LEE CHARLES GOON LOK v. LEE KWOK CHING AND OTHERS

HCA 2366/2015

[2026] HKCFI 5016

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 2366 OF 2015

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BETWEEN

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JUDGMENT

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I. INTRODUCTION

1.  This is a trial concerning Li Wa (or Wah) Fuk Tso (李華福祖) (the “Tso”). This is not the first time litigation has been commenced concerning the Tso: see Brigg J’s Decision in Li Tang-shi v Li Wai-kwong and Another [1969] HKLR 367 and the Full Court’s judgment in Li Tang-shi v Li Wai-kwong and Another (No 2) [1969] HKLR 629. Those cases were related mainly to who should be the managers of the Tso. In those cases, the plaintiff Li Tang Shi was the widow of Li Wah Fuk (the focal ancestor of the Tso) leaving no surviving child, and the defendant Li Wai Kwong was the nephew of Li Wah Fuk and the father of the 1^st Defendant (“Kwok Ching”), the 2^nd Defendant (“Kwok Lim”) and the Plaintiff (“Charles”)’s father the 3^rd Defendant (“Kwok Chi”) herein. For convenience, they are collectively referred to as the “Brothers”. In the present trial:-

(1) Charles, as a member of the Tso claims against the only three managers of the Tso, namely, Kwok Ching, Kwok Lim and Kwok Chi, for their breaches of duties as the managers of the Tso in relation to the disposals of 25 landed properties (collectively, the “Properties”) registered in the name of the Tso, and for the account of the rental income of 11 properties now still in the name of the Tso. The Plaintiff also claims against the 4^th Defendant (“Janyet”) and the 5^th Defendant (“Wellot”) and the 6^th Defendant (“Pearl Luck”) for assistance of the breaches of the duties.

(2) Kwok Chi, as a co-manager of the Tso, claims against Kwok Ching and Kwok Lim for indemnity or contribution in relation to the Plaintiff’s claim against him. Kwok Chi, as a member of the Tso, also claims against Kwok Ching and Kwok Lim for breaches of duties as managers of the Tso.

II. PARTIES

2.  Li Wah Fuk is the focal ancestor of the Tso. Li Tang Shi was his wife and after Li Wah Fuk passed away, his widow. They did not have any children. Nor did Li Wah Fuk or Li Tang Shi adopt any son.

3.  Lee Wai Kwong was the nephew of Li Wah Fuk. After Li Wah Fuk passed away and the Tso was set up, Lee Wai Kwong and Li Tang Shi were appointed the managers of the Tso.

4.  Lee Wai Kwong passed away on 23 February 1992, leaving Kwok Ching, Kwok Chi and Kwok Lim as the only surviving sons and also leaving two surviving daughters. Kwok Ching was the eldest son, Kwok Chi the second and Kwok Lim the third.

5.  In May 1995, Kwok Chi and Judy Gar-yee Lau (“Judy Lau”) were married and had a son Charles, born on 27 March 1996. Kwok Chi and Judy Lau got divorced in 2007.

6.  Because all the parties’ interests in the present case are based on their memberships of the Tso, so, understandably, none of the parties takes issue over their memberships of the Tso, although none of them is in the direct descendant line of the focal ancestor of the Tso, namely, Li Wah Fuk. I have some doubt over such membership, and I also have some doubt over whether the Court can simply accept what the parties do not dispute in relation to the membership, given that who can be a member of the Tso is a mixed question of fact and law (Chinese customary law being part of the domestic law). All that said, in the absence of any expert evidence on this issue, I proceed on the basis that they are the members of the Tso.

7.  Janyet is a limited company incorporated in Hong Kong. It was acquired by Kwok Ching, Kwok Lim and Kwok Chi in 1992. They became the equal shareholders (each holding 200,000 shares) and the directors upon acquisition. In April 2000, Kwok Chi ceased to be a director and in December 2000, Kwok Chi transferred 90,000 shares to Kwok Ching, 90,000 shares to Kwok Lim and 20,000 shares to the Plaintiff.

8.  Wellot is also a limited company incorporated in Hong Kong. It was acquired by Kwok Ching and Kwok Lim in 1993. They became the equal shareholders and directors upon acquisition. They remain so now.

9.  Pearl Luck is a limited company incorporated in the BVI. It was acquired by Kwok Ching and Kwok Lim in 1995. On 31 October 2006, it was struck off from the Register of Companies in the BVI for non-payment of fees. Pearl Luck was not represented in the trial.

III. BACKGROUND

10.  Around 1908, Li Wah Fuk died intestate and left no issue, but left Li Tang Shi as his widow. On 28 March 1912, the District Office, Tai Po appointed Li Tang Shi, one Li Hang Ho and one Li Yuk Shing as the trustees (as mangers were then referred to) for the Tso. On 5 September 1939, the District Office, Tai Po appointed Li Tang Shi as the trustee for the Tso in place of Li Hang Ho and Li Yuk Shing.

11.  In 1957, 1960 and 1964 respectively, Kwok Ching, Kwok Chi and Kwok Lim were born.

12.  In 1965, Lee Wai Kwong was registered as an additional manager of the Tso (with Li Tang Shi being the other manager).

13.  On 20 November 1970, the District Office removed Li Tang Shi as manager of the Tso, and on 20 April 1971, appointed Lee Wai Kwong as the manager of the Tso.

14.  On 23 February 1992, Lee Wai Kwong passed away, leaving Kwok Ching, Kwok Lim and Kwok Chi as the only surviving sons.

15.  On 10 March 1992, they became the managers of the Tso.

IV. THE PROPERTIES

16.  In respect of the Properties (referred as to “Property 1”, “Property 2” until “Property 25” throughout the proceedings):-

(1) All the Properties are in the New Territories.

(2) All the Properties except Properties 20 to 23 are located in buildings. Properties 20 to 23 are land-lots.

(3) Properties 1 to 8 are premises in Lok Sing Building, No. 10 Kau Yuk Road, Yuen Long, New Territories.

(4) Properties 11 to 18 are premises in Yuk Sing Building, Yu King Square, Yuen Long, New Territories.

(5) Properties 20 to 23 are land-lots in Demarcation District No. 116 in Yuen Long.

V. DISPOSALS OF THE PROPERTIES BEFORE AND AFTER CHARLES’ BIRTH

17.  21 out of the 25 Properties were disposed of before Charles’ birth on 27 March 1996, and the remaining 4 were disposed of in November 1996 when Charles was less than one year old. Specifically, before Charles’ birth on 27 March 1996, the Tso disposed of the following Properties:-

(1) On 20 April 1993, Properties 4 and 8 were assigned to Janyet with the consent granted by the Yuen Long District Office on 8 March 1993.

(2) On 29 September 1993, Properties 1 to 3 and 5 to 7 were assigned to Janyet with the consent granted by the Yuen Long District Office on 3 September 1993.

(3) On 30 September 1993, Property 24 was assigned to Chan Sau Lan Kitty (“Kitty Chan”) with the consent granted by the Yuen Long District Office on 3 September 1993.

(4) On 14 October 1993, Property 25 was assigned to Lau Kwok Kwong (“KK Lau”) and his daughter Lau Sze (“Lau Sze”) with the consent granted by the Yuen Long District Office on 3 September 1993.

(5) On 3 October 1994, Properties 14 and 15 were assigned to Kwok Chi with the consent granted by the Yuen Long District Office on 15 April 1994.

(6) On 9 October 1994, Properties 9 and 10 were assigned to Wellot with the consent granted by the Yuen Long District Office on 15 April 1994.

(7) On 20 January 1995, Properties 11, 12, 16, 17 and 18 were assigned to Wellot with the consent granted by the Yuen Long District Office on 21 November 1994.

(8) On 8 February 1995, Property 13 was assigned to Kwok Chi with the consent granted by the Yuen Long District Office on 21 November 1994.

(9) On 17 February 1995, Property 19 was assigned to Wellot with the consent granted by the Yuen Long District Office on 15 April 1994 extended on 25 November 1994.

(10) For the disposals of Properties 1 to 19 above, there was no actual consideration paid to the Tso.

(11) For the disposal of Property 24 on 30 September 1993, the Tso received a consideration of HK$480,000 from Kitty Chan.

(12) For the disposal of Property 25 on 14 October 1993, the Tso received a consideration of HK$450,000 from KK Lau and Lau Sze.

18.  After Charles’ birth on 27 March 1996, in November 1996 (when Charles was less than one year old), the Tso disposed of the following Properties:-

(1) On 18 November 1996, Properties 20 and 21 were assigned to Pearl Luck with the consent granted by the Yuen Long District Officer on 11 December 1995 (pre-Charles’ birth) extended on 23 July 1996 (post-Charles’ birth).

(2) On 25 November 1996, Properties 22 and 23 were assigned to Onfine Development Limited (“Onfine”) with the consent granted by the Yuen Long District Officer on 11 December 1995 (pre-Charles’ birth) extended on 23 July 1996 (post-Charles’ birth).

(3) For the disposals of Properties 20 to 21, there was no actual consideration paid to the Tso.

(4) For the disposals of Properties 22 and 23 under one single assignment, the Tso received a consideration of HK$11,325,600 from Onfine.

VI. CHINESE CUSTOMARY LAW GOVERNING THE PROPERTIES

19.  By section 13(1) of the New Territories Ordinance (Cap. 97) (the “NT Ordinance”), “in relation to land in the New Territories, the court shall have power to recognise and enforce any Chinese custom or customary right affecting such land”, which has been understood to mean the Chinese customary law. While there could be room to interpret the wording of section 13(1) to mean that the Court has a choice whether or not to enforce “Chinese custom or customary right”, it has been held and consistently applied in a way that the Courts are in fact mandated to enforce Chinese custom or customary right: see Man King Chuen and Others v Hong Lok Yuen International School Association Limited and Another [2023] HKCFI 1435 at §239 per K Yeung J (as he then was). Although there is some force in the submissions of Kwok Ching and Kwok Lim’s counsel (Mr Jonathan Chang SC leading Mr Timothy Lam) that the Court has such a choice and there have been obiters in support, it is not necessary here for me to rule on this matter.

20.  Another relevant provision of the NT Ordinance is section 15. It is a rather long provision. For clarity sake, I break it down as follows, insofar as relevant, and I shall refer to the breakdowns as “section 15[1]”, “section 15[2]”, “section 15[3]” and “section 15[4]”:-

“[1] Whenever any land is held from the Government under lease or other grant, agreement or licence in the name of a clan, family or t’ong, such clan, family or t’ong shall appoint a manager to represent it. Every such appointment shall be reported at the appropriate New Territories District Office of the Home Affairs Department, and the Secretary for Home and Youth Affairs on receiving such proof as he may require of such appointment shall, if he approves thereof, register the name of the said manager

[2] who shall, after giving such notices as may be prescribed, have full power to dispose of or in any way deal with the said land as if he were sole owner thereof, subject to the consent of the Secretary for Home and Youth Affairs, and

[3] shall be personally liable for the payment of all rents and charges and for the observance of all covenants and conditions in respect of the said land.

[4] Every instrument relating to land held by a clan, family or t’ong, which is executed or signed by the registered manager thereof in the presence of the Secretary for Home and Youth Affairs and is attested by him, shall be as effectual for all purposes as if it had been executed or signed by all the members of the said clan, family or t’ong…”

21.  Although “Tso” is not mentioned in section 15, it is well established that section 15 also applies to a Tso.

VII. CHARLES’ CLAIM

22.  Charles claims that as mangers of the Tso, the Brothers were fiduciaries and trustees and so they owed duties analogous to fiduciaries and trustees towards the Tso and all members of the Tso including future members like the Plaintiff, to, inter alia, (a) give a true and proper account in respect of all their dealings with the money and assets of the Tso; (b) maintain the Tso and the Tso properties for the benefit of existing and future members of the Tso; and (c) act in good faith in the best interest of the Tso and its members.

A. Properties 1 to 25

23.  For Properties 1 to 25, Charles seeks relief to set aside the disposals for the reasons set out in §21 of the Re-Amended Statement of Claim, on the causes of action of the Brothers’ “fraudulent breach of trust” and their assignees’ knowing assistance in the said fraudulent breach of trust. The reasons can be broadly summarised as follows:-

(1) For the disposals of Properties 1 to 21, there was no actual consideration given.

(2) In applying for the consent in respect of the disposals of Properties 1 to 25, the Brothers made the following fraudulent misrepresentations to the Yuen Long District Office, namely:-

(a) there were no other members of the Tso even in relation to the disposals of Properties 20 to 23 taking place after Charles’ birth; and

(b) contrary to the reason provided to the Yuen Long District Office, the disposals were not for the development and/or investment of the members of the Tso, either because there was no consideration paid or because the proceeds from the disposals were not used for such purposes.

(3) The assignees were the Brothers themselves or companies controlled by the Brothers or any of them.

(4) There was no justification or cause and no real necessity for the Brothers as managers of the Tso to make the disposals.

B. Properties 1 to 12 and 16 to 21

24.  Further, for Properties 1 to 12 and 16 to 21, which are still registered in the name of Janyet, Wellot or Pearl Luck, they are held on resulting or constructive trust for the benefit of the Tso, and Janyet, Wellot and Pearl Luck are liable to account to the Tso of their dealings with those Properties.

C. Properties 13 to 15 and 22 to 25

25.  Also, for Properties 13 to 15 and 22 to 25, which have been sold to third parties, the Brothers hold the sale proceeds on resulting or constructive trust for the benefit of the Tso and each of the Brothers shall give a true and proper account of their dealings with the proceeds.

