許尊明 v. 歐振清

  DCCJ 5396/2005

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 5396 OF 2005

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[Consolidated by the Order of Master Tracy Chan dated 9^th January 2006]

JUDGMENT

Background

1.  The Plaintiff ("Mr. Hui)" originally commenced 4 separate proceedings in the Small Claims Tribunal.  These proceedings were transferred to the District Court and consolidated by order of Master Tracy Chan on 9 January 2006.  This is the trial of the consolidated action.

2.  As can be seen from the Statement of Claim filed in the consolidated action, Mr. Hui's claims against the Defendants are made in his capacity as the executor of the estate of his father, the late Hui Chun Yuen.  It is not in dispute that at all material times, the late Mr. Hui, the 1st Defendant ("Mr. Au"), the 2nd Defendant (" Mr. Yung"), one Mr. Fong, and one the late Mr. Soo were the joint registered owners of 4 properties at Greenary Plaza in Tai Po, New Territories ("the Properties").  The Properties were identified in the Statement of Claim as respectively Shop 1A, Shop 1B, Shop 34, and Shop 35.

3.  The Properties were let out at different rents.  At a meeting held on 30 May 2004 which was attended by all the joint owners, Mr. Au was appointed and authorized to collect the monthly rent of the Properties for and on behalf of all the owners.  The owners agreed that Mr. Au would be paid $3,000 a month out of the rental collected, as his remuneration.  The owners also agreed at the meeting on 30 May 2004 that a sum of $25,000 would be distributed to each of them each month out of the monthly rent collected from the Properties.  Accounting of the income and expenditure of the Properties was conducted by one Madam Chan, who was remunerated for her work at the rate of $1,000 per month, also to be paid out of the rental income of the Properties.  These facts are not in dispute.

4.  There is further no dispute that the rental income of the Properties were deposited into an account maintained at the Bank of China (Hong Kong) ("the Account") in the joint names of Mr. Au and Mr. Yung, who (as they admit in their Defence) at all material times held the money in the Account in trust for the co-owners of the Properties.  According to Mr. Au, the Account was used purely for the income and expenditure of the Properties.

5.  The parties accept that the owners' agreement to draw $25,000 per month from the Account is not equivalent to their agreeing that such monthly drawings are exhaustive of or equivalent to their full entitlement to the rental income from the Properties.

6.  Mr. Hui claims that by a letter dated 21 March 2005, he had informed Mr. Au that his authority to collect the rent of Shop 34 and Shop 35 on Mr. Hui 's behalf would be revoked with effect from 1 April 2005, and demanded Mr. Au to pay over to him his share of the rental income from the Properties for the month of March 2005.  The tenancies in respect of Shop 1 and Shop 1A were to expire on 31 March 2005.  Mr. Hui claims that notwithstanding such revocation, Mr. Au continued to collect the rent from Shop 34 and Shop 35 after 1 April 2005.

7.  In these consolidated proceedings, Mr. Hui claims from Mr. Au and Mr. Yung the following :-

8.  It takes effort to understand from the Defence and the pleadings filed in the consolidated proceedings the exact defence put forward to Mr. Hui's claims.  At the commencement of trial on the first day, Counsel for the Defendants finally confirmed that Mr. Au and Mr. Yung accepted that the late Mr. Hui died testate and that Mr. Hui is the sole executor appointed under the late Mr. Hui's will under probate granted by the court.  Although it was originally pleaded in the Defence that Mr. Hui had no authority to revoke Mr. Au's appointment and authority to collect the rental income of the Properties on Mr. Hui's behalf, Counsel for the Defendants also confirmed at the commencement of trial that Mr. Hui's revocation of Mr. Au's authority was no longer in issue.

9.  In answer to Mr. Hui's claim for the sum of $45,000, being his share of the rental due in respect of Shop 34 and Shop 35 for July, August and September 2005, the Defendants claim that Mr. Hui should be bound by an agreement made by the other co-owners that the rent for July and August 2005 should be kept in the Account as reserve, and not distributed. This was never raised in the pleadings.  According to the Defence, the Defendants only allege that Mr. Hui is entitled to his share of the rent of Shop 34 and Shop 35 only after deduction of a reserve for government rent and expenditure, which were particularized to be the sum of $28,232.60 per month (item 5 of the Supplemental Answers to Request for further and better particulars, dated 6 May 2006(" Supplemental Answers")).

