FUNG CHEK FAN AND OTHERS v. FUNG YIU TUNG, Executor of Estate of FUNG HON, Deceased

HCMP 600/2019

[2024] HKCFI 2878

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 600 OF 2019

BETWEEN

_______________________________

________________________

JUDGMENT

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1.   Introduction

1.1  Mr Fung King (“Father”) passed away on 30 November 2004. At the time of Father’s demise, he was survived by 5 children, namely the 1^st Plaintiff, the 2^nd Plaintiff (“Pak Shan”), 3^rd Plaintiff (“Grace”), Mr Fung Hon (“Deceased”) and Mr Fung Tack Shing (“Tack Shing”) (collectively “Siblings”).

1.2  The Deceased passed away on 29 May 2018. Mr Fung Yiu Tung (“Anthony”) is the Deceased’s son and the executor of the Deceased’s estate[1], and in that capacity, the Defendant in these proceedings.

1.3  The subject matter in these proceedings is principally a property known as Ground Floor, No 300 Queen’s Road West, Hong Kong (“Property”). The Property has generated two actions involving some or all of the Siblings, namely HCA1823/2006 (“2006 Action”) and, unfortunately, the present proceedings.

1.4  In the 2006 Action, the Plaintiffs and the Deceased sued Tack Shing, which action was eventually settled by way of a Tomlin Order dated 31 August 2009 (“Tomlin Order”). The Tomlin Order made provisions on how the Siblings were to deal with the Property and shares of various listed companies. It is pertinent to note that whether in respect of the Property and the shares of the listed companies, the Tomlin Order recognized that the Siblings each had an equal share or interest in them.

1.5  In these proceedings, the Plaintiffs seek the following relief against the Defendant:

(1) A declaration that each of the Plaintiffs is a beneficial owner of the Property each owning 25% of the beneficial interest in the Property[2];

(2) An order for sale of the Property pursuant to the Partition Ordinance Cap 352 (“PO”); and

(3) An account from the Defendant and an order that the Defendant do pay to the Plaintiffs the sum due on the taking of the account.

1.6  Conversely, the Defendant counterclaims against the Plaintiffs a total sum of HK$2,163,300 (“Counterclaimed Sum”). The Counterclaimed Sum comprises the following items:

(1) HK$333,300 being reimbursement of the Plaintiffs’ share of the property tax paid by the Deceased in respect of the Property;

(2) HK$300,000 being reimbursement for expenses for trips taken by the Plaintiffs;

(3) HK$1,500,000 which the Plaintiffs had agreed to pay to the Deceased for handling and managing the 2006 Action; and

(4) HK$30,000 being the sum agreed to the paid by the Plaintiffs as condolence money for the Deceased’s demise.

1.7  By closing submissions, the disputes between the parties have considerably narrowed.

(1) The Defendant agrees that an account should be taken for the rental proceeds generated from the Property[3] subject to deductions of the Counterclaimed Sum in respect of which there is a dispute on the quantum of some of the items; and

(2) The parties agree that there should be an order for sale pursuant to the PO[4].

1.8  What continues to be in dispute is the declaratory relief sought by the Plaintiffs. It is common ground that, after the Tomlin Order, Tack Shing’s share in the Property was bought out. Prior to that, the registered owners of the Property were the 1^st Plaintiff, Pak Shan, the Deceased and Tack Shing. After Tack Shing’s shares were bought out, the registered owners of the Property became, and still are, the 1^st Plaintiff, Pak Shan and the Deceased. It is the Plaintiffs’ case that, despite the legal ownership, Grace always had and still has a beneficial interest in the Property. On the evidence, as will be detailed below, the foregoing appears to be the clear position. The Defendant, however, says that Grace’s beneficial interest in the Property ought to be defeated by the clean hands doctrine such that the Property is only owned, legally and beneficially, by the 1^st Plaintiff, Pak Shan and the Deceased in equal shares.

1.9  At the trial, the Plaintiffs were represented by Mr Victor YC Cheng and the Defendant by Mr Johnny CM So (with Mr Chau Hin Chung), all of counsel.

