, Presiding Officer of the Lands Tribunal

Date of Hearing:  28 November 2022

Date of Decision:  31 January 2023

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DECISION

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Introduction

1.This is an application by the applicant for some injunctive reliefs on the ground that the licence to use a common corridor of the Sun Hing Building (“the original corridor”) granted to the 1^st respondent has been terminated. The 2^nd respondent is the tenant of the 1^st respondent who has been allowed by the 1^st respondent to use the original corridor. The fact of the case and the respective pleaded cases of the parties have been set out in my judgment dated 21 October 2022, and I do not repeat.

2.After a trial of 4 days, I grant judgment in favour of the applicant. The 1^st and 2^nd respondents took out separate summons for leave to appeal against my judgment, and for stay of execution. I heard the 2 summonses at the same time and this is my ruling.

Legal Principles

3.The applicant is represented by Mr. Lawrence Ng with Mr. Victor Lui. The 1^st respondent is represented by Mr. Anson Wong SC with Ms. Euchine Ng. The 2^nd respondent is represented by Mr. Patrick Lau. Counsel have kindly prepared written submission to assist this Tribunal.

4.The legal principle governing application for leave to appeal is not in dispute. I could safely adopt the written submission of Mr. Wong –

•  Any party to the proceedings before the Tribunal may appeal to the Court of Appeal against a judgment, order or decision of the Tribunal on the ground that such judgment, order or decision is erroneous in point of law: section 11(2) of Lands Tribunal Ordinance (Cap. 17);

•  Leave to appeal shall not be granted unless the Tribunal is satisfied that the appeal has a reasonable prospect of success or there is some other reason in the interests of justice why the appeal should be heard: section 11AA(6) of Lands Tribunal Ordinance;

•  It is well established that “a reasonable prospect of success” means an appeal with prospects that are more than fanciful without having to be probable: SMSE v KL [2009] 4 HKLRD 125 at paragraph 17.

5.And Mr. Ng, counsel for the applicant refers this Tribunal to the judgment given by DHCJ Au Yeung (as she then was) in Macau First Universal International Limited v Ding Xiaohong and others HCA 992/2010 (unrep., 19 May 2011). I repeat paragraphs 10 and 11:

“10. Leave to appeal is ‘not lightly granted’ and ‘reasonable prospects of success’ for the purpose of s.14AA(4) High Court Ordinance, Cap 4 involves the notion that the prospects of succeeding must be more than ‘fanciful’, without having to be ‘probable’. SMSE v KL [2009] 4 HKLRD 125.

11. To meet the ‘reasonable prospect of success’ test in s.14AA(4)(a) High Court Ordinance, Cap 4, ‘an applicant is required to show “more than just an arguable case, but an appeal that has merits and ought to be heard, although he does not have to demonstrate that the appeal will probably succeed’. In Wynn Resorts (Macau) SA v Mong Henry [2009] 5 HKC 515, Chu J at para 19.”

6.There could be no dispute with these legal principles and that they are applicable to an application for leave to appeal in the Lands Tribunal. I shall follow these guidelines in considering the applications herein. I shall first deal with the application by the 1^st respondent for leave to appeal.

Grounds of Appeal proposed by 1^st Respondent

7.The 1^st respondent has set out 3 proposed grounds of appeal in the summons, which are summarized by Mr. Wong in his submission –

Ground 1 -	the Tribunal erred as a matter of law in holding that there is an implied term in the Chinese Agreement that the [applicant] can unilaterally terminate the licence granted to [the 1st respondent] by reasonable notice (“Ground 1(R1)”);
Ground 2 -	the Tribunal erred as a matter of law in holding that the 6 months’ notice served by [the applicant] is reasonable (“Ground 2 (R1)”);
Ground 3 -	the Tribunal erred as a matter of law in his analysis leading to his rejection of [the 1st respondent’s] proprietary estoppel argument that [the applicant] is in any event estopped from exercising its alleged right of unilateral termination of the Chinese Agreement (“Ground 3 (R1)”).

8.The grounds of appeal as attached to the 1^st respondent’s summons also set out the reason in support which Mr. Wong covered in his submission. It is more convenient to refer to the Grounds and argument as submitted by Mr. Wong in his submission.

