MAN ON SUM v. MAN PING HEI

HCA 352/2015

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

HIGH COURT ACTION NO 352 OF 2015

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D E C I S I O N

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INTRODUCTION

1.  I have before me a summons taken out by the plaintiff dated 4 October 2016 seeking leave to appeal against an earlier decision of this court given on 21 September 2016 (“the Decision”) allowing the defendant’s appeal against an order made by Master Chow dated 18 May 2016 with costs to the defendant.

2.  The applicable principles for leave to appeal against an interlocutory judgment or order made by the Court of First Instance to the Court of Appeal are well established.  Leave to appeal shall not be granted unless the proposed appeal has a reasonable prospect of success or there is some other reason in the interests of justice why the appeal shall be heard.  For this purpose, a “reasonable prospect of success” means a prospect which must be “reasonable”, ie more than “fanciful” but does not have to be “probable”.

PROPOSED GROUNDS OF APPEAL

3.  The basic facts giving rise to the plaintiff’s application for an account, and the eventual order made by the Master, are set out in the Decision and will not be repeated here.   The court’s reasons for setting aside the Master’s order requiring the defendant to effectively give discovery of the passbook of the bank account of Dun Yue Tong (惇裕堂) (“the tong”) with HSBC and to give explanations for the entries in the passbook (other than those relating to the updating of bank balances or interest) are set out in paragraphs 21 to 24 of the Decision.  For ease of reference, they are set out below:-

“21.  In my view, the order made by the Master cannot be justified, for the following reasons.

22.  First, the plaintiff’s application was for an order that the defendant should provide a true and proper account of the moneys, assets and properties belonging to the tong for the past ten years from 2003 to 2014, and verify the same by affidavit. If the Master considered that the plaintiff wasentitled to such an account, she should order the defendant to provide the account as sought. Instead, she ordered the defendant to provide a copy of the passbook of the tong’s bank account at HSBC and give explanations for various entries in that passbook. Effectively, she has turned the present application under Order 43 into one for specific discovery and/or interrogatories. As mentioned above, this is contrary to principle.

23.  Second, there is clearly here a dispute on whether the defendant has already rendered a full and proper account of the tong’s assets, income and expenditures over the years. Whether the defendant has in fact done so is a “preliminary question” which ought to be resolved first at trial before he could be ordered to provide a “complete and proper account” which the plaintiff says the defendant has failed to provide.

24.   At the hearing of the appeal this morning, Mr Cheung argued that the Master’s decision could be supported on the narrow basis that (i) there were missing pages in the bank passbook as exhibited to the affirmations filed for the purpose of the plaintiff’s application, and (ii) some of the entries in the passbook did not have side notes or explanations.  In respect of (i), as mentioned above, the defendant’s evidence (which has not been disputed in the plaintiff’s affirmations) is that the bank passbook, or the relevant pages thereof, have already been displayed orposted up at the ancestral hall of the tong and other public places.  In any event, if what the plaintiff truly wishes to have is a complete copy of the passbook, the plaintiff ought to have applied for specific discovery, instead of for an account.  In respect of (ii), as earlier stated, Order 43 is not the appropriate avenue for seeking answers to interrogatories, or clarification of accounts already rendered.”

4.  In the draft Notice of Appeal, the plaintiff has raised a total of 7 substantive grounds of appeal, with Ground 7 relating to costs.

5.  Ground 1 seeks to distinguish a number of authorities referred to in the Decision on their facts. While obviously the facts of those cases are different from the present one, I consider the principles set out in paragraphs 11 to 15 of the Decision to be correct as a matter of law.

6.  Ground 2 contends that the court ought to have considered in the instant case that (i) the defendant was a manager-trustee, and the plaintiff (with 30 or more members in support) was a member-beneficiary, of a Chinese traditional tong, and (ii) it was beyond reasonable doubt that the plaintiff was entitled as of right to have true and proper accounts of all moneys, assets and properties belonging to the tong.  These matters were, however, not in dispute at the hearing on 21 September 2016. What was in dispute at that hearing was whether the defendant had already rendered an adequate or sufficient account to the members of the tong.  That is a preliminary question which ought to be resolved first before the court should make a summary order for account.  There were other factual issues raised by the plaintiff, including whether there were discrepancies between the figures shown on the publicly displayed ledgers and those appearing on the bank passbook, whether there was a donation of HK$100,000 made by a tso called “文佛常祖” to the tong in or abort 2003 which had gone missing, and whether the defendant misappropriated the tong’s money to speculate in securities, trust funds and foreign currencies.  None of those issues can be resolved on affidavit evidence alone.

