LAM YIM KAM JOHNSON v. LAM YIM HING DAVID

HCA 642/2001

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 642 OF 2001

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JUDGMENT

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Background

1. This is the Defendant's appeal against the Order of Master Wong dated 7th May, 2002 whereby the Learned Master ordered the Defendant to pay the Plaintiff the sum of $130,800.34 together with interest at judgment rate from 1st May, 2001 until full payment.

2. The Plaintiff and the Defendant are brothers. They hold equal interests in 4 companies. Able Step Limited ["Able Step"] and Quinwick Co. Ltd. ["Quinwick"] are 2 of the 4 companies. Able Step and Quinwick hold 3 properties. They are :

(1) No. 5, Mercer Street, Central, Hong Kong ["the Mercer Street Property"];

(2) Nos. 12 and 14, Lok Ku Road, Hong Kong;

(3) No. 136 Bonham Strand, 5th Floor, Hong Kong ["the Bonham Strand Property"].

3. By an agreement dated 19th September, 1991, the Defendant acquired Unit A (Front Portion) on the Ground Floor and Unit B (Rear Portion) on the Ground Floor at No. 169, Wai Yip Street, Kowloon for $7,200,000. By a declaration of trust dated 2nd July, 1992, the Defendant declared that he held this property upon trust in favour of the Plaintiff and himself as tenants in common. Part of this property was sold on 2nd April, 1993. I shall refer to the remaining part of this property as "the Wai Yip Street Property".

4. Unhappy differences arose between the Plaintiff and the Defendant. They tried to settle those differences by a Settlement Agreement dated 24th February, 1995 ["the Settlement Agreement"] drafted by Mr. James Choy ["Mr. Choy"] of Messrs. K.C. Yung & Co. The Settlement Agreement provided for severance of their joint interests. Each blamed the other for non-performance of the provisions in the Settlement Agreement. The net result is that petty disputes between these brothers perpetuated and Mr. Choy became their channel of communication.

5. By a tenancy agreement dated 26th November, 1999 ["the Tenancy Agreement"], the Defendant let the Wai Yip Street Property in favour of a tenant for a term of 3 years commencing from 1st December, 1999 at a monthly rent of $65,000. Prior to 16th December, 2001, Messrs. K.C. Yung & Co. collected the rental on behalf of the Defendant. Messrs. K.C. Yung & Co. used the rent so collected to defray various items of expenditure in connection not only with the Wai Yip Street Property but also in connection with the other properties held beneficially between the 2 brothers. It is the case of Mr. Choy that he had the implied consent of the 2 brothers in so doing. Messrs. K.C. Yung & Co. then divided the surplus equally amongst the 2 brothers.

6. Pursuant to such alleged implied consent, Messrs. K.C. Yung & Co. paid the Plaintiff various sums out of the rental collected from the Wai Yip Street Property for repairs of the following properties :

Date	Property	Amount
10/06/2000	The Bonham Strand Property	$31,490
19/09/2000	The Mercer Street Property	$64,444
14/10/2000	The Mercer Street Property	$35,000
		$130,934

1. Disputes arose between the Plaintiff and the Defendant as to the propriety of the sums incurred in respect of the Mercer Street Property. The Defendant was also dissatisfied with the advice he received from Messrs. K.C. Yung & Co. in relation to his dispute with the tenant of the Wai Yip Street Property. The retainer given to Messrs. K.C. Yung & Co. was terminated by the Defendant on 30th December, 2000. Commencing from 16th January, 2001, the Defendant personally collected rental from the tenant of the Wai Yip Street Property.

2. The writ in this action was issued on 9th February, 2001. The Plaintiff complained that he did not receive $97,500 being his share of the monthly rent from the Wai Yip Street Property for the months of December 2000, January and February 2001. The Plaintiff sought a declaration that the Defendant "is liable to account for all moneys representing the half share of the monthly rent in respect of the [Wai Yip Street Property] to be received or previously received by the Defendant from the Tenant under the said Tenancy Agreement including the sum of HK$97,500...". By his Defence dated 1st March, 2001, the Defendant asserted that he fully understands the mandatory duties of being a trustee of the Trust [Para. 6] and that he had told the Plaintiff that he "would give him a full account of the situation after a healthy financial standing for the Property was set up" [Para. 9].