Discussion and Ruling on Grounds of Appeal of 1^st Respondent

Ground 1 (R1)

9.Mr. Wong submits that the Tribunal erred in holding that there is an implied term to the Chinese Agreement that the applicant may terminate the Chinese Agreement unilaterally by reasonable notice. He submits that this Tribunal fails to consider whether all required conditions for implying a term into a written contract has been satisfied. He refers to the judgment given by the Court of Final Appeal in Kensland Realty v Whale View Investment Ltd & Another (2001) 4 HKCFAR 381. The conditions are set out in the judgment of Bokhary PJ, and which I have considered and set out in my judgment. Mr. Wong submits that I have downplayed the importance of ensuring that each and every of the aforesaid conditions/requirements have been satisfied.

10.Mr. Wong refers to another judgment given by DHCJ Richard Khaw SC in Hong Kong Polytechnic University v Rehabaid Society [2022] 4 HKLRD 857 as an illustration of how to consider the requirement for implying a term. Mr. Wong consider that I have not properly considered conditions before coming to the conclusion of the implied terms.

11.Mr. Ng submits that the 1^st respondent is no longer disputing that the Chinese Agreement constituted a licence and is not disputing that the licence is terminable. He refers again to Megarry & Wade, The Law of Real Property and submits that at common law, a licence was always revocable. He also submits that the argument of the 1^st respondent as pleaded, that the licence is only terminable by the registered owner of the Shops by reasonable notice but that it was not terminable by the applicant by reasonable notice is absurd and offends against common sense.

12.Mr. Wong argues that by placing emphasis on the nature of the Chinese Agreement as a licence, the Tribunal was misguided into thinking that the issue to be determined was solely a question of interpretation or construction of the Chinese Agreement. I do not agree.

13.As I mentioned in paragraph 121, Winter Garden Theatre’s case relied on by Mr. Ng is not of general application, but an example of construing the licence agreement in light of all relevant facts. I believe the judgment of DHCJ Richard Khaw SC is another example on how to apply the considerations, with a different result, and which has not been referred to by parties. I do not repeat my judgment, in particular the analysis from paragraph 115 to 125. I believe I have fully analysed the Chinese Agreement between the applicant and the 1^st respondent and the background facts adduced in evidence against the condition named in Kensland Realty’s case, before I come to the conclusion.

14.I should not response to Mr. Wong’s submission under each of the 5 considerations. It is sufficient for me to say that I disagree. As far as Mr. Wong having addressed me on these matters in the closing, I have covered in my judgment. I only add a few matters in response to his submission for leave.

15.Mr. Wong said the 1^st respondent has to bear all the costs of constructing the new corridor and reinstatement. If he agrees that both parties to the Chinese Agreement benefit from the arrangement, taking all matters into account, I fail to see it could be argued that the costs issue alone would allow the 1^st respondent to have better right.

16.Mr. Wong has argued that if the applicant may serve a notice of termination upon completion of the new corridor, that would create absurdity. I am not convinced that I were wrong in rejecting this as a sign of absurdity, as this is a matter that could be protected by parties by agreeing to a fixed term. I do not repeat my reasons in my judgment.

17.And if the 1^st respondent is now to argue that there could be different implied terms for termination but with pre-conditions for exercising, which I have not considered, this has not been raised in the Notice of Opposition.

18.And on my interpretation of section 34I of Cap. 344, I disagree with Mr. Wong’s submission that I have misread the judgment of 383HK Limited v The Incorporated Owners of Tak Bo Building [2018] HKCA 164, and I do not repeat my reasons in the judgment. But what is more important is my analysis of the proprietary right of the applicant to possession of the original corridor before entering the Chinese Agreement. It is agreed that the original corridor is part of the common areas and hence all co-owners would be entitled to use subject to limits in the DMC and Cap. 344. And that is a consideration why I found that the applicant could at best give a licence to the predecessor of the 1^st respondent, and hence reasonable to infer a break clause by reasonable notice. Mr. Wong suggests an implied term of narrower application/scope could be implied. But this has not been raised before me at the trial, or in the Notice of Opposition.

