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HCA 868/2008
[2020] HKCFI 1606
IN THE HIGH COURT OF THE
HONG KONG SPECIAL ADMINISTRATIVE REGION
COURT OF FIRST INSTANCE
ACTION NO 868 OF 2008
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| BETWEEN |
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SUSAN WONG |
Plaintiff |
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and
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HONOR BUDGET COMPANY LIMITED |
1st Defendant |
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(鴻略有限公司) |
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YEUNG SUET WAH (楊雪華) |
2nd Defendant |
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AND
HCA 1089/2013
IN THE HIGH COURT OF THE
HONG KONG SPECIAL ADMINISTRATIVE REGION
COURT OF FIRST INSTANCE
ACTION NO 1089 OF 2013
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| BETWEEN |
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|
| |
SUSAN WONG |
Plaintiff |
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and
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YEUNG SUET WAH (楊雪華) |
Defendant |
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(Consolidated)
| Before: |
Hon Linda Chan J in Court |
| Date of Hearing: |
2 June 2020 |
| Date of Judgment: |
17 July 2020 |
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J U D G M E N T
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1. In these actions the plaintiff, Ms Susan Wong, claims against the 1st and 2nd defendants, Honour Budget Company Limited and Ms Yeung Suet Wah, for damages for breach of an oral agreement reached between the parties and, as against the 2nd defendant, an account of profits for breach of fiduciary duties as trustee in respect of the property at 13/F, Tung Lee Industrial Building, 9 Lai Yip Street, Kwun Tong, Kowloon (“Property”). The plaintiff also claims an order for sale, alternatively, an order to partition the Property.
2. The actions were consolidated pursuant to the order of 18 July 2014. The plaintiff filed her consolidated Statement of Claim on 15 August 2014 (“SOC”). The defendants filed their consolidated Defence and Counterclaim on 8 October 2014. Following the defendants’ failure to comply with an “unless” order requiring them to file and serve a consolidated list of documents by 15 September 2017, their Defence and Counterclaim was struck out. Since then, the defendants have ceased to have any further involvement in these actions.
3. Pursuant to the directions given by this Court at the 1st and 2nd Pre-Trial Reviews on 10 March 2020 and 27 April 2020, the sealed orders containing directions on trial were served at the last known addresses of the defendants and notice of trial was advertised in 2 local newspapers on 18 May 2020. The defendants did not attend the trial, leaving the plaintiff to prove her case.
A. OBSERVATIONS ON EVIDENCE
4. It is well established that in civil proceedings, the burden of proof lies upon the party who substantially asserts the affirmative of the issue. Where a given allegation, whether affirmative or negative, forms an essential part of a party’s case, the proof of such allegation rests on him (Phipson on Evidence, 19th ed, §6-06).
5. The plaintiff’s claim covers a very long period, from May 2002 to the date of trial. However, there is a paucity of documents relating to matters which the plaintiff bears the burden of proof:
(1) There is no document, whether contemporaneous or after the event, to show the rental income said to have been generated by the Property or the outgoings and expenses associated with or incurred by the Property covering the period of her claim.
(2) Although the plaintiff claims that she has “paid for a half share of the reasonable expenses over the year”, no document evidencing the payments have been adduced.
6. Mr Ryan Poon, counsel for the plaintiff, submits that the lack of documentary evidence was attributed to the defendants’ failure to provide any accounts and documents relating to the rental income and expenses of the Property in the past 18 years, despite repeated requests from the plaintiff’s representative. I am unable to accept this.
7. The submission does not sit well with the scant written requests made on behalf of the plaintiff to the defendants. In any event, it does not explain why the plaintiff did not disclose her own documents to substantiate the assertion that she has paid half share of all the expenses and outgoings relating to the Property, such as cover letters/notes, bank transfer slips, copies of cheques and remittances. Nor does it explain why the plaintiff did not ask the Incorporated Owners of Tung Lee Industrial Building (“IO”) to produce the records of the management fees and other outgoings paid or payable in respect of the Property. There is no reason to think that the IO would refuse to provide the documents, given that the plaintiff is a co-owner of the Property and, therefore, is entitled to request for such documents. This is particularly so when, as further described below, the plaintiff has since at least January 2013 been aware of the proceedings in LDBM 33/2010 and the IO’s case that since September 2008 no management fee has been paid in respect of the Property.
8. On the plaintiff’s case, the Property has been let for rental income during the entire period of her claim. As a co-owner of the Property, the plaintiff was under an obligation to notify the Inland Revenue Department (“IRD”) that the Property was chargeable to property tax, and to pay such tax for each year of assessment[1]. When asked about why she did not produce the relevant tax returns and tax demand notes issued by the IRD, the plaintiff claims that she has not filed any tax return relating to the rental income generated by the Property. She surmises that the defendants must have filed the requisite tax returns with the IRD, given that she has never been chased by the IRD for failing to file such returns. Assuming this were true, the plaintiff could have asked the IRD to produce the relevant tax returns and tax demand notes in her capacity as a co-owner of the Property and, if the IRD refused, a subpoena duces tecum could be issued requiring the IRD to produce such documents. Indeed, Mr Ko was alive to the fact that the defendants must have filed property tax returns and received tax demand notes issued by the IRD, as he specifically requested the defendants to disclose such documents in Messrs. Edward Ko & Company’s (“EKC”) letter of 10 January 2013.
9. The apparent lack of relevant documentary evidence was identified by this Court at the 2nd Pre-Trial Review. The plaintiff was asked to consider producing documents relating to the rental income, outgoings and expenses of the Property, given that in the absence of an order for a “split” trial, the issues of “liability” and “quantum” (to use the terms loosely) would be determined at the trial.
10. At trial, the position remains the same, and documents relevant to the income, outgoings and expenses of the Property remain lacking. Mr Poon confirms that notwithstanding the lack of documentary evidence on the outgoings and expenses of the Property, the plaintiff does not seek an adjournment of the trial and elects to have the issues of “liability” and “quantum” be determined at this trial.
11. I should add that although the plaintiff includes some of the witness statements filed in the proceedings commenced by the defendants against the IO[2], such documents are of limited probative value, if not inadmissible, as (1) the plaintiff had not authorised the defendants to commence the proceedings in her name and she did not participate in the proceedings; (2) the proceedings have already been concluded; and (3) no hearsay notice has been given by the plaintiff to adduce such witness statements as evidence in these actions.
12. The plaintiff and her husband, Mr Ko Ming Tung Edward (“Mr Ko”), give oral evidence at trial. It is clear that the plaintiff’s evidence is of limited evidential value, as she was not involved in dealing with any matters relating to the Property other than paying HK$340,000 as down payment for the Property and other lump sum payments requested by Mr Ko from time to time.
13. Ms Lo Yee Tak Ellen (“Ms Lo”) of Dudley Surveyors Limited, a chartered surveyor, gives evidence as an expert on the current market value of the Property and the “market rent” of the Property from May 2002 to the date of trial. The expertise of Ms Lo is not in doubt. She has over 35 years’ experience in general practice surveying and over 30 years’ experience in valuation and her evidence has previously been accepted by the Court.