2.   Background facts

2.1  Counsel have prepared a relatively detailed joint chronology and managed to reach an important agreement on the distribution of the income generated from the Property during the trial. In the light of the curtailed scope of disputes between the parties mentioned at §1.7 above and agreements reached at the hearing, it is unnecessary to set out the events set out in the joint chronology in extenso. Unless otherwise stated, the matters stated in this section are not disputed or indisputable.

2.2  In 1979, Father acquired a piece of land registered at the Land Registry as No 300 Queen’s Road West (“Land”) and engaged a building contractor to build a 5-storey building (“Building”) on the Land. The Property, which is the ground floor of the Building, is a shop space which has at all material times been rented out to generate rental income.

2.3  By a deed of gift dated 12 July 1999 (“Deed of Gift”), Father gifted the Property to the 1^st Plaintiff, Pak Shan, Tack Shing and the Deceased as tenants-in-common in equal shares. It is the Plaintiffs’ evidence that, despite the legal ownership of the Property, Father had in fact also gifted the Property to Grace, such that the Property was owned by the Siblings in equal shares (20%). Grace was married in 1979 but was separated from her husband since October 1992. It is the Plaintiffs’ evidence that Father decided not to include Grace as a legal owner as Father did not want Grace’s husband to have a claim on the Property in the event of divorce proceedings. Despite Grace’s lengthy separation from her husband, no divorce proceedings have ever been commenced.

2.4  Despite the Deed of Gift, Father had collected the rental income from the Property for his own expenses. Following Father’s demise in November 2004, Tack Shing became responsible for collecting and distributing the rental income generated from the Property to himself and the rest of the Siblings.

2.5  Prior to Father’s demise, Father had made a number of other inter vivos gifts to the Siblings. Shortly after Father’s demise, the 1^st Plaintiff, Pak Shan, Tack Shing and the Deceased (ie the then registered owners of Property) on 12 December 2004 signed a document titled “Family Agreement” (“2004 Agreement”) in which they declared, inter alia, that the Property was also jointly owned by Grace (Clause 7) and the income generated from the Property would be divided into 5 equal shares (Clause 8).

2.6  As mentioned earlier, the 1^st Plaintiff, Pak Shan, Grace and the Deceased sued Tack Shing by way of the 2006 Action which was eventually settled by the Tomlin Order. During the currency of the 2006 Action, it is the Plaintiffs’ evidence that Tack Shing kept 20% of the rental income generated from the Property and the Deceased collected 80% of the rental income and distributed the same to the Plaintiffs and himself.

2.7  In so far as relevant to these proceedings, the Tomlin Order provided as follows:

(1) The Property was to be sold within 60 days at a price of not less than HK$7,500,000 and in any event the Siblings would take all reasonable steps to sell the Property at market value or the highest offer from any buyer or intended buyer whichever is the higher (collectively “Highest Market Price”);

(2) The Siblings were at liberty to buy each other(s)’ share of the legal and equitable estate and interest in the Property based on the Highest Market Price; and

(3) The net proceeds of the sale of the Property would be distributed to the Siblings in 5 equal shares.

2.8  As shown in an assignment dated 26 November 2009 (“Assignment”), Tack Shing’s share in the Property was bought out at a consideration of HK$1,680,000. It is the Plaintiffs’ evidence that the 1^st Plaintiff, Pak Shan, Grace and the Deceased each contributed HK$420,000 (HK$1,680,000/4) to buy out Tack Shing’s share in the Property.

2.9  The Assignment only conveyed the Property into the names of the 1^st Plaintiff, Pak Shan and the Deceased as tenants-in-common in equal shares.

2.10  Also on 26 November 2009, the 1^st Plaintiff and Pak Shan (with the agreement of Grace) executed a power of attorney (“POA”) appointing the Deceased to, inter alia, manage the Property. This is because the 1^st Plaintiff, Pak Shan and Grace resided in Canada. The Deceased collected the rents generated from the Property and from time to time made distributions to the Plaintiffs.

2.11  It is the Plaintiffs’ pleaded case that an account should be rendered from 26 November 2009, ie the date of the POA.

2.12  As agreed by the parties during the trial[5]:

(1) The total rental income generated from the Property for the period from November 2009 to April 2024 is HK$6,469,500;

(2) The Plaintiffs have each received approximately HK$953,000[6] between November 2009 to March 2017; and

(3) Condolence money of HK$30,000 should be deducted from the rental income.