7.  Grounds 3 to 4 complain about the court’s finding that there is a “preliminary question” which ought to be resolved first at trial before the defendant could be ordered to provide a complete and proper account which the plaintiff says the defendant has failed to provide.  On behalf of the plaintiff, Mr Cheung argues that “a preliminary question to be tried” in the context of the instant case is confined to disputes as to whether the defendant is an accounting party and whether he should be made or ordered to render an account.  For this submission, Mr Cheung relies upon the decision of Suffiad J in Ironwood Capital Limited v KTH Capital Management Limited, HCA 2836/2004 (20 November 2007), at paragraph 32.  In my view, a dispute as to whether the defendant, undoubtedly an accounting party, has already provided an adequate or sufficient account is a proper preliminary question to be determined at the trial before the court should make a summary order for account.  It is a matter of judgment and degree whether the ledgers coupled with the bank passbook publicly displayed or posted up by the defendant amount to an adequate or sufficient account in the circumstances of this case, bearing in mind the nature of the business of the tong.  The question of whether the defendant has already provided an adequate or sufficient account in this case is, I believe, a preliminary question to be tried for the purpose of Order 43.

8.  Ground 5 alleges that the court erred in making a conjecture on the reasoning of the Master, which it is said was not relevant because the appeal was a hearing de novo. The so called conjecture is a reference to the court’s observation, at paragraph 19 of the Decision, that the Master apparently accepted the legal principles stated in paragraphs 11 to 15 of the Decision.  Those principles were, I understand, relied upon by the defendant at the hearing before the Master and were well supported by authorities.  What the Master went wrong, in my view, was her failure to apply those principles to the factual situation before her.  In any event, if the Master did not accept what I regard to be the correct legal principles, that could hardly give rise to any reasonable ground of appeal against the Decision.

9.  Ground 6 alleges that the court ought to have considered that the plaintiff’s application was for an account and not for specific discovery or interrogatories.  That may be so.  However, the Master, instead of ordering any account to be given by the defendant, made an order requiring the defendant to give discovery of the passbook of the tong’s bank account with HSBC and to give explanations for the entries in the passbook.  At the hearing, the plaintiff supported the order made by the Master and did not ask the court to make any order requiring the defendant to give an account.  It is, in my view, clear that the order made by the Master cannot be supported as a matter of principle, and thus the order made by the Master should be set aside in any event.

10.  Ground 7 relates to the costs order made by the court, namely, that the plaintiff shall bear the costs of the appeal as well as the costs of the application before the Master. The plaintiff maintains that he was entitled and justified to make the original application by summons dated 20 August 2015.  Costs are, generally, in the court’s discretion.  The usual starting point is that costs should follow the event, although the court may depart from that starting point on good grounds being shown.  In the present case, I can see no good reason why costs should not follow the event.

11.  In all, I do not consider that the plaintiff’s proposed appeal has any reasonable prospect of success, or there is any other reason in the interests of justice why the appeal shall be heard.  I therefore dismiss the plaintiff’s summons dated 4 October 2016 with costs to the defendant.

HCA 352/2015

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

HIGH COURT ACTION NO 352 OF 2015

____________

____________

__________________

D E C I S I O N

__________________

INTRODUCTION

1.  The plaintiff is a member of a traditional tong known as Dun Yue Tong (惇裕堂) (“the tong”) under section 15 of the New Territories Ordinance, Cap 97, and the defendant is the only surviving registered manager of the tong.

2.  In this action, the plaintiff complains that the defendant has failed to:-

(1)  provide information relating to the bank account(s) of the tong;

(2)  give an account to the members in respect of the rental income generated from the tong’s landed properties; and

(3)  give an account to the members in respect of the balance of the tong’s monies, including but not limited to the balance in an account at HSBC and other bank accounts (if any).

These allegations are denied by the defendant.

3.  In the statement of claim indorsed with the writ, the plaintiff seeks (inter alia) an account from the defendant in respect of the income and expenditures of the tong for the period from 2003 onwards.

4.  By a summon dated 20 August 2015, the plaintiff seeks, pursuant Order 43, rule 1 of the Rules of the High Court, Cap 4A, an order that the defendant do, within 30 days of the order to be made, provide the plaintiff with a true and proper account of all moneys, assets and properties belonging to the tong for the past 10 years from 2003 to 2014, and verify the same by an affidavit or affirmation of the defendant, and other consequential relief.

