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Tang Tak Sum And Another v Tang Kai Fong

Judgment Cited authorities 13 Cited in Precedent Map Related
Vincent
Judgment Date20 March 2020
Neutral Citation[2020] HKCFI 349
Judgement NumberHCA2089/2009
Citation[2020] 2 HKLRD 338
Year2020
Subject MatterCivil Action
CourtCourt of First Instance (Hong Kong)
HCA2089B/2009 TANG TAK SUM AND ANOTHER v. TANG KAI FONG

HCA 2089/2009

[2020] HKCFI 349

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 2089 OF 2009

________________________

BETWEEN
TANG TAK SUM 1st Plaintiff
TANG TAK CHUEN 2nd Plaintiff
and
TANG KAI FONG Defendant

________________________

Before: Master Anthony H K Chan in Court
Date of Hearing: 4th, 5th & 22nd July 2019
Date of Decision: 20 March 2020

_________________________________

JUDGMENT

_________________________________

A. Introduction

1. On 28 November 2014, the Court of Appeal ordered (“CA Order”):

“There be Judgment for the 1st and 2nd Plaintiffs for an account and inquiry of the income and expenditure received and incurred by the Defendant of the Land and payment to the 1st and 2nd Plaintiffs of money (if any) due to them in respect of their share of the Land after taking the account and inquiry.”

2. The Court of Appeal’s Judgment is reported as Tang Tak Sum v Tang Kai Fong [2015] 1 HKLRD 286 (“CA Judgment”). I shall adopt the abbreviations and nomenclature used in the CA Judgment.

3. This is the hearing for an account and inquiry as directed by the Court of Appeal. D gave 6 affirmations and viva voce evidence in Court. Ps filed two notices of objections to D’s accounts. I also received and considered submissions from Mr KM Chong and Mr Aidan Tam (acting for Ps) and from Ms Candy Chan (acting for D).

4. The difference in principle between the parties, which I need to resolve first before moving on to deal with the actual account and inquiry, is Ps’ claim, which D disputes, that the account for rent should be calculated not on the basis of rent actually received by D but based on market rent of the Land regardless of whether D had actually rented out the Land and the rent he received. More specifically, the bases of Ps’ claim are first, D’s alleged wilful default and second, that D ought to pay occupation rent[1] for his sole occupation of the Land.

5. In my view, this dispute is primarily resolved by reference to the terms of the CA Order read in the context of the CA Judgment, to which I presently turn to.

B. CA Judgment

6. Ps and D are tenants in common of the Land (i.e. a piece of land in the New Territories known as Lot 581 in Demarcation District 130). Ps hold ¼ share in the Land whereas D holds the remaining ¾ share: CA Judgment §1.

7. The Land had been let out by D as a car park which was against its authorized use. D has been collecting the rent of the Land without accounting to Ps: CA Judgment §2.

8. Ps’ claim against D for an account of the income and expenditure of the Land was put on two bases: they said D was liable to account qua trustee to beneficiaries or alternatively qua co-owner of the Lot appointed as bailiff of other co-owners: CA Judgment §42.

9. Both the trial Judge and the Court of Appeal rejected the first basis for the reason that Ps had failed to establish the alleged ancestral worship trust such that D had no duty qua trustee to render an account of income and expenditure in respect of the Land: CA Judgment §§43-45.

10. On the other hand, the Court of Appeal, differing from the trial Judge, held that the authority of D’s father and subsequently of D to collect rent from the Land came from the Division of Family – whereby the clear wording provided that D’s father was assigned to collect rent from the Land – and therefore D must account qua bailiff of other co-owners of the Land: CA Judgment §§7-9, 11, 45, 49.

11. In this regard, Ps’ contention[2] that the Court of Appeal “did not make any finding as to the basis (agent or bailiff) upon which the account should be rendered.” is plainly wrong.

12. The Court of Appeal allowed Ps’ appeal and set aside the judgment below. More specifically, it held at CA Judgment §51:

“...Further there will be judgment for the plaintiffs for an account and inquiry of the income and expenditure received and incurred by the defendant of the Land and payment to the plaintiffs of money (if any) due to them in respect of their share of the Land after taking the account and inquiry.”

C. Wilful default

13. I reject Ps’ claim that D is liable to account for the market rent of the Land on the basis of wilful default.

14. As shown above, the CA Order (and CA Judgment §51) specifically provided that there should be an account and inquiry for the income received by D of the Land. In my view, what is being directed is an account and inquiry in common form as opposed to an account and inquiry on the footing of wilful default. Nor did the CA Order make any provision that Ps may later apply for the account to be taken on the latter basis. Ps did not appeal against the CA Order. Accordingly, it seems to me the CA Order precluded Ps’ claim for an account on the basis of wilful default.

