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

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JUDGMENT

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A. Introduction

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

“There be Judgment for the 1^st and 2^nd Plaintiffs for an account and inquiry of the income and expenditure received and incurred by the Defendant of the Land and payment to the 1^st and 2^nd 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 (34^th Ed), §20-026^[3]; Meagher, Gummow and Lehane’s Equity: Doctrines and Remedies (5^th Ed), §26-095^[4]; Lewin on Trusts (19^th 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 have made of the lands without his wilful default, as is expressly held in Co. Lit. 172a, and in many other books: but by the plain words of the statute a tenant in common, when sued as bailiff, is answerable only for so much as he has actually received more than his just share and proportion.”^[8]

D.      Occupation rent

24.  I also reject Ps’ claim for occupation rent. 

25.  In the first place, the CA Order did not direct that D should account to Ps for occupation rent for his occupation or use of the Land.  Ps did not appeal and are thus bound by the CA Order. 

26.  Second, I reject the various bases put forth by Mr Chong to ground Ps’ claim for occupation rent. In particular, for reasons discussed below, I consider that none of the authorities that Mr Chong cites to me are applicable to the present case. 

27.  More specifically, the Court of Appeal held that there was no ouster: CA Judgment §39.^[9]  Therefore, Biviano v Natoli (1998) 43 NSWLR 695 and Kong Colin Chung Ping v Kong Wing On (CACV 69/2015, 11 November 2015) are readily distinguishable as occupation rent was payable in those two cases as there had been ouster of the other tenants in common. 

28.  In respect of Forgeard v Shanahan (1994) 35 NSWLR 206^[10], at pages 297 (line 10) to 298 (line 45), Meagher JA (with whom Mahoney JA agreed) held that in equity, an occupation rent may be extracted in at least two scenarios: first, in partition suit or related litigation where there has been exclusion; and second, in partition, administration or statutory sale cases where the owner in occupation who claims an allowance in respect of improvements effected by him will only be permitted to do so if he is accountable for an occupation rent.  Neither scenarios apply to our present case. 

29.  I also consider Wing Ming Garment Factory Ltd v Wing Ming Industrial Centre (IO) [2014] 4 HKLRD 52 to be inapplicable.  In that case, the incorporated owners counterclaimed against the developer (who retained an undisposed interest in the building) for marking out an area designated as common area for its own enjoyment in breach of the deed of mutual covenant that no one should convert common areas for their own use or interfere with common areas.  Godfrey Lam J held that there was liability to pay occupation rent or an equivalent sum in damages.  More specifically: 

29.1   His Lordship first noted that in the absence of ouster (and there was none in that case), “the liability of a co-owner to pay an occupation rent for his occupation of the land is less clear.  The basic rule is that one co-owner is not normally obliged to pay another co-owner rent by reason merely of the fact that the former has been in sole occupation of the property”: §§212-213 of the judgment.

29.2   Reference was then made to In re Pavlou [1993] 1 WLR 1046 for the proposition that the court of equity will order occupation rent not only in the case of ouster but in any other case in which it is necessary in order to do equity between the parties.  That said, his Lordship noted that this proposition is confined to partition or analogous proceedings.  Forgeard and Chen Yu Tsui, which I have mentioned above, were also cited.  See §§213-214 of the judgment.

29.3   His Lordship concluded that there was liability to pay occupation rent because the breach of covenant was “so analogous to the situation recognised in the old cases, where one owner became by agreement the bailiff for his co-owner and liable for an occupation rent...that equity will order an inquiry and payment of occupation rent”: §§215 of the judgment. 

30.  For clarity of exposition, it is necessary to look more closely at the two “old cases” that his Lordship referred to.  In M’Mahon v Burchell (1846) 2 Ph 127, 41 ER 889, an executor was sued for payment of a legacy and in answer, the executor alleged that the plaintiff had for several years occupied a house, that was part of an estate of which the executor and others were tenants in common, and the rent due from the plaintiff in respect of the occupation exceeded the amount of the legacy.  The question was whether Vice Chancellor Wigram was correct in directing the Master to inquire, inter alia, whether the plaintiff was in occupation as pleaded and, if so, whether he ought to be charged with occupation rent, and, if so, the sum chargeable.  Lord Cottenham LC answered the questions in the negative.  For present purposes, I need only state two of the reasons given: first, the executor’s pleaded case that the plaintiff’s occupation of itself made him liable to his co-tenants for rent was unsustainable as a matter of law^[11]; and second, the executor’s argument that there was an agreement that the plaintiff would pay rent to his co-tenants for his occupation was unsupported by the evidence. 