5.  The plaintiff’s summons came before Master Chow on 18 May 2016.  After hearing submissions from counsel for the parties, the Master, instead of granting the order sought by the plaintiff, made (inter alia) the following order:-

“The Defendant do within 30 days from the date of this order provide and serve the Plaintiff with copy of passbook held under the [tong] of the [HSBC] account for the period from 2004 to 2014 and the explanations for the entries in the passbook other than entries for updating [or] interest”.

6.  By a notice of appeal dated 27 May 2016 as subsequently amended on 15 September 2016, the plaintiff appeals against the Master’s aforesaid order.

7.  This is my decision on the plaintiff’s appeal after having heard counsel for the parties this morning.

APPLICABLE PRINCIPLES

8.  Order 43, rule 1(1) of the Rules of the High Court provides that where a writ is indorsed with a claim for an account or a claim which necessarily involves taking an account, the plaintiff may, at any time after the defendant has acknowledged service of the writ or after the time limited for acknowledging service, apply to the court for an order under this rule.

9.  Order 43, rule 1(3) goes on to provide as follows:-

“On the hearing of the application, the Court may, unless satisfied that there is some preliminary question to be tried, order that an account be taken…”

10.  The following principles for deciding whether to make a summary order for account under Order 43 of the Rules of the High Court are well established.

11.  First, “Order 43 is not appropriate where the parties are engaged in substantial disputes of fact which are fundamental to the manner in which any proposed account is to be taken.  Such disputes of fact first need to be resolved by trial.  The person conducting the account or inquiry would need guidance on how to resolve such fundamental factual disputes if the account or inquiry is to proceed smoothly.  Such guidance could effectively only come after a trial judge has fully heard the parties and decided their fundamental disputes, not before”: see Kids World v XL Machine Ltd, HCA 125/2002 (18 September 2003), at paragraph 3 per Reyes J.

12.  Second,Order 43 is not the appropriate avenue for seeking answers to interrogatories, or specific discovery, or clarification of accounts already rendered: see Kids World, ante, at paragraph 9 per Reyes J.  As stated by Litton JA (as he then was) in Ho Lee Man v Wong Wai Kai [1993] 1 HKC 183 at 191F, the summary process under Order 43, rule 1 is not designed as an instrument for specific discovery.

13.  Third, “Order 43 provides for the taking of an account which is a process of inquiry… Order 43 does not simply involve both parties setting out what each party proposes to be the proper account between themselves.  The taking of an account essentially involves the Court (whether by a master or judge) vetting the accounts (including supporting oral and written evidence) produced by both parties with a view to arriving at an outstanding figure due from one party to another”: see Kids World, ante, at paragraph 11 per Reyes J.

14.  Fourth, if there are some preliminary questions to be tried, it would be inappropriate to make a summary order for account: see Lei Chun Kin v Yip Teresita Pumares, DCCJ 892/2006 (11 April 2007), at paragraph 47 per H H Judge Marlene Ng. For this purpose, a “preliminary question” means a question which (i) might be relevant to the entitlement of the plaintiff concerned to an account as of right, or (2) concerns whether there might be any circumstances in which it would be appropriate for the court not to direct an account at that stage, or (3) relates to issues concerning the extent of the matters for which it might be appropriate for the defendant to account: see Aforge Finance SAS v HSBC Institutional Trust Services Ltd [2009] IEHC 565, at paragraph 4.3 per Clarke J.

15.  Fifth, where the defendant has already provided an account and the issue is the adequacy of the account provided, such issue should, generally speaking, be regarded as a “preliminary question” to be tried and thus it would not be appropriate to make a summary order for account: seeHolborow v Macdonald Rudder (a firm) [2001] WASCA 91; Aaronisle Pty Ltd v Thorpe & Anor [2005] WASC 87; and Tandor Pty Ltd v Australia Liquor Marketers (WA) Pty Ltd [2008] WASC 244.

Basis of plaintiff’s application

16.  It is the defendant’s case that he has rendered full accounts of the income and expenditures of the tong on an annual basis by displaying or posting up the relevant ledgers at the ancestral hall of the tong and other public places, including the nearby Sun Tin Market.  That the defendant has in fact displayed or posted up the ledgers of the tong is not in dispute.  In addition, the defendant says that the passbook, or the relevant pages thereof, of the tong’s only bank account at HSBC have also been displayed or posted up alongside the ledgers.  The plaintiff has not denied this allegation in his affirmations filed for the purpose of this application, although I understand from his counsel, Mr Anthony Cheung, that this matter is not admitted.  For the purpose of the present appeal, I shall proceed on the basis of the defendant’s undisputed evidence that the passbook, or the relevant pages thereof, of the tong’s bank account at HSBC have also been so displayed or posted up on an annual basis.