B. BACKGROUND
14. The following fact is taken from contemporaneous documents, the Judgment of the Lands Tribunal in LDBM 33/2010 dated 24 January 2011 (“LDBM Judgment”), the Judgment of the Court of Appeal in HCMP 911/2011 dated 21 October 2011 (“Leave Judgment”), and the Decision dated 25 March 2014 in LDBM 33/2010 where HH Judge Alex Lee (as he then was) struck out the name of the plaintiff from the proceedings (“Striking Out Decision”) or fact which is indisputable.
15. The plaintiff and Mr Ko are both legally qualified. The plaintiff practised as solicitor from 1991 to 2012. Mr Ko has been a practising solicitor and the proprietor of EKC.
16. The 1st defendant was incorporated on 19 September 1991 under the former Companies Ordinance (Cap 32). The 2nd defendant has always been a shareholder of the 1st defendant (holding 33% to 75% of its issued shares) and one of its directors. Except for the period from September 2010 to September 2012, the only other shareholder of the 1st defendant was Mr Hui Wai Yee (“Mr Hui”), the 2nd defendant’s former husband, who was also its director.
17. Mr Ko has since his traineeship known of the 2nd defendant and Mr Hui[3].
18. In March 1992, the plaintiff and the 1st defendant (represented by the 2nd defendant) purchased the Property as tenants in common with each of them holding an equal undivided half share in the Property. At the time of purchase, the Property was already sub-divided into 5 units, namely Unit A, B, C1, C2 and D.
19. The purchase price of the Property was HK$2,725,000, which was financed in part by a HK$2,000,000 loan (“Loan”) advanced by Sun Poh Shing Finance Company Limited (“SPS”) and secured by a legal charge against the Property (“Charge”).
20. Mr Ko has been acting as the plaintiff’s agent in dealing with all matters relating to the Property while the 2nd defendant has been the agent of the 1st defendant with full power to handle all matters in relation to the Property. The plaintiff never had any direct discussion with the 2nd defendant over the Property[4].
21. According to Mr Ko, until 2000 (when the 2nd defendant and Mr Hui began to embroil in matrimonial proceedings), the Loan (and the interest accrued thereon) was repaid by monthly instalments of HK$15,000 each. The monthly instalments and other expenses associated with the Property were met out of the rental income generated by the Property, and the amounts were “more or less equal”.
22. Until May 2008, the management fee in respect of the Property was HK$3,000 per month and was fully paid. In June 2008, the management fee was increased to HK$3,300 per month but the defendants continued to pay HK$3,000 per month in June, July and August 2008. From September 2008, other than a sum of HK$5,750, the management fee in respect of the Property was not paid. From 1 July 2010, the management fee was increased by 20% (to HK$3,960 per month)[5].
23. In 2005, while the matrimonial proceedings between the 2nd defendant and Mr Hui were ongoing, Mr Ko considered that the return on the Property was unsatisfactory and proposed to sell the Property. This was met with the objection of the 2nd defendant. Since then, the relationship between Mr Ko and the 2nd defendant has turned sour and Mr Ko has been unwilling to talk to the 2nd defendant and has not responded to her letters[6].
24. Meanwhile, in the matrimonial proceedings between the 2nd defendant and Mr Hui, the Court made an Order dated 21 September 2007 which required Mr Hui to procure the 1st defendant to transfer and assign its 50% share in the Property to the 2nd defendant within one month[7] (“MP Order”). By letter dated 6 October 2007, the 2nd defendant informed Mr Ko of the MP Order, and enquired whether he had any proposal or arrangement in relation to the letting of, or any other plan in relation to, the Property.
25. Upon being told by the 2nd defendant that she had difficulty in collecting rent from the tenants, Mr Ko prepared and asked the plaintiff to execute a Power of Attorney dated 9 November 2007 (“POA”)[8] whereby the plaintiff appointed the 2nd defendant as her attorney to do, execute and perform all of the specified acts and things in relation to the Property, that is:
(1) to manage the Property as she thinks fit;
(2) to repair, build, rebuild and improve the Property or any parts thereof;
(3) to rent out the Property or any parts thereof at such rent or for such period as she in her absolute discretion thinks fit;
(4) to demand, sue for and receive all rents from the tenants of the Property, and to settle, pay and allow all claims on account of repairs or other lawful deduction;
(5) to enter upon the Property to view the state or report thereof and to order and direct all necessary or proper repairs and improvements of the same; and
(6) to pay and allow out of the monies for the time being in her hand and all rates, taxes and other lawful payments and all insurance premium and payments in respect of the repairs and to hold the balance on the plaintiff’s behalf with an account thereof and to receive from any appropriate Government authority the refund of rates and taxes payable to the co-owners of the Property.
26. In EKC’s letter of 31 March 2008 to the defendants, which was a “letter before action”, the plaintiff complained about (1) the 2nd defendant’s occupation of Unit C1 without the plaintiff’s consent and without paying any market rent for her use; and (2) the defendants’ failure to account for the profit and income of the Property to the plaintiff. The requests were ignored by the defendants. On 16 May 2008, the plaintiff commenced HCA 868/2008 against the defendants.
27. According to SPS’s letter of 17 April 2008, a receipt on discharge of the Charge had been executed and returned to the mortgagors and all rates, premium, Government rent and management fees during the subsistence of the Charge had been duly paid, and the outstanding arrears would be undertaken by solicitors for the mortgagors. The discharge was registered at the Land Registry on 13 May 2008.
28. By July 2008, the condition of the Property had deteriorated to a state which made it difficult to attract any tenants, and the 2nd defendant wrote to Mr Ko to seek his comments on renovating the Property. In August 2008, the 2nd defendant wrote to the plaintiff inviting her to go to the bank to apply for a loan for renovating the Property[9]. Both requests were ignored by Mr Ko/the plaintiff.
29. Pursuant to the MP Order, the 1st defendant executed an Assignment dated 26 September 2008 to assign its 50% interest in the Property to the 2nd defendant (“Assignment”). The Assignment, together with the MP Order, was registered at the Land Registry on 16 October 2008.
30. According to the 2nd defendant, she had applied for a loan of about RMB1.55 million to finance the renovation, which took a year during which no rental income was generated by the Property and she had to bear the high interest rate of the loan. After the renovation, the Property was sub-divided into 20 units[10].
31. In January 2010, the defendants commenced LDBM 33/2010[11] in their names and name of the plaintiff against, inter alios, the IO for alleged overpayment of management fees from September 1996 to August 2008. The IO counter-claimed for the shortfall of the management fee for June-August 2008 and arrears of management fee from September 2008[12].
32. By letters dated 2 and 12 October 2010 to EKC, the 2nd defendant informed the plaintiff that she intended to commence proceedings in the Lands Tribunal against the IO for overpayment of management fees and requested the plaintiff to sign documents relating to the proceedings. Mr Ko received the letters but ignored their contents[13].