2.13  Thus, even were the Defendant to succeed on the Counterclaimed Sum in its entirety (and for the reasons stated below the Defendant does not), there remains rental income unaccounted for. As each Plaintiff received HK$953,000, that would account for [HK$953,000 x 4 =] HK$3,812,000. Even taking into account the entirety of the Counterclaimed Sum, that would only account [HK$3,812,000 + HK$2,163,300 + HK$111,100[7] =] HK$6,086,400 which is still less than the income generated in the sum of HK$6,469,500. As stated earlier, the Defendant, in view of the agreed calculation, no longer maintains that an account should not be taken. However, the Plaintiff’s proper entitlements are complicated by the fact that it is part of the Plaintiffs’ case that part of the rental income generated was agreed to be used to invest in various listed companies over the years.

2.14  On 13 December 2016, the 1^st Plaintiff, Pak Shan, Grace and the Deceased executed a document by which the parties thereto acknowledged that Grace was entitled to 25% of the Property despite the fact that she was not a registered owner (“2016 Agreement”).

2.15  I now turn to the disputed issues. Pak Shan and Grace gave evidence at the trial for the Plaintiffs and Anthony himself gave evidence. Given the curtailed scope of disagreement, only a handful of disputed factual findings are required to be made. I generally prefer the evidence of Pak Shan and Grace, as it is backed up by contemporaneous evidence. In my view, the cogency of Anthony’s evidence is suspect, as it contained many unsupported allegations. As set out below, Mr So in closing did not seriously vouch for the Defendant’s factual case.

3.   Whether Grace has 25% beneficial interest in the Property

3.1  During the trial, Anthony acknowledged that he was not privy to the discussions between Siblings and in particular between the Plaintiffs and the Deceased in relation to the Property. Mr So also confirmed in closing that it is not part of the Defendant’s case to call into question the validity of the 2004 Agreement, the Tomlin Order and/or the 2016 Agreement, all of which clearly acknowledge Grace’s interest in the Property, namely 20% prior to the 2006 Action and 25% after Tack Shing’s share in the Property was bought out.

3.2  I have no hesitation in finding that the Property was jointly owned by the Siblings in equal shares prior to the 2006 Action (20% each) and by the Plaintiffs and the Deceased in equal shares after Tack Shing’s shares had been bought out by the Plaintiffs and the Deceased (25% each). As I understand Mr So, he does not enthusiastically suggest otherwise[8].

3.3  The point which Mr So rigorously pursues is premised on what is pleaded at Defence and Counterclaim §7. It is the Defendant’s pleaded case that the arrangement to “hide” Grace’s ownership in the Property was an attempt to dissipate her assets before formal commencement of her matrimonial proceedings, and it is said that by doing so Grace is not entitled to any remedy from the law of equity.

3.4  It may be immediately pointed out that, on the evidence, the Deceased himself had agreed to the arrangement and the Defendant stands to gain were Grace’s interest in the Property denied.

3.5  Mr So refers to Grace’s own evidence which is to the effect that one of the main reasons for her not being a registered owner of the Property was her concern that her interest in the Property would be affected in the event of divorce proceedings. Grace, however, clarified that an additional reason for her not being a registered owner following the Tomlin Order was premised on her desire to avoid paying extra stamp duty as she thought that the Property would then be sold in the near future.

3.6  On the clean hands doctrine, Mr So relies principally on The Pui Ying Middle School of Hong Kong v The Hong Kong Council of the Church of Christ in China [2021] HKCFI 692. In the context of specific performance, DHCJ Man SC said as follows:

“ [228] One who comes to equity must come with clean hands. By this maxim, specific performance is denied to a claimant whose past conduct has been highly improper. Mr Wong cited Roger VP’s judgment in Ng Yat Chi v Max Share Ltd & anor [2001] 1 HKLRD 561 (CA) (at 573D): “It seems to me that it cannot be right that a person can rely on principles of justice and equity when he founds his claim on an agreement which not only has he not honoured but has deliberately abused.” In that case, the “equity sued for” was a winding-up order on the just and equitable ground. In refusing leave to appeal, Ribeiro PJ similarly said in (2001) 4 HKCFAR 299 at 302I:

‘ We also agree with the Court of Appeal that it lies ill in the mouth of a petitioner who has defrauded the company and his fellow investors to complain that he has not been accorded equitable treatment by those other investors, characterised as members of an alleged quasi-partnership. It is a well-known principle that he who seeks equity must do equity...’