31.  In Henderson v Eason (1851) 17 QB 701, 117 ER 1451, Robert and Edward were co-tenants of certain farmlands, which were occupied and worked by Edward during his lifetime.  After Edward’s demise, Robert, relying on the Administration of Justice Act 1705 (4 & 5 Anne c 16), sued Edward’s executor for an account for the rent and profit received by Edward that were more than his just share and proportion.  Parke B held that on the evidence Edward did not receive more than his just share within the meaning of the Act.  Relevant for present purposes, the learned Judge held (at page 720 of the former report) that:

“There are obviously many cases in which a tenant in common may occupy and enjoy the land or other subject of tenancy in common solely, and have all the advantage to be derived from it, and yet it would be most unjust to make him pay anything. For instance, if a dwelling house, or bar, or room, is solely occupied by one tenant in common, without ousting the other, or a chattel is used by one cotenant in common, nothing is received; and it would be most inequitable to hold that he thereby, by the simple act of occupation or use, without any agreement, should be liable to pay a rent or anything in the nature of compensation to his cotenants for that occupation or use to which to the full extent to which he enjoyed if he had a perfect right.” (emphasis supplied)

32.  It seems to me that these two cases demonstrate that where there is an agreement that a co-owner in sole occupation of the property would pay occupation rent to the other co-owner, it may, depending on the circumstances, be equitable to order the former to account to the latter for occupation rent.  However, this proposition does not assist Ps as they have not pleaded any agreement between Ps and D that D would pay occupation rent for his occupation and use of the Land.  Nor am I aware of any evidence supporting the existence of any such agreement. 

33.  Further, unlike the Wing Ming case, Ps are not alleging that there is any agreement between them and D marking out a common area in the Land, which D has breached.  Hence, the analogy drawn by Godfrey Lam J, with reference to the two old cases, has no application in this case. 

34.  For these reasons, I reject the various bases advanced by Mr Chong to ground his clients’ claim against D for occupation rent.  The order of Master H Au-Yeung of 16 January 2015, where D was directed to “file and serve an account of the income and expenditure received and incurred by him of and for the use and enjoyment of...the Land, inclusive of the letting, use and enjoyment thereof...”, does not detract from the analysis.  It was a procedural order for the further conduct of the present account and inquiry, where the question of whether a particular item (such as occupation rent) should be accounted for or paid to Ps would be determined.  In any case, while I am not privy to what transpired before the learned Master, Ps informed me that the order was made pursuant to the CA Judgment^[12] so it seems to me that the learned Master could not have intended to deviate from the CA Judgment or the CA Order. 

E.      Account

E1.     Law

35.  I bear in mind the guiding principles on the taking of an account and inquiry in common form: Snell’s at §§20-014 to 20-022.  In particular, I highlight the following points. 

36.  The beneficiary carries the burden of proving surcharges and the accounting party bears the burden of proving discharge.  The accounting party must therefore be prepared to document each item, and presumptions may be made against them if they have not kept proper records or have destroyed them.  The court will lean particularly hard against a professional who has kept inadequate records or anyone who destroys records in bad faith.  At the other extreme, a non-professional fiduciary who has acted in good faith may be granted fair and reasonable allowances despite having neglected to keep proper accounts: Snell’s at §20-018. 

37.  In Libertarian at §174, Lord Millett NPJ held that:

“Where the absence of evidence is the consequence of the fiduciary’s own breach of duty, the court is not without resource, for it can have resort to three principles. First, it may be able to take the fiduciary at his own word and use his falsehoods to establish the facts as if they were true even though they are known to be untrue. Secondly, the court is entitled to make every assumption against the party whose conduct has deprived it of necessary evidence. And thirdly the court is entitled to be robust and do rough and ready justice without having to justify the amount of its award with any degree of precision.”

