XVI v XVJ & Anor

Facts

Two brothers disputed the administration of their late father's estate. The father died on 30 October 1989, and the estate's main asset was a two-storey shophouse. The first defendant (XVJ), the executor, held the shophouse with a half share for himself and the other half on trust for the estate. He controlled the ground floor and all but one upstairs room, let out parts of it, and paid all the rent into his personal account; the estate had no bank account until 18 January 2019. The plaintiff (XVI) was added as co-executor in 2017 and sued in Suit No 5 of 2017. After a trial in November 2019, a Judicial Commissioner ordered on 6 February 2020 that an account be taken on the footing of wilful default.

A jointly appointed accountant reported that the shophouse could very likely have earned more than the first defendant's rent ledger recorded, and gave two methods for estimating what could have been earned: one based on the official annual value of the property, the other on market rents from a valuation report. The shophouse was sold on 16 September 2022, and $230,338.13 was paid to the estate from the first defendant's share. In Summons No 365 of 2021 the plaintiff sought a surcharge, directions on breach of trust, interest and costs. The second defendant, another brother and beneficiary, attended only on a watching brief.

Issues

1. Whether the earlier order had already found wilful default by the first defendant.
2. Whether the first defendant under-declared the rent he actually received, and how much of it reached the estate.
3. What rent he could have received had he been diligent, and which estimation method should be used.
4. What directions, interest and costs should be ordered.

Holding

The High Court allowed the summons in part: it ordered the account surcharged by $198,332.91, which the first defendant must make good to the estate (by deduction from his share or otherwise), with interest at 5.33% from 17 September 2022, and dismissed the prayer for directions on other breaches of trust. It ordered the first defendant to pay costs of $175,000 and disbursements, the estate to pay the plaintiff the balance of his indemnity costs of $270,000, and the first defendant to repay the expert's fees, with no recourse to the estate for his own costs.

Reasoning

The argument that no wilful default had been found was misconceived. An account on that basis requires proof of at least one act of wilful default, and the transcript showed the Judicial Commissioner had expressly made that finding, in relation at least to the rental income. The first defendant also admitted not marketing the property, not checking market rents and not remembering what some tenants paid.

The burden of proving under-declaration lay on the plaintiff, and he did not discharge it: the ledger matched the tax returns, the first defendant explained how he supported his family, and gaps against tenancy agreements were explained by tenants who did not pay. But a trustee must show the money actually reached the estate, and only $406,788.13 had been received.

On what could have been received, the court preferred the method based on the official annual value. The market-rent report drew on few transactions, chose the 75th percentile without explanation and gave figures in some years more than triple the official values. Using the URA commercial property price index to fill early years without annual value data was the best available approach. The plaintiff's further claimed shortfall was already allowed for in the expert's assumptions.

The plaintiff's evidence on other breaches went only to rent, so there was no basis for further directions. He succeeded both at trial and on the account, the suit was in substance for the estate's benefit, and a trustee's indemnity ranks ahead of beneficiaries' claims.

From the judgment