Top 3 Cases December 2024 06 January 2025
This series of articles highlights 3 of the most interesting cases in the property and telecommunications field decided in the past month. This month: limitation for constructive trusts, repudiation of a lease, and the correct parties to Code renewal and termination claims.
1. Hui Chun Oing v Hui Kau Mo [2024] HKCFA 32
Summary
The Hong Kong Court of final Appeal determined that a claim to recover secret profits made by a fiduciary was limitation-barred.
The defendant had acted as the plaintiff’s agent in negotiating an agreement under which the plaintiff would act as a consultant in respect of a building project. The plaintiff was to be remunerated in part by shares in the proceeds of the project. The plaintiff alleged that the defendant had, in breach of his fiduciary duty to the plaintiff as agent, secretly acquired the shares for himself, as a result of which he held the shares on constructive trust for the plaintiff.
All of the relevant events having happened some time ago, the defendant argued that the claim was limitation barred. The Court of Final Appeal upheld that conclusion.
Why it’s important
The relevant part of the Hong Kong limitation ordnance mirrors the wording of s.21 Limitation Act 1980, and so this decision is of interest to practitioners in this jurisdiction, and brings welcome clarity to the law.
Lord Hoffmann (with whom the other members of the Court agreed), having traced the relevant authorities and the development of associated legal fictions, delineated two kinds of trusteeship for limitation purposes:
- ‘Category 1 trustees’ are trustees because they have accepted fiduciary duties in relation to trust property before the relevant transaction. Time does not run against them for limitation purposes, by virtue of the Hong Kong equivalent of s.21(1)(b).
- ‘Category 2 trustees’ are trustees because of the relevant transaction. The general 6-year limitation period runs against them.
In this case, if the agent held the shares on constructive trust, he did so because of his own wrongdoing; he would therefore be a category 2 trustee, and the claim was time barred.
The Court also determined that the remedy taking of an account is ancillary to a claim for breach of trust – so if the claim for breach of trust was limitation-barred, so too was the claim for an account.
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2. Ramsbury Properties Ltd v Ocean View Construction Ltd [2024] UKPC 40
Summary
The Privy Council determined that a lease had been validly repudiated.
The claimant had been the landlord under a 7-month lease of premises to house construction workers while they worked on a hotel. The lease referred to ‘sleeping accommodations only’. A dispute arose as to whether the works were permitted to eat meals and do laundry at the premises, which the landlord said was prohibited. The workers complained about the conditions and threatened to leave. The defendant informed the claimant that it was repudiating the lease. The claimant claimed specific performance of the lease, and damages for breach of contract.
The Privy Council determined that:
- On a true construction of the lease, the words ‘sleeping accommodation only’ included being able to eat and launder at the premises;
- It is possible to repudiate a lease;
- On the facts of this case, there had been a repudiatory breach entitling the claimant to terminate the lease.
Why it’s important
This case contains a useful synthesis and summary of the law regarding repudiatory breach of contract specifically in the context of determination of a lease.
The judgment also provides an illustration of the application of those principles to the ‘exceptional’ facts of this case: given the shortness of the lease, its purpose (providing accommodation for workers for a specific project), and the commercial consequences that might ensue if the workers made good on their threat to quit, the landlord’s breach was sufficient to deprive the tenant of substantially the whole of the benefit of the contract.
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3. AP Wireless II (UK) Limited v On Tower UK Limited [2024] UKUT 00429 (LC)
Summary
The Upper Tribunal determined an appeal regarding the appropriate parties to renewals under Part 5 of the Code.
The case concerned a number of transitional licence agreements where the benefit, but not the burden, had been assigned to the operator (the burden not being assignable at law). The Tribunal was asked to consider whether an operator in this situation is a ‘party to the code agreement’ for the purposes of Part 5.
Although Mr Justice Fancourt considered the matter ‘finely balanced’, it being difficult to interpret the Code in a manner consistent with its provisions but which also gave effect to common sense, the Tribunal determined that an operator should be treated as party to a code agreement for these purposes if they are a lawful assignee and have assumed (such as by way of a unilateral deed of covenant) responsibility for performing the obligations under the licence.
Why it’s important
This case is of considerable significance for all practitioners dealing with the Code, as it determines the correct parties to renewal and termination claims in the case of licences which pre-date the Code. Although the issue the Tribunal was considering does not arise in respect of new agreements, where it is dealt with by paragraph 16 of the Code, long-term licence agreements are common and, as the Tribunal recognised, it is likely that such matters will have to be dealt with for years to come.
The Tribunal also provided clear guidance to applicants that the identity of the parties to the code agreement for part 5 purposes, and how they came to be so, should be clearly pleaded in all cases.
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