HUMBERT MEDICAL LIMITED v MUI CHUN YUE

DCMP 711/2025

[2026] HKDC 84

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MISCELLANEOUS PROCEEDINGS NO 711 OF 2025

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JUDGMENT

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BACKGROUND

1.  By an agreement dated 20 September 2021 (“Agreement”), the Defendant engaged the 1^st Plaintiff to provide medical consultancy services through the 2^nd Plaintiff. Under the Agreement, the Defendant is defined as the “Company” and the 1^st Plaintiff is defined as the “Consultant”. Pursuant to a Deed of guarantee and Undertaking, the 2^nd Plaintiff undertakes to indemnify the Defendant against any loss or damage the Defendant may suffer as a result of the 1^st Plaintiff’s failure to perform its obligations under the Agreement.

2.  The Agreement contains inter alia the following clauses:-

(a)  Under Clause 3.1:

“The Appointment shall be for an initial term of 5 years from the Commencement Date (the “Initial Term”) subject to renewal in accordance with Clause 12 or termination in accordance with Clause 13 below.”

(b)  Clause 3.2:

“Both the Company and the Consultant will have the right to terminate this Agreement on the third anniversary after the Commencement Date [1 December 2021] (the “Break Clause”). The termination will be in accordance with Clause 13 below without the need for paying an early-termination payment as stipulated in 13.1.2”

(c)  Clause 13.1:

“13.1 During the first 3 year of this 5 year Agreement, either the Company or the Consultant may terminate this Agreement by:

13.1.1 giving 3 months’ prior written notice to the other or payment in lieu of notice; and

13.1.2 paying an early-termination payment to the other in an amount as follows:

(a) …

(b) …

Such early-termination payment shall be paid before the date of termination.

(c) After fulfilling the first 3 years of the contract, the remaining of the contract can be terminated by either party by notifying the other party in writing at least three months prior to the termination, without any compensation.”

3.  On 28 September 2024, the 2^nd Plaintiff on behalf of the 1^st Plaintiff sent an email to the Defendant (“1^st Notice”), purportedly giving notice to terminate the agreement in the following terms:

“I am writing to notify you of my intention to terminate the consultancy agreement between [the Defendant and the 1^st Plaintiff], in accordance with the terms stipulated in our agreement.

The last date of my consultancy services will be 31^st December 2024…”

4.  On 2 October 2024, the Defendant’s staff and the 2^nd Plaintiff had a telephone conversation, in which the 2^nd Plaintiff was informed that an early-termination payment (“ETP”) would be payable under the Agreement. That was apparent on the basis that since the 1^st Notice was given prior to the end of the 3-year period after commence date of the Agreement, such ETP is payable under Clause 13.1.2 of the Agreement.

5.  It is not disputed that according to the formula set out under Clause 13.1.2 of the Agreement, the ETP (if payable) would be in the sum of HK$1,355,579.04. As shall be explained below, the Plaintiffs disagree that any ETP is payable, which is the crux of the dispute between the parties in these proceedings.

6.  On 3 October 2024, the Defendant sent an email to the 2^nd Plaintiff acknowledging the receipt of the 1^st Notice, and stated that ETP was payable.

7.  On 4 October 2024, the 2^nd Plaintiff emailed the Defendant, stating that “I am withdrawing my previous letter dated 28 September 2024, in which I notified you of the termination of our consultancy agreement dated 31 December 2024.”

8.  On 1 December 2024, the 2^nd Plaintiff on behalf of the 1^st Plaintiff sent another email to the Defendant, giving notice of termination (“2^nd Notice”). The last day of service was stated to be 1 March 2025. The 2^nd Notice was sent after the period of three years from the commencement date of the Agreement.

9.  As the Defendant purported to set off the Commission that the 1^st Plaintiff is entitled to against the ETP, such Commission has not been paid to the 1^st Plaintiff.

10.  On 4 February 2025, the Plaintiffs commenced the present proceedings by Originating Summons (“OS”), seeking essentially:-

(a)  A declaration that upon the true construction of the Agreement, no ETP is payable.

(b)  Payment to the 1^st Plaintiff its commission pursuant to Clause 6 of the Agreement for services rendered in the months of October, November and December 2024 (“Commission”). On the documents presently available, such Commission amounted to HK$422,061.33, HK$283,410.27 and HK$14,283.36 for those three months.