19.Taking all these into consideration, there is no reasonable prospect of success in Ground 1 and I therefore refuse to grant leave.

Ground 2 (R1)

20.Ground 2 is on what constitute reasonable notice.

21.Mr. Wong now raises the point that end day of the notice should be tied to the time when the lease granted to the 2^nd respondent should be terminated. But this has not been pleaded in the Notices of Opposition of both respondents. And Mr. Ng submits during the trial that the issue of reasonable notice is not before me and if I found that there is an implied term of termination by reasonabl notice, I do not have to consider if the notice is reasonable. I rule that I have to consider reasonable notice because this is a point raised by the applicant.

22.That brings to an important point on the purpose of the particulars in Notice of Application and Notice of Opposition, which I have covered in my judgment. It is well established that they are not pleadings, but they are to give the other party sufficient notice of the case relied on and the evidence that they are expecting. Yet the respondents would not be entitled to raise at the trial a point not “pleaded” in the Notice of Opposition.

23.I have referred to the judgment of the Court of Appeal given in Grand Power International Ltd v Chan Sing Hoi Enterprises Ltd and others [2020] 2 HKLRD 142 which confirmed the point. And the Lands Tribunal may hear a point not set out in the Notice of Opposition, but the discretion shall be exercised judicially. And I refer to paragraphs 40 and 41 of the judgment of the Court of Appeal:

“40. We also have regard to s. 10(5)(a) of the Lands Tribunal Ordinance, Cap. 17, which provides that “the proceedings of the Tribunal shall be conducted with as much informality as is consistent with attaining justice”, and Direction No 4 given by the President of the Lands Tribunal on 1 July 1986 which states, inter alia, that presiding officers should not regard Notices as in the nature of pleadings by which parties are bound, but as an indication of the issues which are likely to be raised.

41. In this particular instance, all the parties have engaged counsel early on and litigation has been conducted in a fairly rigorous manner. As the judge as stated, this is not a classic building management dispute. The notice of application and the notice of opposition set out the respective cases of the applicant and the 1^st respondent with such details that are in no way different from a pleading. The 1^st respondent even insisted on the applicant filing a notice of reply to plead its reliance on bone fide purchaser for value without notice, instead of merely mentioning this in the solicitors’ letter. Even if the amended notice of opposition is not to be treated as a pleading by which the 1^st respondent is strictly bound, it can hardly be regarded as given “fair indication” of the issues likely to be raised.”

24.In conclusion, the Court of Appeal disallowed the 1^st respondent in that case to rely on some unpleaded grounds.

25.Here, we have very detailed particulars set out in the Notices and is in no way different from pleadings. Legal issues and facts relied on have been set out. The parties are bound to raise the issue set out in the Notices. There is no plead on the reasonable period of notice, or mode of notice that is required, as now suggested by Mr. Wong in his submission. As Mr. Ng rightly pointed out in his submission, there is no alternate plead that the notice given by the applicant is in anyway not reasonable. And no application has been made before this Tribunal for amendment.

26.I have not rejected the whole argument of Mr. Ng. But I do take the point that since the applicant raised reasonable notice, they bear the burden to prove it is reasonable. And the reasonable notice would be determined from the evidence adduced.

27.Mr. Wong is also arguing that I could not come to the conclusion that the notice is reasonable based on the evidence before this Tribunal, in particular the evidence given by Mr. Mak, the witness of the applicant. He is referring to the evidence given by Mr. Mak for not taking action after serving the first demand letter by applicant’s solicitors in 2012. That is not a concession on reasonable notice, and there is no plead to rely on the evidence of Mr. Mak as an alternative plead on what should be the reasonable notice. It is not the duty of this Tribunal to consider any special features or facts to assess the reasonableness of the notice, which is not pleaded. I do not agree with the submission of Mr. Wong and Ground 2 has no merit and I would not allow leave.

Ground 3 (R1)

28.Ground 3 is on estoppel. I should start with the closing submission of Mr. Wong at the trial. The applicant relies on proprietary estoppel. And according to paragraph 115 to 117 of Mr. Wong’s closing submission, the 1^st respondent is claiming that the applicant, knowing both the 1^st respondent’s belief and of the existence of applicant’s own inconsistent right fails to assert that right against the 1^st respondent. And on the facts, the 1^st respondent is relying on the inaction taken by the applicant after its letter by solicitors dated 17 May 2012 and having received the letter from the 1^st respondent dated 8 June 2012. Mr. Wong said no express representation is required to establish this type of estoppel. But I believe he relies on the conduct of the applicant in standing by and failing to take proper action.