33. The trial in LDBM 33/2010 was heard on 3-5 January 2011. In the meantime, the IO registered the following incumbrances against the Property:
(1) a Memorandum of Charge dated 1 April 2010 in respect of outstanding management fees;
(2) a Memorandum of Charge dated 13 December 2010; and
(3) a Memorandum of Charge dated 15 December 2010.
34. On 24 January 2011, the LDBM Judgment was handed down dismissing the defendants’ claim against the IO, and held that the owners of the Property were liable to pay management fees in the amount of HK$3,300 per month from June 2008[14] and HK$3,960 per month from July 2010[15]. Their application for leave to appeal out of time was refused on 21 March 2011[16].
35. In May 2011, the defendants (in their names and the name of the plaintiff) applied to the Court of Appeal, in HCMP 911/2011, for leave to appeal against the LDBM Judgment out of time, which was refused in the Leave Judgment.
36. On 23 January 2013, the plaintiff exercised her right to revoke the POA[17].
37. On 29 January 2013, the plaintiff applied in LDBM 33/2010 to strike out her name as one of the applicants on the ground that the proceedings (and the subsequent appeal in HCMP 911/2011) had been brought by the defendants without her knowledge or authorisation[18]. The plaintiff said that Mr Ko was not aware of the proceedings until 12 January 2013 when he received the documents sent by the 2nd defendant regarding the taxation of the costs in LDBM 33/2010. The plaintiff first learnt of the proceedings 2 days later upon being told by Mr Ko[19].
38. The trial of the striking out application took place from 11 November 2013 to 23 January 2014. In the Striking Out Decision handed down on 25 March 2014, the Court found that (1) the 2nd defendant was not a reliable witness and did not accept her evidence[20], and (2) the proceedings in LDBM 33/2010 had been commenced in the name of the plaintiff without her authority and, consequently, the name of the plaintiff was struck out[21].
39. On 30 January 2013, the plaintiff made a similar application to strike out her name in HCMP 911/2011[22], which was stayed by the Court of Appeal on 22 August 2013 pending determination of the striking out application in LDBM 33/2010. Following the Striking Out Decision, the Court of Appeal struck out the name of the plaintiff in HCMP 911/2011.
40. On 19 June 2013, the plaintiff commenced HCA 1089/2013 against the 2nd defendant claiming damages for breach of Oral Agreement and account of profits and an order for sale or partition of the Property.
41. In her letter dated 27 February 2014 to the plaintiff, the 2nd defendant referred to the termination of the POA, and stated that she had since 23 January 2013 ceased to manage the plaintiff’s 50% share in the Property and required the plaintiff to pay HK$9,010, being 50% of the Government rent and rates for the 15 months from January 2013 to March 2014. In EKC’s letter dated 8 March 2014, the plaintiff complained that the 2nd defendant had never paid 50% of the rental income to her, and it was unreasonable for the 2nd defendant to withhold payment of the rental income and required the plaintiff to pay her share of the expense. As the 2nd defendant continued to control the entire Property, she remained liable to account for the rental income to the plaintiff.
C. ISSUES
42. It is the plaintiff’s case that when the Property was purchased, the plaintiff (represented by Mr Ko) and the 1st defendant (represented by the 2nd defendant) made “verbal consent” as follows (“Oral Agreement”):
(1) The Property was purchased for investment purpose and would be rented out for rental income. The proceeds would be equally divided between them.
(2) The 2nd defendant was authorised to deal with the rental affairs of the Property and keep all accounting records.
(3) The defendants must report regularly (at least once a year) to Mr Ko an account of the rental proceeds by providing an account, giving half of the proceeds to Mr Ko[23].
43. The plaintiff claims that for many years, the 2nd defendant handled the rental affairs of the Property and collected rental income generated by it[24]. At the defendants’ requests, the plaintiff (through Mr Ko) paid for half of the reasonable expenses of the Property[25].
44. Since May 2002, the 1st defendant has acted in breach of the Oral Agreement in that:
(1) Despite Mr Ko’s repeated “verbal requests” made to the defendants, the 1st defendant refused to provide an account of the rental proceeds of the Property, and to give half of the rental proceeds of the Property to him[26].
(2) Without the consent of the plaintiff/Mr Ko, the 1st defendant allowed the 2nd defendant to occupy and use Unit C1 of the Property (“Unit C1”) and did not pay rent for such use[27].
(3) Despite Mr Ko’s repeated “verbal requests” that the 2nd defendant must stop occupying Unit C1, she refused to deliver vacant possession or pay market rent for the use of the Unit[28].
45. As against the 2nd defendant, the plaintiff claims that:
(1) By virtue of the POA, since 9 November 2007, the 2nd defendant has been her agent and/or trustee and owes “fiduciary and trust duties in relation to the matters set out in the [POA]”[29].
(2) The 2nd defendant acted in breach of her duties in that despite the plaintiff’s repeated requests since 9 November 2007, she (a) refused to provide an account and give half of the rental proceeds of the Property to the plaintiff; (b) continued to occupy Unit C1/Unit 1328 without paying any rent; and (c) refused to deliver vacant possession of Unit C1/Unit 1328 or pay monthly market rent for using the same[30].
(3) By reason of the Assignment, the 2nd defendant was under the same obligations as the 1st defendant under the Oral Agreement[31].
46. The plaintiff claims that since May 2002, she has suffered loss and damages, being (1) 50% of “all rental proceeds and profits of the Property” and (2) “half of all mesne profit or assessed market rental” for the 2nd defendant’s use of Unit C1 and Unit 1328[32].
47. The plaintiff also claims that the Assignment was done without any notice to her[33], and that the 2nd defendant had commenced LDBM 33/2010 and HCMP 911/2011 without her authority[34]. However, the issue of want of authority in commencing LDBM 33/2010 and HCMP 911/2011 has already been determined in the Striking Out Decision. It is not open to the plaintiff to re-litigate the same issue in these actions.
48. Lastly, the plaintiff seeks an order under section 6 of the Partition Ordinance for an order to sell the Property, alternatively, an order under section 4 to partition the Property into 2 parts. Mr Poon in his opening submissions refers to the irretrievable breakdown in relationship between the plaintiff/Mr Ko and the 2nd defendant and the fact that the plaintiff/Mr Ko do not know the present whereabouts of the 2nd defendant and submits that an order to partition the Property “may not be desirable” or possible. In his closing, Mr Poon confirms that the plaintiff does not pursue the alternative relief for an order to partition the Property.
49. Accordingly, the issues I have to determine are:
(1) whether the plaintiff and the 1st defendant made the Oral Agreement (Oral Agreement Issue);
(2) whether by virtue of the POA, the 2nd defendant became the agent of the plaintiff and, if so, what duties she owed to the plaintiff (POA Issue);
(3) whether as a result of the Assignment, the 2nd defendant assumed the rights and obligations of the 1st defendant under the Oral Agreement (if existed) (Assignment Issue);
(4) whether the defendants acted in breach of the Oral Agreement, and the 2nd defendant acted in breach of her fiduciary duties as agent of the plaintiff (Breach Issue);
(5) whether the 2nd defendant is liable to pay mesne profits and/or account for the benefit she received through the use of Unit C1 (Unit C1 Issue);
(6) if the above issues are determined in favour of the plaintiff, what is the quantum of damages or profits which the defendants are liable to pay or account to the plaintiff (Quantum Issue); and
(7) whether it is appropriate to make an order for sale of the Property (Sale Issue).