11.  In case of the Court finding against the Plaintiffs in relation to the above, the Plaintiffs seek an alternative declaration that inter alia the 1^st Notice was ineffective and/or validly withdrawn, and the Defendant committed repudiatory breach of the Agreement by refusing to pay the Commission and insisting on treating the 1^st Notice as having terminated the Agreement.

12.  In the affirmation filed by the Defendant in opposition to the OS, the Defendant sought a counter-declaration that on the proper interpretation of the Agreement, the 1^st Plaintiff is liable to pay ETP, and for the payment of ETP by the Plaintiffs in the sum of HK$1,355,579.04. By the order of Master J Chow dated 17 June 2025, the relevant part of the affirmation was ordered to stand as the Defendant’s counterclaim herein.

13.  For completeness sake, it is noted that the parties do not dispute that the Defendant would receive payments from its customers on account of services provided by the 1^st Plaintiff for previous months. These payments are what the Plaintiffs described as “delayed remittance” (“Delayed Remittance”). In the Plaintiffs’ skeleton submissions, the Plaintiffs seek an additional order (not already included in the OS) that such Delayed Remittance is to be assessed.

14.  The Defendant opposes to that and submits that:-

(a)  The Plaintiffs filed their last round of evidence in this action on 19 May 2025, without seeking any information about any alleged delayed remittance. Then out of the blue, on 31 December 2025, the Plaintiffs sought such information when the present hearing is only days away.

(b)  This does not only prejudice the Defendant, but also contravenes paragraph 3 of the order of Master J Chow dated 20 March 2025, where it was directed that there be no further affirmation to be filed without leave.

15.  In my view, it is not desirable for any loose end to be left in these proceedings for the “assessment” of the Delayed Remittance. Firstly, there is no evidence that any of such Delayed Remittance is in fact payable. Secondly, there is no indication at all as to whether the quantum of such Delayed Remittance (if any) falls within the jurisdiction of the Small Claims Tribunal, the District Court or the High Court. Thirdly, the main difference between the Parties is whether ETP is payable. It is expected that the Parties would be able to sensibly approach the question of any Delayed Remittance after this Judgment is handed down.

LEGAL PRINCIPLES

16.  It is trite that in interpreting a written contract, the starting point is that the words of a contract should be interpreted in their natural and ordinary sense in context, unless there is good reason to adopt a different meaning. See Lewison: The Interpretation of contracts (8^th Ed) at 5.01.

17.  In Eminent Investments (Asia Pacific) Ltd v DIO Corp (2022) 23 HKCFAR 487, the Court of Final Appeal summarized the principles as follows:-

“43. It is a truism that the starting point is the ordinary and natural meaning of the words of the contract, and of course in the vast majority of cases that is the ending point also. But, as Ma CJ pointed out in Fully Profit (Asia) Ltd v Secretary for Justice (2013) 16 HKCFAR 351 at §15, in the more difficult cases it is not particularly helpful to refer to the “ordinary and natural meaning” of words because in such cases there can be much debate over exactly what is the ordinary or natural meaning of words; and in those cases the surer guide to interpretation is context.

44. In Wood v Capita Insurance Services Ltd [2017] AC 1173, Lord Hodge JSC reviewed the many cases on interpretation and emphasised that interpretation was a unitary exercise. That is why, where there are conflicting interpretations, account should be taken of the natural and ordinary meaning of the provision in question, the purpose of the contract and of the provision, other relevant provisions, the facts and circumstances known or assumed by the parties at the time that the contract was executed, the quality of the drafting of the instrument, and commercial common sense.

45. The following points emerge from the judgment of Lord Hodge JSC:

(a) it does not matter whether the more detailed analysis commences with the factual background and the implications of rival constructions or a close examination of the relevant language in the contract, so long as the court balances the indications given by each;

(b) the court must be alive to the possibility that one side may have agreed to something which with hindsight did not serve its interest, or that a provision may be a negotiated compromise or that the negotiators were not able to agree more precise terms;

(c) some agreements may be successfully interpreted principally by textual analysis, for example because of their sophistication and complexity and because they have been negotiated and prepared with the assistance of skilled professionals, whereas the correct interpretation of contracts which are marked by informality, brevity or the absence of skilled professional assistance may be achieved by a greater emphasis on the factual matrix;

(d) but negotiators of complex formal contracts may often not achieve a logical and coherent text because of, for example, the conflicting aims of the parties, failures of communication, differing drafting practices, or deadlines which require the parties to compromise in order to reach agreement; and

(e) commercial common sense and surrounding circumstances should not be used to undervalue the importance of the language of the provision which is to be construed, and the mere fact that a contractual arrangement, if interpreted according to its natural language, has worked out badly for one of the parties, is not a reason for departing from the natural language.”