[229] But one needs to be cautious because all this was said in the context of the just and equitable winding-up jurisdiction. Roger VP in fact distinguished Lord Cross’s dictum in Ebrahimi because Ng Yat Chi was concerned with a deliberate abuse of position (siphoning off of profits) which fundamentally negatived the original agreement of mutual trust and confidence, as opposed to misconduct that was merely causative of the breakdown: 573A-D. The abuse was so fundamental that Rogers VP did not actually analyse whether this was indeed an application of the “clean hands” maxim: 572G.

[230] The English Court of Appeal expressed the bar in more cautious terms. In RBS v Highland Financial Partners [2013] 1 CLC 596, Aiken LJ held at [159] that the scope of application of the “unclean hands” doctrine is rather limited:

‘ It was common ground that the scope of the application of the ‘unclean hands’ doctrine is limited. To paraphrase the words of Lord Chief Baron Eyre in Dering v Earl of Winchelsea the misconduct or impropriety of the claimant must have ‘an immediate and necessary relation to the equity sued for’. That limitation has been expressed in different ways over the years in cases and textbooks. Recently in Fiona Trust & Holding Corp v Privalov Andrew Smith J noted that there are some authorities in which the court regarded attempts to mislead it as presenting good grounds for refusing equitable relief, not only where the purpose is to create a false case but also where it is to bolster the truth with fabricated evidence. But the cases noted by him were ones where the misconduct was by way of deception in the course of the very litigation directed to securing the equitable relief. Spry: Principles of Equitable Remedies suggests that it must be shown that the claimant is seeking ‘to derive advantage from his dishonest conduct in so direct a manner that it is considered to be unjust to grant him relief’. Ultimately in each case it is a matter of assessment by the judge, who has to examine all the relevant factors in the case before him to see if the misconduct of the claimant is sufficient to warrant a refusal of the relief sought.’

[231] This paragraph was cited with approval in Snell’s Equity (34th edn) at [5-010]. The learned author stressed that the question is not whether any general moral culpability can be attributed to the party seeking relief. Rather, one asks whether relief should be denied because there is a sufficiently close connection between that party’s alleged misconduct and the relief sought. In Spry, Equitable Remedies (9th ed) at 5:

‘ This is doubtless a maxim which is both striking and succinct and which may be found to be of value for many explanatory or justificatory purposes. But when its content is examined it is seen that it is of little or no use in assisting a court to decide whether, if specific performance is sought, relief should in the particular circumstances be refused… Again, it has been laid down that the absence of clean hands is of no account ‘unless the depravity, the dirt in question on the hand, has an immediate and necessary relation to the equity sued for’ ’ (emphasis added)

[232] This notion of “immediate and necessary relation” requires that (1) such misconduct must be wanting in good faith (2) it must be “in the transaction” which is the basis of the suit. The court does not conduct a balancing exercise of the improprieties on each side: Sang Lee Investment v Wing Kwai Investment [1983] HKLR 197 at 208E, 209G (PC) (Lord Brightman).

[233] I believe the takeaway from this limited review of authorities is that the doctrine is to be applied cautiously. It is certainly not the case that whenever a claimant has done something in the course of the history of the dispute which may attract criticism, a decree of specific performance will be refused. It is a fact-sensitive analysis that examines all relevant factors to see if the misconduct is sufficient to warrant the refusal of the relief sought: RBS v Highland Financial Partners at [159].” (emphasis added)

3.7  Mr So also relies on Yim Bo Ying v Chung Iu Warm, CACV 125/1084, 19 April 1985 in which the Court of Appeal endorsed the propositions set out in the following cases:

“ [35] Gascoigne v Gascoigne established the proposition that where a person pats property into the name of his wife or child, he is not permitted to rebut he presumption of advancement thereby raised by leading evidence that his motive was not one of advancement but in reality to effectuate an illegal or immoral purpose. There a man took a lease of land in his wife's name and built a house on it with his own money. This he did to save his property from his creditors, and his wife knew about the motive and connived in the transaction. When the man later claimed the beneficial interest, Lawrance, J. and Lush, J. held that he could not be allowed to rebut the presumption of advancement by setting up his own “illegality and fraud” - whether or not the point had been taken at the trial.