38.  In Malhotra at 322 (right column), Morritt LJ (as his Lordship then was) explained the application of the principle of omnia praesumuntur contra spoliatorem in the context of taking an account: 

“First, if it is found that the destruction of the evidence was carried out deliberately so as to hinder the proof of the plaintiff’s claim, then such finding will obviously reflect on the credibility of the destroyer. In such circumstances it would enable the court to disregard the evidence of the destroyer in the application of the principle. But this is not this case.

Second, if the court has difficulty in deciding which party’s evidence to accept, then it would be legitimate to resolve that doubt by the application of the presumption.  But thirdly, if the judge forms a clear view, having borne in mind all the difficulties which may arise from the unavailability of material documents, as to which side is telling the truth, I do not accept that the application of the presumption can require the judge to accept evidence he does not believe or to reject evidence he finds to be truthful.”

39.  Similarly, in Kao, Lee & Yip (a firm) v Donal Koo Hoi Yan (HCA 8847/1993, 7 June 2007) at §§13-15, Reyes J held that the presumption against an accounting party in favour of the beneficiaries where there is a lack of proper records cannot be the Court’s sole consideration.  Whilst expedient, the presumption is not a licence to draw any inference against the accounting party however unreasonable or disproportionate.  The Court must approach a disputed issue with a measure of realism and pragmatism and must always ask whether the result of any application of the presumption accords with common sense. 

E2.     Between June 1984 and 31 March 1990

40.  D was ordered to render an account since he “has been in control and/or management” of the Land. There is no dispute that the period began in June 1984. 

41.  D claims the rental income received in respect of the Land between June 1984 and 31 March 1985 was HK$3,000 and thereafter HK$3,000 per financial year from 1 April 1985 to 31 March 1990.  According to him, the Land was leased under an oral tenancy and there were no rental receipts.  He does not claim any expenses. 

42.  Whilst Ps initially complained about the lack of evidence on the rental income, they are now prepared to accept (see §43 of their Closing Submissions) D’s figures. 

43.  Accordingly, I find that the net income between June 1984 and 31 March 1985 was HK$3,000 and thereafter HK$3,000 for each of the 5 financial years from 1 April 1985 to 31 March 1990.  

E3.     Between 1 April 1990 and 31 March 1995

44.  D claims he did not receive any rental income nor incurred any expense because the Land was not leased out during the period. 

45.  Ps complain that D failed to produce any evidence.  They contend that D should account for the market rent either on the basis that he should pay occupation rent for his sole occupation of the Land or on the basis of his wilful default.  For reasons explained in Sections C and D above, those two grounds are not open to Ps in the present account and inquiry. 

46.  On balance, and bearing in mind the following factors, I find that the net income for the period is nil. 

46.1   First, D’s authority and obligation under the Division of Family is to collect rent from the Land.  The Court of Appeal found that his accounting obligation is confined to the income received and expenditure incurred in respect of the Land.  The upshot, it seems to me, is that D is not required to ensure that the Land is leased continuously. 

46.2   Second, Ps bear the burden of proving surcharge and their claims that D should account for the market rent are, as I have explained, unsustainable. 

46.3   Third, the present case is unlike the Kao Lee & Yip case, where one would expect solicitors to have kept at least some record of the fees waived.  On the other hand, it is probably uncommercial or unrealistic to expect a non-professional landlord to keep records about why a piece of farmland was unleased for a few years.

46.4   Fourth, I have considered whether I could use D’s statement in his pleading^[13] that since about 1984 and up to the date of his pleading, he “has continued to collect and receive rents from” the Land against him and assume that the Land has been leased out all along since 1984.  In my view, it would be inappropriate to do so as the statement did not assert that the Land has been leased out continuously since 1984. 

E4.     Between 1 April 1995 and 31 March 2004

47.  It is common ground that the annual rental income D received from the Land was HK$120,000 for each of the 9 financial years. 