10.  On the basis of the Defence and the further and better particulars served by the Defendants, the only answer to Mr. Hui's claim for the sum of $38,686.53 (being his share of the balance in the Account) is that Mr. Hui is only entitled to his share after deduction of a reserve for government rent and "other expenditure" in respect of the Properties, which reserve and expenditure were, again, particularised as the total sum of $28,232.60 per month (item 4 of the Supplemental Answers).  On the face of these particulars, therefore, the only amount in dispute in relation to Mr. Hui's claim for his share of the balance in the Account is the sum of $10,453.93.  This was raised at the commencement of trial, but the Defendants’ final position was simply to put Mr. Hui to proof of his claim for the sums due, with the claim that Mr. Hui had made wrong calculations of the amount due to him. 

Issues

11.  Mr. Hui's capacity as executor and his revocation of Mr. Au's authority to collect the rent on his behalf no longer being in issue, no further dispute has been raised in the pleadings filed with regard to Mr. Hui's right to payment of his share of the rent collected from the Properties.  The only dispute relates to the calculation of the amount payable to him.

12.  Accordingly, the remaining issues for determination at trial are:

Did Mr. Hui agree that a reserve should be maintained ?

13.  Mr. Au and Mr. Yung rely upon a meeting held on 15 March 2005, which was attended by all the joint owners with the exception of Mr. Hui. At this meeting, it was resolved that any further matters in relation to tenancies affecting the Properties would have to be resolved at meetings of the owners, and to be decided by the majority of the owners.  Mr. Hui claims that he had never received any notice of such meeting, and that he never attended such meeting nor agreed to the resolution purportedly passed by the other owners at the meeting.  It is not disputed that the meeting was held in Mr. Hui's absence.  Mr. Au further seeks to rely on a meeting of the owners held on 3 August 2005, whereby the joint owners with the exception of Mr. Hui agreed to set up a reserve fund of $500,000 for rental deposit refund and maintenance expenditure payable in respect of the Properties. This reserve fund is different to the reserve for government rent and other expenditure in the sum of $28,232.60 particularized in the Supplemental Answers.  Although counsel for Mr. Hui objected to this reserve fund being raised by the Defendants by way of defence as it was never raised in the pleadings, the issue can be easily disposed of. 

14.  Counsel for the Defendants argues that Mr. Hui is bound by the resolutions made at the meetings on 15 March 2005 and 3 August 2005 by the majority of the joint owners.  He accepts that the joint owners had not agreed on any rules for holding meetings and deciding on matters relating to the Properties prior to the meeting on 15 March 2005.  He argues that the basis of the validity of any meeting of the joint owners should be the benefit of the parties and it suffices that "the major part of the majority in favor of the decision" reached at the meeting be required to attend such meeting. 

15.  I do not accept the Defendants' submissions in this regard.  In issue is not the resolution of a corporation.  Here we have individual owners, and whether Mr. Hui is bound by the agreement to set up a reserve fund of $500,000 is simply to be determined by whether he had by word or by conduct agreed to the setting up of the reserve fund.  In the absence of any evidence of the joint owners having agreed at any time before 15 March 2005 that decisions relating to the Properties would be made by the majority of the owners, or by Mr. Au on their behalf, I find on the evidence that Mr. Hui had never agreed to the setting up of a reserve fund of $500,000 in relation to the Properties.

16.  As counsel for Mr. Hui has correctly pointed out, Mr. Hui and the other 4 owners hold undivided shares in the Properties as tenants in common.  As tenants in common, counsel for Mr. Hui submits that the agreement of all the co-owners is required in the management of the Properties.  No submissions were made by counsel for the Defendants in this respect by way of challenge.

17.  On the first issue, therefore, I find that Mr. Hui is not bound by the agreement of the other 4 owners to set up a reserve fund in respect of the Properties.  Nor is Mr. Hui bound by the resolution to such effect purportedly passed at the meeting on 3 August 2005.

What is the amount due to Mr. Hui in respect of his share of either the balance in the Account or the rental received ?

18.  In relation to Mr. Hui's claim for the total sum of $45,000 as his share of the rental income from Shop 34 and Shop 35 for July, August and September 2005, paragraphs 24 and 25 of the Statement of Claim set out Mr. Hui's calculations of his 1/5 share of the total monthly rent of $75,000 for the 3 months, namely $15,000 per month.  The Defendants do not dispute the monthly rent of $75,000 collected, and have only claimed that Mr. Hui is only entitled to his share of such rental income after deduction of $2,837 for government rents, $1,000 for Madam Chan's remuneration and $3,000 for Mr. Au's remuneration.  In their Supplemental Answers, the Defendants claim that the amount to which Mr. Hui is entitled for his share in the monthly income for Shop 34 and Shop 35 is $28,232.60 per month.