D. Properties 26 to 36

26.  In respect of Properties 26 to 36 which the Tso has rented out for rental income, the Managers shall give a true and proper account of their dealings with the rental income. I note that Charles has never said that he has demanded an account of the rental income but has been refused.

VIII. D1245’s DEFENCE

27.  Kwok Ching and Kwok Lim (the 1^st and 2^nd Defendants respectively) and Janyet and Wellot (the 4^th and 5^th Defendants respectively) (collectively, “D1245”) filed one joint single defence. The latest defence is the Re-Re-Amended Defence filed on 30 September 2025.

28.  D1245’s defence is that the Brothers owed and owe to Tso’s members duties of a fiduciary nature being duties of good faith recognised under the Chinese customary law, and such duties would include a duty to give a true and proper account. However, no duties were owed to the Plaintiff before his birth on 27 March 1996 or any other future members of the Tso. The Tso’s properties are owned by living or current members of the Tso at a particular point of time. Further, the common law concept of trust was unknown to the Chinese customary law, and there is no right of tracing the proceeds generated from the sale of the Tso’s properties.

A. Properties 1 to 8

29.  In respect of Properties 1 to 8, D1245’s defence is that in 1992, Kwok Chi requested from the Tso, and Kwok Ching and Kwok Lim agreed to advance, a loan of HK$1,700,000 for paying his gambling debt. In late 1992, the Brothers agreed to have a more clear-cut segregation of their respective shares in the properties of the Tso in order to protect Kwok Ching and Kwok Lim from (i) the unreasonable demands by Kwok Chi’s creditors for repayment of this debts; (ii) the risk of dissipation of their share in the Tso’s properties; and (iii) unnecessary augments among the Brothers as the only managers and beneficiaries. To achieve this, the Brothers came to an oral agreement (the “1992 Agreement”):-

(1) The bulk of the Tso properties would be sold in stages to a limited company to be set up and held equally by the Brothers;

(2) The sale proceeds would be distributed to the Brothers in equal shares as the only beneficiaries or members of the Tso; and

(3) A sufficient quantity of properties within the Tso would be kept by the Tso in order to generate income for renovation of the ancestral home and future ancestral worship.

30.  Properties 1 to 8 were transferred to Janyet pursuant to the 1992 Agreement.

B. Properties 9 to 12 and 16 to 19 and Properties 13 to 15

31.  After the Brothers reached the 1992 Agreement, Kwok Chi still incurred much gambling debts, and continued to request monies from the Tso. In late 1993, the Brothers reached a further oral agreement (the “1993 Agreement”):-

(1) The next lot of the Properties originally intended to be sold to Janyet would be divided among the Brothers as members of the Tso and transferred to Kwok Ching and Kwok Lim on the one hand (held by a corporate vehicle equally owned by the two of them) and Kwok Chi on the other for their respective benefits and disposals; and

(2) The division shall take into account the personal debts owed by Kwok Chi to Kwok Ching and Kwok Lim.

32.  Pursuant to the 1993 Agreement, Properties 9 to 12 and 16 to 19 were sold to Wellot (equally owned by Kwok Ching and Kwok Lim) and Properties 13 to 15 were sold to Kwok Chi. There was no actual transfer of consideration, which was settled by way of setting-off the distribution of the purchase prices.

C. Properties 20 to 23

33.  In the latter half of 1995, Kwok Chi had borrowed from Kwok Ching and Kwok Lim personally a total sum of approximately HK$1,000,000. Around that time, Kwok Chi decided to get married in Canada and was likely to spend more time away from Hong Kong. Despite Kwok Ching and Kwok Lim’s requests, Kwok Chi had yet to repay all his debts owed to Kwok Ching and Kwok Lim. As a result, Kwok Ching proposed, and Kwok Chi agreed to, the following agreement (the “1995 Agreement”):-

(1) Properties 20 to 23, believed to be agricultural lands at the time, would be distributed and sold to Kwok Ching and Kwok Lim at HK$3,000,000; and

(2) The sale proceeds would be distributed between Kwok Ching and Kwok Lim, with Kwok Chi forgoing his 1/3 share in the sale proceeds (HK$3,000,000 x 1/3 = HK$1,000,000) by way of repayment to Kwok Ching and Kwok Lim.

34.  In November 1996, Properties 20 and 21 were transferred to Pearl Luck for HK$2,491,632, though no consideration was not actually paid but was settled by way of setting off of the distribution of the purchase price.

35.  Also in November 1996, Onfine, a developer, was interested in acquiring Properties 22 and 23. Onfine, through Kwok Chi, approached Kwok Ching and Kwok Lim. After negotiation, Kwok Ching and Kwok Lim agreed to cause the Tso to sell Properties 22 and 23 to Onfine at HK$11,325,600.

36.  When the 1995 Agreement was reached, Charles was not yet born and was not a member of the Tso. So, no duty to him was owed and breached. After Charles was born, by the time the disposals of Properties 20 to 23 in November 1996, Charles was a minor and Kwok Chi, as Charles’ father, consented to the disposals on behalf of himself and Charles.

37.  Further, when applying for the extension of the consent of the Yuen Long District Office, although by the application, Charles had been born, the Brothers were not asked by the solicitors or the District Office to submit any additional list of members of the Tso.

D. Properties 24 and 25

38.  In late 1993, the Brothers discovered undesirable business in the form of hourly hotel in the vicinity or Properties 24 and 25. Therefore, the Brothers agreed to sell Properties 24 and 25. They used part of the sale proceeds to pay the debts of their father (Li Wai Kwong)’s estate, and deposited the balance into the Tso’s account.

E. Kwok Chi transfer of his shares in Janyet to Kwok Ching and Kwok Lim

39.  In or about early 2000, debt collectors approached Kwok Ching and Kwok Lim to demand repayment of Kwok Chi’s debt in the sum of about HK$8,000,000. Further, by that time, Kwok Chi had already been indebted to Kwok Ching and Kwok Lim as well as other siblings over HK$10,000,000 in total.

40.  To raise money, Kwok Chi offered to transfer his interest in Janyet to Kwok Ching and Kwok Lim. After discussion, each of Kwok Ching and Kwok Lim agreed to acquire 90,000 shares from Kwok Chi, (totalling 180,000 shares) for HK$24,000,000 (totalling HK$48,000,000) together with assignment of Kwok Chi’s shareholder’s loan booked in Janyet’s account assigned to Kwok Ching (HK$10,296,529.52) and Kwok Lim (HK$10,296,529.51).

41.  Instead of paying HK$24,000,000, with Kwok Chi’s consent, Kwok Ching and Kwok Lim paid off Kwok Chi’s debts and remitted the balance of HK$2,740,000 to Judy Lau on or about 18 April 2000.

F. Properties 1 to 25

42.  For the above disposals of Properties 1 to 25, D1245 aver that there was no requirement of “real necessity” and unanimous consent of the managers and members would be sufficient. They also aver that in any event, the disposals were proper and justified.

43.  As regards the Brothers’ application for consent to the disposals above, D1245 aver that there was no misrepresentation made.

G. Properties 26 to 36

44.  In relation to the rental income on Properties 26 to 36, D1245 accept that the Brothers as managers of the Tso have a duty to give a true and proper account of the rental income, and aver that the rental income had been recorded in the ledgers and/or relevant bank statements of the Tso.

H. Charles’ locus standi in relation to his claim on wrongs allegedly done before his birth

45.  In respect of Charles’ locus standi, D1245’s defence (pleaded in §53A of their defence) is threefold:-

(1) Charles has no locus to make any complaint in respect of dealings that took place before he became a member of the Tso.

(2) In relation to the dealings that took place after his birth, (a) Charles consented to the same through the acts and decisions of his father Kwok Chi, as his father and head of the fong to which Charles belongs, and (b) Kwok Chi’s decisions, made at the time when Charles was still a minor, are binding on Charles.

(3) Chares is not entitled to raise any objection or take any legal action in respect of the dealings of the Tso or family property by his father Kwok Chi and his paternal uncles Kwok Ching and Kwok Lim, as this would seriously transgress the rules of filial piety.

IX. KWOK CHI’S DEFENCE

46.  Kwok Chi pursues his own defence. According to Kwok Chi, Kwok Ching, as the eldest brother, assumed a dominant role in the management of the business and affairs of the Tso and made decisions on its behalf, including completing and providing written returns and applying for consent from the Yuen Long District Office. Kwok Chi acceded to Kwok Ching’s decisions. Therefore, Kwok Chi seems to raise a defence, short of duress or undue influence, that Kwok Ching had the dominant role and Kwok Chi had no responsibility.

47.  Kwok Chi also admitted that there was no real necessity justifying the disposals of Properties 1 to 25.

A. Properties 1 to 8

48.  In 1992, after the Brothers were appointed the managers, Kwok Ching made the following representation (the “D1’s First Representation”) to Kwok Chi pleaded in §8(2) of the latter’s defence to the effect that:-

(1) “There would likely be a change to the application of Chinese customary law to the entitlement of the properties of the Tso after 1997, making it possible that female descendants would become eligible to be entitled to the beneficial interests of the said land lots; and”

(2) “in the event that the 1^st, 2^nd and 3^rd Defendants passed away before any direct male descendants of the Tso were born, the Tso would become extinct and the said land lots would devolve to other distant relatives of the Lee family.”

49.  Kwok Ching proposed that Properties 1 to 8 should be transferred out of the Tso first as they were the most valuable ones among the Tso’s properties. Kwok Ching further made the representation (the “D1’s Second Representation”) to Kwok Chi pleaded in §8(4) of the latter’s defence that the Brothers could transfer Properties 1 to 8 out of the Tso if there was unanimous agreement by the Brothers as managers of the Tso.

50.  According to Kwok Chi, he acceded to Kwok Ching’s proposal to transfer Properties 1 to 8 due to Kwok Ching being the eldest brother and Kwok Ching’s dominant role in the management of the business and affairs of the Tso. Janyet was acquired and Properties 1 to 8 were then transferred to Janyet.

B. Properties 9 to 19

51.  Kwok Chi avers that Kwok Ching told him that Properties 9 to 12 and 16 to 19 should be transferred to Kwok Ching and Kwok Lim, and Properties 13 to 15 should be transferred to Kwok Chi. Again, due to Kwok Ching being the eldest brother and Kwok Ching’s dominant role in the management of the business and affairs of the Tso, Kwok Chi agreed.

52.  Kwok Chi sold Properties 13 to 15 in April and May 1995 for a total sum of HK23,200,000.

C. Properties 20 to 23

53.  In mid-1996, in Canada, Kwok Ching made a representation (“D1’s Third Representation”) to Kwok Chi, pleaded in §13(1) of the latter’s defence, that “not much use could be made of the agricultural lands registered in the name of the Tso…and [Kwok Lim] and [Kwok Ching] could buy [Kwok Chi]’s share in those agricultural lands for the sum of HK$4,000,000”.

54.  In need of money at the time, and in reliance on Kwok Ching’s advice as the actual person in control of the management of the business and affairs of the Tso, Kwok Chi agreed to Kwok Ching’s suggestion, and executed the necessary documents.

55.  Kwok Chi discovered that in fact four pieces of agricultural lands were transferred, and that in particular, two (Properties 20 and 21) were transferred to Pearl Luck for HK$2,491,632 and two (Properties 22 and 23) were transferred to Onfine for HK$11,325,600.

D. Kwok Chi’s case specific to Properties 1 to 23

56.  Based on the above, Kwok Chi’s case in relation to Properties 1 to 23 is that:-

(1) D1’s First, Second and Third Representations were misrepresentations;

(2) Kwok Ching failed to inform or disclose to Kwok Chi that the disposals would constitute a potential breach of the fiduciary duties owed by the managers of the Tso;

(3) Kwok Ching misrepresented and/or failed to disclose to Kwok Chi the true market value of Properties 1 to 23; and

(4) Had Kwok Chi known the potential consequences of §§(1) – (3) above, he would not have consented to the disposals.

E. Properties 24 and 25

57.  Kwok Chi accepts that the Brothers agreed to the sale of Property 24 to Kitty Chan for HK$480,000 and the sale of Property 25 to KK Lau and Lau Sze for HK$450,000.

58.  Kwok Chi’s case in relation to Properties 24 and 25 is, similar to that for Properties 1 to 23, that:-

(1) D1’s First and Second Representations were misrepresentations (the Third Representation only applicable to Properties 20 to 23);

(2) Kwok Ching failed to inform or disclose to Kwok Chi that the disposals would constitute a potential breach of the fiduciary duties owed by the managers of the Tso;

(3) Kwok Ching misrepresented and/or failed to disclose to Kwok Chi the true market value of Properties 24 and 25; and

(4) Had Kwok Chi known the potential consequences of §§(1) – (3) above, he would not have consented to the disposals.

F. Properties 26 to 36

59.  Kwok Chi’s case in relation to Properties 26 to 36 is that Kwok Ching assuming the dominant role, Kwok Chi had no idea that Properties 26 to 36 were let for rental income.

G. Kwok Chi’s general defence – no role, no liability

60.  Kwok Chi’s general defence to Charles’ claim can be summarised as “no role, no liability”: despite being a manager, he should have no liability because Kwok Ching assumed the dominant role and he only acceded to whatever requests Kwok Ching made.