48.  As for expenses, it is not in dispute that:

48.1   For the financial year ended 31 March 2002, D paid HK$7,387.50 for Government rent. 

48.2   For the financial year ended 31 March 2003, D paid HK$17,730 for Government rent and HK$3,600 for property tax whereas D’s initial claim for HK$18,310.57 for rates should be falsified (or disallowed) for lack of supporting evidence. 

48.3   For the financial year ended 31 March 2004, D paid HK$22,162.50 for rates, HK$17,730 for Government rent and HK$2,803 for property tax. 

49.  In the circumstances, the net income for the period was:

49.1   For the 6 financial years between 1 April 1995 and 31 March 2001, HK$120,000 per year

49.2   For the financial year ended 31 March 2002, HK$112,612.50.

49.3   For the financial year ended 31 March 2003, HK$98,670.

49.4   For the financial year ended 31 March 2004, HK$77,304.50.

E5.     Between 1 April 2004 and 31 March 2015

50.  D’s account for this period is, to say the least, confusing and wholly inadequate. 

51.  For instance, on actual rental income received alone, he produced 3 different versions of accounts. Each later version is said to be an updated version of the earlier, taking into account matters discovered in the intervening period.^[14] 

Year	1st Account (HK$)	3rd Account (HK$)	4th Account (HK$)
1 April 2004 to 31 March 2005	40,000	10,000	10,000
1 April 2005 to 31 March 2006	0	0	0
1 April 2006 to 31 March 2007	30,000	30,000	30,000
1 April 2007 to 31 March 2008	70,000	70,000	70,000
1 April 2008 to 31 March 2009	10,000	10,000	10,000
1 April 2009 to 31 March 2010	50,000	60,000	60,000
1 April 2010 to 31 March 2011	10,000	10,000	40,000
1 April 2011 to 31 March 2012	60,000	60,000	50,000
1 April 2012 to 31 March 2013	110,000	110,000	90,000
1 April 2013 to 31 March 2014	100,000	120,000	120,000
1 April 2014 to 31 March 2015	80,000	110,000	110,000

52.  But a different picture emerges if one considers the assessable value of the Land as shown in the various Property Tax Assessment Demanding Final Tax for the Land (“Tax Demands”) for the period. 

Year	Assessable value (HK$)
1 April 2004 to 31 March 2005	96,300
1 April 2005 to 31 March 2006	96,300
1 April 2006 to 31 March 2007	96,300
1 April 2007 to 31 March 2008	117,637
1 April 2008 to 31 March 2009	120,000
1 April 2009 to 31 March 2010	117,024
1 April 2010 to 31 March 2011	117,024
1 April 2011 to 31 March 2012	117,024
1 April 2012 to 31 March 2013	119,812
1 April 2013 to 31 March 2014	115,812
1 April 2014 to 31 March 2015	106,836

53.  “Assessable value” is defined in section 5B(2) of the Inland Revenue Ordinance (Cap 112) (“IRO”) as follows:

“The assessable value of land or buildings or land and buildings for each year of assessment shall be the consideration, in money or money’s worth, payable in that year to, to the order of, or for the benefit of, the owner in respect of the right of use of that land or buildings or land and buildings.”

54.  Therefore, one would have thought the “assessable value” shown in the Tax Demands for the period represents the rental income in respect of the Land during that period. 

55.  Further still, on D’s own admission, the annual rental income from the Land since 1 April 1995 was HK$120,000.  In particular, D claims that the present tenant has been leasing the Land since around 1997 or 1998 for a monthly rent of HK$10,000.  This is reinforced by:

55.1   The draft (and unsigned) tenancy agreement between D and the tenant for a period of 3 years from 1 January 2009.  Clause 2 provided that the rent would be HK$10,000 per month and clause 5 provided that the landlord would be responsible for rates.  D said the tenant refused to sign the agreement. 

55.2   D’s Statement of Claim in DCCJ 2777/2011 against the tenant where the monthly rent since January 2009 is said to be HK$10,000.

