WONG KWOK YING v. MOO KWOUN TOW AND OTHERS

DCCJ 1473/2019

[2026] HKDC 1233

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 1473 OF 2019

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BETWEEN

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JUDGMENT

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INTRODUCTION

1.  The present case concerns a village house known as No. 11D, San Uk Ka, Tai Po, New Territories (“House”).

2.  The Plaintiff (“P”) is the registered owner of the 1/F of the House (“1/F”). He claims against the 1^st Defendant (“D1”) and the 2^nd Defendant (“D2”) for trespassing to the 1/F. P seeks, inter alia, an order for vacant possession of the 1/F.

3.  It is not in dispute that D1 and D2 have occupied the 1/F since around March 2018. Ds’ case is that pursuant to a Chinese written agreement dated 12 March 2010 (“Written Agreement”), P is a bare trustee, or alternatively a constructive trustee, holding the 1/F on behalf of the 3^rd Defendant (“D3”), and that D3, as beneficiary, permitted D1 and D2 to use and occupy the 1/F as his licencees. D3 counterclaims against P for transfer of the 1/F.

4.  P denies that he is holding the 1/F on trust for D3 as alleged. However, in the event that the Court so finds, he would “counterclaim” against D3 for the costs and expenses incurred as trustee for D3.

5.  It is noted that when P commenced the present proceedings in March 2019, they were only against D1 and D2. By an order dated 23 February 2024, D3 joined as a party to the proceedings upon his own application. From that point onwards, Messrs Li, Kwok & Law (“LKL”) represented all three Defendants.

6.  In the written Opening Submissions for D1 and D2, Mr Tommy Cheung informed the Court that LKL had lost contact with D3 and was unable to obtain instructions from him. On the first day of trial (i.e. 22 December 2025), Mr Cheung confirmed that he was acting only for D1 and D2 and LKL would apply for an order to cease to act for D3. Until LKL obtained an order to cease to act, Ms Wong of LKL would represent D3 but only on a very limited basis. Such order was obtained in the morning on the last day of the trial (i.e. 30 December 2025) before the hearing in the afternoon.

OVERVIEW

7.  D1, D2 and D3 are brothers. Their father, Mr Moo Cock Ching (“Moo Senior”), was P’s father-in-law. According to P, Moo Senior had two wives; D1 and D2 are the sons of his Chinese wife, whereas D3 is the son of his Japanese wife.

8.  On 8 April 2009, Lands Department issued, inter alia, three Certificates of Exemption to exempt the house to be erected on Lot No. 598 in DD 21, Tai Po (“Lot”), which was registered in the name of P, in respect of the drainage works, the building work, and the site formation work.

9.  In or around early 2010, there were discussions between P and Moo Senior that P would construct a village house on the Lot and, upon completion, transfer the G/F to D1, the 1/F to D3 and the 2/F to D2 at a total consideration of $3 million.

10.  On or about 12 March 2010, P, D1 and Moo Senior (on behalf of D2 and D3) signed the Written Agreement which contained, inter alia, the following terms:

(a) Recital: P agreed to transfer the Lot to Ds at the consideration of $3 million and acknowledged that the said consideration had been fully paid;

(b) Clause 1: P should deliver vacant possession of the Lot to Ds and provide three Certificates of Exemption;

(c) Clause 2: Ds should be responsible for all fees and expenses in relation to the construction of the House and the transfer of the Lot; and

(d) Clause 4: Ds agree to pay the land premium to the Government for the transfer of the Lot. However, Ds had the option to defer the transfer by five years from the date of the Certificate of Compliance in order to avoid paying land premium (“Option”).

11.  On the date of the Written Agreement, Ds elected to exercise the Option.

12.  It is P’s case that, when the Option was exercised, D1 and Moo Senior (on behalf of D2 and D3) agreed that P could use and enjoy the House as the sole owner for his own benefits until the transfer (“Additional Term”). D1 denied the existence of the Additional Term. Ds’ case is that, when the Option was exercised, P promised that he would keep the House vacant. P denied making any such promise.

13.  Moo Senior sadly passed away on 17 March 2010, just a few days after signing the Written Agreement.

14.  On 15 October 2010, a Certificate of Compliance in respect of the House was issued.

15.  On 30 May 2016, P, D1 and D2 came to Hong Kong to execute documents to transfer the G/F and the 2/F to D1 and D2 respectively. The transfers were made by way of sale and purchase, and the property concerned was 1/3 undivided share of the Lot with the exclusive use of the respective floor. It is common ground that D1 and D2 did not pay the consideration stated in the sale and purchase agreements, or any other money, to P for the transfer. The 1/F was not transferred because D3’s passport had expired and D3 was unable to come to Hong Kong.