X. KWOK CHI’S CLAIM AGAINST KWOK CHING AND KWOK LIM

61.  Kwok Chi, as a co-manager, claims contribution or indemnity from Kwok Ching and Kwok Lim, on the ground that D1’s First, Second and Third Representations were fraudulently made, in that Kwok Ching knew that they were false or was reckless as to the truthfulness.

62.  In respect of D1’s Third Representation, the one pleaded in Kwok Chi’s claim against Kwok Ching and Kwok Lim has more than that pleaded in Kwok Chi’s defence. According to Kwok Chi (pleaded in §2(12) of his claim):-

“In or around mid-1996 in Canada, the 1^st Defendant represented to the 3^rd Defendant that not much use could be made of the agricultural lands registered in the name of the Tso and should be sold off if the opportunity arose and he and the 2^nd Defendant could buy the 3^rd Defendant’s share in those agricultural lands for the sum of HK$4,000,000. Specifically, the 1^st Defendant explained that a third party was interested in acquiring 3 agricultural lands for the sum of around HK$12,000,000 and he and the 2^nd Defendant could buy the 3^rd Defendant’s share in those agricultural lands for the sum of HK$4,000,000 to enable the ease of onward transfer to the third party.” (emphasis added)

63.  It is the emphasised part that is missing in Kwok Chi’s defence.

64.  Based on the ground of fraudulent misrepresentation, Kwok Chi claims that his consent to the disposals was vitiated. Further or alternatively, he also claims that there was no requisite real necessity for the disposals, and/or that Kwok Ching and Kwok Lim made profits out of the disposals.

65.  Kwok Chi also relies on material non-disclosure under family arrangement. He points to:-

(1) the falsity of D1’s First, Second and Third Representations;

(2) Kwok Ching and Kwok Lim’s failure to disclose to him the true market values of Properties 13 to 15 (transferred to him) and those of Properties 9 to 12 and 16 to 19 (transferred to Wellot owned by Kwok Ching and Kwok Lim), Properties 13 to 15 being substantially less than the latter;

(3) the exclusion of him from the value of Properties 20 and 21 (transferred to Pearl Luck owned by Kwok Ching and Kwok Lim);

(4) §§(1) – (3) above diminishing his 1/3 entitlement to the total value of the properties held by the Tso.

66.  Kwok Chi avers that had he known the above matter, he would not have consented to the disposals.

67.  Besides his claim in the capacity of a co-manager, Kwok Chi also claims against Kwok Ching and Kwok Lim in his capacity of a member of the Tso. Kwok Chi, as a member, claims that Kwok Ching and Kwok Lim breached their duties as managers in, among others, disposing of the Properties and depriving Kwok Chi of his entitlement to the value of the Properties and the rental income on the Properties. He claims that Kwok Ching and Kwok Lim should disgorge the dividends they received from Janyet and Wellot as well as the rental income on the Properties to the Tso, and that they should give an account in relation to the dealings of the Properties. Finally, he also claims for the return of the Properties now registered in the name of Janyet and Wellot, although neither Janyet nor Wellot is a party in Kwok Chi’s claim.

XI. ISSUES

68.  The parties agree to a list of issues (the “Agreed List of Issues”). In respect of Charles’ claim, the issues can broadly be summarised as follows:-

(1) Whether Charles has standing to commence the present claim;

(2) What was the “unanimous consent of the members” required for the disposal of the Properties, in particular, whether Kwok Chi’s consent would be binding on Charles;

(3) Whether a minor member could renege on such consent upon becoming an adult;

(4) Whether “real necessity” was also required (in addition to unanimous consent of the members) for the disposal of the Properties 1 to 25;

(5) What were the contents of the duties owed by the Brothers to the members of the Tso, in particular, whether they would have to give to its members detailed explanation of their dealings with the money and assets of the Tso;

(6) Whether the disposals of Properties 1 to 25 were justified;

(7) Whether the disposals of Properties 1 to 25 constituted fraudulent breach of trust and if so, whether the assignees of the Properties knowingly assisted the breach;

(8) Whether the rights and interest of any member of the Tso would extend to the right to any proceeds of sale of the Properties of the Tso, and if so, what is the nature of such rights and interests;

(9) Whether the Properties or the sale of the proceeds are held on resulting or constructive trust for the benefit of the Tso; and

(10) What remedies (such as return of the Properties, giving true and proper accounts, equitable compensation) should be granted.

69.  In respect of Kwok Chi’s claim against Kwok Ching and Kwok Lim, the issued can be broadly summarised as follows:-

(1) Whether Kwok Ching made D1’s First, Second and/or Third Representations;

(2) If so, whether the Representations were fraudulently made;

(3) Whether Kwok Chi relied upon the Representations as alleged in giving the consent to the disposals of the Properties;

(4) Whether Kwok Ching and Kwok Lim owed any duty to make full disclosure of all material information to Kwok Chi in relation to the disposals of the Properties, and if so, whether such duty was breached;

(5) Whether Kwok Chi’s claim on misrepresentation and/or breach of duty of disclosure has been time-barred by section 4 of the Limitation Ordinance (the “LO”) and/or laches and/or acquiescence;

(6) Whether Kwok Chi is any in event disentitled from claiming against Kwok Ching and Kwok Lim by reason of Kwok Chi having agreed to, participated in and/or concurred in the acts allegedly constituting breach of duty; and

(7) What remedies should be granted.

XII. FACTUAL WITNESSES

70.  For Chares, he himself and his mother Judy Lau are the factual witnesses. For D1245, Kwok Ching and Kwok Lim are the factual witnesses. For Kwok Chi, he himself is the factual witness.

71.  Before proceeding to the expert evidence on Chinese customary law, it is convenient to deal with certain factual issues first.

XIII. CONSIDERATION FOR THE DISPOSALS

72.  The first factual issue concerns whether considerations were paid for the disposals. There is no dispute that considerations were not actually paid (except for those properties sold to third parties). D1245’s case is that there were considerations, while Charles’ case and Kwok Chi’s case is that there were not. D1245’s evidence is largely documentary, including bank statements and ledgers, the authenticity of which is not challenged. I see no reason to doubt the accuracy of the same. In his evidence, Kwok Ching explains how the documentary evidence should be understood. His explanation is consistent with the documentary evidence, and there is no positive evidence to traverse his explanation. I accept his explanation. My findings are set out below.

73.  For Properties 4 and 8, the stated consideration of HK$24,750,000 was paid, as documentarily evidenced in the following manner:-

(1) On 20 April 1993, Janyet obtained a mortgaged loan of HK$10,000,000 from Kwangtung Provincial Bank (“KPB”) under a charge dated 20 April 1993 on Properties 4 and 8.

(2) Also on 20 April 1993, Janyet transferred HK$3,500,000 from its current account with KPB (“Janyet’s KPB Account”) to the Tso’s account maintained with KPB (“Tso’s KPB Account”).

(3) Then, on 8 June 1993, there were several round-robin transactions between Janyet (via Janyet’s KPB Account) and the Tso (via Tso’s KPB Account). Kwok Ching explains that Janyet’s transfers (totalling HK$21,206,915.50) to the Tso were payments of the consideration while the transfers from the Tso to Janyet (totalling HK$15,523,010) were distributions from the Tso to the Brothers via Janyet.

(4) The total of the transfers from Janyet to the Tso and the HK$3,500,000 paid on 20 April 1993 added up to HK$24,706,915.50, which is just HK$43,084.50 short of the total consideration of HK$24,750,000. Kwok Ching does not recall how this amount was paid, but given the relatively small amount, I accept his explanation.

74.  For Properties 1 to 3 and 5 to 7, the stated consideration of HK$45,000,000 was paid, as documentarily evidenced in the following manner:-

(1) On 29 and 30 September 1993, Janyet drew down mortgage loans in the total sum of HK$15,000,000 from Po Sang Bank pursuant to a mortgage dated 29 September 1993.

(2) On 4 October 1993, Janyet paid by cheque HK$12,615,867 into Tso’s KPB Account.

(3) Then, on 5 October 1993, there were several round-robin transactions between Janyet (via Janyet’s KPB Account) and the Tso (via Tso’s KPB Account). Kwok Ching explains that Janyet’s transfers (totalling HK$31,384,133) to the Tso were payments of the consideration while the transfers from the Tso to Janyet (totalling HK$31,384,133) were distributions from the Tso to the Brothers via Janyet.

(4) The total of the transfers from Janyet to the Tso and the HK$12,615,867 on 4 October 1993 came to an integer HK$44,000,000, which is just HK$1,000,000 short of the total consideration of HK$45,000,000. Kwok Ching does not recall how this amount was paid, but in the overall scheme of things, I accept his explanation.

75.  The Tso’s ledgers do not post the above money flows as “distribution” or “receipts of purchase price”, but just essentially as “withdrawals” or “deposits”. However, the above money flows, evidenced by the bank statement, did happen, and the figures by and large tally with the amounts of the consideration, and the discrepancies can be explained with reference to costs and expenses such as legal expenses. In my view, one should read both the bank statements and the ledgers together to see the full picture. There is no other plausible explanation for such transactions the figures of which by and large tally with the amounts of the consideration.

76.  The above round-robin transfers were, in my view, mere accounting treatments, and were not necessary. That this was not necessary was realised for Properties 9 to 21: the stated considerations were not actually transferred and not even round-robin transfers were made. I accept that the disposals of these Properties, like Properties 1 to 8, were effectively distributions of the Properties.

77.  Mr Dexter Leung, counsel for Charles, submits that during his evidence, Kwok Ching put forward a new version about the money flow. In the cross-examination on Day 3, Kwok Ching said that Janyet in fact borrowed a mortgage loan of HK$24,000,000, and each of the Brothers was effectively distributed HK$8,000,000 (“每人實質分到HK$8,000,000”). Mr Leung submits that this evidence on Day 3 is inconsistent with his evidence given on Day 2 summarised in §§73-74 above. With respect, I disagree. As Mr Jonathan Chang SC, leading Mr Timothy Lam, counsel for D1245, points out, the “HK$24,000,000” mortgage loan clearly refers to the mortgage loan in the total sum of HK$25,000,000 mentioned in §§73(1) and 74(1) above, and the distributions were effective in the sense that the Properties were transferred to them or their nominees. There is no inconsistency as Mr Leung submits.

78.  For Properties 22 and 23 sold to Onfine, a total of HK$11,325,600 was deposited into the Tso’s account on 10 and 11 December 1996, as evidenced by the bank statement of the Tso’s account.

79.  For Property 24 sold to Kitty Chan and Property 25 sold to KK Lau and Lau Sze:-

(1) On or about 12 October 1993, as evidenced by the ledgers of the Tso’s savings account, the Tso received HK$8,000 and HK$427,860 from Kitty Chan for Property 24.

(2) On or about 19 October 1993, again as evidenced by the ledgers of the Tso’s savings account, the Tso received HK$391,225 from Lau Sze for Property 25.

(3) On 18 November 1993, the total sum of HK$827,085 (HK$8,000 + HK$427,860 + HK$391,225), together with other sums, in the aggregate sum of HK$1,160,000, was transferred to the Tso’s current account.

(4) On 18 November 1993, a total of HK$1,158,972 was withdrawn for paying property tax.

80.  A point is also made that in examination-in-chief, Kwok Ching corrected his Witness Statement §81 to the effect that it was not HK$830,000 premium but should be HK$1.15 million odd property tax paid to the Government, evidenced by the Tso’s ledgers. Rightly, not much is made on that Kwok Ching’s credibility arising from this sensible correction. However, Mr Leung and Mr Keith Tam, counsel for Kwok Chi, take the credibility point in respect of Kwok Lim that during the examination-in-chief, Kwok Lim simply adopted Kwok Ching’s Witness Statement without the correction, and this should reflect negatively on Kwok Lim’s credibility. In my view, Kwok Lim was in Court listening to Kwok Ching’s oral evidence, and thus he could be forgiven for simply saying that he would adopt Kwok Ching’s Witness Statement. In any event, this is a minor matter, and the main witness with more personal knowledge of the relevant matters is Kwok Ching. Therefore, I do not pay much regard to this credibility point in respect of Kwok Lim.

XIV. MISREPRESENTATIONS?

81.  The second factual issue concerns D1’s First, Second and Third Representations.

A. D1’s First Representation

82.  In respect of D1’s First Representation, in the cross-examination, Kwok Chi was asked why in his pleadings, he pleaded that Kwok Ching used the word “likely” in the D1’s First Representation made to him about the change to the application of Chinese customary law, but in Kwok Chi’s own witness statement, Kwok Ching was said to use the word “possibility” about the change. Both his pleadings and witness statements are prepared in English, and were interpreted (as evidenced by the interpretation clause) to him before he appended his signature onto the documents. “Likely” and “possible” are indeed different and can be said to be inconsistent (“likely” means a higher chance than “possible”), but I would think that in the interpretation, such difference may not really be obvious. Therefore, I do not pay much regard to such difference and inconsistency in assessing the credibility of D1’s First Representation.

83.  It is not in dispute that around 1992, it was the “talk of the town” in the New Territories that a legislative councillor was proposing change to the inheritance regime of the land in the New Territories such that female descendants would also be eligible to inherit lands under the Chinese customary law after 1997. In all probabilities, the “likely” or “possible” change must have been a big concern for Kwok Ching as well as the two other Brothers, and Kwok Ching would have talked to the other Brothers about this big concern. It is inherently probable that in the talk, Kwok Ching also mentioned that the Tso would become extinct and pass to distant relatives in the event that the Brothers all died without issues. Having considered the above, I find that Kwok Ching did make D1’s First Representation.