3. By Summons dated 26th March, 2001, the Plaintiff applied under O. 27 r. 3 for various reliefs on the basis of the Defendant's admissions. The application was supported by an affidavit of the Plaintiff dated 26th March, 2001. The application was resisted by an affidavit of the Defendant dated 9th April, 2001. The Defendant referred to his correspondence with the Plaintiff wherein he proposed to engage a certified public accountant to prepare the account desired by the Plaintiff. This proposal was rejected by the Plaintiff whose solicitors pointed out in their letter dated 31st March, 2001 that the Plaintiff was merely asking for "a simple account which serves to set out the income and expenses in respect of the Property but not otherwise". The Defendant's request on 6th April, 2001 for a sample format to avoid misunderstanding and dispute met with no response.

4. It was in these circumstances that Master Wong made a consent order on 11th April, 2001 ["the Consent Order"].

Terms of the Consent Order

5. After reciting the Plaintiff's affidavit of 27th March, 2001 and the Defendant's affidavit of 9th April, 2001, the Learned Master entered Judgment by consent against the Defendant for the following reliefs :

"(1) a declaration that the Defendant ...is liable to account to the Plaintiff for all moneys representing the half share of the monthly rents in respect of the [Wai Yip Street Property] previously received or to be received by the Defendant from [the Tenant] under the Tenancy Agreement dated 26th November 1999...

(2) an order that the Defendant shall prepare an account in respect of the [Wai Yip Street Property] setting out all the income and expenses thereof by the last day of each calendar month during the term of the tenancy created under the said Tenancy Agreement and deliver the said account together with all the supporting documents and papers to the Plaintiff within 7 days from the last day of each calendar month;

(3) an order that the Defendant shall pay to the Plaintiff half share of all incomes (after deducting the liabilities) from time to time generated from [the Wai Yip Street Property] at the time of delivery of each account mentioned in (2) above..."

The accounts furnished by the Defendant

12. By letter dated 4th May, 2001, the Defendant sent to the Plaintiff a Statement of Account for the month ended 30th April, 2001. In arriving at the Plaintiff's entitlement, the Defendant sought to deduct therefrom the sum of $130,934 referred to in paragraph 6 above ["the Disputed Item"] on the basis that the same was not related to the Wai Yip Street Property and paid by Messrs. K.C. Yung allegedly without the Defendant's consent. The Defendant continued to tender accounts to the Plaintiff. According to the account for the month of October, 2001, $133.66 was said to be due from the Plaintiff to the Defendant. The Plaintiff says that the Defendant failed to comply with the Consent Order when he deducted the sum of $130,934 and after giving credit for the sum of $133.66, the Defendant should pay him $130,800.3 which is the sum ordered by the Learned Master on 7th May, 2002.

13. This appeal was scheduled to be heard by Deputy High Court Judge Lam on 4th June, 2002. That hearing was adjourned as the Defendant sought to adduce in evidence 2 additional affidavits, one from Mr. Kwok Wing Wah ["Mr. Kwok"] and the other one from the Defendant himself. Mr. Kwok produced 2 further sets of account. On the basis of those accounts, the Defendant says that even if he be wrong in deducting the sum of $130,934, his true liability to the Plaintiff is for the sum of $65,400.17.

Setting aside the Consent Order

14. Mr. Johnny Cheng ["Mr. Cheng"], Counsel for the Defendant, drew my attention to para. 42/5A/3 of the Hong Kong Civil Procedure 2002. That paragraph adverted to the increased burden on solicitors to ensure that consent judgment or order "is expressed fully, clearly and with precision, and carries into effect the intention of the parties, without ambiguity or possibility of a conflict of construction". I find it difficult to follow the relevance of this submission. Messrs. W.K. To & Co. drafted the Consent Order on behalf of the Plaintiff. Mr. Cheng did not identify in what way did Messrs. W.K. To & Co. fail to carry into effect the intention of the parties. Mr. Cheng further adverted to the fact that the Defendant was acting in person when he assented to the Consent Order. There is however not a shred of evidence indicating that Messrs. W.K. To & Co. was involved in any unconscionable conduct such as unfair prejudice, domination or victimisation.

