In Tang Tak Sum v Tang Kai Fung (No 2) [2020] 2 HKLRD 338, P and D were tenants in common of a property, P owned a 25% share and D a 75% share. For many years, D granted leases and received the income without accounting to P.
In earlier proceedings, D was ordered to account to P for the income and expenditure relating to the property. These proceedings concerned a dispute as to how the account was to be conducted.
Was the account to be in common form or on the basis of wilful default?
‘Wilful default … refers to a default whereby an accounting party, in breach of duty, failed to obtain a benefit which should have been obtained for the fund’ ([19]).
If the account was on the basis of wilful default, D would have to account not only for income actually received but for income which ought to have been received.
Master Anthony HK Chan decided that the account should not be on the basis of wilful default. This was not what the Court of Appeal had ordered. Wilful default had not been pleaded or proved ([16]). Default in rendering an account is not, on its own, a sufficient basis to ground a claim for an account on the basis of wilful default ([20]).
Should D be ordered to pay an occupation rent?
An ouster may not be absolutely necessary for an occupation rent to be ordered. It may be equitable to order such a payment where an owner in occupation seeks an allowance for improvements ([28]) or where there was a prior agreement to pay an occupation rent ([32]). None of these factors was present and there would be no order to pay an occupation rent.
Michael Lower