84.  In respect of whether D1’s First Representation was a false representation, it is just Kwok Ching’s opinion, rather than a statement of fact, based on the legislative councillor’s proposed change. There is no plea (and it is the burden on Kwok Chi to plead that, as he raises the cause of action of misrepresentation or some cause of action akin to that) that Kwok Ching did not hold this opinion honestly. Nor can I see why with the “talk of the town” about this topic, his opinion was not honestly held. Therefore, I cannot see how D1’s First Representation is false.

85.  In respect of whether Kwok Chi’s consent to the disposals was given in reliance on D1’s First Representation, at the time when D1’s First Representation was made in 1992, the Brothers were 35, 32 and 28 years old respectively, and according to Kwok Chi himself, none of them had any illness that would make them think that they would pass away soon. It therefore does not make sense to me that at that time, Kwok Chi would rely on D1’s First Representation in giving the consent. Further, in the cross-examination, Kwok Chi accepted that the Brothers, including himself, agreed to the distributions upon the disposals. The highest Kwok Chi put (on which I make no finding at this stage subject to my finding below on Kwok’s Chi’s debts and gambling habit, if any) was that he gave his consent only upon repeated requests by Kwok Ching, but short of any allegation of undue influence or duress. In the circumstances, I find that Kwok Chi did not rely on D1’s First Representation in giving the consent.

B. D1’s Second Representation

86.  In considering to dispose of the Properties, the Brothers must have discussed whether they could do so. On balance, I find that Kwok Ching did make D1’s Second Representation.

87.  In respect of whether D1’s Second Representation was false, the focus would be on Kwok Ching’s understanding at that time of whether consent of the Brothers as managers (rather than as members) would be sufficient for the disposals. There is no plea as to what opinion Kwok Ching held that would be said to be inconsistent with D1’s Second Representation. Further, understood in context, in respect of the Properties disposed of prior to Charles’ birth, the Brothers were the only members of the Tso, and so in context, in my view, there was no falsity in D1’s Second Representation. Further and in any event, on the strength of section 15 of the NT Ordinance and given the reasonable disagreement even between the experts (as shall be seen below) on whether members’ consent would be necessary for disposing of the Properties when all the managers have already consented, I am not satisfied with any cogent evidence that Kwok Ching made D1’s Second Representation with an opinion held otherwise. In short, I am not satisfied that the D1’s Second Representation was made fraudulently, or negligently (which is not pleaded in any event).

C. D1’s Third Representation

88.  In the cross-examination, no question was asked about the difference between D1’s Third Representation pleaded in Kwok Chi’s defence and that pleaded in Kwok Chi’s claim against Kwok Ching and Kwok Lim, as pointed out in §§62-63 above. I am prepared to consider the one pleaded in Kwok Chi’s claim against Kwok Ching and Kwok Lim.

89.  In all probabilities, there must have been some talk among the Brothers before they signed onto the sale of Properties 20 to 23. On balance, I accept that Kwok Chi did make the first part of D1’s Third Representation, to the effect that not much use could be made of the agricultural lands registered in the name of the Tso. I also find that naturally, Kwok Ching did suggest the sale of the agricultural lands of the Tso.

90.  For the remaining parts of the pleaded D1’s Third Representation (that is, a third party was interested in acquiring 3 agricultural lands for the sum of around HK$12,000,000 and he and the 2^nd Defendant could buy the 3^rd Defendant's share in those agricultural lands for the sum of HK$4,000,000 to enable the ease of onward transfer to the third party), the relevant evidence is an application form (the “Application Form for DO Consent for Properties 20 to 23”) titled “Application for Sale/Mortgage/Transfer or Tso/Tong Property” in respect of Properties 20 to 23 dated 24 August 1995 submitted to Yuen Long District Office for the latter’s consent. The Application Form for DO Consent for Properties 20 to 23 was signed by all the Brothers, including Kwok Chi himself. The Application Form for DO Consent for Properties 20 to 23 clearly set out 4 lots and the amount of consideration was stated to be HK$6,000,000. Kwok Ching would know that Kwok Chi would have to sign the Application Form for DO Consent. In all likelihood, Kwok Ching would not represent to Kwok Chi that there would be only 3 lots to be sold for HK$4,000,000 only, because he knew he would be confronted by Kwok Chi (who would have to sign the Application Form for DO Consent) if he did say that. Further, there is no evidence from Kwok Chi that when he signed the Application Form for DO Consent, he raised any query with Kwok Ching or Kwok Lim like “why is the sale inconsistent with what Kwok Ching has told me?”. In the circumstances, I find that Kwok Ching did not make any representation of the rest of D1’s Third Representation.

91.  In any event, irrespective of whether D1’s Third Representation was made or not, Kwok Chi signed the Application Form for DO Consent, and thus he knew the details of the sale of Properties 20 to 23 and would not rely on D1’s Third Representation (if it were made). I do not accept the faint suggestion made by Mr Tam, that Kwok Chi trusted the other two Brothers and did not look at the Application Form for DO Consent. The Application Forms were important at least in two aspects: first, they were representations made to the Government and Kwok Chi, being literate, would have read the Application Forms, which were not complicated; second, they were about disposal of the Tso’s Properties, which were substantial properties. In such circumstances, Kwok Chi must have read the Application Form for DO Consent before signing them. Further and in any event, Kwok Chi is not running a defence of non est factum, and so he must be held to what he signed.

92.  D1’s Third Representation as found by me, namely, not much use could be made of the agricultural lands of the Tso and should be sold off if the opportunity, is not false because first, there is no plea as to how Kwok Ching held some other opinion, and second, more fundamentally, “not much use” is not a clear phrase and can be understood objectively in many ways. Therefore, I find no falsity in D1’s Third Representation found by me.

93.  Critically, for D1’s First, Second and Third Representations, as Mr Chang submits, the following evidence of Kwok Chi in the cross-examination, which I accept, renders his claim on D1’s First to Third Representations unviable as any cause of action:-

(1) He agreed to the disposals because he wanted the Tso Properties to be distributed to him and Kwok Ching and Kwok Lim.

(2) He voluntarily consented to the disposals or in his evidence “你情我願”.

(3) For Properties 11-12, 16-19 and 13-15, he agreed to the arrangement because he wanted to the cash from the arrangement for himself, even though he knew that the overall value of Properties 13-15 to himself would be lower than the overall value of Properties 11-12 and 16-19 to Wellot.

XV. KWOK CHI’S DEBTS AND GAMBLING?

94.  The third factual issue I should deal with concerns Kwok Chi’s debts and gambling addiction, if any.

95.  There is some dispute over whether Kwok Chi was addicted to gambling. Nevertheless, the dispute is over the time of addiction rather than whether Kwok Chi has ever been addicted, because Kwok Chi himself admits that he got addicted in 1992. His evidence is that he did not gamble after he migrated to Canada in April or May 1994 until he returned to Hong Kong in 1998, and he gambled again in 1998. He honestly admits that by August 1999, he had incurred about HK$6.8 million of debt, HK$3 million of which was owed to one casino room keeper and other remaining of which was to his friends. He also honestly admits that “over the few years” he had lost around HK$50,000,000. In fact, in §35(4) of his own Reply to the 1^st and 2^nd Defendant’s Defence to his Claim, he accepted that in 2000, the transfer of his shares in Jaynet was for paying off his debts. The dispute is only whether it was at the request of Kwok Ching or whether it was an offer initiated by Kwok Chi, and this dispute, in my view, has no significance here.

96.  So, was it that during the period from 1994 to 1998, when Properties 9, 10, 11, 12, 13, 16, 17, 18, 19, 20, 21, 22 and 23 were disposed of, Kwok Chi did not gamble at all?

97.  I mainly have the say-so evidence from Kwok Ching that Kwok Chi still gambled even in Canada and did so heavily.

98.  On balance, given that he had gambled heavily before he migrated to Canada and again gambled heavily after he returned to Hong Kong in 1998, in my view, he did gamble and incur debt in Canada, although there is no evidence of the extent of the gambling and the debt there. In any event, it is not necessary for me to make any finding of the extent.

99.  It follows that on balance, there were indeed the 1992 Agreement, the 1993 Agreement and the 1995 Agreement, whereby Kwok Chi’s debts were paid off or set off. Mr Leung submits that the Tso could rely on the rental incomes generated by the Properties to pay off Kwok Chi’s debts, rather than selling the Properties. With respect, I am unable to accept such submissions because first, it would take longer time to pay off the debts, and second and in any event, it was the Brothers, as managers, commercial decision as to how to deal with the Properties, and it would, in my view, be within the range of reasonableness to choose sale or division of the Properties rather than rental income.

100.  It means, following from these fact-findings, that Kwok Chi, Charles’ father, benefited from the disposals of the Properties by having his debts paid off, and now Charles and Kwok Chi himself as members come up to say that the disposals should be set aside.

101.  I note that the 1992 Agreement, the 1993 Agreement and the 1995 Agreement are the reasons D1245 provided for the disposals of the Properties, while Charles and Kwok Chi deny and basically provided D1’s First, Second and Third Representations to explain the disposals. They appear opposite at first glance, but they are not necessarily mutually exclusive given my findings that D1’s First Representation (not relied upon), D1’s Second Representation and only part of D1’s Third Representation (not relied upon) were made.

XVI. MISREPRESENTATIONS TO YUEN LONG DISTRICT OFFICE?

102.  The fourth factual issue is the Plaintiff’s allegation that the Brothers knowingly gave false information to the Yuen Long District Office when applying for the consent for disposals of the Properties under section 15 of the NT Ordinance.

103.  The false information allegedly given by the Brothers is:-

(1) There were no considerations paid for the disposals of Properties 1 to 21, contrary to what were stated in the application forms (in general, the “Application Forms for DO Consent”) for the consent of the Yuen Long District Office for the disposals.

(2) For Properties 20 to 23, although at the time when the Application Forms for DO Consent for these Properties, Charles was not yet born and thus was not a member, by the time when extension of the consent was applied for and when the disposals of these Properties took place, Charles had been born and was a member. However, the managers did not inform the Yuen Long District Office that there was now an additional member.

(3) In the Application Form for DO Consent, the purpose of the disposals were “作為祖堂成員發展之用” or “to obtain cash for development and/or investment of members of the said Li Wah (or Wa) Fuk Tso”. However, for Properties 1 to 8, there were no considerations at all. For sale proceeds of Properties 9 to 25, the proceeds were not for the purpose as stated.

104.  However, there is no plea and no evidence before me to explain how the Yuen Long District Office would have acted otherwise than it did.

105.  In any event:-

(1) (1) is not false: as found above, there were considerations for the disposals of Properties 1 to 21, just that no actual payments of the considerations were made but rather by way of round-robin transfers and/or setting-off by distribution of the very same purchase prices.

(2) (2) is false: information in that the managers should have informed the Yuen Long District Office that a new member had come into being, although I cannot see any real difference that would impact upon the Yuen Long District Office when that very new member’s father was one of the members and managers consenting to the disposals.

(3) (3) is not false: the meaning of “development and/or investment of the members of the Tso” is, in my view, broad enough to include the individual members of the Tso (as opposed to the Tso collectively). For the development and/or investment of the individual members, I think even paying debts of a member or simply distribution of the assets to the member would suffice. It is not necessary, as apparently submitted by Mr Leung, that explanation should be given as to how the money was used. Further, with respect, I fail to follow Mr Leung’s submissions that how the Properties were used after the disposals would have any effect on whether the disposals themselves would be for “development and/or investment of the members of the Tso”. The Disposals (sale for proceeds and/or distribution) would be for the “development and/or investment of the members of the Tso”, while the way the Properties were used (for example, still being rented out after the Disposals) could remain the same.

XVII. EXPERT WITNESSES ON CHINESE CUSTOMARY LAW

106.  Charles and D1245 each call their own experts on Chinese customary law. For Chares is Dr Patrick Hugh Hase (“Dr Hase”), and for D1245 is Professor Michael Palmer (“Professor Palmer”). Both of them are respectable and well known to the Courts in Hong Kong. They have filed their respective reports (“Dr Hase’s Report” and “Professor Palmer’s Report” respectively) and a joint report (the “Expert Joint Report”).

107.  Kwok Chi does not have his own expert. During the opening submissions, his counsel, Mr Tam, confirmed the pleaded position at §18(1) of D3’s Re-Re-Amended Defence that Kwok Chi would rely on Dr Hase’s expert opinion.

XVIII. APPROACH ON CHINESE CUSTOMARY LAW

108.  Chinese custom, customary rights or Chinese customary law as applicable to lands in the New Territories under section 13 of the NT Ordinance is part of the domestic law. For the proper approach on Chinese customary law, it is sufficient for me to refer to the following passages in K Yeung J’s judgment in Man King Chuen and Others v Hong Kok Yuen International School Association Limited and Another [2023] HKCFI 1435 at §§243, 249 and 250:-

“243… whilst Chinese law and custom can be proved by expert evidence, their proof is not confined to such. They can be subject-matters of judicial notice, and can also be ascertained from previous judicial decisions, textbooks and other sources in manner similar to the ascertaining of common law…

249. Now this Court has had the opportunity to consider the expert evidence filed and adduced. This Court is in a much better position to gauge the binding nature of any decided cases in the light of the nature of the issues in dispute, whether the issues involved are facts sensitive, and whether there is any local variance or evolution over time.