50. I deal with these issues in turn.
D. DISCUSSION
D1. Oral Agreement Issue
51. From the background set out in Section B above, it is clear that since the purchase of the Property, the parties have conducted themselves on the basis that all the affairs relating to the Property were entrusted to the 1st defendant who, in turn, was represented by the 2nd defendant. Neither the plaintiff nor Mr Ko had any substantive involvement in the affairs of the Property. Such conduct is consistent with, and supports, the plaintiff’s case that the parties had reached an oral agreement at the outset that the Property was acquired for investment and rental purposes and the latter would be handled by the 1st defendant. I find that the plaintiff has established, on a balance of probability, that the plaintiff (represented by Mr Ko) and the 1st defendant (represented by the 2nd defendant) made the Oral Agreement on the terms pleaded in §3(a)-(b) of the SOC (as summarised in §42(1)-(2) above).
52. Similarly, I find that the plaintiff has proved that the parties had agreed in March 1992 that the 1st defendant should report regularly or at least once a year to the plaintiff/Mr Ko an account of the rental income of the Property and would give half of the rental proceeds to the plaintiff regularly or at least once a year as alleged in §3(c) of the SOC (summarised in §42(3) above) for these reasons:
(1) The plaintiff in her witness statement (“WS”) refers to the agreement with the 1st defendant that they would purchase the Property for investment and rental purposes and entrusted the 2nd defendant to handle all matters of the Property[35].
(2) Mr Ko in his WS[36] says that he on behalf of the plaintiff agreed with the 1st defendant that the latter would regularly (at least once a year) report to him the rental proceeds of the Property by providing an account to him.
(3) In EKC’s letter dated 10 January 2013 to the 2nd defendant, Mr Ko referred to these obligations in the context of the first action (HCA 868/2008).
(4) At trial, Mr Ko further explains that from 1992 to 2000, the 2nd defendant prepared all the income statements in respect of the Property and provided the same to him. However, he did not retain such statements except a one-page handwritten “2000年同利大廈收支表” (statement of income/expense for 2000) (“2000 Account”) which had been prepared by Mr Hui. According to Mr Ko, in 2000, the 2nd defendant, owing to her family problem, “disappeared” and stopped providing any accounts to Mr Ko, so Mr Hui took over the management of the Property and prepared the 2000 Account.
D2. POA Issue
53. The following principles, which govern a relationship of agency, are applicable to the present case:
(1) Where there is an express agreement between the principal and the agent for the conferral of authority, this constitute the relationship of principal and agent, and the assent of both parties will be contained in it (Bowstead & Reynolds on Agency, 21st ed, §2-027).
(2) The scope of the agency is to be ascertained by applying ordinary principles of construction of contracts, including any implications from the express words used, the usages of the trade, or the course of business between the parties (Freeman & Lockyer v Buckhurst Park Properties (Mangal) Ltd [1964] 2 QB 480 at 502, per Diplock LJ).
(3) Subject to any special circumstances indicating the contrary, the agent is bound to obey all lawful and reasonable indications of his principal in relation to the manner in which the agent carries out his duties. In determining what is reasonable the Court will have regard to all the circumstances of the case, including the nature of the agency and the customs, practices and ethics of the business to be undertaken by the agent (Bowstead, §6-008).
(4) An agent owes to his principal a duty of loyalty, a duty that attracts fiduciary obligations (Bowstead, §6-033). As a fiduciary, he must act in good faith; he must not make a profit out of his trust; he may not act for his own benefit or the benefit of the third person without the informed consent of his principal (Bristol and West Building Society v Mothew [1998] Ch 1 at 18, per Millett LJ).
54. The plaintiff and the 2nd defendant agreed under the POA that the 2nd defendant would act as the plaintiff’s agent in handling the specific matters listed therein, all of which relate to the day-to-day management and the rental affairs of the Property. Indeed, at the trial of the striking out application, it was common ground between the parties that upon execution of the POA, the plaintiff appointed the 2nd defendant as her agent in respect of the Property, and the only issue was the scope of the POA specifically, whether it conferred authority on the 2nd defendant to commence LDBM 33/2010 and HCMP 911/2011 in the name of the plaintiff.
55. Under the POA, the 2nd defendant agreed, inter alia, to pay out of the monies in her hand all lawful payments in respect of the repairs and to hold the balance on the plaintiff’s behalf with an account thereof (see §25(6) above). In my view, this imposes an obligation on the 2nd defendant to account to the plaintiff’s 50% share of the net rental proceeds generated by the Property, after defraying all the expenses reasonably incurred in respect of the Property.
56. As agent of the plaintiff, the 2nd defendant is obliged to obey all lawful and reasonable indications of the plaintiff in relation to the manner in which the agent carries out her duties. This includes complying with the plaintiff’s reasonable requests for provision of accounts and documents relating to the agency from time to time, and to pay the net rental proceeds to the plaintiff when there is surplus available to do so.
57. The above duties came to an end on 23 January 2013 when the plaintiff gave notice to the 2nd defendant to terminate the POA (which the 2nd defendant never protested). In my judgment, the termination of the agency only took away the authority of the 2nd defendant to act as agent of the plaintiff. As the 2nd defendant continued to retain exclusive control over the management of the Property including collecting all the rental income generated by the Property against the plaintiff’s objection, the 2nd defendant remained bound by the duties discussed in §53 above.
D3. Assignment Issue
58. The plaintiff’s case is that the Assignment was done without any notice to her/Mr Ko[37]. This complaint is a thoroughly bad one, as the plaintiff has not identified any basis for requiring the 1st defendant to notify her before assigning its 50% interest in the Property to the 2nd defendant. More importantly, as stated in §24 above, the 2nd defendant did inform Mr Ko of the MP Order in October 2007, and the Assignment was only effected 11 months afterwards. It is reasonable to infer that the plaintiff agreed to the Assignment, given that Mr Ko never indicated his objection to the Assignment, and in the SOC, the plaintiff relies on the Assignment as the basis for claiming that the 2nd defendant has assumed all the rights and obligations of the 1st defendant under the Oral Agreement.
59. As the Assignment was effected with the knowledge and consent of the 1st defendant and the plaintiff (as parties to the Oral Agreement) and the 2nd defendant (as “third party”), it constituted an effective novation of the Oral Agreement. Consequently, since the date of the Assignment, the 2nd defendant has replaced the 1st defendant as a party to the Oral Agreement (Chitty on Contracts, 33rd ed, §§19-087, 19-089).
D4. Breach Issue
60. There are 2 main aspects to this Issue: (1) the alleged failure to provide regular reports and accounts to the plaintiff and (2) the alleged failure to pay and account for 50% share of the rental income generated by the Property to the plaintiff, both since May 2002.
