Lau Koon Ying Matthew, As the Executor of the Estate of Lau Yiu Wing, Deceased (“The Deceased”) v. Lau Tark Wing and Another

CACV 228, 229 & 230 /2019

[2019] HKCA 1387

CACV 228/2019

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 228 OF 2019

(ON APPEAL FROM HCAP NO 23 OF 2013)

______________________

______________________

______________________

AND

CACV 229/2019

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 229 OF 2019

(ON APPEAL FROM HCA NO 2305 OF 2012)

______________________

______________________

AND

CACV 230/2019

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 230 OF 2019

(ON APPEAL FROM HCA NO 2306 OF 2012)

______________________

______________________

(Consolidated by Order of Master K Lo dated the 9th September 2013)

(De-consolidated by Order of Registrar K W Lung dated the 24th day of February 2016)

______________________

(Heard together)

____________________

J U D G M E N T

____________________

Hon Kwan VP (giving the Judgment of the Court):

1.This judgment deals with the question whether the appeals from the orders of a master made upon the taking of accounts ordered by a judge should be brought before a single judge of the Court of First Instance or the Court of Appeal.

2.The matter arose in this way.

3.The taking of accounts was ordered by Chow J in his judgment dated 25 September 2017 after the trial of these three actions: HCAP 23/2013, HCA 2305/2012 and HCA 2306/2012.

4.In HCAP 23/2013, Lau Koon Ying Matthew (“Matthew”) as the executor of the estate of his father sued his uncle Lau Tark Wing (“Tark Wing”) and the estate of his grandmother (represented by Tark Wing) on the ground that the father never received his share of the sale proceeds of Lot 2785 and Lot 3825.

5.In HCA 2305/2012 and HCA 2306/2012, Matthew personally and as executor of the estate of his father sued Tark Wing and his companies for rental proceeds generated from Lot 3763C in DD 124 (owned by the father), Lot 3763D (owned by Matthew) and Lot 3763RP (50% owned by the father).

6.Chow J accepted Matthew’s claim in respect of the father’s share of the sale proceeds of Lot 2785 and Lot 3825 and the claim in respect of the rental proceeds.  He held that Tark Wing held the sale proceeds as the father’s agent and was under a fiduciary duty to properly account to Matthew in respect of the proceeds, and that Tark Wing’s payment of such proceeds to the grandmother constituted a breach of his fiduciary duty owed to the father.  In respect of the claim of the rental proceeds, the judge held that Matthew’s claim was a claim for equitable relief based on breaches of fiduciary duty on the part of Tark Wing and his companies as agents and that Tark Wing and his companies were treated as holding the rental proceeds as trustees for the father and Matthew and ought to properly account to Matthew.

7.The judge ordered and directed that: (1) an account be taken of the father’s share of the proceeds of sale of Lot 2785 and Lot 3825 received by Tark Wing and the grandmother; (2) an account be taken of the rental proceeds received by Tark Wing and his companies; and (3) the questions of (a) the appropriate period and rate of interest, and (b) what (if any) credit should be given for the construction costs of the houses on Lot 3763C, Lot 3763D, Lot 3763RP and Lot 884 in DD 379, be dealt with in the taking of the accounts.

8.Master J Wong proceeded with the taking of the accounts pursuant to Chow J’s judgment and ordered on 29 April 2019 as follows:

(1) in HCAP 23/2013, Tark Wing is liable to pay to Matthew the sale proceeds in the sum of $7,252,785.41 (inclusive of compound interest from 21 September 1992 to 29 April 2019) and interest at judgment rate thereafter with costs;

(2) in HCA 2305/2012, Tark Wing and his company are liable to pay to Matthew the sum of $6,956,135.86 (inclusive of compound interest from 1 January 1997 to 29 April 2019) and interest at judgment rate thereafter with costs;

(3) in HCA 2306/2012, Tark Wing and his company are liable to pay to Matthew the sum of $3,893,950.20 (inclusive of compound interest from 1 January 1997 to 29 April 2019) and interest at judgment rate thereafter with costs; and

(4) no credit should be given to any construction costs.

9.The orders made by the master represented the remedies to which Matthew is entitled in relation to his claims for breach of fiduciary duties in respect of the sale proceeds and the rental proceeds.  The orders were made under Order 44 rule 11 of the Rules of the High Court and the taking of the accounts were carried out by the master under Order 43.

10.The material part of Order 44 rule 12(1) provides as follows:

“... Order 58, rule 1 shall apply to an order made under rule 11 as it applies to any judgment, order or decision of a master, save that the hearing shall be in open court unless the Court directs otherwise.”