[36] The same principle was applied in Re Emery's Investment Trust by Wynn-Parry, J. In that case a husband bought American bonds in the name of his wife, who was a citizen of the U.S.A., to evade American Federal tax. The intention found by the Judge was that the spouses should own the bonds in equal proportions in equity. It was held that the presumption of advancement could only be rebutted by proof of the intent to evade tax, and the husband would not be permitted to prove this intent. And so, despite the fact that the wife was a party to the design, she was entitled to retain the whole.

[37] This line of authority was approved in Tinker v. Tinker⁽³⁾ where a husband conveyed property into his wife's name so that it could be protected from his creditors if his new garage business failed. His attempt to rebut the presumption of advancement failed. Lord Denning, MR said this at page 141:

‘ ....I am quite clear that the husband cannot have it both ways. So he is on the horns of a dilemma. He cannot say that the house is his own and, at one and the same time, say that it is his wife's. As against his wife, he wants to say that it belongs to him. As against his creditors, that it belongs, to her. That simply will not do. Either it was conveyed to her for her own use absolutely: or it was conveyed to her as trustee for her husband. It must be one or other. The presumption is that it was conveyed to her for her own use: and he does not rebut that presumption by saying that he only did it to defeat his creditors. I think it belongs to her.’ ”

3.8  I am not convinced that Mr So can derive assistance from Yim Bo Ying and in particular the Tinker v Tinker line of cases. Those cases all deal with rebutting the presumption of advancement. As observed by Rogers VP in Cheung Cho Kam Sindy v Cheung Yuet Ying Rose, CACV 178/2008, 8 December 2009 at §7:

“ On this appeal Mr Yip has manfully tried to argue that the judge should have applied the presumption of advancement. He says that the judge should have started with that. But the fact of the matter is that the presumption of advancement is only a presumption which is applied when there are no facts upon which the court can operate which would determine one way or the other where the particular property was intended to be owned. Once the judge has made findings of fact, as has the judge in this case, there is no scope, in my view, for the presumption of advancement.”

3.9  In the present case, as found at §3.2 above, there is evidence on the ownership of the Property over the relevant period.

3.10  Even were I wrong in the above conclusion on the inapplicability of the Tinker v Tinker line of cases to the present facts, Mr So’s arguments premised on the clean hands doctrine, in my view, fail on an alternative basis, namely that the “dirt on the hand” may be “washed”. At Pui Ying Middle School, it is further stated:

“ [240] In RBS v Highland Financial Partners at [159] and [164], Aikens LJ clearly considered that a party who acted with unclean hands could “wash them”. A summary judgment was granted in favour of RBS followed by a quantum trial. Subsequently, RBS sought a permanent anti-suit injunction to restrain some Texas proceedings. The misconduct arises from (1) RBS not accepting the judge’s findings made in the quantum judgment and (2) the perjury committed by RBS’s key witness in trying to challenge the findings in the quantum judgment. If RBS had instead accepted the conclusions made in the quantum trial, its “unclean hands” would have been washed – even those challenges had already been pleaded. At first instance, Burton J similarly stated that “a claimant can wash its hands i.e. a conclusion can be reached by the court that any previous misconduct is and can be explained or exonerated, if not persisted in”: [2012] 2 CLC 109 at 195, 198 (upheld on appeal on this point); citing with approval Meagher, Gummow and Lehane's Equity: Doctrines and Remedies (4th edn.) [3–130].

[241] In Harbour Front Ltd v Money Facts Ltd and others [2018] HKCFI 2596, Harbour Front sought an interlocutory injunction against the defendant companies to restrain them from selling a piece of land. DHCJ Kenneth Wong held that Harbour Front demonstrated serious issues to be tried that it had made real effort in purging its past wrongs: [29]-[32]. An interlocutory injunction was accordingly granted in favour of Harbour Front. Those steps of “repentance” included offers to settle the dispute with the tendering of a cheque. His Lordship did not consider the steps as being taken too late so as to permanently bar Harbour Front from participating in the management of the companies. There was no deadline imposed whether in previous judgments or otherwise on Harbour Front to remedy its previous wrongs: at [31].