61. So far as the first breach is concerned, I do not think the plaintiff has discharged the burden of proving that the defendants were in breach of their obligations to provide regular reports and accounts for the following reasons.
62. First, it is not in dispute that the 1st defendant provided regular reports and accounts to Mr Ko until 2000 when the 2nd defendant had, according to Mr Ko, gone missing, whereupon the responsibility of managing the Property and preparing the accounts was undertaken by Mr Hui. In his oral testimony, Mr Ko confirms that until April 2008 when the Loan was fully repaid, the income and outgoings (including monthly repayment of Loan) of the Property were more or less the same. Unless regular reports and accounts were provided to him, Mr Ko would not be able to come to this view.
63. Second, there is no document to show that Mr Ko has in the past complained about the 1st defendant’s failure to provide any regular reports or accounts to the plaintiff.
(1) Even in the “letter before action” dated 31 March 2008, the plaintiff only complained about (a) the 2nd defendant’s occupation of Unit C1 and (b) the defendants’ failure to account for the profit and income of the Property to the plaintiff.
(2) Had the defendants failed to provide regular reports and accounts to the plaintiff since as early as May 2002, one would have expected Mr Ko to write to the 1st defendant to complain about the matter. This was particularly so when, according to Mr Ko’s evidence given at the trial of the striking out application, since 2005, he had not really been on speaking term with the 2nd defendant and had ignored all her requests and correspondence.
64. Third, the alleged failure to provide any reports and accounts from May 2002 is contradicted by the fact that between October 2007 and August 2008, the 2nd defendant continued to write to Mr Ko to seek his comments and proposal concerning the rental and renovation matters of the Property and even invited the plaintiff to jointly apply for a bank loan to finance the renovation.
65. Fourth, specifically on the question of accounts, in her letter dated 28 December 2012 to EKC, the 2nd defendant stated that she would provide the statements of income/expenses from March 2008 to 2012, and urged Mr Ko to provide the statements of income/expenses from 2001 to March 2008 during which the Property had been jointly managed by Mr Hui and Mr Ko. Although in EKC’s letter of 10 January 2013, Mr Ko denied having any involvement in the management of the Property or the preparation of statements of income/expenses from 2001 to 2008, he did not say that the plaintiff had not been provided with any statements of income/expenses from 2001 to 2008. Nor did EKC request for such statements in the categories of documents which they contended were in the defendants’ possession, custody or control and, therefore, ought to be disclosed by way of discovery in these actions.
66. I turn to the second breach. There are 3 matters which require elucidation.
67. First, in the SOC the plaintiff claims damages for breach of Oral Agreement or account of 50% of the rental income from May 2002. However, following Mr Ko’s admission during his oral testimony that until April 2008, the monthly repayments of the Loan were paid out of the rental income generated by the Property and the income and outgoings were more or less equal, Mr Poon accepts, in his closing submissions, that the plaintiff’s claim can only be made in respect of the period from May 2008 to the date of trial.
68. Second, I do not think that the plaintiff is entitled to claim 50% of the rental income of the Property. Rather, the plaintiff is only entitled to claim 50% of the net rental income generated by the Property (i.e. after deducting all legitimate outgoings and expenses), having regard to the following matters:
(1) It is indisputable that there were outgoings and expenses associated with the management and maintenance of the Property. Such outgoings and expenses were legitimate expenses and should be met out of the rental income. This accords with the overall object of the remedy of an account of profits, namely to give the beneficiary the true extent of the profits made by the fiduciary, not to punish him (Kao Lee & Yip v Koo Hoi Yan Donald & Ors [2003] 3 HKLRD 296 §§140-145, per Ma J (as he then was)). This is accepted by Mr Poon.
(2) The evidence shows that until April 2008, all the expenses associated with the Property were paid. This was confirmed in SPS’ letter of 17 April 2008 (see §27 above) and §9 of LDBM Judgment (insofar as management fees are concerned).
(3) Although the plaintiff claims in her WS and during oral testimony that “for many years” she and/or Mr Ko “paid for a half share of the reasonable expenses of the Property”[38], and Mr Ko says the same in his WS[39], I am unable to accept their assertions. Not only they are not supported by any documents which the plaintiff could have obtained and produced in order to prove her assertions (for the reasons stated in §7 above), they fly against (a) the terms of the POA, which stated that the 2nd defendant was authorised to pay out of the monies received all lawful payments in respect of the Property (see §25 above), and (b) the fact that since September 2008, the management fees in respect of the Property have not been paid to the IO.
(4) It is inconceivable that the plaintiff would continue to pay half of the expenses of the Property when, on her case, the 2nd defendant had for a long time refused to pay or account for 50% of the rental income to her.
(5) As the 2nd defendant has been the person managing the Property and she was authorised by the POA to pay the expenses of the Property, it seems to me that it is more likely, and I so find, that she used the rental income to pay the outgoings and expenses of the Property. This is reinforced by the fact that the 2nd defendant paid for the expenses in renovating and sub-dividing the Property, after Mr Ko had ignored her requests to discuss the same.
69. Third, in the SOC, the plaintiff’s claim is for breach of the Oral Agreement and breach of fiduciary duties as agent. By May 2008 (the period of the plaintiff’s claim), the 2nd defendant had already been appointed as the plaintiff’s agent. As the duties qua agent were more extensive than the duties under the Oral Agreement, if the 2nd defendant is found to have acted in breach of her duties as agent, it would follow that she also acted in breach of her duties under the Oral Agreement.
70. In my view, the plaintiff has proved, on a balance of probability, that the 2nd defendant acted in breach of her duties to account for the net rental income of the Property received and retained by her from May 2008:
(1) The 2nd defendant was the only person managing the Property and, as such, she must have received the rent paid by the tenants. Indeed, the 2nd defendant relied on the difficulty she had encountered in collecting the rent from the tenants as the reason for asking the plaintiff to execute the POA.
(2) In the correspondence between Mr Ko and the 2nd defendant including the “letter before action”, the plaintiff repeatedly complained about the 2nd defendant’s failure to pay 50% share of the rental income generated by the Property to her. The 2nd defendant never denied that or suggested that she was not liable to account to the plaintiff.
D5. Unit C1 Issue
71. As regards the use and occupation of Unit C1 from May 2002, the plaintiff claims against the 2nd defendant on 2 bases, namely mesne profits and breach of fiduciary duties for using Unit C1 and without making any payment for her use.
72. So far as mesne profits are concerned, it is well established that where the defendant wrongfully deprives the claimant of his land, damages are recoverable in the action for mesne profits. The normal measure of damages is the market rental value of the property occupied or used for the period of wrongful occupation. If the rental value varies due to market fluctuations during the period of wrongful occupation, these fluctuations should be taken into account. If the defendant makes improvements on the land, the rental value should be assessed upon the unimproved value. (McGregor on Damages, 20th ed, §§39-044, 39-046).