11.Order 58 rule 1(1) relevantly provides:

“Except as provided by rule 2, ... an appeal shall lie to a judge in chambers from any judgment, order or decision of a master, irrespective of whether the judgment, order or decision was given or made on the basis of written submissions only or after hearing.”

12.Order 58 rule 2 provides:

“An appeal shall lie to the Court of Appeal from any judgment, order or decision (other than an interlocutory judgment, order or decision) of a master, given or made –

...

(b) on an assessment of damages under Order 37 or otherwise; ...”

13.The question here is whether the taking of accounts in the circumstances described above would come within the “or otherwise” limb of the exception in Order 58 rule 2, there being no dispute that this is not “an assessment of damages under Order 37”.

14.Mr Paul Lam, SC submitted on behalf of Tark Wing, the appellant in these appeals, that the answer is yes and the Court of Appeal has jurisdiction.  He contended that an order made after the taking of an account is akin to, or in substance of the same nature and effect as, an order made after an assessment of damages.

15.Mr Eugene Fung, SC with Mr Robin D’Souza submitted for Matthew that the taking of accounts does not come within the “or otherwise” limb and these appeals should be brought before a single judge of the Court of First Instance.  They contended that properly construed, Order 58 rule 2(b) provides that an appeal against a master’s judgment, order or decision shall lie to the Court of Appeal where the judgment, order or decision was given or made either (1) on an assessment of damages under Order 37; or (2) on an assessment of damages in circumstances other than under Order 37.  There is no mention of any taking of an account in Order 58 rule 2(b), and nothing to suggest that this provision is intended to cover the taking of an account under the “or otherwise” limb.

16.Both parties referred to Libertarian Investments Ltd v Hall (2013) 16 HKCFAR 681 in which Lord Millett NPJ explained the taking of an account in the equitable context at §168:

“... an order for an account does not in itself provide the plaintiff with a remedy; it is merely the first step in a process which enables him to identify and quantify any deficit in the trust fund and seek the appropriate means by which it may be made good. Once the plaintiff has been provided with an account he can falsify and surcharge it. If the account discloses an unauthorized disbursement the plaintiff may falsify it, that is to say ask for the disbursement to be disallowed. This will produce a deficit which the defendant must make good, either in specie or in money. Where the defendant is ordered to make good the deficit by the payment of money, the award is sometimes described as the payment of equitable compensation; but it is not compensation for loss but restitutionary or restorative. The amount of the award is measured by the objective value of the property lost determined at the date when the account is taken and with the full benefit of hindsight.”

17.Mr Lam recognized and accepted that the purpose of the taking of accounts in these circumstances was to identify and quantify the deficit in the trust funds and that the orders made by the master upon the taking of the accounts were in effect equitable compensation.  That being the case, the making good of the deficit in the trust funds is not compensation for loss, but only restitutionary or restorative.  The taking of an account in these circumstances is not akin to, and does not in substance have the same nature and effect as, an assessment of damages.

18.In contrast to the present situation, it was held, correctly in our view, by Deputy High Court Judge Sakhrani in Chinacast Education Corp v Chan Tze Ngon [2019] 2 HKLRD 668 at §77 that an inquiry as to damages pursuant to a cross-undertaking on damages under a Mareva injunction was an assessment of damages under the “or otherwise” limb in Order 58 rule 2(b).

19.Mr Lam also referred to §170 of Libertarian Investments Ltd v Hall in which Lord Millett said that in a case of “wilful default”, the defendant will be ordered to make good the deficiency by the payment of money, and the payment of “equitable compensation” in such case is akin to the payment of damages as compensation for loss.

20.We do not think this would assist him as the present case does not come within the situation in which the plaintiff can surcharge the account by asking for it to be taken on the basis of “wilful default” as explained by Lord Millett.

21.We hold that the taking of accounts in the present circumstances does not come within the “or otherwise” limb in Order 58 rule 2(b).  These appeals should not be brought before the Court of Appeal but should be brought before a single judge of the Court of First Instance. We make an order in each of the appeals that the Notice of Appeal be struck out, with an order nisi that Matthew should pay the costs of Tark Wing in these appeals.

Written submissions by Mr Paul Lam SC, instructed by Hon & Co, for the Defendants (Appellants) in all three actions

Written submissions by Mr Eugene Fung SC and Mr Robin D’Souza, instructed by Wellington Legal, for the Plaintiff (Respondent) in all three actions