[242] In the related proceedings in the Harbour Front litigation, failure to “wash hands” was mentioned in the context of unfair prejudice and just and equitable winding-up. In [2018] HKCFI 358, Harris J found that Harbour Front had made no sensible effort to remedy those past breaches and “this will remain the case until such time as Harbour Front takes genuine and substantial steps to remedy its misconduct”: at [42].

[243] It is worth noting that the relief of just and equitable winding up and unfair prejudice are very different from specific performance. Although they all draw upon equitable considerations, both the just and equitable winding up and unfair prejudice jurisdictions are founded on statute.

[244] Mr Wong made two additional observations.

[245] First, a plaintiff may not be permanently and absolutely barred from seeking equitable relief by reason of his past breaches if there had been some genuine and substantial steps to remedy the misconduct which gave rise to the equitable bar. In Littlewood v Caldwell 147 ER 413, the plaintiff’s application for an injunction application was refused because he acted improperly. However, the Court made clear that the dismissal was “without prejudice ... to any future application which may hereafter be thought adviseable to make”: at 414.

[246] Second, nonetheless, such past breaches remain relevant to the Court’s discretion in granting or refusing equitable relief, though perhaps they could be of diminishing relevance by reference to any attempt to remedy them, their materiality, and/or lapse of time etc. The learned authors commented in Spry on Equitable Remedies, 9th edn. (2014) that:

‘ ... an injunction is refused where the plaintiff has acted unlawfully in relation to the subject matter of the action, and continues to act unlawfully, and it is unconscionable to grant the relief sought, whether in an absolute or a limited or conditional form. So on one occasion a plaintiff in proceedings for the dissolution of a partnership was shown to have removed the partnership books wrongfully; and it was held that in these circumstances he could not succeed. It would have been open to him to return the partnership books and then make a new application, and in this event less weight would have been given to his wrongful conduct, although even in this case it might have been of importance in association with such other matters as hardship ... the court may, in the exercise of its discretion, also take account of past breaches although they have been remedied.’ (emphasis added)”

3.11  In the present case, the pleaded allegation is that the arrangement to “hide” Grace’s ownership in the Property was an attempt to dissipate her assets before formal commencement of her matrimonial proceedings. As noted above, the evidence, which I accept, is that no divorce proceedings have ever been commenced. In seeking a declaration from the court of her beneficial interest in the Property seems to me to be precisely Grace’s attempt to “wash the dirt”, in the event divorce proceedings are commenced.

3.12  Drawing the threads together, and bearing in mind that the clean hands doctrine is to be applied cautiously, I do not agree with Mr So that the arrangement complained of is sufficient misconduct to deny Grace’s interest in the Property. I take stock of (1) the arrangement was Father’s wish to have the ownership of the Property remain with the Siblings, (2) Father’s wish was honoured and acknowledged by the Siblings before the 2006 Action and thereafter by the Plaintiffs and the Deceased after Tack Shing’s share in the Property was bought out, (3) Grace’s claim in the present proceedings has the effect of “washing the dirt on hand” and (4) no divorce proceedings have in fact been commenced. I therefore make a finding that each of the Plaintiffs is a beneficial owner of the Property each owning 25% share in the beneficial interest in the Property (Relief (4) of the Statement of Claim).

4.   The Counterclaimed Sum

4.1  Of the 4 items of the Counterclaimed Sum, 3 may be dealt with shortly:

(1) In relation to the trip expenses, Mr So in closing no longer insisted on the pleaded deduction of HK$300,000[9] and was content to accept the Plaintiffs’ pleaded case that only HK$26,000 is to be deducted;

(2) In relation to the deduction of HK$1,500,000 for the Deceased’s handling of the 2006 Action, Mr So in closing made no submission[10], not doubt an acknowledgement of the lack of cogency of Anthony’s evidence. At the trial, Anthony gave evidence that (1) the Deceased did not ask him to request for the sum, (2) he called the 1^st Plaintiff but could not remember when he did so, (3) the 1^st Plaintiff allegedly offered HK$1,500,000 after the Property was sold and (4) he did not inform the Deceased of the 1^st Plaintiff’s offer. The foregoing evidence is plainly at odds with the Defendant’s case pleaded at Defence and Counterclaim §22(g) which, on a fair reading, suggests that an agreement was reached with the Deceased when the 2006 Action was settled in 2009. I do now allow this item; and

(3) In relation to the Condolence Money, a deduction of HK$30,000 has been agreed.