16.  According to P, D3 was residing in Brazil and P had tried his best to contact him but was unsuccessful. He asked D1 and D2 for assistance, but they refused because there was allegedly a dispute between the two branches of the family (i.e. the branch from Moo Senior’s Chinese wife and the branch from his Japanese wife) over the distribution of Moo Senior’s estate. D1 and D2 denied that P had ever sought their assistance in contacting D3.

17.  In June 2016, P rented out the 1/F to a tenant (“Tenant”) at a monthly rent of $10,000.

18.  On 1 September 2016, D3 executed a Power of Attorney (“2016 POA”) in Brazil granting D1 the full powers to deal with the 1/F, including selling, signing all paperwork, receiving money and dealing with authorities, etc.

19.  By the letter dated 27 September 2016, LKL, acting for Ds, demanded P to transfer the 1/F to D3 and pay the money received from the Tenant to him. The same request was repeated in another letter dated 4 October 2016 from LKL to P.

20.  In response to LKL’s requests, Messrs Rene Hout & Co (“RHC”), acting for P, sent a draft Deed of Gift in respect of the 1/F to LKL for approval via the letter dated 15 October 2016.

21.  By the letter dated 14 August 2017, LKL repeated the request for transfer of the 1/F to D3 and payment of money received from the Tenant.

22.  On 5 September 2017, D3 signed a declaration authorising D1 to receive all the money from the rental of 1/F and giving D1 the full powers to represent him (“2017 Declaration”).

23.  By the letter dated 12 September 2017, LKL repeated the demand for transfer of the 1/F and referred to a draft Deed of Gift sent out by RHC for P’s execution.

24.  By the letter dated 2 October 2017, LKL gave P the “final notice” to execute the draft Deed of Gift and provided a copy of the 2017 Declaration for P’s reference.

25.  In the meantime, LKL sent various letters to the Tenant requesting her to pay rent directly to D1, whereas P’s solicitors, Messrs Johnnie Yam, Jacky Lee & Co (“JYJL”), also sent letters to the Tenant asking her to ignore LKL’s requests.

26.  In or around March 2018, the Tenant terminated her lease of the 1/F and moved out of the same.

27.  After the Tenant’s departure, D1 and D2 took possession of the 1/F and changed the lock at the iron gate at the G/F leading to the 1/F and the 2/F (“Gate”). According to D1 and D2, they took possession of the 1/F with the authority and consent of D3. P repeatedly demanded D1 and D2 to provide the new keys to the Gate, but these demands were refused.

28.  On 21 March 2019, P commenced the present action against D1 and D2 for trespassing to the 1/F.

29.  On 23 August 2019, D3 executed a Power of Attorney (“2019 POA”) in Brazil in favour of D1 authorising him to execute documents and handle all matters in relation to the 1/F.

30.  By the letter dated 17 October 2019, LKL provided a copy of the 2019 POA to P and demanded P to transfer the 1/F to D3.

31.  By the letter dated 23 October 2019, JYJL requested LKL to provide a certified true copy of the 2019 POA to enable them to give proper legal advice to P.

32.  By the letter dated 18 November 2019, LKL repeated the request for transfer of the 1/F.

33.  According to P, he refused the request for transfer because he had grave concerns about the authenticity, legality and enforceability of the 2019 POA. P questioned whether D1 and D2 had authority to act for D3, particularly in light of their alleged refusal to assist him in contacting D3. P confirmed at the trial that he had full intention to transfer the 1/F to D3, but said that he was duty-bound to make sure that the transfer was made to the “right person”, instead of someone who purported to represent D3.

34.  As of today, P has not transferred the 1/F to D3.

ISSUES IN DISPUTE

35.  Mr Cheung proposed that the present action turned on the following issues:-

(a) Issue 1: Whether P is and was a trustee holding the 1/F for D3 as beneficiary?

(b) Issue 2: Whether, on the facts found by the Court, P should be debarred from being awarded any judicial remedies if and when P is a trustee?

(c) Issue 3: If the Court is not with D1 and D2 on either Issue 1 or Issue 2, whether P can establish the causes of action against D1 and D2 on the facts found by the Court?

(d) Issue 4: If the Court is with D1 and D2 on both Issue 1 and Issue 2, whether P’s counterclaim against D3 should be dealt with at this trial, or should it be dealt with by P and D themselves at the time of “completion” of the assignment of the legal title in accordance with the Written Agreement or because of the lack of evidence?

36.  Mr Ray Kwan for P did not object to the above list of issues.

WITNESSES

37.  P, D1 and D2 gave evidence at the trial. D3 did not attend the trial to testify, and his witness statement is excluded as evidence.