73. As stated in Section D1 above, I find that the Property was acquired for investment and rental purposes and the 1st defendant was entrusted with the responsibility of managing the Property. Under the Oral Agreement, the 1st defendant did not have any right to occupy or use any part of the Property at any rate, without paying rent for its use.
74. In the SOC, the plaintiff claims that the 2nd defendant has since May 2002 been occupying Unit C1 for her exclusive use. The plaintiff and Mr Ko both confirm that the contents of the SOC are true and correct to the best of their knowledge. Their evidence is corroborated by the following documents, which show that the 2nd defendant has used Unit C1 or the Property as her correspondence or residential address:
(1) the POA dated 9 November 2007;
(2) the Notification of Change of Secretary and Director of the 1st defendant filed with the Companies Registry on 31 July 2009;
(3) the Annual Returns filed by the 1st defendant with the Companies Registry on 29 September 2010 and 30 October 2013;
(4) the Return of Allotment filed by the 1st defendant with the Companies Registry on 24 August 2012;
(5) the 2nd defendant’s letters to EKC/Mr Ko dated 6 October 2007, 16 July 2008, 28 December 2012;
(6) the 2nd defendant’s letter to the High Court dated 27 October 2012; and
(7) the 2nd defendant’s letter to the plaintiff dated 27 February 2014.
75. In my judgment, the 2nd defendant has been occupying Unit C1 and, after the sub-division, Unit 1328, and she never paid for the use of either Unit. The 2nd defendant’s occupation of Unit C1 and Unit 1328 constituted a breach of the Oral Agreement. It was also wrongful given that the plaintiff, who has 50% interest in the Property, had not authorised the 2nd defendant to use either Unit for her personal purpose. The 2nd defendant is liable to pay mesne profit for the wrongful occupation of Unit C1 and Unit 1328. The real issue is the period of occupation on which there is no direct evidence.
76. Neither the plaintiff nor Mr Ko has given evidence on the precise period of the 2nd defendant’s occupation of Unit C1, or when the sub-division of the Property took place and when the 2nd defendant began to occupy Unit 1328.
77. In the Order of Master Hui dated 3 June 2019 when leave was given to the parties to file expert evidence on the market value and the market rental of the Property, “1 January 2010” was adopted as the date when (1) the Property became sub-divided into 20 units of equal size, and (2) the 2nd defendant ceased to occupy Unit C1 and, instead, occupied Unit 1328. This date accords with the undisputed evidence recorded in the LDBM Judgment that the Property had been under renovation for one year in around 2009 and thereafter, became sub-divided into 20 units.
78. It was stated in Ms Lo’s reports that during her “external inspection” of the Property on 19 June 2019 and 24 April 2020, the Property was vacant. This shows that the 2nd defendant has moved out of Unit 1328 sometime before 19 June 2019.
79. On the basis of the above evidence and matters, I find that the 2nd defendant occupied Unit C1 from 1 May 2002 to 31 December 2008, and she occupied Unit 1328 from 1 January 2010 to 31 December 2018. As such, she is liable to pay mesne profits for these periods of occupation.
D6. Quantum Issue
80. According to Ms Lo, the floor area of the Property, Unit C1 and Unit 1328 are as follows:
|
Gross floor area (sq. ft.) |
Saleable area
(sq. ft.) |
|
Property |
7,762 |
6,915 |
|
Unit C1 |
1,030 (13% of Property) |
732 |
|
Unit 1328 |
388 (5% of Property) |
233 |
81. As stated in Section A above, the plaintiff could have obtained the tax returns and tax demand notes from the IRD to prove the rental income generated by the Property in the past. This has not been done. Instead, the plaintiff seeks to rely on expert evidence on the “market rent” of the Property during the period of her claim. While “market rent” is relevant to the assessment of mesne profits which the 2nd defendant is liable to pay for her occupation of Unit C1/Unit 1328, I do not think it should be adopted as the actual rental income generated by the Property, at any rate without any adjustments to take account of the fact of this case.
82. In assessing the “market rent” of the Property and Unit C1/Unit 1328, Ms Lo adopted the direct comparison method on “a vacant and to let basis for a term of 2 years exclusive of Government Rent, Rates and management fees and by reference to comparable rental transactions”, and made adjustments for the time difference and the location of the Property vis-à-vis the comparables. Ms Lo provided 2 sets of “market rent” for the Property.
83. The first set of valuations is based on the Property having been divided into 5 units, with 3 of them (i.e. Unit A, B and D) of equal size and 2 of them (i.e. Unit C1 and C2) are of half the size of the other 3 units. Ms Lo assessed the “market rent” of the Property, as follows:
|
Date of Valuation |
Monthly Market Rent (HK$) |
Annual Market Rent (HK$) |
|
1 May 2002 |
25,800 |
309,600 |
|
1 May 2004 |
23,700 |
284,400 |
|
1 May 2006 |
28,000 |
336,000 |
|
1 May 2008 |
35,300 |
423,600 |
|
1 May 2010 |
33,700 |
404,400 |
|
1 May 2012 |
41,000 |
492,000 |
|
1 May 2014 |
48,900 |
586,800 |
|
1 May 2016 |
56,200 |
674,400 |
|
1 May 2018 |
62,600 |
751,200 |
|
1 May 2020 |
66,600 |
799,200 |
84. The second set of valuations is based on the Property having been divided into 20 units of equal size. Ms Lo assessed the “market rent” of the Property, as follows:
|
Date of Valuation |
Monthly Market Rent (HK$) |
Annual Market Rent (HK$) |
|
1 January 2010 |
46,600 |
559,200 |
|
1 January 2012 |
55,000 |
660,000 |
|
1 January 2014 |
68,200 |
818,400 |
|
1 January 2016 |
79,200 |
950,400 |
|
1 January 2018 |
87,000 |
1,044,000 |
|
1 January 2020 |
92,000 |
1,104,000 |
85. As a matter of principle, it seems to be wrong for the plaintiff to rely on the second set of the valuations, which assessed the “market rent” at considerably higher amounts without taking into account the fact that:
(1) the 2nd defendant had incurred expenses in renovating the Property, which was within the scope of the authority given to her under the POA. As a result of the 2nd defendant’s unsuccessful attempts to discuss the same with Mr Ko, she was left with no choice but to proceed with the renovation on her own;
(2) by early 2008, the Property was in a dire state such that it could not attract any tenants; and
(3) the one year period when the Property was undergoing renovation and no rental income generated.
86. As the plaintiff has not adduced any evidence on, or give any credit to, the expenses incurred by the 2nd defendant in the renovation, I do not think it is fair or appropriate for the plaintiff to rely on the second set of valuations, thereby taking the benefit of the renovation without having to bear the burden associated with such renovation. I consider that the plaintiff can only rely on the first set of valuations, which better reflect the fact that Mr Ko (and hence the plaintiff) has unreasonably ignored the 2nd defendant’s request to discuss the proposed renovation, subject to the adjustments discussed further below.