250. If not, and if the issue involved is a point of law which a higher court has considered and decided, I see no reason why the decision ought not to be a binding precedent on that point applying the usual stare decisis considerations.”

109.  “Custom”, “customary rights”, or Chinese customary law, by nature, mean that that such custom, customary rights or customary law was so well recognised to the point that the members of the community would have internalised the same as the reference point for their conduct, described by DHCJ To in terms of phrases like “certain” and “obligatory force from within the custom itself” in Tang Che Tai and Others v Tang On Kwai and Others [2007] 5 HKC 277 at §72(5) and (6). Put another way, in my view, the relevant community would generally say “of course” to certain custom, customary rights or customary law. Such custom may overlap with moral and social values, but is not necessarily the same. There may be moral or social theory for what should be done or what not, but it is the practice that the Court should look at to determine whether there is the custom, customary rights and the Chinese customary law advocated for. Further, the Qing Code as at 1843 no doubt serves as a starting point, but should not be taken as the only relevant “reference point” when the Qing Code is not clear on the matter issue: see Liu Ying Lan v Liu Tung Yiu & Another [2003] 3 HKLRD 249 at §20 per A Cheung J (as he then was). Also, both experts accept that given that such custom, customary rights or Chinese customary law is an ancient institution, it may not have any answer at all to questions arising from the facts in the modern world of more complexity, or, as Dr Hase puts it, it may be that given the little value the land had in the past, the persons involved simply did not bother to sort out or enforce any right and duties, if any, but nowadays land is far more valuable, the people involved would try to sort out the matter legally. Both experts also opine, and I accept as common sense and logical, that if such custom, customary rights and Chinese customary law do not provide any direct answer, one may resort to the first principles, but if there are still no answers or only an answer of 50-50 (that is, falling short of proof on balance of probabilities), then in my view, there is no custom, customary rights and Chinese customary law that is applicable.

110.  I add that logically, it would not be surprising that there would be no relevant Chinese customary law on certain matters at all, given that the Chinese customary law is an ancient institution while the matters arising for the Court’s determination come from the modern world. However, since the legislation mandates the application of the Chinese customary law to lands in the New Territories, one has to accept this unsatisfactory state of the affairs.

XIX. WHETHER CHARLES HAS STANDING TO COMMENCE THE PRESENT CLAIM

111.  For this question of Charles’ standing, I start with the less controversial propositions.

112.  The nature of the unborn interests in the land of a Tso, if any, is a question expressly left open by DHCJ Lam (as Lam PJ then was) in Leung Kuen Fai v Tang Kwong Yu (or U) T’ong or Tang Kwong Yu Tso [2002] 2 HKLRD 705 at §24(f). Mr Leung draws my attention to §45, where his Lordship, “in passing”, referred to an obiter in §13.2 of To Kan Chi v Pui Man Yau, HCMP 562/1992, 26 November 1998. I cannot see how such expressly passing reference to an obiter in another case, in the context of adverse possession, would help Mr Leung’s position.

113.  There is some dispute over when a male descendant would become a member of a Tso. This dispute seems a red-herring. The more pertinent question is when the interest arises. In any event, insofar as relevant, I follow Leung Kuen Fai v Tang Kwong Yu (or U) T’ong or Tang Kwong Yu Tso’s case at §24(e), where DHCJ Lam held that “the interest of a member arose automatically by birth”, and this must mean that a male descendant becomes a member upon birth, rather than some kaideng (開燈) ceremony as opined by Professor Palmer, as it would make no sense to say that a male descendant is not a member but has acquired interest in the land of the Tso.

114.  Professor Palmer opines that Charles has no such standing to claim against the Brothers as managers because Kwok Chi, being Charles’ father, had made a decision binding on him, and for a son to commence a claim against his father (Kwok Chi) and his paternal uncles (Kwok Ching and Kwok Lim) would be contrary to wulun (五倫) (five cardinal relationships) and would constitute an intolerable crime in imperial statutory law.

115.  Insofar as Charles’ standing to commence the claim for setting aside the disposals of the Properties, I think his own expert, Dr Hase’s opinion, is pertinent. Before I proceed to that, I should quickly dispose of the submissions made by Mr Leung, that Professor Palmer himself accepts that under Statute 93, Sub-statute 6 of the Qing Code, lands would have to be returned if the purchaser was aware of the illegal nature of the disposal. However, one should understand Professor Palmer’s opinion in the context of Statute 93, Sub-statute 6 of the Qing Code, which provided that:-

“If lands which have been set apart for maintaining ancestral sacrifices are alienated by the descendants of the family interested to the extent of 50 mow or upwards, they shall be punishable as for selling a family burying ground, viz., with banishment for military servitude to a distant frontier. If the lands are less than 50 mow in extent or if lands dedicated to charitable uses (義田: yitian) are sold, the punishment shall be the same as for fraudulently selling Government land. The sale of buildings long used as ancestral temples is also forbidden under a penalty not exceeding 3 years’ banishment. In each case the purchaser, if cognisant of the illegal nature of the transaction, shall be equally punishable. The land or buildings shall be returned to the custody of the elder of the clan…” (emphasis added)

116.  Put broadly, Tso’s properties, the Properties, were kept for the benefits of the lineal descendants in return to their duty to pay worship to the focal ancestor. The properties, or at least the Properties, are not set aside for ancestral sacrifices (for example, building a temple for paying sacrifices for the ancestors). Therefore, this Qing Code provision does not apply to the present case, and Professor Palmer’s opinion that the lands should be returned should be understood as limited to the situations where the Qing Code provision applies.

117.  Dr Hase’s opinion on standing to sue largely draws on the cases of son’s succession to his father’s properties, as opposed to Tso’s properties in which living members have life interests. In summary:-

(1) The reasonable expectation of the heirs to have interests in the land should not be disappointed without the gravest of reasons.

(2) “If the reasonable expectations of the heirs are unreasonably disappointed, it is open to the heir(s) to renege [on] the transaction on inheritance or majority”: see Dr Hase’s Report §30(b).

(3) “There are several cases where heirs offered the purchaser his purchase price back, and the village community required the purchaser to return the land. However, any such attempt to renege on a disposal would be controversial and divisive within the community” (emphasis added): see Dr Hase’s Report §30(b).

(4) “Usually a scandalous disposal of landed property would be a matter of public comment and disquiet, which would make it easier for the disposal to be reneged”: see Dr Hase’s Report §30(b).

(5) In this regard, in Dr Hase’s Report §30(b), Dr Hase refers to Part 2, Section 6 of his own publication “Custom, Land and Livelihood in Rural South China: The Traditional Land Law of Hong Kong’s New Territories, 1750-1950” (HKU Press with the Royal Asiatic Society, Hong Kong, 2013). There, he gave two examples where the purchasers of the lands in question sold them back to the next heir (or next-next heir) of the vendors. In the first example, according to Dr Hase, the purchaser was “forced to surrender the land back”, “forced to accept sixty dollars for the land” and “impelled to sell by the force of public opinion”. In the second example, Dr Hase’s opinion is that “the force of local public opinion can be safely assumed to underlie the transaction”, although it is rather a mere assumption rather than any concrete opinion based on evidence. Having referred to these two examples, Dr Hase concluded that “redemption of absolute sales did occasionally take place” (emphasis added). I add that those examples given in his book were not about tso’s lands, but lands of a father with his son as the heir subsequently disputing the sale. That said, I agree with Mr Leung, that those examples could be drawn as analogy to the present situation where Tso’s lands were sold or disposed of.

(6) “However, in this case, the entire family of Lee Wa-fuk comprises a mere 3 brothers and their sons at the present, and the wider village community may well feel that they are not involved” (emphasis added): see Dr Hase’s Report §30(b).

(7) “[T]he Qing Law provides for far fewer restraints on the rights of men to disappoint their heirs” (emphasis added): see Dr Hase’s Report §30(b).

(8) “As discussed above, disposal of property by the Managers which is contrary to the general rules of Customary Law can be reneged on by the disappointed heir when he reaches his majority or inherits. However, any such case would be explosively controversial. Cases are very rare. See my answer and the examples quoted in issue (b) above” (emphasis added): see Dr Hase’s Report §30(f).

(9) I note that in respect of the general propositions above, Dr Hase does not make any distinction between disposals of Tso’s properties to third parties or bona fide purchasers and those to the Tso’s managers or their associates. During the re-examination, when asked about the Properties transferred to Janyet or Kwok Chi, who would have knowledge that the Properties were Tso Properties without actual consideration paid, the best Dr Hase could say is that such transactions were suspicious and the Properties should be returned, without any reference to the source of the custom, customary right and Chinese customary law. He added that if there would be any source of power, it would be the community’s opinion which he kept mentioning that the Properties should be returned.

118.  In other words, according to Dr Hase, with public comment and disquiet, it would be easier to set aside the disposal, but this may still be controversial and divisive within the community. To me, “making it easier”, “controversial”, “divisive”, “explosively controversial”, “forced”, “impelled”, “occasionally” all mean that there was no such custom or customary right to set aside such a disposal. At best, where the community was involved, the community may exert pressure on the purchaser to return the land in question, but such pressure or return would still be controversial and divisive. Be that as it may, as Dr Hase fairly points out, “in this case, the entire family of Lee Wa-fuk comprises a mere 3 brothers and their sons at the present, and the wider village community may well feel that they are not involved”. Therefore, in the present case, even Dr Hase, Charles’ own expert, cannot say that there would be such pressure. In the circumstances, I find that Charles has no customary right to seek to set aside the disposals of the Properties.

119.  For the sake of completeness, I also add that the fact that Dr Hase has to refer to succession cases, rather than Tso’s cases, show that there have been no examples of the situation like the present case to substantiate the existence of Charles’ standing to seek setting aside under the Chinese customary law as Charles submits.

120.  What about Charles’ right to commence claim other than setting aside the disposals?

121.  One may argue that because the disposals could not be set aside, the disposals are therefore binding on Charles, and therefore Charles has no claim even for monetary awards. However, there is no expert opinion on whether absence of law for setting aside means that the disposals are binding on Charles. In their written reports, both experts seem to take this question to hinge on whether Charles could renege on the disposals, without differentiating the right to set aside the disposals, and the right to seek other remedies (such as compensation), assuming that there was breach. Therefore, even assuming that the Brothers or any of them breached a duty owed to Charles (if any), no evidence has been adduced to prove what other remedy would be available for the breach. In Dr Hase’s oral evidence, when I asked him whether there would be such right for monetary awards, his answer is, consistent with his answer for setting aside, that the community may be of the opinion that because setting aside would be unavailable, there should be monetary compensation. The dependence on the community opinion, however, as explained above, would have little play here. In the premises, I find that there are no evidence and other materials like decided cases and no judicial notice I can take to prove that Charles has any right to seek other remedies.

122.  Viewed this way, given that Charles has no standing to commence the present claim, whether his consent was needed or not is irrelevant.

123.  Charles’ standing to commence the present claim can also be understood this way, without recourse to any customary right to set aside or other remedies: the decisions of Kwok Chi, being Charles’ father, are binding on Charles.

124.  On the validity of Kwok Chi’s consent binding Charles, Dr Hase’s opinion is that because the Tso’s Properties were meant to remain with the Tso perpetually, the managers, including Charles’ father, owed a duty to the Tso to keep the Properties, and therefore, none of them, even with Kwok Chi’s consent, could validly consent to the disposal of the Properties. With respect, I reject the proposition that consent for disposal of a Tso’s properties could not be valid because the properties in a Tso are meant to remain with the Tso perpetually:-

(1) The notion that the properties in a Tso are meant to remain with the Tso perpetually clearly is contrary to the well-established line of judicial decisions that a Tso can dispose of its properties with the unanimous consent of its managers and members, or put another way, with no objection from its managers and members: see Kan Fat-tat also known as Kan Fat v Kan Yin-tat also known as Kan Tat [1987] HKLR 516 at 536F-G and 539C per Deputy Judge Robert Tang QC. I cannot see any reason in the present case to depart from this well-established line of judicial decisions, despite the common opinion of the two experts that a Tso is supposed to hold properties perpetually. The answer to this common opinion lies in Professor Palmer’s opinion given during the cross-examination, which I accept: it is supposed to be perpetual in theory, but it is not so in practice. Even Dr Hase himself has to accept that in reality, a Tso does sell properties with unanimous consent of the managers and the members. To determine what the custom, customary right or the Chinese customary law are, I look at the practice rather than the theory.

(2) In the cross-examination, Dr Hase expressed his opinion that there should be no end to when a member may claim – an unborn member, after becoming an adult, could claim in respect of the Tso’s transaction many years ago. To say that there should be no end to when a member may claim is, with respect, contrary to common sense and is impractical. While I would understand that there can be law running contrary to common sense, I should be extremely cautious in coming into such a conclusion in respect of non-statutory law and especially in respect of customary law, because people would tend not to come to or internalise any custom, customary rights or customary law contrary to common sense and practicality.

(3) Further and in any event, in the present unique situation as mentioned in §6 above, the focal ancestor Li Wah Fuk had no descendants at all, and thus the duty to keep the Properties for his descendants to pay respect the ancestor should logically be loosened. While it can be said that the Brothers, though not Li Wah Fuk’s descendants, having received benefits from the Tso, should still be obliged to pay respect to the focal ancestor as if they were the descendants, the descendants of the Brothers have not yet received any benefit and the descendants may eventually choose not to receive any benefits. Thus, it cannot be expected that the Tso would continue forever as in the usual situation where the focal ancestors’ descendants, whether receiving any benefits from the Tso or not, would have the duty to pay respect to the ancestor.