29.Mr. Wong in his closing submission refers to the 1^st respondent being able to use the original corridor during this period of inaction. While this is not inconsistent with the Chinese Agreement, it is submitted that on the faith of such belief, and in view of the applicant’s standing by in silence, the 1^st respondent entered into a new lease with the 2^nd respondent on 16 August 2017. And financial detriments is claimed and is relied on to establish estoppel against the applicant because it is unconscionable to allow the applicant to enforce the right.

30.Mr. Wong now suggests that delay, and knowledge of the new lease is irrelevant. I can see that he is shifting his ground to other matters than the grounds that he raised in his closing. That is not the case run by the 1^st respondent and in any event, if not with the support of the loss of the new lease, there would not be sufficient ground to support the 1^st respondent’s claim of estoppel.

31.Taking all into account, I do not believe there is merit in Ground 3 and I therefore refuse to grant leave on Ground 3.

Conclusion on 1^st Respondent’s Summons

32.And having considered all matters, I found that there is no reasonable prospect of success with any of the grounds raised by the 1^st respondent and I do not find any other reason that leave to appeal should be granted and I therefore dismiss the 1^st respondent’s application for leave to appeal. And following that, I see no reason why a stay of execution shall be granted and I therefore dismiss the summons of the 1^st respondent and I shall deal with costs at the end.

Grounds of Appeal proposed by 2^nd Respondent

33.The proposed grounds of appeal has been summarised in Mr. Lau’s written submission:-

Ground 1 -	This Tribunal erred as a matter of law in holding that the Chinese Agreement can be unilaterally terminated by the [applicant] by giving reasonable notice (“Ground 1 (R2)”);
Ground 2A –	This Tribunal failed to considered and address, at all or sufficiently, the relevant matters and thus erred in holding that 6 months constituted reasonable or sufficient notice in the present case (“Ground 2A (R2)”);
Ground 2B –	This Tribunal erred as a matter of law in ruling that if the notice is insufficient, it is not defective and time lapsed since giving of the notice could render the same reasonable (“Ground 2B (R2)”).
(Ground 2A and 2B are together Ground 1 in the draft Grounds of Appeal as attached to the 2nd respondent’s summons)

34.The draft Grounds of Appeal also set out the reason in support and are covered by the submission of Mr. Lau. I also find it more convenient to refer to the Grounds as now summarized by Mr. Lau.

Discussion and Ruling on Grounds of Appeal of 2^nd Respondent

Ground 1 (R2)

35.I have considered the written submission of Mr. Lau. In gist, Ground 1 (R2) of the 2^nd respondent, is similar in substance to Ground 1(R1) of the 1^st respondent. His argument is similar to the submission of Mr. Wong.

36.Mr. Lau submits that there is no presumption in favour of an implied term of termination. And a term is to be implied only if it is necessary to make the contract works. These are similar to the argument raised by Mr. Wong and I do not repeat my ruling above.

37.Mr. Lau also submits that a right of termination of equal ambit on both sides is not necessary. I do not agree. Anyway, this is just one consideration I took to analyse if termination by reasonable notice should be implied and I do not repeat my analysis in my judgment.

38.I do not find any merit in Ground 1 and I would not allow leave for appeal.

Ground 2A (R2)

39.On Ground 2A (R2), Mr. Lau started with a comment that I have applied the wrong test by quoting a part of my judgment “… why 6 months would not be sufficient for the respondents to reinstate the original corridor?” This has been quoted out of context.

40.I have stated clear that the burden to prove a reasonable notice rests on the applicant. As the respondents have not raised any particular factors that I have to take into consideration, I only have to assess the point from the facts before me. Reinstatement is what follows from the notice of termination and naturally I start my consideration from a reasonable period required to complete the reinstatement. That I concluded in my judgment the 6 months’ period is sufficient to be a reasonable notice. I do not accept Mr. Lau’s submission.