87. The first set of valuations on the “market rent” has not taken into account of the following fact and matters:
(1) As recorded in the 2000 Account, the rental income (inclusive of management fees and rates charged against the tenants) of the Property for the year of 2000 was HK$65,045, of which HK$44,785 was attributed to Unit C2. This income represents only 21% of the annual “market rent” assessed for the year commencing 1 May 2002. This undermines the appropriateness of wholesale adoption of “market rent” as the basis for assessing the rental income of the Property.
(2) It is not in dispute that by early 2008, the 2nd defendant already told Mr Ko that due to the poor condition of the Property, it was unable to attract any tenants.
(3) It is unreal to assume that the Property would be fully occupied by the tenants all the time, and that the rent would only increase over time.
88. When questioned by this Court as to why no allowance was given to the time when the Property would be vacant, Ms Lo says that with “proper marketing effort”, the Property should have a 10% vacancy rate when it was sub-divided into 5 units, and 20% vacancy when it was sub-divided into 20 units (the latter owing to higher turnover of tenants for smaller units). It seems to me that the vacancy rates stated by Ms Lo are on the low side, as it assumes that there would be “proper marketing” for the Property, which is not a realistic assumption given that the defendants were not professionals or had any expertise in the market. On a broad brush approach, I would adopt a vacancy rate of 15% for the Property during the period of the plaintiff’s claim.
89. The plaintiff has not adduced any evidence or provided any estimates on the amount of outgoings and expenses of the Property, despite this Court’s indication at the 2nd PTR that such evidence is necessary.
90. As matter now stands, the Court is left to ascertain the outgoings and expenses on the basis of the other circumstantial evidence, which include:
(1) as stated in the LDBM Judgment, until June 2008, the management fees payable in respect of the Property was HK$3,000 per month;
(2) in the 2000 Account, it was stated that the Property had incurred total expenses of HK$87,861 in that year[40], being HK$36,000 for management fees, HK$17,280 for rates, HK$373 for electricity, HK$16,422 for building’s electrical repair work, HK$5,000 for insurance, HK$5,800 for repairing works inside the Property, HK$6,986 for legal fees;
(3) as landlord would have to pay agency fee from time to time, equivalent to half a month of the rent payable by the tenant for a 2-year term, equivalent to about 4% of the total rental income for that term, such expense should be included;
(4) property tax was payable on the net assessable value[41] at 15% from 2008/09 onwards. On the basis of the rental income generated in 2000, the effective property tax payable would be around 8.8%[42] of the rental income; and
(5) Mr Ko’s admission that until April 2008, the income and expenses of the Property was more or less even. If one adds the Loan repayments (HK$180,000), the expenses (say HK$87,900), the agency fees (say HK$10,600) and the effective property tax at 8.8%, the estimated rental income of the Property would be around HK$305,400 per annum.
91. While the estimated rental income of HK$305,400 appears to be considerably higher than the actual rental income for the year 2000 (HK$65,045), the discrepancy has to be seen against the fact that in that year, the 2nd defendant had “disappeared” and did not manage the Property, which explains the very low occupancy rate of 15.6%[43] of the Property. This estimated rental income of HK$305,400 is in line with the “market rent” for the periods commencing 1 May 2008, as adjusted by the 15% vacancy rate, which is HK$360,060.
92. I therefore adopt the first set of valuations and adjust the “market rent” by applying a 15% vacancy rate to arrive at the annual rental income of the Property for the period of the plaintiff’s claim.
93. As Unit C1/Unit 1328 is located within the Property, the rental income which the 2nd defendant is liable to account should be reduced by (1) 13%, being the area of Unit C1 occupied by the 2nd defendant during the period from 1 May 2008 to 31 December 2008; and (2) 5%, being the area of Unit 1328 occupied by the 2nd defendant during the period from 1 May 2010 to 31 December 2018.
94. In 2000, the total expenses represented about 41% of the total estimated rental income[44]. I adopt 40% as the recurring expenses of the Property, and the net rental income would be 60% of the total rental income. The rental income and net rental income for the period of the claim is as follows:
|
Period |
Rental Income (HK$) |
Net Rental Income (HK$) |
1 May 2008- 31 December 2008;
1 January 2010 - 30 April 2010 |
322,854[45] |
193,712 |
1 May 2010 –
30 April 2012 |
653,106[46] |
391,864 |
1 May 2012 –
30 April 2014 |
794,580[47] |
476,748 |
1 May 2014 –
30 April 2016 |
947,682[48] |
568,609 |
1 May 2016 –
30 April 2018 |
1,089,156[49] |
653,494 |
1 May 2018 –
31 December 2018 |
404,396[50] |
242,638 |
|
TOTAL |
4,211,774 |
2,527,065 |
95. As the net rental income has already taken into account the outgoings and expenses associated with the Property, it remains the responsibility of the 2nd defendant to pay and discharge all the outgoings and expenses of the Property if and to the extent that they have not been paid.
96. I turn to the mesne profit payable by the 2nd defendant for her occupation of Unit C1 and Unit 1328. As stated in Section D5 above, I find that the 2nd defendant occupied Unit C1 from 1 May 2002 to 31 December 2008, and Unit 1328 from 1 January 2010 to 31 December 2018.
97. Ms Lo assessed the “market rent” of Unit C1 and Unit 1328 for the period commencing 1 May 2002 at HK$3,600 per month, which was quite close to the HK$3,500 monthly rent paid by the tenant of Unit C2 (as recorded in the 2000 Account). I consider that it is appropriate to adopt Ms Lo’s valuations on the “market rent” of Unit C1 and Unit 1328 as the amount of mesne profits payable by the 2nd defendant. The amounts are as follows:
|
Period |
Monthly Market Rent (HK$) |
Market Rent for the period (HK$) |
|
Unit C1 |
1 May 2002 –
30 April 2004 |
3,600 |
86,400 |
1 May 2004 –
30 April 2006 |
3,300 |
79,200 |
1 May 2006 –
30 April 2008 |
3,900 |
93,600 |
1 May 2008 –
31 December 2008 |
4,900 |
39,200 |
|
Unit 1328 |
1 January 2010 –
31 December 2011 |
2,300 |
55,200 |
1 January 2012 –
31 December 2013 |
2,800 |
67,200 |
1 January 2014 –
31 December 2015 |
3,400 |
81,600 |
1 January 2016 –
31 December 2017 |
4,000 |
96,000 |
1 January 2018 –
31 December 2018 |
4,300 |
51,600 |
|
TOTAL |
|
650,000 |
98. To reflect the fact that the plaintiff only has 50% interest in the Property:
(1) the net rental income the 2nd defendant is liable to pay to the plaintiff for the period from 1 May 2008 to 31 December 2018 should be 50% of the estimated net rental income for the period, that is, HK$1,263,533; and
(2) similarly, the mesne profits the 2nd defendant is liable to pay to the plaintiff for the period from 1 May 2002 to 31 December 2018 should be 50% of the market rent of Unit C1/Unit 1328, that is, HK$325,000.