125.  As a non-existing member before Charles’ birth, assuming consent from such a non-existing member would be required, I have no hesitation to accept Professor Palmer’s opinion that the consent of Kwok Chi, being his future father, would bind him. In §265(u) of Man King Chuen and Others v Hong Lok Yuen International School Association Limited and Another, supra, K Yeung J, having reviewed the relevant authorities and considered the expert evidence, expressly held that unanimous consent means unanimous consent of all adult members. This, in my view, is self-evident, and makes eminent sense. A fortiori for a member yet to be born. This is because if such a consent from a non-existing member is required, logically, one would go to the head of that family, being the father in that family, and legitimately take his decision as binding on his future son being a future member of the Tso. This is also consistent with the Chinese custom that the senior members of the family should be respected.

126.  After Charles was born, if his father could not give any consent on behalf of Charles, when Charles was still a minority, and in the present case, at the material times, less than one year old, to say that Charles himself should give consent is absurd. Again, with common sense and logically, one would go to Kwok Chi: his decision, as Charles’ male parent, should bind Charles.

127.  The alternative would be for the managers to wait until Charles would become an adult for consultation, or for the managers to accept that the consent could be subject to challenge when Charles would become an adult. However, this would be equally absurd, and would be even more absurd when the Tso would have to make a decision quick and fast.

128.  Another alternative would be that simply, in the first place, there was no need to seek consent from non-existing members and minority members, and the father of that family, or fong, is sufficient.

129.  In sum, in my view, there would not be any requirement for obtaining consent from an unborn member or an infant, or if there would be such requirement, Kwok Chi’s consent would be taken as binding on Charles, and Charles has no standing to commence claim against the Brothers in respect of the disposals to which Kwok Chi consented.

130.  Also, from the angle of whether managers owe any duty to future members, having considered the expert evidence and the above, I am of the view that the managers owed no duty at all to any future member not yet born in respect of acts done prior to the member’s birth. I take this view for the following reasons:-

(1) When ascertaining whether according to the customary law, any duty is owed, one aspect to look at is whether remedies would be available under the customary law. As found above, Charles does not have any right to set aside the disposals or other remedies in respect of the disposals. This tends to show that there is no such duty.

(2) The basis for Dr Hase to say that there is such a duty is that the Tso is set up to continue perpetually for the benefits of the focal ancestor’s descendants, and so the manager has a duty to preserve the Tso’s property for the benefit of the descendants. I have no qualm with that as some general propositions. However, it is a non sequitur from these general propositions that the manager owes a duty to unborn members. It is one thing to say that the manager, in making his decision, has to a duty to consider the interests of the future members or even to preserve the Tso’s property perpetually, and that duty to consider the interests of the future members can still be owed to the existing members only; it is another thing to say that the manager owes a duty to some unborn future members to consider the interests of such members and preserve the Tso’s property perpetually. Further, in the situation where the manager has a duty to consider the interests of the future members, for the same reason explained in §125 above, the yet-to-be member’s father would be the one to consult about such non-existent member’s interest. The father’s consent would represent such interest.

(3) To me, it makes no sense to say that custom would impose a duty on the manger to some non-existing members. Such duty would be unworkable at all because (a) the manager could not have any knowledge of who the members will be and when any particular future member will come into being; and (b) the so-called unborn members may not even come into being at all.

131.  Insofar as one may argue that irrespective of any such duty or not, the right to claim against the manager comes into being upon that member’s birth, this goes back to my view above that such member has no right to set aside the disposal and any other remedies. In other words, there is no such right.

132.  In conclusion, as there is no duty owed to an unborn member and an unborn member has no right to sue the managers for wrongdoing before his birth, logically, the members whose unanimous consent is required for the disposals of the Tso’s properties are confined to living members only. In respect of a born member who is infant or a minor, his father’s consent also binds on him.

133.  For the sake of completeness, assuming consent would be required (whether before or after Charles was born), unless Kwok Chi’s consents are vitiated, Charles could not make any claim in respect of the disposals of the Properties. In this regard, there is no admissible expert evidence on when a manager or member’s consent would be vitiated. Charles, as well as Kwok Chi, seems to say that Kwok Chi’s consent was invalid because:-

(1) he gave consent on the fraudulent misrepresentations made by Kwok Ching, namely, D1’s First, Second and Third Representations; and/or

(2) Kwok Chi’s consent was given without full and frank disclosure of the relevant information; and/or

(3) the managers and members of a Tso cannot validly give consent to disposals of Tso’s properties because a Tso is supposed to hold its properties perpetually for the benefit of the Tso and its members, existing and future.

134.  For §133(1) above, namely, misrepresentations, there is no expert evidence on Chinese customary law on when a consent to disposal of a Tso’s property could be vitiated. While I tend to think, as a matter of common sense, that if the consent is induced by fraudulent misrepresentation, custom would regard such consent invalid, as I have found above, there are no misrepresentations at all, and in any event, Kwok Chi did not rely on such representations. Therefore, even assuming that fraudulent misrepresentations would vitiate consent induced by the same, Kwok Chi’s consent was not vitiated by any misrepresentation.

135.  For §133(2) above, namely, failure to make full and frank disclosure, it is not any issue in the Agreed List of Issues. Further, there is no expert evidence on Chinese Customary Law on whether there was any duty on Kwok Ching and Kwok Lim to make disclosure of information to Kwok Chi also himself being a manager. In fact, consistent with the fact that this is not an agreed issue, this question is not within the expert directions given by Master Pheobe Man on 28 February 2022 (the “Expert Directions”). There is also no expert evidence on the contents of the information to be conveyed, if there was such duty. My view is this:-

(1) Mr Leung and Mr Tam rely on the following ruling of the Court of Appeal in Ho Kang Yau v Ho Chun Wing [2011] 3 HKLRD 491 at §§20-21, where Cheung JA said:-

“20. The Courts in Hong Kong have consistently held that the manager of a tso or t’ong is in the nature of a trustee and he has the fiduciary duty to account to the members who are beneficially entitled to the properties of the tso or t’ong: see Tang Kai Chung v. Tang Chik Shang [1970] HKLR 276; To Kan Chi v. Pui Man Yau (unrep., CACV 32/1992, [2000] HKEC 136); Tang Yau Yi Tong v. Tang Mou Shou Tso [1996] 2 HKLR 212; Man Ping Nam v. Man Fong Hang (2006) 9 HKCFAR 674.

21. We are not satisfied that there is any room for challenge of these well recognized principles.” (emphasis added)

(2) I have no qualm that the manager of a Tso is in the nature of a trustee. I also have no qualm that the manager has the fiduciary duty to account to the Tso’s members. I also agree that whatever the experts would say about these two propositions, these two propositions are so well-established that there is no room for challenge. However, what I cannot accept is any submissions that because the manager is in the nature of a trustee, all the fiduciary duties in equity would be imposed on the manager. First, even in equity, what exactly are the fiduciary duties a trustee or a fiduciary owe depends on the specific circumstances. Second, though a manager is in the nature of a trustee, and the duties he owes are “analogous” (as pleaded by Charles and opined by Dr Hase) to fiduciary duties, the substantive contents, in my view, should still be a matter of the Chinese customary law. In this regard, one duty which the higher courts have consistently held is the duty to account. However, neither Mr Leung nor Mr Tam has shown me any case to the effect that to obtain consent from a co-manager or a member of the Tso, the other managers would have to make full and frank disclosure of the relevant information for an informed consent, and what information, if any, would be regarded as relevant. Although in his own report, Dr Hase did lightly touch upon this topic that full consultation should be made with the members, full opportunity should be afforded to members to raise questions and full notice of the proposed transaction should be given, however, probably because this question is not within the scope of the Expert Directions, this is no longer discussed in the Expert Joint Report, let alone any elaboration or further elaboration. In cross-examining Professor Palmer, Mr Tam, did try to solicit opinion from Professor Palmer on what contents should be disclosed for obtaining consent. I raised this matter of the scope of the Expert Directions to Mr Tam, and in order not to disturb too much the flow of the evidence, I left this question to be argued during the closing submissions. During the closing submissions, Mr Tam submits that informed consent is a pleaded issue although it is not an issued on the Agreed List of Issues, and the expert issues “whether and under what circumstances consent given by the father would bind his male children members” and “whether the managers are entitled to sell or otherwise dispose of landed properties with unanimous consent” are broad enough to cover whether the consent should be informed and what constitute an informed consent. Mr Tam also submits that Professor Palmer is well qualified to answer the questions on “informed consent”. With respect, I disagree because:-

(a) While the duty to make full disclosure is pleaded in §2(21)-(24) of the 3^rd Defendant’s Statement of Claim, probably because Kwok Chi decided not to call his own expert but to rely on Charles’ expert (namely, Dr Hase) and because Charles did not rely on the duty to make full disclosure as pleaded by the 3^rd Defendant’s Statement of Claim, the experts are not prepared to address such issues. The expert issues relied upon by Mr Tam in his submissions, with respect, cannot be understood to cover “informed consent”. Understood in proper context, the issues are about whether a father’s consent can bind his son, and whether managers are entitled to dispose of Tso’s properties with consent. It is unacceptable to say that because “consent” is part of the expert issue, one can then say that “informed consent” is also part of the issue. This would defeat the purpose of defining issues in the first place, namely, to allow the experts to conduct necessary research in advance and narrow down the disagreements before trial, so as to properly assist the Court. If Mr Tam is right, one can simply define the issue to be whether the Brothers could sell the Properties, and then one can raise any unnamed sub-issues to suit his position. However, preparing expert evidence in this manner would not achieve the purpose of defining the issues in the first place, and in a word, unfair.

(b) While Professor Palmer may well be qualified to answer questions on “informed consent”, as a matter of fairness to Professor Palmer, he was not prepared to, because he was not tasked to answer such questions in the first place. Again, if an expert can be asked questions not within the defined issues, this would defeat the purpose of defining the issues in the first place. Though Professor Palmer tried his best to answer the questions on informed consent on spot, Dr Hase’s opinion in this regard, again because of the scope of the Expert Directions, did not address such questions in any detail, and he was not asked about such questions in the cross-examination, again, because of the scope of the Expert Directions. In such circumstances, I do not think it appropriate to consider such unilateral evidence from Professor Palmer.

(3) Therefore, I am not satisfied that with any proper expert evidence there is any Chinese customary law requiring Kwok Ching to disclose to Kwok Chi relevant information, and what should have been disclosed, if there were such a duty to disclose.

(4) For the sake of completeness, I note that as a result of my refusal to give leave for Kwok Chi to amend his pleadings in my Decision handed down back on 9 June 2025 (see [2025] HKCFI 2444 at §67), the self-dealing rule and the fair dealing rule cannot be invoked. I leave it open for future cases to decide whether these rules, whether in equity or as a matter of Chinese customary law, would apply to managers of a Tso or Tong, if properly pleaded.

(5) To say that a consent that is not informed will still be valid may appear unattractive at first glance. However, without proper admissible expert evidence, I am unable to decide (a) the scope of such duty (if any) to inform (for example, what would be regarded as material information and what not); and (b) the effect of less-than-properly-informed consent (for example, void? Voidable? Or mere damages? As against Kwok Chi only who failed to get proper information? Or as against the other two Brothers who failed to give proper information?). In appropriate cases, with proper evidence, there may be answers to these questions.

136.  For §133(3) above that Tso’s properties are not supposed to be disposed of but have to be held perpetually, this clearly is contrary to the well-established line of judicial decisions that a Tso can dispose of its properties with the unanimous consent of its managers and members, I have dealt with this point in §124 above.

137.  In the circumstances, there is nothing that has vitiated the consent.

138.  For completeness, I would also deal with the point raised by Professor Palmer that under the Qing Code, the Seventh and the Eight Wrongs of “The Ten Great Wrongs” is lack of filial piety and this includes bringing suit against one’s parents and paternal uncles. Based on this, his view is that “A son was under a legal obligation to obey and to show respect for his father, and not to challenge his authority, especially by litigating against the father or the paternal grandfather”, and “to bring an action against senior relatives in the manner of this litigation would not in Qing China be allowed as it would seriously transgress rules of filial piety”.

139.  I have no doubt that in the traditional society, a son was expected to obey and show respect for his father and his uncles, irrespective of the Qing Code. The Qing Code was also clear that it would be a wrong for a son to bring a claim against his father and his uncles. Further, insofar as Dr Hase argues that Qing Code may not apply to the New Territories given that it was a very remote area in China, I would reject such argument because the Qing Code was supposed to apply to the New Territories and therefore, in the absence of any positive evidence to the contrary, people at the time would refer to the Qing Code as a reference point for their conduct.

140.  All that said, while bringing a lawsuit against senior relatives may transgress any rule of filial piety, it does not follow that the junior member would have no right to bring the lawsuit. The junior member may bear the stigma of being unfilial, be it criminal or moral, or may even be criminally punished for that, but if he so chose, it would be his own choice. Where his rights were infringed by senior members of the family, it would be absurd to me that his rights would practically mean nothing simply because of the filial obligation or any crime arising from enforcing such rights. An example would be, where the son was seriously assaulted by his father. When asked, Professor Palmer could not give a direct answer, but mentioned an example where the father killed the son for adultery with a close relative and the Court found that no offence was committed. However, this is different from a claim for compensation commenced by the son.