17.  Nevertheless, the plaintiff says that there are discrepancies between the figures shown on the ledgers and the bank passbook.  As can be seen from the reasons given by the Master for her decision, the main point relied upon by the plaintiff at the hearing below was that the ledgers could not be reconciled with the balances shown on the bank passbook.  In the present appeal, the plaintiff maintains that the defendant has not given a “complete and proper account” of the tong’s money, assets, properties and expenditures (see paragraph 36 of Mr Cheung’s skeleton argument). 

18.  The defendant does not accept that there are any discrepancies between the figures shown on the ledgers and the bank passbook.  In this regard, it is important to note that according to the defendant, the ledgers of the tong record the cash income and expenditures, whereas the bank account at HSBC is used to receive income by way of cheques and pay expenses as required.  Since the ledgers and the passbook record different incomes and expenditures, it is obvious that the figures shown therein would not tally with each other.  It would not, in my view, be meaningful to talk about discrepancies between them.

19.  The Master apparently accepted the legal principles stated above, which I understand were also relied upon by the defendant.  She therefore did not order the defendant to provide the account as sought by the plaintiff in his summons.  However, she considered that the provision of a mere copy of the bank passbook would not a sufficient discharge of the defendant’s duty to account.  In the end, she ordered the defendant to provide a full copy of the passbook of the tong’s account at HSBC from 2004 to 2014, and furthermore to provide explanations for all the entries in the passbook other than those relating to “updating or interest”.

20.  In passing, I should mention that the plaintiff also alleges that (i) there was a donation of HK$100,000 made by a tso called “文佛常祖” to the tong in or abort 2003 but that sum of money could not be found in the tong’s ledgers or bank passbook disclosed by the defendant, and (ii) he has heard, from an unidentified source, that the defendant has misappropriated the tong’s money to speculate in securities, trust funds and foreign currencies, and his activities have not been recorded in the ledgers of the tong or consented to by the members of the tong.  These allegations are all denied by the defendant.  They undoubtedly constitute disputes of fact which cannot be resolved on affidavit evidence alone and cannot justify the making of a summary order for account.

discussion

21.  In my view, the order made by the Master cannot be justified, for the following reasons.

22.  First, the plaintiff’s application was for an order that the defendant should provide a true and proper account of the moneys, assets and properties belonging to the tong for the past ten years from 2003 to 2014, and verify the same by affidavit.  If the Master considered that the plaintiff was entitled to such an account, she should order the defendant to provide the account as sought.  Instead, she ordered the defendant to provide a copy of the passbook of the tong’s bank account at HSBC and give explanations for various entries in that passbook.  Effectively, she has turned the present application under Order 43 into one for specific discovery and/or interrogatories.  As mentioned above, this is contrary to principle.

23.  Second, there is clearly here a dispute on whether the defendant has already rendered full and proper accounts of the tong’s assets, income and expenditures over the years. Whether the defendant has in fact done so is a “preliminary question” which ought to be resolved first at trial before he could be ordered to provide a “complete and proper account” which the plaintiff says the defendant has failed to provide.

24.  At the hearing of the appeal this morning, Mr Cheung argued that the Master’s decision could be supported on the narrow basis that (i) there were missing pages in the bank passbook as exhibited to the affirmations filed for the purpose of the plaintiff’s application, and (ii) some of the entries in the passbook did not have side notes or explanations.  In respect of (i), as mentioned above, the defendant’s evidence (which has not been disputed in the plaintiff’s affirmations) is that the passbook, or the relevant pages thereof, have already been displayed or posted up at the ancestral hall of the tong and other public places.  In any event, if what the plaintiff truly wishes to have is a complete copy of the passbook, the plaintiff ought to have applied for specific discovery, instead of for an account.  In respect of (ii), as earlier stated,Order 43 is not the appropriate avenue for seeking answers to interrogatories, or clarification of accounts already rendered.

DISPOSITION

25.  For the above reasons, I allow the plaintiff’s appeal and set aside Master Chow’s order dated 18 May 2016, as well as her subsequent order regarding summary assessment of costs dated 17 June 2016.

26.  I shall now hear the parties on the question of costs below and of this appeal.