99. As the 2nd defendant is liable to pay and account for the net rental income of the Property to the plaintiff, and the plaintiff has been kept out of pocket of the amounts which she ought to have received in the past, it is appropriate to order the 2nd defendant to pay interest on the amounts payable annually at judgment rate. Although this rate is slightly higher than the usual commercial interest rate (i.e. prime plus 2%), I consider that it is an appropriate rate given that the plaintiff has not asked for compound interest, which is commonly ordered against a party required to account for profits wrongfully retained by him.
100. In calculating interest payable by the 2nd defendant, the plaintiff shall assume that the amounts payable by the 2nd defendant were due annually. In other words, in respect of the net rental income for the period from 1 May 2008 to 30 April 2009, interest shall accrue on HK$62,650 (HK$125,301 x 50%) at judgment rate from 1 May 2009 until payment. The same applies to the mesne profits payable by the 2nd defendant.
D7. Sale Issue
101. As stated above, the relationship between the defendants and the plaintiff/Mr Ko has since 2005 broken down to such a state that they would not cooperate with each other on any matters concerning the Property. The Property has not been managed by either party for some time and has been left vacant since at least April 2019. Despite the plaintiff’s repeated requests, the 2nd defendant did not agree to proceed with a sale of the Property. It seems to me that the only way to resolve the impasse is to make an order for sale of the Property, so as to achieve a parting of ways between the parties.
102. Ms Lo assessed the market value of the Property as at 28 June 2019 and 1 May 2020 at HK$28.7 million and HK$24 million respectively. This seems to be a fair valuation, having taken into account the physical condition of the Property and the prevailing market condition. It is appropriate to adopt HK$24 million as the reserve or minimum price for sale of the Property, which is to be carried out by way of public auction or private agreement.
103. As the plaintiff has not put forward any proposal on the manner in which the sale is to be carried out, I direct the plaintiff to provide a draft order on the manner of sale together with the proposed terms of sale within 14 days of this Judgment.
104. Once the Property is sold, the proceeds shall be held by the plaintiff’s solicitors and be applied for the following purposes:
(1) first, to defray all expenses associated with the sale of the Property;
(2) second, to pay the outgoings and expenses (and any interest accrued thereon) incurred by or associated with the Property for the period from 1 January 2019 to the date of sale of the Property;
(3) upon payment of the amounts under sub-paragraphs (1) and (2), the remaining amount (“Net Proceed”) shall be divided into 2 equal parts, and the plaintiff is entitled to be paid 50% of the Net Proceed;
(4) the 2nd defendant’s 50% share of the Net Proceed shall be held by the plaintiff’s solicitors for the purpose of discharging all outgoings and expenses (and any interest accrued thereon) incurred by or associated with the Property from 1 May 2002 to 31 December 2018 to the extent that they have not been paid; and
(5) upon payment of the amounts under sub-paragraph (4) above, the balance shall be applied to pay the amount payable to the plaintiff under this Judgment, and the balance, if any, shall be paid to the 2nd defendant.
E. DISPOSITION
105. In summary, I hold that:
(1) the 2nd defendant is liable to pay to the plaintiff 50% of the net rental income of the Property for the period from 1 May 2008 to 31 December 2018, together with interest, as stated in §§98 to 100 above;
(2) the 2nd defendant is liable to pay to the plaintiff 50% of the mesne profits for her occupation of Unit C1/Unit 1328 from 1 May 2002 to 31 December 2018, together with interest, as stated in §§98 to 100 above;
(3) there be an order for sale of the Property, as per §§102 to 104 above; and
(4) there be liberty to apply.
106. As for costs, I make a costs order nisi that the 2nd defendant do pay the costs of the actions to the plaintiff, to be taxed if not agreed. My preliminary view is that although the plaintiff has not been wholly successful in all the claims pleaded in the SOC, I do not consider that there should be any apportionment of costs as the plaintiff will have to pursue and prove her claims at trial.
| |
(Linda Chan) |
| |
Judge of the Court of First Instance |
| |
High Court |
| Mr Ryan WK Poon, instructed by Kwok, Ng & Chan, for the plaintiff |
| The 1st and 2nd defendants were not represented and did not appear |
[1] Section 5(1) of the Inland Revenue Ordinance (Cap 112) provides that “Property tax shall, subject to the provisions of this Ordinance, be charged for each year of assessment on every person being the owner of any land or buildings or land and buildings wherever situate in Hong Kong and shall be computed at the standard rate on the net assessable value of such land or buildings or land and buildings for each such year” (underlined added)
[2] Being LDBM 33/2010 and HCMP 911/2011
[3] §21(i) of Striking Out Decision
[4] §37 of Striking Out Decision
[5] §9 of LDBM Judgment
[6] §21(vi) of Striking Out Decision
[7] As recorded in recital (2) of the Assignment referred to in §29 below
[8] §§21(vii), 27 of Striking Out Decision
[9] §39(iii) of Striking Out Decision
[10] §39(iii) of Striking Out Decision
[11] §39(iv) of Striking Out Decision
[12] §§2, 4 of LDBM Judgment
[13] §§49-51 of Striking Out Decision
[14] §34 of LDBM Judgment
[15] §37 of LDBM Judgment
[16] §15 of Leave Judgment
[17] §22 of SOC
[18] §25 of SOC
[19] §6 of Striking Out Decision
[20] §§39-40, 43 of Striking Out Decision
[21] §56 of Striking Out Decision
[22] §26 of SOC
[23] §3 of SOC
[24] §4 of SOC
[25] §5 of SOC
[26] §6 of SOC
[27] §7 of SOC
[28] §8 of SOC
[29] §10 of SOC
[30] §§11-14 of SOC
[31] §16 of SOC
[32] §24 of SOC
[33] §15 of SOC
[34] §§17-21 of SOC
[35] §§2, 6(a) of plaintiff’s WS
[36] §3 of Mr Ko’s WS
[37] §15 of SOC
[38] §6(b) of plaintiff’s WS
[39] §5 of Mr Ko’s WS
[40] Excluding the Loan repayments (HK$180,000) and refund of deposit (HK$23,750) listed under the expenses column, as they are not expenses of the Property
[41] Being “Rental Income” less “Irrecoverable Rent”, less “Rates paid by owner” and subtract the net total by a further 20% statutory allowance for repairs and outgoings
[42] Being (HK$65,045 (rental income) – HK$17,280 (rates)) x 80% x 15%
[43] Of the 5 units, only Unit B was rented out for 2 months, and Unit C2 (with 50% of size of Unit A, B and C) for 11 months
[44] Being HK$98,500/HK$305,400 + 8.8%
[45] Being (HK$35,300/mth x 87% x 8 mths x 85%) + (HK$35,300/mth x 95% x 4 months x 85%)
[46] Being HK$33,700/mth x 24 mths x 95% x 85%
[47] Being HK$41,000/mth x 24 mths x 95% x 85%
[48] Being HK$48,900/mth x 24 mths x 95% x 85%
[49] Being HK$56,200/mth x 24 mths x 95% x 85%
[50] Being HK$62,600/mth x 8 mths x 95% x 85%
|