141.  My above view that filial piety does not stop a son from suing his father may lead to the question of whether in the present case, Charles could sue Kwok Chi for wrongfully giving the consent to the disposal on behalf of Charles (if such consent from Charles would be required and if there was wrongfulness in giving the consent). Fortunately, this is not the basis for Charles’ claim against Kwok Chi, and I do not need to deal with this question.

142.  In conclusion, for the above reasons, in my view, under the Chinese customary law, an unborn members have no standing to commence claim against the managers of a Tso in respect of conduct carried out before his birth. In the present case, Charles has no standing to commence the present claim in respect of Properties 1 to 25.

XX. IS REAL NECESSITY AN ADDITIONAL REQUIREMENT FOR DISPOSAL OF THE TSO’S PROPERTIES?

143.  Dr Hase opines that in addition to unanimous consent of members, “real necessity” was a requirement for the disposals and since there was no “real necessity”, the disposals were wrongfully carried out and Charles should be compensated for the loss of his interests in the Properties. In his opinion, “real necessity” means that the household would not survive without the disposal, or that the Tso would need to pay taxes, or to reinvest the proceeds for generating more profit. With respect, I reject the opinion that “real necessity” is a requirement at all, for the following reasons:-

(1) In Kan Fat-tat also known as Kan Fat v Kan Yin-tat also known as Kan Tat, supra, Deputy Judge Robert Tang QC (as he then was) at 534G-H referred to a decision of the Supreme Court in Nanking and concluded at 535A that:-

“… as a general rule, alienation must be because of necessity that unanimous consent of the members of the clan must be obtained though this general rule is subject to local custom being different.” (emphasis added)

(2) At a first glance, it seems that his Lordship ruled that “necessity” was a requirement. However, he further went on to examine the matter, and concluded at 536F-G that:-

“I am satisfied on the evidence before me that as a matter of Chinese customary law, as applied in China, disposition of Tso property by sale, must be by the unanimous consent of members of the Tso subject to local customs to the contrary.

That being the case, prima facie, in the New Territories, unanimous consent of all members are required unless local customs or the New Territories Ordinance require otherwise.” (emphasis added)

(3) No longer was “necessity” mentioned at the conclusion.

(4) Subsequently, in Leung Kuen Fai v Tang Kwong Yu (or U) T’ong or Tang Kwong Yu Tso, supra, DHCJ Johnson Lam (as he then was), having conducted extensive review of the authorities, concluded at §24:-

“(c) The members of a Tso are the living male descendants of the focal ancestor from time to time. They have the beneficial interest in the property. The managers could not dispose of the property against the wishes of the members.

(d) In practice, with unanimous consent of all the members, the Tso property could be sold, partitioned or distributed. The members could also decide on the use of the surplus income generated from Tso property. However, as noted by Deputy Judge Robert Tang QC [in Kan Fat-tat also known as Kan Fat v Kan Yin-tat also known as Kan Tat, supra], Chinese customary law did not provide for that. Rather, it was allowed to happen because no-one would raise objection given the unanimous consent of the members.” (emphasis added)

(5) His Lordship’s summary does not mention any “necessity”. His Lordship’s summary has often been cited and/or applied subsequently, for example, recently by Keith Yeung J in Man King Chuen and Others v The Personal Representative(s) of Wai Tze Hang Alex, deceased and Another [2023] HKCFI 1435 at §231.

(6) Mr Leung heavily relies on Tang Che Tai and Others v Tang On Kwai and Others, supra, for his submissions that “necessity” or “real necessity” is a requirement under the Chinese customary law. In that case, at §71, Cheung JA expressed his opinion of endorsement of the trial judge’s opinion that “compelling circumstances” was a requirement for disposal of tso’s properties, and his Lordship further said that the Court of Final Appeal in Re Lau Wai Chau (2000) 3 HKCFAR 98 was not faced with the issue of whether necessity was a requirement. Lam J (as he then was) agreed with Cheung JA. However, it is clear from §61 of the judgment that Cheung JA’s opinion was an obiter only. The issue for the appeal was whether the compensation from the compulsory resumption of the Tso’s lands should be governed by the Chinese customary law (§16), and therefore, Tang VP did not express any view on the requirement of “compelling circumstances”. In other words, Cheung JA’s opinion, though agreed with by Lam J, is not binding on me.

(7) Rather, in my view, more pertinent is Cheung JA’s agreement with Yuen JA (with whom Kwan JA also agreed) in a subsequent case Tang Kap Wing Tso v Tang Leuk Tso [2011] 4 HKLRD 132. In that case, a live issue was whether unanimous consent and necessity were requirements (§28.1). Having considered the issue of unanimous consent in §§28-29 referring to both Re Lau Wai Chau, supra and Tang Che Tai and Others v Tang On Kwai and Others, supra, at §31, on necessity, Yuen JA held:-

“As for the requirement of necessity, this was never pleaded…as a requirement precedent to alienation of KWT’s property. In any event the Court of Final Appeal did not hold in Re Lau Wai Chau that there was such a requirement.” (emphasis added)

(8) There can be no doubt that the Court of Appeal (including Cheung JA himself) considered Cheung JA’s obiter in Tang Che Tai and Others v Tang On Kwai and Others, supra, a case expressly considered by Yuen JA. Thus, in addition to the fact that Yuen JA’s §31 is a ratio binding on me, in the event of any argument that there was inconsistency between the two Court of Appeal judgments, I would think that the subsequent one, namely, Tang Kap Wing Tso v Tang Leuk Tso, supra, should be followed.

(9) Assuming that there were conflicting lines of Court of Appeal authorities, in my view, absence of a requirement of necessity is consistent with the effect of section 15 of the NT Ordinance – so long as there is the unanimous consent of the mangers and the consent of the District Office, a disposal of a Tso’s land is effective. It is not qualified by any such phrase as “effective as against bona fide purchasers”. Therefore, the effectiveness is general, and no argument can be validly made that it is only effective as against the third parties but a member may still sue the managers for disposing of the Tso’s property without real necessity. If there would be any requirement of necessity or real necessity, this would seem to be inconsistent with section 15. In other words, (a) in the first place, there was no such requirement; or (b) if there were any such requirement, section 15 has the effect of dispensing with such a requirement.

(10) Further, Dr Hase is unable to explain the source of his opinion that “real necessity” would be required. The best he could point to is the example when during the Japanese occupation, a Tso disposed of the Tso’s properties. Logically, in my view, while that Tso disposed of its properties in extreme situation, this does not follow that the extreme situation was a requirement for the disposal.

(11) In the cross-examination, Professor Palmer agreed in principle that “real necessity” has emerged as a condition. However, to test whether the principle has been accepted as custom or customary, one still has to look at what happened in practice.

(12) Practically, what would count as “real necessity” should be best be decided by the managers and the members. Their unanimous consent speaks volume. They all know the purpose and the perpetual nature of a Tso, and if despite that, they decide unanimously to sell a Tso’s property, even to the extent that all the properties will be sold and effectively the Tso will be dissolved (though not so in the present case), I see no reason why a District Officer or the Court or the respected gentry in the village in the Qing dynasty should intervene and substitute their view in respect of the properties in which they, but not the District Officer or the Court or some other officials or the gentry, have interest.

(13) Put another way, if all the members consent, it would be absurd that subsequently one of the members who gave consent would claim that the disposal, despite his consent, should not be valid because there was no real necessity for the disposal. This would result in much uncertainty rendering the disposal at the mercy of any members.

(14) Another practical concern is that putting aside the standing to sue for the time being, I see no sense that an unborn or infant member, becoming an adult, could sue the managers or the members on the ground that at the moment of the consent, there was no real necessity. This would inevitably force the managers to make much speculation at the time of giving consent, and force the Court to use much hindsight to look back at the time of the consent. This would be infeasible at all.

(15) The practical concerns in §§(12), (13) and (14) above make the requirement of “real necessity” infeasible, and in all probabilities, custom would not have such infeasible requirement. This conclusion is consistent with the customary law as applied in Hong Kong in the past, as recounted in §§(1) – (6) above.

144.  Lastly, in my view, assuming that “real necessity” was a requirement, this should be understood broadly – distribution to individual members would be sufficient to be such “real necessity”, as found by Mills-Owens J in Tang Kai-chung and Another v Tang Chik-shang and Others [1970] HKLR 276 at 319-320, which was cited with approval by DHCJ Johnson Lam at §18 in Leung Kuen Fai v Tang Kwong Yu (or U) T’ong or Tang Kwong Yu Tso, supra, when reviewing the authorities as mentioned in §143(4) above. In particular, Mills-Owens J said at 320:-

“… if necessary, the family meeting would ‘adopt’ some good purpose if it was desired to sell; in other words, whilst paying lip-service to custom, custom would not be allowed to stand in the way of an advantageous sale, whether advantageous to the Tso as a whole or advantageous to individual members by reason of intended distribution of moneys per captia…”

145.  Therefore, in the present case, if “real necessity” was a condition, it was satisfied by the fact that the Properties were disposed of as distributions to the Brothers as members.

XXI. NO ROLE, NO RESPONSIBILITY?

146.  As mentioned above, when summarising Kwok Chi’s pleaded positions, it seems to me that Kwok Chi is taking a position that Kwok Ching was dominant and making all the decisions, Kwok Chi himself had to follow Kwok Ching and had no role in the management of the Tso, and thus he had no responsibility. It seems to me from the Agreed List of Issues and Mr Tam’s submissions that this position is no longer taken. In any event, for the sake of completeness, I reject such position. Kwok Chi himself was (and still is) a manager. He himself has personal responsibilities. In my view, the reason for having more than one manager is to ensure mutual check. It is just like administrators or liquidators, or directors. It can never be that one of them can be heard to say that some others have been dominant and so he did not pay attention to the affairs. He would fail his duties. The same, in my view, should apply managers of Tso.

XXII. ANSWERS TO THE ISSUES OF CHARLES’ CLAIM

147.  With the above rulings and findings, I give my answers below to the issues of Charles’ claim set out in Part XI above.

A. Issue (1)

148.  For Issue (1), whether Charles has standing to commence the present claim, the answer is “no”.

B. Issue (2)

149.  For Issue (2), what was the “unanimous consent of the members” in the present case, the answer is the consent of the Brothers only.

C. Issue (3)

150.  For Issue (3), whether a minor member could renege on such consent upon becoming an adult, the answer is “no”.

D. Issue (4)

151.  For Issue (4), whether “real necessity” was required, the answer is “no”, and in any event, distribution of properties to individual members would constitute such real necessity.

E. Issue (5)

152.  For Issue (5), what were the contents of duties owed by the Brothers to the members of the Tso, the answer is that the managers have a duty to account in respect of the Tso’s properties.

F. Issue (6)

153.  For Issue (6), whether the disposals of Properties 1 to 25 were justified, the answer is “yes”, given that there were unanimous consents of the Brothers.

G. Issue (7)

154.  For Issue (7), whether the disposals of Properties 1 to 25 constituted fraudulent breach of trust, the claim, pleaded in §21 of the Re-Amended Statement of Claim, has been summarised in §23 above. My analysis is as follows:-

(a) While there was no actual consideration for Properties 1 to 21, there were considerations, as found above.

(b) While for Properties 20 to 23, there was misrepresentation made to the Yuen Long District Office in that the membership of the new born Charles was not mentioned, there was no representation as to the reason for the disposal. However, as canvassed above, there is no plea and no evidence as to what the Yuen Long District Office would have done differently had Charles’ membership was stated. In other words, if this misrepresentation on the membership would constitute any fraud, there is no plea and no evidence as to the effect of such fraud.

(c) There was justification for the disposals, namely, distribution of the Properties and in particular giving funds to Kwok Chi to pay off his debts and in any event for his own benefits.

(d) In the circumstances, I am not satisfied that there is any actionable fraud.

(e) More fundamentally, the so-called breach of trust is effectively a complaint of appropriation of the Properties with consent of Kwok Chi improperly induced. If the appropriation of the Properties was all consented to by the Brothers, the disposals would not be any appropriation but would be proper disposals and distribution. As found above, the Brothers’ unanimous consent to the disposals was the only requirement, and the consent was not vitiated. So, there was simply no appropriation.

155.  Therefore, my answer to Issue (7) is “no”.

H. Issues (8) and (9)

156.  Issue (8), whether the rights and interest of any member of the Tso would extend to the right to any proceeds of sale of the Properties of the Tso, and if so, what is the nature of such rights and interests, and Issue (9), whether the Properties or the sale of the proceeds are held on resulting or constructive trust for the benefit of the Tso, should be considered together.