18.  In Achieve Goal Holdings Limited v Zhong Xin Ore-material holding Company Limited [2020] HKCA 51, CACV 6/2019, 17 January 2020, Kwan VP said:-

“Where the disputed provision is open to two possible interpretations, the unitary exercise involves an interactive process, by which each suggested interpretation is checked against the provisions of the contract and its commercial consequences are investigated. Once one has read the language in dispute and the relevant parts of the contract that provide its context, it does not matter whether the more detailed analysis commences with the factual background and the implications of rival constructions or a close examination of the relevant language in the contract, so long as the court balances the indications given by each.”

19.  In Re Sigma finance Corp [2021] 1 All ER 571 at §12, Lord Mance JSC (which whom Lords Hope, Scott and Collins concur) highlighted the importance of context and said:-

“12. In my opinion, the conclusion reached below attaches too much weight to what the courts perceived as the natural meaning of the words of the third sentence of clause 7.6, and too little weight to the context in which that sentence appears and to the scheme of the Security Trust Deed as a whole. Lord Neuberger was right to observe that the resolution of an issue of interpretation in a case like the present is an iterative process, involving “checking each of the rival meanings against other provisions of the document and investigating its commercial consequences” (para. 98, and also 115 and 131). Like him, I also think that caution is appropriate about the weight capable of being placed on the consideration that this was a long and carefully drafted document, containing sentences or phrases which it can, with hindsight, be seen could have been made clearer, had the meaning now sought to be attached to them been specifically in mind (paras. 100-1). Even the most skilled drafters sometimes fail to see the wood for the trees, and the present document on any view contains certain infelicities, as those in the majority below acknowledged (Sales J, paras. 37-40, Lloyd LJ, paras. 44, 49-52 and 53, and Rimer LJ para. 90). Of much greater importance in my view, in the ascertainment of the meaning that the Deed would convey to a reasonable person with the relevant background knowledge, is an understanding of its overall scheme and a reading of its individual sentences and phrases which places them in the context of that overall scheme. Ultimately, that is where I differ from the conclusion reached by the courts below. In my opinion, their conclusion elevates a subsidiary provision for the interim discharge of debts “so far as possible” to a level of pre-dominance which it was not designed to have in a context where, if given that pre-dominance, it conflicts with the basic scheme of the Deed.”

20.  In Building Authority and Appeal Tribunal (Buildings) (ENM Holdings Ltd) [2018] HKCFA 20, the Court of Final Appeal per Tang PJ and Lord Collins of Mapesbury NPJ said:-

“54. The more unreasonable the result the more unlikely it is that the parties can have intended it, and if they do intend it the more necessary it is that they shall make that intention abundantly clear: L Schuler AG v Wickman Machine Tool Sales Ltd [1974] AC 235, 251…”

ANALYSIS

Interpretation of the Agreement

21.  In line with the approach elucidated in these authorities, both Mr Lam (for the Plaintiffs) and Mr Siu (for the Defendant) have made extensive submissions on the context, commercial rationale and language used in the Agreement, all of which I have considered. Essentially:-

(a)  Mr Lam submits that the Parties’ intention was to provide for a right to terminate the Agreement “on the third anniversary”. This means that a termination notice could be served prior to the third anniversary, providing for termination on the third anniversary of the commencement of the Agreement, or any dates thereafter.

(b)  Mr Siu disagrees, and submits that Clause 13.1 of the Agreement mandates that a termination notice could only be served after the third anniversary. This effectively means that the Agreement could only be terminated at the earliest three years and 3 months after its commencement.

22.  Having considered the matter in the round, I came to the conclusion that the interpretation put forward by the Plaintiffs is the correct one.

23.  Firstly, an important context for the interpretation of when ETP is payable is the fact that under Clause 3.1, the initial term of the cooperation shall be for a term of 5 years. That is subject to the “break clause” contained in Clause 3.2, which provides that “Both the Company and the Consultant will have the right to terminate this Agreement on the third anniversary…in accordance with Clause 13 below without the need for paying an [ETP] as stipulated in 13.1.2”. This is in line with Mr Lam’s submission that the parties intended a right to bring about the termination of the Agreement on its third anniversary, rather than three months after its third anniversary.

