The recent Court of Appeal decision in Hong Kong Polytechnic University v Rehabaid ([2023] HKCA 856) looked at whether a right to terminate by giving reasonable notice could be implied into a contractual licence.
Hong Kong Polytechnic University (‘the University’) granted the licence to Rehabaid at a time when the University’s Rehabilitation Centre and Rehabaid engaged in complementary activities. The collaboration ceased in 1991.
The licence, granted in May 1988, was silent as to duration and as to whether, and if so how, either party could end it.
In 2015, the University served notice to quit on Rehabaid and demanded delivery up of the space.
Chan J. delivered the Court of Appeal’s judgment. Considering whether the University had the right to terminate by giving reasonable notice to Rehabaid,he said:
‘The task is to ascertain the common intention of the parties in respect of the duration of the Licence at the time they entered into [it]’ ([40]).
The possibility of mutually beneficial co-operation was ‘the substratum’ of the relationship between the Plaintiff and the Defendant’ ([42]).
The arrangement imposed a heavy financial burden on the University; it made no sense for the parties to have contemplated that the arrangement would continue when it was no longer mutually beneficial ([49] – [50]).
On its true construction, either party could terminate the licence when the substratum disappeared; this would require reasonable notice ([53] – [55]).
Rehabaid was ordered to give up possession and to pay mesne profits from 1 June 2016 up to the delivery of vacant possession.
The Court of First Instance, went wrong by focusing too narrowly on the question of whether the requirements for implying a term had been satisfied, perhaps not locating this question in the broader context of the search for the parties’ common intention and the question of how the agreement was to be interpreted.
The Court of First Instance should not have rejected the interpretation argued for by the University without ruling on the true interpretation ([39]).
Michael Lower