15. Even supposing I were wrong, I would reject P’s present claim for an account on the basis of wilful default for the following reasons.

16. The leading texts on the subject are clear that a plaintiff who wishes to obtain an account on the footing of wilful default must specifically plead and prove the alleged wilful default: Snell’s Equity (34th Ed), §20-026[3]; Meagher, Gummow and Lehane’s Equity: Doctrines and Remedies (5th Ed), §26-095[4]; Lewin on Trusts (19th Ed), §§39-048 & 39-050[5]. The two passages from Lewin are particularly illuminating:

“Sometimes, though, trustees are guilty of breaches consisting of omission, failing to do what they ought to have done. If some such breach is pleaded, and proved at trial, or at least a case for further inquiry established, then the trustees may be ordered to account on the footing of wilful default. In such an account the trustees are charged, not only with what they have actually received, but also surcharged with what they might have received apart from their wilful default or neglect...

If the particulars of claim allege wilful default, the court can order an account on that footing at any stage of the proceedings. Nonetheless, the claimant must be ready with the requisite degree of proof at the trial, and if at the original hearing the common accounts only are directed it is then too late to ask for relief against omissions of wilful default that transpire incidentally in the course of other inquiries. Even so, an order has been made at trial on the footing of wilful default for part of an estate and a common account for the rest, but with liberty to apply for further accounts and inquiries on the footing of wilful default on evidence of further default being produced.”

17. Ps did not plead a case of wilful default against D nor prayed for an account on that footing. Therefore, the Court of Appeal, in allowing Ps’ appeal, only granted an account and inquiry in common form. Further, the CA Order did not make any provision that Ps may later apply for the account to be taken on the basis of wilful default. Accordingly, Ps cannot now claim an account on the basis of wilful default, which was neither pleaded nor proved.

18. But even leaving that aside, the alleged wilful default by D that Ps presently rely on at the hearing before me (i.e. that D had knowingly and blatantly failed to render any account for over 30 years)[6] would not be sufficient to ground a claim for an account on the footing of wilful default.

19. Wilful default in the context under discussion refers to a default whereby an accounting party, in breach of duty, failed to obtain a benefit, which should have been obtained, for the fund: Libertarian Investments Ltd v Hall (2013) 16 HKCFAR 681 at §170 (Lord Millett NPJ); Agricultural Land Management Ltd v Jackson (No 2) (2014) 48 WAR 1 at §347 (Edelman J).

20. Therefore, a default in rendering an account per se is inadequate to ground a claim for an account on the basis of wilful default: Snell’s at §20-026 citing Meehan v Glazier Holdings Pty Ltd (2002) 54 NSWLR 146 at §66 (Giles JA).

21. The three authorities that Mr Chong refers me to do not assist.

21.1 In Lee Ming Yueh v Broadway-Nassau Investments Ltd [2012] 5 HKLRD 208, the Court of Appeal discussed the meaning of the term “wilful default” in the context of deciding whether a management company and the incorporated owners of a residential estate were in breach of the Deed of Mutual Covenant and section 18 of the Building Management Ordinance (Cap 344).

21.2 In Re Young and Harston’s Contract (1885) 31 Ch D 168, the Court was concerned with the same term in the context of conditions of sale and in particular whether the vendor has been in wilful default.

21.3 Malhotra v Dhawan [1997] 8 Med LR was concerned with the application of the principle of omnia praesumuntur contra spoliatorem (i.e. all things are presumed against the wrongdoer) where evidence relevant to the taking of an account had been destroyed. This was not a case about whether to order an account on the footing of wilful default.

22. That said, I should say at once that it does not follow that the present account and inquiry is in common form that the principle of omnia praesumuntur contra spoliatorem, relied on by Mr Chong to criticize what he perceived to be inadequacies in D’s accounts, must have no application in this case. I shall return to this issue below.

23. I should also say I do not agree with Ms Chan’s contention[7] that a tenant in common as bailiff (such as D) is only liable to account for rents actually received but not rent which would have been received but for the bailiff’s wilful default. Wheeler v Horne (1851) Willes 208, which she cites, actually contradicts her contention. At page 210, Willes CJ held:

“...a bailiff at common law is answerable not only for his actual receipt but for what he might...

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