The Hong Kong Polytechnic University v. Rehabaid Society

CACV 402/2022, [2024] HKCA 33

On Appeal From [2023] HKCA 956

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 402 OF 2022

(ON APPEAL FROM HCA NO. 1789 OF 2017)

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JUDGMENT

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Hon Anthony Chan J (giving the Judgment of the Court) :

1.There are two applications before the Court. First, by a Notice of Motion filed on 22 September 2023, the Defendant seeks leave to appeal to the Court of Final Appeal (“CFA”) against the Judgment of this Court dated 25 August 2023 (“CA Judgment”) by which the Judgment below dated 9 September 2022 was overturned. Second, by a Summons filed also on 22 September 2023, the Defendant seeks a stay of execution of the CA Judgment pending the determination of the leave application[1].

2.Pursuant to the directions of this Court, both applications are to be determined by paper disposal.  Altogether 4 sets of written submissions had been lodged by the parties, 3 from the Defendant (one each for the leave application and stay application and one reply submissions) and one from the Plaintiff. 

Leave application

3.There are 4 proposed questions said to be of great general or public importance set out in the Notice of Motion for which the Defendant seeks leave to appeal to the CFA :

(1)  For a contract with no express term on its duration and no prescribed manner for determining duration, what is the correct approach to determining whether the contract is terminable (on any ground relied on by one of the parties)?  In particular, is the correct approach one of construction of the contract (see Re Spenborough Urban District Council’s Agreement [1968] 1 Ch 139 at 146G-147C and CA Judgment §29) or one of implication of terms (under the general approach to implied terms explained in Marks & Spencer plc v SNP Paribas Securities Services Trust Co (Jersey) Ltd [2016] AC 742)?

(2)  Where a party seeks to terminate a contract or a licence of the kind addressed in Q1 above, and asserts a specific term allowing it to so terminate (whether by construction or implication), what is the correct approach for determining whether the party is permitted to so terminate the contract?  In particular:

(i)    Is the correct approach the one propounded at CA Judgment §37, resting on two questions: (1) whether the contract or licence can be terminated unilaterally; (2) if so, the terms on which it could be terminated?  Or does the correct approach involve just one question: whether the alleged term allowing it to so terminate exists (whether by construction or implication)?

(ii)   In resolving a termination dispute in the above circumstances, is the court required to form a view generally on whether the contract is terminable or indeterminable (or perpetual)?  Or is the Court only required to determine whether the contract can be terminated on the specific term alleged and asserted in the claim?

(3)  Where it applies, does the process of construction as a “unitary exercise” (CA Judgment §§38-39) entail the need to exhaustively ascertain the full boundaries and complete terms (including any and all non-express terms) of the agreement, in order to resolve a claim that depends on the proving of a particular term or right asserted within that agreement?

(4)  What is the proper approach on an appeal before the Court of Appeal to findings by the first instance judge on the background, the purpose of the contract, and the common intention of the contracting parties which are relevant to the construction of the contract and/or the implication of terms?  Are these findings of fact, which would be subject to a high threshold of review (as explained in China Gold Finance Ltd v CIL Holdings Ltd CACV 11/2015 (unrep., 7 November 2015)) or is the court entitled to reconsider such findings on the basis that the construction of the contract is a question of law?

4.As an overview of this case, what lay at its heart was a simple question of construction (or interpretation) of the contractual licence granted by the Plaintiff to the Defendant to occupy spaces within its campus when there was no stipulation in the written document (which gave rise to the licence) as to the duration of the licence.  This Court disagreed with the narrow approach taken by the learned Judge below that whether the licence was terminable was a matter of implied term[2].  We took the view that construction of the licence was a unitary exercise, and after taking into account the factual matrix of the case came to the conclusion that as a matter of proper construction the licence was terminable unilaterally[3].  We also accepted the Plaintiff’s case on the conditions for termination[4].

5.Further, this Court took the view that the Judge had taken an unduly narrow view on implied term, and held that with correct application of the principles the Plaintiff’s case on implied term[5] was also upheld.

6.In respect of Question (1), we agree with Mr Yu SC, who represented the Plaintiff with Mr Lam, that it does not arise in view of the finding of this Court that the Plaintiff would also succeed on implied term.  This point applies equally to Questions (2) and (3). 

7.Moreover, it is trite that construction of a contract is a unitary exercise.  It is unnecessary to draw a sharp distinction between “interpretation” and “implication”[6].  Question (1) seeks to draw such a distinction, and we are unable to see the merits in it or that it raises a question of great general or public importance.

8.Question (2) concerns the analytical approach of this Court that the Plaintiff’s case involved two questions, (a) whether the licence was terminable unilaterally and (b) if so, on what terms[7]. We agree with Mr Yu that the approach adopted was conducive to conceptual clarity, and whether or not the question to be addressed should be broken down into two does not give rise to a question of great general or public importance. 

9.Further, we fail to see how analysing the Plaintiff’s case as a single question could have produced a different result. We are unable to see any merit in this Question.

10.As regards Question (3), it appears that para 14 of the submissions[8] of Mr Chan SC, who represented the Defendant with Mr Lam and Mr Cheung, encapsulated the point being made: “[w]here a specific contractual term is put forward (as in this case), the unitary exercise simply asks whether the party can or cannot terminate based on the specific alleged term”.  The first point to note is that it was the Defendant’s own case that the licence was a perpetual one[9].  Hence, even on the Defendant’s analysis, there was nothing wrong with the approach take in the CA Judgment.

11.Secondly, as submitted by Mr Yu, the Defendant’s proposition does not sit well with the accepted principles on the unitary exercise.  It was explained in Wood v Capita Insurance Services Ltd [2017] AC 1173 at [11]-[12] (cited by this Court in Dah Shing Group Ltd v Rich Promise Ltd [2021] HKCA 960 at [23]), that the exercise “involves an iterative process by which each suggested interpretation is checked against the provisions of the contract and its commercial consequences are investigated”. 

12.We are unable to see any question of great general or public importance or merit in the proposed Question.

Question (4)

13.With respect, it was a natural consequence of disagreeing with the narrow approach of the Judge that this Court considered the factual matrix in a wider context.  For instance, the substratum of the relationship between the parties[10] and whether the licence would lack commercial or practical coherence[11] in the absence of an implied term on its duration.

14.This Court was entitled to take a different view on the facts where the Court below had materially erred in law: see Singh Jarjit v Determination Business Ltd t/a Muse Studio, unrep, CACV 68/2015, 24 November 2015, at [9].

15.We are unable to see any question of great general or public importance or merit in the proposed Question.

Stay application

16.Given our view on the lack of merits in the leave application, there is no basis for a stay of execution.  However, we are prepared to grant a further interim stay of execution to allow the Defendant the opportunity to make an application to the Appeal Committee for leave to appeal within 28 days from today.  The further interim stay is justified because the application to the Appeal Committee may be rendered nugatory without it.

Disposition

17.For these reasons, both applications are dismissed.  There is no apparent reason why costs should not follow the event. We make an order nisi that the costs of both applications be paid by the Defendant with a certificate for two counsel.  Such costs are summarily assessed at HK$250,000.

18.We grant an interim stay of execution of the CA Judgment, and the above costs order, pending the determination of the Defendant’s application to the CFA for leave to appeal, on condition that the application is made within 28 days from today and proceeded with expeditiously thereafter.

19.We are grateful to counsel for their assistance.

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

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