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Chen Yu Tsui v Tong Kui Kwong

Judgment Cited authorities 29 Cited in Precedent Map Related
Vincent
Judgment Date25 October 2005
Year2005
Judgement NumberHCA1/2003
Subject MatterCivil Action
CourtHigh Court (Hong Kong)
HCA000001/2003 CHEN YU TSUI v. TONG KUI KWONG

HCA1/2003

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO.1 OF 2003

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BETWEEN

　 CHEN YU TSUI, the Executrix of the Will of Plaintiff
　 TONG KUI MING deceased 　
　 and 　
TONG KUI KWONG Defendant

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Before : Deputy High Court Judge Fung in Court

Date of Hearing : 25 – 29 April 2005, 4-6 May 2005, 12-13 May 2005, 3 June 2005 and 8 June 2005

Date of handing down Judgment : 25 October 2005

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JUDGMENT

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1. The plaintiff’s late husband Mr. Tong Kui Ming (“deceased”) and the defendant are registered tenants in common in equal share of Block D, 3/F, 1 Walnut Street, Kowloon (“the Property”). The plaintiff is suing on behalf of the deceased’s estate for an account of rent collected by the defendant. The defendant counterclaims a declaration that the deceased held the half share of the Property as trustee for him, and denies that the deceased’s estate is entitled to any rent.

Introduction

2. The deceased was the younger brother of the defendant. They were partners in the family partnership of Kong Hing Plastic Factory (“the Factory”).

3. In 1973, the partnership was incorporated as Kong Hing Plastic Factory Limited (“the Company”). The shareholders were: the defendant (1,200 shares); the deceased and the two younger brothers (500 shares each); Madam Cheung Po Ling, the defendant’s wife (400 shares). The deceased and the defendant are the two permanent directors of the Company. The defendant is the Chairman of the Company, and the deceased became a full time employee of the Company in 1984.

4. On 20 February 1967, the deceased and the defendant entered into an agreement for the purchase of the Property. The purchase price was $107,996.00. The construction of the Property was then still uncompleted. Prior to completion, certain part payments as deposit and instalments were made.

5. On 14 March 1968, the sale and purchase was completed. On the same date, the deceased and the defendant executed a mortgage in favour of the Hang Seng Bank Limited to secure the loan and interest of $60,553. The loan was repayable by 19 equal instalments of $3,187.00. On 16 October 1969, the Property was reassigned to the deceased and the defendant upon repayment.

6. Ever since completion, the Property was let to the Factory, and then the Company for the use as office and/or factory. The registered office of the Company was and is situated at the Property. The accounts of the Company showed that between 1987 and 1992, a monthly rent of $15,000 was paid by the Company in respect of the Property. It is not in dispute that between 1987 and 1989, the deceased received sums out of the Rent Account of the Company. The entries do not always show $7,500 per month, but the defendant admitted that a personal subsidy of $7,500 per month was paid by him to the deceased, which unbeknown to him at the time was booked to the Rent Account. The payment stopped after 11 November 1991.

7. The deceased left the employment of the Company some time after November 1991.

8. On 1 April 1993, the deceased through his solicitors wrote to the Company demanding payment of the arrears of rent in respect of the Property (being the half payable to the deceased) from 1 November 1991 to 31 March 1993 in the sum of $127,500 ($7,500 x 17).

Plaintiff’s case

9. The plaintiff’s pleaded case can be summarised as follows:

(1) The plaintiff is beneficially entitled to half share of the Property as tenant-in-common.
(2) Since completion of the purchase in about March 1968, the Property was let by the deceased and the defendant to the Factory and later to the Company.
(3) From October 1988 to 1991, the rent paid by the Company was $15,000 per month, i.e. $7,500 each to the deceased and the defendant for their respective half share of the Property.
(4) After 11 November 1991 and continuing, the Company has been paying the deceased’s rent to the defendant receiving as the deceased’s agent for the use of the deceased (“the Collected Rents”).
(5) Since 1993 and from time to time, rent was revised.

10. It is common ground that the Company’s audited accounts show that rent was paid in respect of the Property up to the end of 1998. No further accounts have been produced. The Company is not wound up and the Court is asked to infer that the defendant is still in receipt of rent.

11. Mr. Chan SC for the plaintiff based the claim as follows :

(1) duty to account in equity as between co-owners;
(2) agency and breach of fiduciary duty;
(3) money had or received or unjust enrichment or restitution;
(4) constructive trustee and liability to account for the Collected Rents with all profits and/or interest thereon.

Mr. Chan clarified that he is not claiming any occupation rent on the ground of ouster.

Defence case

12. The defendant’s pleaded case can be summarised as follows:

(1) The purchase price of the Property (deposit, downpayment and mortgage loan) was paid for entirely by the defendant pursuant to the common intention of the deceased and the defendant that the deceased would hold the half share of the Property conveyed into his name as trustee for the defendant, and the defendant counterclaims a declaration that he owns the entire beneficial interest in the Property.
(2) Until the end of December 1998, $15,000 was paid by the Company to the defendant for the letting of his interest in the Property (as beneficial owner of the whole of the Property or alternatively for his share as tenant in common).
(3) It is denied that the Company ever paid $7,500 to the deceased as rental, and it is denied that the defendant was ever appointed by the deceased as his agent for the letting of the Property or the receiving of rent from the Company.
(4) At the end of December 1998, the Company ceased to be the tenant of the Property and thereafter, the defendant has not received any further rent in respect of the Property.
(5) Insofar as the plaintiff’s claim against the defendant for rent collected prior to 2 January 1997 is founded on simple contract or tort or on account or an action of breach of trust, the same is times-barred by virtue of section 4(1) and (2) and section 20(2) of the Limitation Ordinance, Cap.347.

13. The defendant admitted that he had paid the deceased a personal subsidy of $7,500 per month. This subsidy ceased on 11 November 1991.

14. Further, Mr. Yin for the defendant stated that in the event that the deceased were found to be a beneficial owner, the plaintiff is put to the strict proof of whether:

(a) Prior to 11 November 1991, there is one single letting jointly by the deceased and the defendant, or two separate lettings of the respective shares of the Property;
(b) If there were one joint letting, whether the same letting continued after 11 November 1991, or it was replaced a new letting by the defendant at $15,000.
(c) If there were two separate lettings, whether the defendant had let his half share to the Company at $15,000 after 11 November 1991.

Issues

15. The issues in this case are:

(1) Beneficial ownership of the Property:
(a) Whether the defendant provided the entire purchase price of the Property;
(b) Whether the deceased received any rent from the Property;
(c) If the deceased were a trustee of the defendant for the Property, whether the trust was for an illegal purpose with an intention of defrauding the Commissioner for Inland Revenue (“CIR”);
(2) Whether the defendant collected the rent for the deceased after November 1991:
(a) If the deceased were a beneficial owner, whether the rent paid by the Company from November 1991 to 1998 related to the deceased’s half share of the Property;
(b) The amount of rent for 1996 and 1997;
(c) Whether the Company is still paying rent from 1999 until now;
(3) Whether tenants in common are accountable to each other in equity for rents collected by one of them;
(4) Whether the defendant collected the rent as agent for the deceased;
(5) Whether the defendant held the Collected Rent as constructive trustee for the deceased;
(6) Restitution;
(7) Limitation of action.

Plaintiff’s evidence

16. Both the plaintiff and her daughter Tong Kit Chi (PW2) gave evidence that the deceased had told them that he paid for half of the purchase price of the Property, and he retained...

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