157.  I start with Kan Fat-tat also known as Kan Fat v Kan Yin-tat also known as Kan Tat, supra. That case is a case on compensation for compulsory resumption of lands in the New Territories. In that case, Deputy Judge Robert Tang QC said at 527G:-

“…Doing the best I can, I have come to the conclusion that it would be unjust or oppressive to apply the rules against perpetuities to such compensation [on compulsory acquisition]…I do not believe the legislature ever intended to destroy Tsos by a side wind. The definition of land in the New Territories Ordinance is inclusive. I do not read from it any intention on the part the legislature deliberately to exclude such compensation from the protection of Chinese custom. I hasten to add that I do not decide what the position might be regarding the applicability of the rules against perpetuities to the proceeds of voluntary sales where different considerations may apply. That question does not arise here and naturally I would not deal with it.” (emphasis added)

158.  Mr Leung refers me to Lok Tin Choi v Lai Kwai Lin [2015] 2 HKLRD 448 at §§3.4-3.8. In those paragraphs, Cheung JA clarified that in his previous judgment in Tang Che Tai and Others v Tang On Kwai and Others [2008] 3 HKC 521, he never meant to rule that “land” in section 13 of the NT Ordinance could cover “compensation”, but simply that “the Chinese law and custom applied to the compensation because the resumed land itself had always been imprinted with the characteristic of an ancestral worship t’ong under Chinese law and custom”. Mr Leung submits that based on this reason, the sale proceeds of the Properties should also be governed by the Chinese customary law. With respect, I disagree. The compensation in Tang Che Tai and Others v Tang On Kwai and Others, supra, like that in Kan Fat-tat also known as Kan Fat v Kan Yin-tat also known as Kan Tat, supra, arose from compulsory resumption (§11). It was in that context that in his judgment Cheung JA said at §53 that the compensation from the lands in the New Territories, imprinted with the characteristic of the Tso, was held to be governed by the Chinese customary law. I do not understand his Lordship to mean that his reason should be applicable generally to all money arising from the lands in the New Territories. In any event, in their majority judgment, Tang VP (with whom Lam J (as he then was) agreed) adhered to his view in Kan Fat-tat also known as Kan Fat v Kan Yin-tat also known as Kan Tat, supra, expressly limited to compensation arising from compulsory resumption (§11).

159.  What are the different considerations for a voluntary sale and those for a compulsory resumption?

160.  For a compulsory acquisition, the Tso would have no choice but to surrender the Tso’s land, and the land would be converted into the compensation. If the compensation is not held on trust and the remaining Tso’s lands were also compulsorily acquired, then the Tso would be destroyed compulsorily. This is, to my understanding, what Deputy Judge Robert Tang QC meant by “destroy Tsos by a side wind” in Kan Fat-tat also known as Kan Fat v Kan Yin-tat also known as Kan Tat, supra.

161.  However, for voluntary sales, there is no question of “destroying Tsos by a side wind” compulsorily. On the contrary, on voluntary sales, following from the voluntary nature of the transactions, logically, it would be for the managers and the beneficiary members to decide how to make use of the proceeds (subject to any future members’ rights, of which I have held there is none). They can choose still to hold the proceeds on trust for the descendants of the focal ancestor subject to the rules against perpetuities. Or they can choose to have the proceeds distributed to themselves. The bottom line is these proceeds arising from the voluntary disposals are private properties in which the beneficiary members hold proprietary interest.

162.  In the present case, Charles pleads that there is a resulting trust or constructive trust on the sales proceeds. No particulars have been pleaded as to such rolled-up plea and how such trust has arisen. I echo Eugene Fung J’s observation mad recently in Wong Kiu v Pang Hong Ngor [2026] HKCFI 3381 at §21 that such “highly ambiguous”, “sloppy” “rolled-up plea” “should never have found its way into a pleading”.

163.  For the sake of completeness, for resulting trust, though not clearly pleaded, I presume that Charles’ plea is that the sales proceeds came from the Tso’s Properties and therefore it is the Tso or its members who hold beneficiary interests. However, one has to bear in mind that resulting trust arises from a presumption that because the beneficiary pays the money, it is presumed that the property still belongs to the beneficiary. Here, at the time of the disposals, the only members were the Brothers (or at most, also Charles who would be bound by Kwok Chi, as found above), and they decided to distribute the sales proceeds and divide the Properties among themselves as members. Their decision to distribute flatly rebuts the presumption of resulting trust.

164.  Insofar as constructive trust is concerned, Charles pleads no particulars as to what constructive trust it would be. In any event, the only members and beneficiaries of the constructive trust (if any), being the Brothers (or at most, also Charles who would be bound by Kwok Chi, as found above), decided to distribute the sale proceeds and divide the Properties among themselves as members.

165.  In the premises, my answers to both Issue (8) and (9) are “no”.

I. Issue (10)

166.  Given my answers above, the only remedy I have to consider whether to grant or not is account in respect of Properties 26 to 36, given that Properties 1 to 25 have been distributed and if any account is required for Properties 1 to 25, account has been given in the proceedings by D1245’s explanation (which I have accepted) of what happened in relation to the disposals. Mr Chang submits that Kwok Ching and Kwok Lim have all along accepted that they have a duty to account, and they would do so if requested. Mr Chang submits that there is no evidence of such request or demand, and therefore, in the absence of any breach of duty to account, I should not order such an account. As a matter of strict law, Mr Chang must be correct. However, by commencing the present action seeking account, Charles made the demand already. It would be unnecessary for Charles to commence yet a fresh action on this duty to account only upon the demand by the writ issued in the present proceedings, eventually to be consolidated with the present action. It would seem that if parties are genuine and pragmatic enough, Kwok Ching and Kwok Lim would have provided the account at least to the extent they admit in the pleadings rather than taking the technical point that Charles has not made any demand.

167.  There is not much expert evidence on the extent of the account under the Chinese customary law, as this is not within the Expert Directions. But at least the parties are agreed that the ledgers and the bank statements are the minimal.

168.  Taking a pragmatic approach, I do order the Brothers (as managers) to provide accounts in respect of Properties 26 to 36 by giving the relevant ledgers and bank statements with proper identification of the relevant transactions, to be verified with an affirmation. In ordering the Brothers including Kwok Chi to do so, I am aware of Kwok Chi’s allegation that he has no control over the Tso and it is Kwok Ching who does. But the duty to account is, in my view, on the managers jointly and severally, so that each of them would take necessary steps to ensure that the duty is discharged. Therefore, it is appropriate for me to order the Brothers to give the account.

XXIII. ANSWERS TO THE ISSUES OF KWOK CHI’S CLAIM

169.  With the above findings, I give my answers below to the issues of Kwok Chi’s claim set out in Part XI above.

A. Issue (1)

170.  For Issue (1), whether Kwok Ching made D1’s First, Second and/or Third Representations, the answer is “yes”, except for the latter part of the Third Representation, as found in Part XIV above.

B. Issue (2)

171.  For Issue (2), whether the Representations were fraudulently made, the answer is “no”.

C. Issue (3)

172.  For Issue (3), whether Kwok Chi relied upon the Representations made:-

(a) There is no reliance on D1’s First Representation, so D1’s First Representation is not actionable.

(b) As regards D1’s Second Representation, in the light of my finding that there was such Representation made, the likelihood is, and so I find, that there was reliance. However, as found above in §87 above, there was no fraud and no negligence, and so, D1’s Second Representation is also not actionable.

(c) As regards D1’s Third Representation, to the extent that it was made (see §89 above), again, in the light of my finding that there was such Representation made, the likelihood is, and so I find, that there was reliance. However, for the part of the D1’s Third Representation that forms the real complaint (namely, a third party was interested in acquiring 3 agricultural lands for the sum of around HK$12,000,000 and he and the 2^nd Defendant could buy the 3^rd Defendant's share in those agricultural lands for the sum of HK$4,000,000 to enable the ease of onward transfer to the third party), I have found in §90 above that it was not made, and so D1’s Third Representation is also not actionable.

D. Issue (4)

173.  For Issue (4), whether Kwok Ching and Kwok Lim owed any duty to make full disclosure of all material information to Kwok Chi in relation to the disposals of the Properties, the answer is “no”.

E. Issue (5)

174.  For Issue (5), the time limitation issue, given my answers above, it is not necessary for me to answer. The difficulty I have in even expressing some opinion on this issue is that the nature of Kwok Chi’s claim is not entirely clear – whether it is a claim under Chinese customary law, or trust in equity, or some other claim. Probably because of this difficulty, I find that this limitation issue has not been fully argued. I shall leave this interesting legal issue, namely, whether a Chinese customary law claim is barred by the LO or laches, to be decided in appropriate cases with full argument.

F. Issue (6)

175.  For Issue (6), whether Kwok Chi is any in event disentitled from claiming against Kwok Ching and Kwok Lim by reason of Kwok Chi having agreed to, participated in and/or concurred in the acts allegedly constituting breach of duty, given that Kwok Chi’s consent is not vitiated, my answer is that Kwok Chi cannot claim against Kwok Ching and Kwok Lim in respect of the disposals to which he himself also consented.

G. Issue (7)

176.  For Issue (7), given the above answers, I grant no remedies subject to account below.

H. Account

177.  In his capacity of a member, Kwok Chi claims against Kwok Ching and Kwok Lim for account. Although it is my view in §168 above that all the Brothers as managers should be liable to give account to Charles, as between Kwok Chi on the one hand and Kwok Ching and Kwok Lim on the other hand, I do accept the evidence that Kwok Ching has had access to the information for the purpose of giving account. Similar to Charles, there is no evidence that Kwok Chi demanded for an account, whether as a member or as a co-manager, but after his claim against Kwok Ching and Kwok Lim was issued, Kwok Ching and Kwok Lim could and should have provided the account. Again, taking a pragmatic approach, I think that Kwok Ching and Kwok Lim should give account in respect of Properties 26 to 36.

I. No basis for indemnity or contribution

178.  It remains to say that in any event, Kwok Chi fails to identify the basis for his claim for indemnity or contribution from Kwok Ching and Kwok Lim. There is no claim that a co-manager owes any duty to the other co-managers. Insofar as Kwok Chi would rely on D1’s First, Second and Third Representations, given my answers above, such reliance does not assist Kwok Chi.

XXIV. PEARL LUCK

179.  Pearl Luck, as mentioned in §9 above, was struck off the Register of Companies in the BVI on 31 October 1996. The properties transferred to Pearl Luck, namely, Properties 20 and 21, were transferred to it on 18 November 1996, subsequent to the striking off. During the written reply closing submissions, Mr Leung, for the first time during the whole proceedings commenced back in 2015, submits that by section 101 of the BVI International Business Companies Act 1984, Kwok Ching and Kwok Lim (Pearl Luck’s shareholders) would not be permitted to deal with the properties of Pearl Luck after it was struck off, and therefore, by parity of reasoning with Attorney General of Trinidad and Tobago v Trinsalvage Enterprises Ltd [2023] 1 WLR 4045 at §§16-17, the transfers of Properties 20 and 21 to Pearl Luck should be void, and thus Properties 20 and 21 should be returned to the Tso.

180.  Pearl Luck was at an earlier stage represented by the same legal representatives of D1245 until 21 December 2020 (by then D1245 and Pearl Luck filed a single defence) after it was discovered that Pearl Luck was struck off in 1996 and dissolved in 2006. In other words, the service was effected on a company that had been dissolved, and I have serious doubt whether such service is effective. Assuming that the service was effective, Charles has since carried his claim against Pearl Luck in default of Pearl Luck. In default of the defendant after the defendant has filed its defence, the Court still has to be satisfied that the causes of action pleaded in the pleading are viable for the relief claim: see Hong Kong Civil Procedure 2026 Volume 1 §§19/7/11 and 19/7/14, and if necessary, the Court is entitled to order the claim to proceed to trial for proof of the case by evidence: see Hong Kong Civil Procedure 2026 Volume 1 §19/7/7.

181.  The averments in relation to Pearl Luck are pleaded in §§9, 16, 17, 21(b), 22, 25, 26 and 27B of the Re-Amended Statement of Claim. In summary, the averments are that Kwok Ching and Kwok Lim received Properties 20 and 21 via Pearl Luck in breach of their duties to the Tso and Charles. Thus, the claim against Pearl Luck rises and falls together with his claim against D1245. Since nothing has ever been pleaded along the line of the submissions made late during the reply closing submissions of Mr Leung, I am unable to give remedy on this very late, unleaded cause of action, let alone the fact that this very late cause of action involves foreign law and the Court may well require evidence. Rather, since I have not found favour of Charles’ claim against D1245, his claim against Pearl Luck should also fall on his pleadings.

XXV. CONCLUSION

182.  Based on the above findings and analysis, I dismiss Charles’ claim and Kwok Chi’s claim, except that:-

(1) the Brothers do, within 35 days from today, give an account to Charles in relation to Properties 26 to 36 by giving the relevant ledgers and bank statements with relevant transactions properly identified, to be verified by an affirmation to be filed and served on their behalf within 14 days thereafter;

(2) Kwok Ching and Kwok Lim do, within 35 days from today, give an account to Kwok Chi in relation to Properties 26 to 36 by giving the relevant ledgers and bank statements with relevant transactions properly identified, to be verified by an affirmation to be filed and served on their behalf within 14 days thereafter; and

(3) Liberty to apply in respect of (1) and (2) above.

183.  For costs, I make the following order nisi:-

(1) For Charles’ claim, Charles shall pay Kwok Chi’s costs (except the costs on account for Properties 26 to 36), to be taxed if not agreed, and pay D1245’s costs (except the costs of the claim for account for Properties 26 to 36, apportioned to be 3%), to be taxed if not agreed, with certificate for two counsel.

(2) For Kwok Chi’s claim, Kwok Chi shall pay Kwok Ching and Kwok Lim’s costs, to be taxed if not agreed, with certificate for two counsel. I do not find it appropriate to apportion the costs of the claim for account for Properties 26 to 36 because (a) Kwok Chi himself is a manager and he has a duty to keep the account, and (b) in any event, he spent little, if any, time on this account issue but basically rode on Charles’ claim for account.

(3) There shall be no order as to costs as between Charles and Pearl Luck.

184.  Lastly, I thank counsel for their able and thorough assistance.