56.  Notwithstanding the aforesaid, D claims that the actual amount of rent received during the 11 financial years under discussion was, as shown in the 4^th Account, much lower because:

56.1   Since around mid 2004, the tenant refused to pay rent and/or paid rent late. 

56.2   D’s bankbooks, which were used to compile the 4^th Account, show the actual amount of rent he had received during the period. 

56.3   D’s daughter filled in the tax returns, which formed the basis of computing the figures set out in the Tax Demands, and erroneously stated the rent received.  He signed the tax returns without checking and therefore did not discover the error. 

57.  I reject D’s claim (as shown in the 4^th Account) for the following reasons. 

58.  First, any irrecoverable rent is deductible if it is proved to the satisfaction of the assessor that it has become irrecoverable.   In re-examination, D said he had tried but failed to obtain a deduction.  However, there is no documentary evidence of D’s attempt.  Had D really tried, he should have no difficulty producing application letter(s), with supporting evidence showing rent was irrecoverable, and response(s) from the Inland Revenue Department. 

59.  Second, beyond D’s bare assertion, there is no documentary evidence that rent during this period is in fact irrecoverable.  On D’s own evidence, he successfully sued the tenant in the District Court (in DCCJ 2777/2011) for HK$70,000 rent in arrears, and the tenant eventually paid up.  There is no further documentary proof of D having made further claims or demands against the tenant for unpaid rent.  I should also say it seems to me that D’s successful District Court action also militates against his claim that he is wary of taking action against the tenant (who he claims is a triad member).  

60.  Third, D’s bankbooks are difficult to follow.  I have tried, but am unable, to decipher how it is said that the bankbooks confirm the actual amounts of rent received by D are the amounts reported in the 4^th Account.  The bankbooks only show sums deposited and withdrawn from the bank account with no explanation at all what the deposits and withdrawals are for.  D has highlighted in the bankbook the entries he claims represent the actual rent received but he has failed to explain how he is able to identify those entries, particularly after so many years.  On his own admission, there are no rental receipts evidencing the amount he has received from the tenant. 

61.  Fourth, I am not at all convinced by D’s assertions in relation to the filing of tax returns.  In his first response to Ps’ objections, he attributed the alleged mistakes in the tax returns to his daughter misreading the bankbooks.  But in his second response, he explained (in relation to the financial year between 1 April 2004 and 31 March 2005) that neither he nor his daughter checked the bankbooks and his daughter filled in the tax return based on his erroneous recollection of the amount of rent he had actually received.   However, when asked during cross-examination what documents did his daughter have when filling in the tax returns, D said he cannot say and does not know.  Leaving all this aside, D has not given a good explanation as to why he has not asked his daughter to give an affirmation to support his account of what had happened.  This is surprising bearing in mind he has had the benefit of legal advice throughout the present proceedings for an account and inquiry. 

62.  Fifth, having regard to the reasons above and also the fact that it is entirely D’s own doing for failing to produce cogent evidence to support his claim of the amount of rent received, but giving due allowance that D is not a professional accountant or bailiff, I think I am entitled to apply the legal presumptions or assumptions, described in the authorities cited at §§36-39 above, against D and disregard his claim (as shown in the 4^th Account) as to the amount of rent he has received for the period under discussion. 

63.  Mr Chong invites me to add back the rates paid to the assessable value shown in the Tax Demands.  He relies on D’s second response to Ps’ objections where D explained that for the financial years 1 April 2004 to 31 March 2005 and 1 April 2009 to 31 March 2010, the assessable value was derived after deducting the rate from the annual monthly rental of HK$120,000. 

64.  The effect of Mr Chong’s submission would be:

Year	Assessable value (HK$)	Rate[15]  (HK$)	Amount asked for by Ps (HK$)
1 April 2004 to 31 March 2005	96,300	23,700	120,000
1 April 2005 to 31 March 2006	96,300	23,700	120,000
1 April 2006 to 31 March 2007	96,300	23,700	120,000
1 April 2007 to 31 March 2008	117,637	5,025	122,662
1 April 2008 to 31 March 2009	120,000	0	120,000
1 April 2009 to 31 March 2010	117,024	7,164	124,188
1 April 2010 to 31 March 2011	117,024	7,164	124,188
1 April 2011 to 31 March 2012	117,024	7,164	124,188
1 April 2012 to 31 March 2013	119,812	188	120,000
1 April 2013 to 31 March 2014	115,812	7,164	122,976
1 April 2014 to 31 March 2015	106,836	13,164	120,000

65.  Having considered the Tax Demands and the demands for rates and Government rent carefully, it appears to me that what had happened was that the person filling in the tax return thought that assessable value meant, contrary to the statutory definition of the term, the annual rental income of a financial year less the rates payable. 