4.2  The main dispute is in relation to the Property Tax. It is the Defendant’s case that from December 2009 up to April 2018 (“Relevant Period”)[11], the Deceased had paid property tax in the total sun of HK$444,400. The Defendant seeks a deduction of 75% of that sum, representing the Plaintiffs’ share.

4.3  There is no documentary evidence showing that the Deceased had paid for the property tax. Whilst there is documentary evidence that property tax had been paid, the relevant tenancy agreements show that the obligation to pay property tax was on the tenant.

4.4  Mr So in closing submitted that it is common practice and also logical and sensible for the landlord instead of the tenant to pay property tax.

4.5  I am unable to accept Mr So’s submission. Over the Relevant Period, tenancy agreements of 2-year term were successively entered into with the same tenant, each providing that the obligation to pay for property tax was on the tenant.

4.6  In my view, the Defendant has failed to come up to proof on its counterclaim in respect of property tax. I disallow this item.

5.   Manner of the taking of the account

5.1  Had the accounts only involved the undistributed rental income, the exercise would have been straightforward. There is, however, a dispute between the parties on whether the Plaintiffs and the Deceased had agreed to use part of the rental income to invest in the stock market.

5.2  On the evidence, I find that there was such an agreement. As summarized by Mr So, there are the following documentary evidence prepared by the Deceased himself:

(1) A document which sets out (a) shares in 6 listed companies held by Anthony (耀東托管) and (b) shares in 11 listed companies kept at the San Po Kong Branch of Shanghai Commercial Bank by the fund[12] (基金持有存上海商業銀行新蒲崗分行) for the period 26 May to 7 June 2011; and

(2) A letter written by the Deceased dated 1 September 2017 to the 1^st Plaintiff dealing with shares held by the fund including those in New World Development.

5.3  It is also Anthony’s own evidence that the last payment distributed to the Plaintiffs in November 2017 (HK$333,000 each) included proceeds generated from the sale of shares in New World Development.

5.4  I therefore find that the Plaintiffs and the Deceased had agreed to use part of the rental proceeds generated from the Property to invest in the stock market. The accounting-taking exercise would therefore have to include the profits generated (including any dividends received) and losses sustained in the stock investments.

5.5  At the trial, no primary records of the stock investments were discovered (eg bank statements). Given the lapse of time[13] and the amount at stake, whether it is in the parties’ interest to embark upon an expensive and complicated accounting exercise is an issue which they need to consider[14].

6.   Disposition and costs order nisi

6.1  There shall be Judgment in favour of the Plaintiffs as follows:

(1) A declaration that each of the Plaintiffs is a beneficial owner of the Property each owing 25% in the beneficial interest in the Property:

(2) An order for sale of the Property pursuant to section 6 of the PO in the manner set out at DCS §81, with the clarification that the remaining proceedings referred to at DCS §81 is to be distributed to the Plaintiffs and the Defendant in four equal shares[15];

(3) An order for all accounts and inquiries as to what is due to the Plaintiffs, including interest, be conducted by a Master[16] taking into account the matters set out at Sections 4 and 5 above;

(4) An order that the Defendant shall pay the amount found due to the Plaintiffs, if any, upon taking the said accounts and inquiries; and

(5) Liberty to apply.

6.2  Regarding the Defendant’s counterclaim, as set out at Section 4 above, I have only allowed it to the extent of HK$26,000 in respect of traveling expenses and HK$30,000 for condolence money. The rest of the counterclaim is dismissed.

6.3  I also make a costs order nisi that the costs of the action (including 90% of costs of the counterclaim and all costs reserved) be paid by the Defendant to the Plaintiffs, to be taxed if not agreed.