41.Mr. Lau also seeks to rely on some facts to argue that the notice is not reasonable. It is true that the 2^nd respondent operated the mahjong parlour for about 16 years. And there is a new lease entered for 20 years in 2017. But the respondents have not raise any alternate plead that, say, if I rule the implied term, the reasonable notice shall be determined having regards to certain particular facts or matters. No explanation has been given why this was not been raised in the Notice of Opposition and there is no prospect of inviting the Court of Appeal to hear new issues.

42.I am not convinced that there is merit on Ground 2A (R2).

Ground 2B (R2)

43.Related to Ground 2A (R2), for Ground 2B (R2), Mr. Lau submits that it is at least reasonably arguable that insufficient/defective notice cannot be cured by time lapsed, and a new and sufficient notice is required. Mr. Lau also mentioned that I was wrong in concluding that the 2^nd respondent agreed that if the notice is insufficient, it is not defective. He refers to the closing submission of the 2^nd respondent that, while the 2^nd respondent acknowledged that the case of Minister of Health v Belloti & Another [1944] KB 298 held that an insufficient notice would not be invalid but only unenforceable until a reasonable time has elapsed, but this Tribunal was invited to follow the cases of Canadian Pacific Railway Co v The King [1931] AC 414 and Parker v Parker [2003] EWHC 1846. A number of cases have been referred to by Mr. Lau to support the point.

44.While I do not agree with Mr. Lau, for this part of the ground, I accept that there it is at least a point worths further consideration by the Court of Appeal. But this is the fallback position that if I were wrong in holding that 6 months’ notice is reasonable. And as I do not agree with Mr. Lau that my consideration of reasonable notice is arguably wrong for the above reason, (and I have refused leave for Ground 2A), I do not have to go to the ruling of Belloti’s case for my judgment. Ground 2B (R2) would be academic and there is no merit to grant leave to appeal.

Conclusion on 2^nd Respondent’s Summons

45.I refuse leave for the proposed grounds of appeal by the 2^nd respondent.

46.The 2^nd respondent applies for stay of execution on various grounds. First, if I grant leave to appeal, it applies for stay. Since I refuse leave to appeal on the proposed grounds, I see no reason for a stay of execution.

47.Secondly, if I refuse leave, an interim stay pending the renewed application for leave from the Court of Appeal. And as I refused leave, I see no reasonable prospect of obtaining leave from the Court of Appeal. I refuse to grant stay.

48.The 2^nd respondent also applies for stay of 7 months from my ruling herein as it takes time for reinstatement. And it takes a considerable period to find an alternate operating space and to obtain the licence. He relies on the affirmation of Chan Chung Keung filed herein for this application.

49.A stay is only to facilitate the respondent to comply with the order. It would not be correct for this Tribunal to entertain the difficulty of the 2^nd respondent in relocating the business at the expenses of the applicant.

50.And I agree with Mr. Ng that the application is in conflict with the intention to proceed with the appeal. That would only mean that the 2^nd respondent would not take action to reinstate the corridor. Having considered all the submission, I refuse to grant the stay.

51.Having concluded as aforesaid that there is no merit in the grounds of appeal, there is no reasonable prospect of success and I do not find any other reason to allow leave to appeal. I therefore dismiss the 2^nd respondent’s summons.

52.As for costs, I would grant an order nisi that the 1^st respondent shall bear the costs of the applicant on the 1^st respondent’s summons, including all costs reserved, with certificate for one counsel. I also grant an order nisi that the 2^nd respondent shall bear the costs of the applicant on the 2^nd respondent’s summons including all costs reserved, with certificate for one counsel. The order nisi shall become absolute within 14 days unless parties apply to vary the same. And the order absolute shall be taxed according to the District Court scale if no agreement on quantum could be reached.

53.And I thank counsel for their assistance.

Mr Lawrence K F Ng and Victor T S Lui, instructed by Lam & Partners, for the applicant

Mr Anson Wong SC and Ms Euchine Ng, instructed by Rowdget W Young & Co, for the 1^st respondent

Mr Patrick Lau, instructed by Kenneth CC Man & Co, for the 2^nd respondent