65.1   This is obvious from the 6 financial years ended 31 March 2005, 2006, 2007, 2009, 2013 and 2015.  The total of the assessable value and rate for each of these years add up to HK$120,000, which accords with the available evidence (see §55 above) to the effect that the annual rental income for the Land for each of the 11 financial years under discussion was HK$120,000.  

65.2   For the financial year ended 31 March 2010, as D explained in his second response, only the rate payable for the eastern portion of the Land (i.e. HK$2,976) was deducted from the annual rental income of HK$120,000 but not the rate payable for the western portion of the Land (i.e. HK$4,188).   

65.3   The same reasoning would explain how the respective assessable values for the financial years ended 31 March 2011 and 2012 were arrived at. 

65.4   Similarly, for the financial year ended 31 March 2008, it appears that whoever filled in the tax return only deducted the rate payable for the eastern portion of the Lot (i.e. HK$2,363) but not the western portion (i.e. HK$2,662).  

65.5   Lastly, for the financial year ended 31 March 2014, it appears that the person filling in the tax return only deducted the rate payable for the western portion of the Lot (i.e. HK$4,188) but not the eastern portion (i.e. HK$2,976). 

66.  In the circumstances, I am unable to accept Mr Chong’s submission to the extent that it would result in the annual rental income for 5 out of the 11 financial years under discussion exceeding HK$120,000.  It is true that the Court may, in in an appropriate case, make various legal presumptions or assumptions against an accounting party who fails to produce evidence to support the account put forth.  But these legal presumptions or assumptions are tools that the Court may deploy in order to arrive at a result that is just and accords with common sense on the facts of each case.  Notwithstanding that D’s accounts have fallen short of the standards that the law expects of an accounting party, I consider it inappropriate to accept Mr Chong’s submission to the extent mentioned particularly when it is tolerably clear, as I have sought to demonstrate, what the annual rental income was and how the corresponding assessable value shown in the Tax Demand was arrived at. 

67.  An additional reason for my conclusion is that there is no evidence that D received anything from the tenant over and above the monthly rent.  Indeed, there appears to be no dispute that D (and not the tenant) was responsible for paying rates. 

68.  For all these reasons, I find that, on the balance of the evidence, the annual rental income for the Land for each of the 11 financial years under discussion was HK$120,000 per year. 

69.  Turning to expenses incurred, the parties are in agreement:

Year	Rate  (HK$)	Government rent (HK$)	Property tax (HK$)
1 April 2004 to 31 March 2005	23,700	14,220	1,920
1 April 2005 to 31 March 2006	23,700	14,220	3,081
1 April 2006 to 31 March 2007	23,700	14,220	7,902
1 April 2007 to 31 March 2008	5,025	12,060	470
1 April 2008 to 31 March 2009	0	12,060	1,800
1 April 2009 to 31 March 2010	7,164	11,498	1,755
1 April 2010 to 31 March 2011	7,164	11,498	1,755
1 April 2011 to 31 March 2012	7,164	11,498	1,755
1 April 2012 to 31 March 2013	188	11,498	1,797
1 April 2013 to 31 March 2014	7,164	11,498	1,737
1 April 2014 to 31 March 2015	13,164	11,498	1,602

70.  In respect of property tax, section 5(1) of the IRO provides that it is charged on the net assessable value of land or buildings or land and buildings wherever situate in Hong Kong and section 5(1A) defines net assessable value as the assessable value less (a) the rates where the owner agrees to pay them and (b) an allowance for repairs and outgoings of 20% of the assessable value after deduction of any rates. 