19.  Despite the Defendants' claim in the Supplemental Answers that the joint owners had to pay $2,837 for government rent in respect of the Properties, counsel for Mr. Hui has referred to the tenancy agreements produced in evidence, from which it appears that the tenants of Shop 1A and Shop 1B were obliged under the agreements to pay government rent.  Further, no evidence has been produced as to the amounts paid or payable by way of government rent in respect of Shop 34 and Shop 35.

20.  In view of the particulars given in the Supplemental Answers, the Defendants admit that Mr. Hui is entitled to a share of $28,232.60 per month in respect of Shop 34 and Shop 35.  As such, I fail to see how the Defendants can resist Mr. Hui's claim to be paid $15,000 a month in respect of his share of the rent from Shop 34 and Shop 35.  That is all Mr. Hui seeks in these proceedings in relation to Shop 34 and Shop 35 for the months of July, August and September 2005.

21.  Counsel for the Defendants referred to a purported payment of $25,000 in respect of Mr. Hui's share of the rent from Shop 34 and Shop 35 for September 2005.  By a letter dated 23 March 2007 (after commencement of these proceedings), the Defendants' solicitors sent to Mr. Hui's solicitors a cheque for the sum of $501,539.22, together with a breakdown of Mr. Hui's share of rent from June 2005 to February 2007.  The breakdown includes a sum of $25,000 for the month of September 2005.  There was subsequent correspondence between the solicitors in which the Defendants' solicitors pressed for a receipt in respect of the aforesaid payment, and the solicitors for Mr. Hui referred to other payments received from the Defendants' solicitors being held by them as stakeholders.  Mr. Au was not clear in his evidence as to whether he had arranged for payment of the sum of $501,539.22, and further could not recall whether payment of $25,000 had been made to Mr. Hui for September 2005.  In the absence of any clear evidence that payment had been made to andreceived by Mr. Hui through his solicitors of the sum of $25,000 for September 2005, I am unable to make any finding in this respect.

22.  For the avoidance of doubt, the Defendants have not made any counterclaim for a declaration that they are entitled to deduct from the rent received in respect of the Properties either the sum of $47,859 which they have referred to in their Supplemental Answers as "other expenditure" for the Properties, or the sum of $2,837 as government rent.  I have not been referred to any evidence which justifies these payments, and I make no finding in this regard. 

23.  In relation to Mr. Hui's claim for the sum of $38,686.53 as his 1/5 share of the balance in the Account as at 2008 February 2005, Mr. Hui has set out his calculations in paragraph 19 of the Statement of Claim.  These calculations are made on the basis of the statement of account from the Bank of China (Hong Kong) as at 28 February 2005, showing a credit evidence of $178,432.65. 

24.  The Defendants have simply put Mr. Hui to proof of the sum claimed.  From the calculations set out in the Statement of Claim and from the evidence of Mr. Hui, I consider that he has established a prima facie case that the sum of $38,686.53 is due.  I can find nothing in the Defendants' evidence to suggest that his calculations are incorrect, or that further payments ought to be deducted from the balance of $178,432.65.

25.  Importantly, the Defendants admit that they hold the money in the Account on trust for Mr. Hui and the other joint owners of the Properties.  As trustees of the rent collected and paid into the Account in the names of Mr. Au and Mr. Yung, the Defendants are under a duty to account to Mr. Hui in respect of the money received and held in their names.  It is not open to either Mr. Au or Mr. Yung, as trustees, to simply say to Mr. Hui that his calculations of his share in the Account are wrong, and hence not payable, without explaining or giving a full account of the amount which they say represent Mr. Hui's share in the balance of the Account or the trust funds.  This, in effect, is what the Defendant have chosen to do by their conduct of the defence in these proceedings.  They persisted in such line of defence notwithstanding queries raised by the court on the first day of trial.  At the conclusion of the evidence of the witnesses, I have not been referred to any evidence which establishes a valid defence to Mr. Hui's claims.

26.  In the absence of any satisfactory evidence from the Defendants to challenge Mr. Hui's claim of $38,686.53 on the basis of his calculations of his 1/5 share in the balance of the Account, I give judgment in his favor of the said sum. 

Conclusion

27.  I give judgment in favor of Mr. Hui for the sums of $45,000 and $38,686.53, with interest at judgment rate.  For the reasons set out in paragraph 25 above, I will also make an order nisi that the costs of these proceedings are to be paid by the Defendants to Mr. Hui on an indemnity basis, with certificate for counsel, to be taxed if not agreed.  Such order nisi will be made absolute upon the expiry of 14 days from the date hereof.