24.  I am aware of Mr Siu’s argument that Clause 3.2 itself refers back to Clause 13, so one has to look to Clause 13 to see whether ETP is payable. However, what is clear is that Clause 13 was the more detailed provision giving effect to the “break clause”. It would be wrong to read Clause 13 without regard to Clause 3.2.

25.  Secondly, I consider the Plaintiffs’ interpretation to be more consistent with the language of Clause 3.2 and Clause 13.1.2(c) as a whole.

(a)  Under Clause 13.1.2(c), “After fulfilling the first 3 years of the contract, the remaining of the contract can be terminated by either party by notifying the other party in writing at least three months prior to the termination, without any compensation”. The words in bold are in line with what is provided in Clause 3.2 that the parties “will have the right to terminate this Agreement on the third anniversary after the Commencement Date…without the need for paying an early-termination payment…”.

(b)  The words underlined above are the requirements that a party has to fulfill in order to exercise the right to terminate without payment of ETP. As can be seen, what is required is a written termination notification to be served at least three months prior to the termination. There is no stipulation at all that the notice could only be served after the first three years of the Agreement.

(c)  Further, “the remaining of the contract” must be a reference to the residual term of 2 years, after the passing of the first 3-year term of the Agreement. As such, there is no qualification under Clause 13.1 that the first 3 months of the 2 years residual term could not be terminated.

26.  Thirdly, according to the Defendant’s interpretation, in order for the Plaintiffs to avoid paying the ETP, if a party wishes to effect a termination on 1 March 2025, one will have to serve the notice on 1 December 2024, but not earlier. However, what Clause 13.1.2(c) requires is the giving of a written notice of termination “at least three months prior to the termination”, which envisages the giving of more than three months’ notice. The Defendant’s interpretation does not sit comfortably with the scheme envisaged under Clause 13.1.2(c).

27.  Fourthly, as Mr Lam points out, the Defendant’s interpretation would create the anomaly that a party could give three months’ notice on 1 December 2024 to effect termination on 1 March 2025, but could not give a longer notice of say four months on 1 November 2024. This is odd as the notice period was supposed to serve the commercial purpose of allowing the parties to plan ahead for the termination.

28.  For the forgoing reasons, I consider that no ETP is payable under Clause 13.1.2 of the Agreement.

CONCLUSION

29.  Mr Siu confirms that if the Court finds in favour of the Plaintiffs on the interpretation of Clause 13.1, an order in terms of the OS is appropriate.

30.  I shall dismiss the Defendant’s counterclaim and make the following declarations as per Paragraph 1 of the OS:-

(a)  The correct interpretation of Clause 13.1 of the Agreement is that a party may terminate the Agreement with the effective termination date falling on any day after the first 3 years of the Agreement (“Years 1-3”) by giving at least 3 months’ written notice, without paying any early-termination payment (“ETP”), even if the termination notice is given within Years 1-3.

(b)  Accordingly, the 1^st Plaintiff’s notice issued to the Defendant on 28 September 2024 to terminate the Agreement with effect from 31 December 2024 (being the last working day), without paying any payment of ETP, was valid and effective.

(c)  The Defendant is liable to pay the 1^st Plaintiff its commission pursuant to Clause 6 of the Agreement for services rendered in the months of October, November and December 2024 (“Commission”), which is due and owing.

31.  As per paragraph 3 of the OS, I also make an order that the Defendant shall pay to the 1^st Plaintiff the amounts of HK$422,061.33, HK$283,410.27 and HK$14,283.36 for the services rendered in the months of October, November and December 2024 respectively. Interest on such sums shall be awarded at the rate of the HSBC Best Lending Rate + 1% from the date of the issuance of the OS to until payment.

32.  As to costs, I shall make an order nisi that the Defendant should pay the Plaintiffs’ costs of the action, including all costs reserved, to be taxed if not agreed, with certificate for counsel.

33.  I thank Mr. Lam and Mr. Siu for their helpful assistance.

Mr Julian Lam, instructed by Withers, for the 1^st and 2^nd Plaintiffs

Mr Patrick Siu, instructed by Hastings & Co, for the Defendant