71.  Given the way in which the tax returns were apparently compiled, particularly when it seems that rates deductible were not deducted, there may be some discrepancy between the amount of property tax paid and the amount of property tax that ought to be paid. That said, the parties have not taken issue.  In addition, I have no means to ascertain whether there was in fact any discrepancy, bearing in mind that the actual property tax paid was computed under personal assessment, which may or may not have reduced the tax liability.  Accordingly, I shall adopt the figures agreed by the parties. 

72.  In the circumstances, I find that the net income for the 11 financial years under discussion was:

Year	Net income (HK$)
1 April 2004 to 31 March 2005	80,160
1 April 2005 to 31 March 2006	78,999
1 April 2006 to 31 March 2007	74,178
1 April 2007 to 31 March 2008	102,445
1 April 2008 to 31 March 2009	106,140
1 April 2009 to 31 March 2010	99,583
1 April 2010 to 31 March 2011	99,583
1 April 2011 to 31 March 2012	99,583
1 April 2012 to 31 March 2013	106,517
1 April 2013 to 31 March 2014	99,601
1 April 2014 to 31 March 2015	93,736

E6.     Between 1 April 2015 to 31 March 2018

73.  In the 2^nd Account, D reported that the annual rental income for the 3 financial years was HK$120,000 per year.  The reported figures, at least for the 2 financial years ended 31 March 2016 and 2017, are supported by the Tax Demands for those 2 years. 

74.  In the 3^rd Account, D amended the annual rental income for the financial year ended 31 March 2016 to HK$110,000 and for the 2 financial years ended 31 March 2017 and 2018 to HK$100,000 per year.  The claim was maintained in the 4^th Account. D explained in his second response to Ps’ objections that the amended figures were the actual amount received according to his bankbooks.  He also said the figures in the Tax Demands for the 2 financial years ended 31 March 2016 and 2017 were wrong because he had filled in the tax returns without checking the bankbooks. 

75.  For the first, second third and fifth reasons identified at §§58-60 & 62 above, which are applicable here mutatis mutandis, I reject D’s claim. 

76.  Mr Chong submits that the rates for the 3 financial years under discussion should be added to the annual rental income.  I reject that submission because:

76.1   As I have said above, the evidence on balance is that the annual rental income was HK$120,000.  There is no evidence that the rent was increased at any point during the 3 financial years under discussion.

76.2   Unlike the situation concerning the 11 financial years discussed in section E5 above, there is no evidence, and D has not said, that the assessable value in the Tax Demands for the financial years ended 31 March 2016 and 2017 was derived by deducting rates from the annual rental income. 

77.  Accordingly, I hold that the annual rental income for each of the 3 financial years under discussion was HK$120,000 per year. 

78.  The parties are ad idem in respect of the expenses incurred.  

78.1   For the financial year ended 31 March 2016, D paid HK$9,676 for rates and HK$11,498 for Government rent. 

78.2   For the financial year ended 31 March 2017, D paid HK$11,164 for rates, HK$11,498 for Government rent and HK$1,673 for property tax. 

78.3   For the financial year ended 31 March 2018, D paid HK$11,164 for rates, HK$11,499 for Government rent and HK$1,674 for property tax. 

79.  In the premises, the net income for each of the 3 financial years under discussion was:

79.1   For the financial year ended 31 March 2016, HK$98,826.

79.2   For the financial year ended 31 March 2017, HK$95,665.

79.3   For the financial year ended 31 March 2018, HK$95,663.

E7.     Other expenses claimed by D

80.  D claims legal costs and disbursements in relation to DCCJ 2777/2011 (totalling HK$171,005) and for costs of fencing the Land (in the sum of HK$20,000).  D claims the fencing work was later abandoned. 

81.  During cross-examination, D confirmed he does no request for the legal costs to be included in the account as a discharge.  He said his solicitors took care of the matter and he did not request them to include the legal costs in the account.  In respect of the fencing costs, he also agreed when cross-examined that he would not claim the same. 