15. I see no ground in setting aside the Consent Order. No insinuation should have been made against Messrs. W.K. To & Co.

Construction of the Consent Order

16. The principle is set out in para. 5-10 of Foskett The Law and Practice of Compromise 5th edition :

"Until such time as the principle is re-visited, it is established law that in order to determine the common intention of the parties to an agreement ...embodied in a consent order or judgment, the intention of the parties must be construed by reference to the document or order itself : extrinsic evidence of what may or may not have been in the minds of the parties at the time of their agreement is not admissible for this purpose".

17. Paragraph 1 of the Consent Order is declaratory in nature. It confirms the Defendant's liability to account. Such liability extends to rental from the Wai Yip Street Property previously received or to be received under the Tenancy Agreement. Such liability is not confined to the months of December 2000 or January and February, 2001.

18. Paragraph 2 of the Consent Order directs the Defendant to prepare an account. The account must set out all the income and expenses of the Wai Yip Street Property by the last day of each calendar month during the term of the tenancy. This is reinforced by paragraph 3 of the Consent Order.

19. Mr. Chua, Counsel for the Plaintiff, submitted that the Consent Order is prospective in effect. The terms of the Consent Order do not support that contention. The Defendant's duty is to account for the income and expenses of each calendar month during the term of the tenancy. The Consent Order did not say that the duty to account should only commence after the date of the Order.

Should the Disputed Item be included in the Defendant's account

20. I regret to say that both sides have overlooked the provisions of O. 43 and the useful exposition in Vol. 1 of Atkin's Court Forms 2nd Edition 1992 Issue on Accounts. O. 43 r. 4 and Form 30 in Atkin's are of particular assistance.

21. Paragraph 2 of the Consent Order directs the Defendant to make out an account of the income and expenses of the Wai Yip Street Property. The account must therefore relate to the receipts from and disbursements for that property. The Disputed Item relates to repairs of the Bonham Strand Property and the Mercer Street Property. Whilst those charges were defrayed out of rental from the Wai Yip Street Property, they do not constitute disbursements for the Wai Yip Street Property. The Disputed Item should therefore not have been included as part of the account ordered by this Court.

22. The account envisaged by the Consent Order is not a general account between the Plaintiff and the Defendant inter se. The Defendant erred in bringing into that account expenses unrelated to the Wai Yip Street Property. It is no answer to say that since the sums in question are not related to the Wai Yip Street Property, they should be deducted in the process of computation. If they are not income or expenses relating to the Wai Yip Street Property, they are simply not within the purview of the Consent Order.

The accounts prepared by Mr. Kwok

23. The accounts prepared by Mr. Kwok constitute a belated attempt on the part of the Defendant to comply with the Consent Order. Despite the directions of Deputy Judge Lam on 4th June, 2002, the Plaintiff filed no further affidavit setting out their objections to those accounts as envisaged by 43/3/1 of the Hong Kong Civil Procedure 2002. Whilst Mr. Kwok's accounts are not strictly in accordance with Form 30 of Atkin's, the Plaintiff did not draw my attention to any item in those accounts which do not relate to the income and expenses pertaining to the Wai Yip Street Property. Version A of Mr. Kwok's account shows a credit of $65,333.34 in favour of the Plaintiff. I am of the view that it is this sum as opposed to the sum of $65,400.17 conceded by the Mr. Cheng that is due in favour of the Plaintiff.

24. For these reasons, I allow the Defendant's appeal in part. In lieu of paragraph (1) of Master Wong's order of 7th May, 2002, I order that the Defendant do pay the Plaintiff the sum of $65,333.34.

Costs

25. The Plaintiff succeeds on the construction of the Consent Order but fails in maintaining his claim for $130,800.34. The Defendant succeeds on his alternative case by virtue of the evidence filed after the Order of Master Wong.

26. In these circumstances, I make the following costs order nisi :

- The costs of and incidental to the Plaintiff's application by Summons dated 26th March, 2001 up to 28th May, 2002 and inclusive of the costs of the hearing before Master Wong on 7th May, 2002 be in favour of the Plaintiff. Certificate for Counsel in respect of the said hearing before Master Wong.

- I make no order in respect of the costs incurred after 28th May, 2002.

27. I give the parties general liberty to apply in relation to any consequential direction arising from this Judgment.