82.  Ms Chan complains that the answers were “unfairly extracted” from D.^[16]  I do not agree.  The cross-examination was conducted in Punti, which D has no trouble understanding or speaking.  Mr Chong was entitled to ask the questions he did.

83.  Ms Chan then submits that the supporting documents concerning the claim “can hardly be disputed” and it is clear that “payment was made”.^[17]  I am not sure she is right either.  I have only been shown fee notes from D’s solicitors (the same firm of solicitors presently acting for him), which are plainly not receipts, and a document from a construction company recording the labour and material costs for erecting a fence, which does not appear to be a receipt.  In other words, there is no evidence of payment or that D has incurred such expenses. 

84.  For these reasons, I consider D is not entitled to claim the legal costs and the fencing costs.

85.  As for the rates and Government rent for the Land for the financial year ended 31 March 2019, I agree with Mr Chong’s submission that it is not appropriate to deal with them now bearing in mind D has not yet accounted for any income received for that year.  In this regard, for financial years that D claims there was no rental income, he would put nil in his account.  However, in the 4^th Account, D left the relevant box empty but did not put nil thus suggesting that he has yet to account for any income received that year. 

E8.     Summary

86.  Taking into consideration all my findings made above, the account of the income and expenditure received and incurred by D of the Land is set out at Annex 1 to this Judgment. 

87.  Mr Chong seeks an order, and I so order, that D do pay Ps the sum due to them in respect of their share of the Land, which represents one quarter of the total net income.  Based on the account in Annex 1, the total net income is HK$2,357,266 and ¼ of that is HK$589,316.50. 

F.     Interest

88.  Ps claim both pre-judgment and post-judgment interest on the sum found to be payable by D to them.  

89.  Insofar as pre-judgment interest is concerned, Ps’ claim is predicated on section 48 of the High Court Ordinance (Cap 48) or in equity.^[18] Mr Chong asks for either compound interest, on the basis that D had allegedly wrongfully profited from his misconduct, or simple interest at 1% over prime. 

90.  Ps’ claim is fatal as they have not pleaded any claim for interest in either the statement of facts in the body of their Statement of Claim or in the prayer.  See Order 18 rule 8(4); Tai Ying Fat v Many Harvest Construction Co Ltd (HCCT 47/2009, 21 November 2011) at §§17-18 (Saunders J); Hong Kong Civil Procedure (2020), Vol 1, §18/8/8. 

91.  Further, the CA Order did not order or award any pre-judgment interest on the sum found to be payable by D to Ps, presumably precisely because Ps did not plead such interest. 

92.  The case that Mr Chong cites, i.e. Lee Yuk Shing v Dianoor International (in Liquidation) (CACV 185/2015, 23 May 2016), is distinguishable because although the plaintiff in that case did not plead breach of contract, the material facts pleaded in his pleading supported such a claim and the prayer asked for a declaration that the plaintiff is entitled to return the purchase price and commission paid. 

93.  It should also be said that notwithstanding that Ms Chan had already taken the pleading point in her Opening Submissions (at §§29-33), Mr Chong never applied to amend Ps’ pleadings. 

94.  Insofar as post-judgment interest is concerned, I will make the usual order for post-judgment interest on the sum payable by D to Ps at judgment rate from the date of this Judgment until full payment. 

G.     Conclusion

95.  For all the above reasons, I order that D do pay Ps the sum of HK$589,316.50, as their share of the net income from the Land for the period between June 1984 and 31 March 2018, together with interest thereon at judgment rate from the date of this Judgment until full payment. 

96.  There is no reason why Ps should not get their costs.  I make a costs order nisi that D is to pay Ps’ costs of and incidental to the present application for an account and inquiry, including all reserved costs and any costs not covered by previous orders, to be taxed if not agreed with certificate for one counsel. 

97.  Mr Chong invites me to give liberty to apply to cater for eventualities and to correct any mistakes in my calculations.  Insofar as there are any clerical or calculation mistakes, there are redress mechanisms under the Rules of the High Court that parties may resort to in an appropriate case.  That said, I see no reason in principle against ordering liberty to apply, and I so order.  

HCA 2089 of 2009

Annex 1