P’s evidence

38.  In March 2010, Moo Senior approached P for his help to build a three-storey village house on the Lot. After discussion, P and Moo Senior reached an oral agreement whereby Moo Senior would pay $3 million to P for the construction of the House and P would assign the G/F, 1/F and 2/F to D1, D3 and D2 respectively (“Alleged Oral Agreement”). It was also a term of the Alleged Oral Agreement that, should any expenses be incurred for the House, P would pay those expenses on Ds’ behalf and Ds would reimburse P.

39.  To give effect to the Alleged Oral Agreement, P, D1 and Moo Senior (on behalf of D2 and D3) signed the Written Agreement on 12 March 2010. After signing the Written Agreement, D1 and Moo Senior (on behalf of D2 and D3) indicated that they would exercise the Option to defer the transfer of the House for five years. P said it was further agreed orally that, before the transfer, he could use and enjoy the House as the sole owner for his own benefits, i.e. the Additional Term.

40.  On 30 May 2016, the G/F and the 2/F were transferred to D1 and D2 respectively. P tried to get in touch with D3 so that he could transfer the 1/F to D3, but all attempts were unsuccessful. P asked D1 and D2 to assist. D1 and D2 told P that the two branches of the family were in dispute over the distribution of Moo Senior’s estate and that D1 was prepared to sue the Japanese branch. D1 and D2 therefore refused to provide D3’s contact to P.

41.  As the 1/F was vacant, P rented it out to the Tenant from June 2016 at a monthly rent of $10,000.

42.  In or around September 2016, P discovered that D1 had demanded the Tenant to pay the monthly rent to D1 directly. P considered that such a demand was inappropriate because, in his view, D1 had no interest in the 1/F.

43.  On or about 27 September 2016, P received a letter from LKL demanding him to transfer the 1/F to D3. He regarded this demand as dubious because of D1 and D2’s refusal to provide D3’s contact to him and their demands to the Tenant for payment of rent. P emphasized that, although he had full intention to transfer the 1/F to D3, he was duty-bound to ensure that the transfer was made to the right person, rather than to someone who purported to represent D3.

44.  Thereafter, LKL continued to send letters to the Tenant demanding her to pay the monthly rent to D1. As a result of the “harassments”, the Tenant reluctantly paid rent from September 2017 to January 2018 to D1 in the total sum of $50,000.

45.  In March 2018, the Tenant terminated the lease and returned the keys to the 1/F and to the Gate to JYJL.

46.  However, when JYJL attempted to enter the 1/F, they found that the keys provided by the Tenant could not open the Gate. JYJL approached D1 and D2 for the new keys to the Gate, but they refused to provide them. As a result, P was unable to gain access to the 1/F.

47.  On or about 17 October 2019, P received a further letter from LKL demanding him to transfer the 1/F to D3. The letter enclosed a copy of the 2019 POA. According to P, he had grave concerns about the authenticity of the 2019 POA because the copy was of very poor quality and the words on it were barely legible. He also questioned whether the 2019 POA, which was executed in Brazil, was valid and enforceable in Hong Kong. P requested LKL to provide a certified true copy of the 2019 POA, but Ds ignored this request.

48.  P denied that he exerted pressure on D3 or asked him not to come to Hong Kong to attend the trial. He argued that the fact D3 had decided not to participate in the present case casted doubt on D1 and D2’s evidence that they occupied the 1/F with D3’s permission.

D1’s evidence

49.  D1’s evidence is that there were discussions between P and Moo Senior in or around 2010 that P would build a village house on the Lot and assign the G/F to D1, the 1/F to D3 and the 2/F to D2 at the consideration of $3 million.

50.  In or around March 2010, P (travelling from England), Moo Senior and D1 (both travelling from Brazil) met in Hong Kong. On 12 March 2010, they attended the office of RHC. In the presence of Ms Winnie Wong (a staff member of RHC), P, D1 and Moo Senior (on behalf of D2 and D3) signed the Written Agreement.

51.  At that meeting, Ms Winnie Wong informed Moo Senior and D1 that a premium would have to be paid to the Government if P assigned the Lot within five years. After discussion, Ds agreed to exercise the Option to defer the transfer for five years so that they would not have to pay the premium.

52.  Although it was agreed that the transfer would be deferred by five years, since the full consideration of $3 million had already been paid to P at that point and it had been agreed that P would provide unconditional assistance in transferring the Lot to Ds, it was Ds’ understanding that they had become the beneficial owners of the Lot and their respective floors until the legal titles were formally transferred to them.

53.  In or around November 2010, D1 was informed by P that a Certificate of Compliance had been issued in respect of the Lot on 15 October 2010.

54.  In or around November 2015, D1 contacted P to request him to transfer the House to Ds, as five years had passed since the Certificate of Compliance. However, P used various excuses to delay the transfer and D1 continued to pursue the matter.

55.  Through Ms Winnie Wong, P finally agreed to meet Ds at RHC on 30 May 2016 to execute transfer documents. However, D3 informed D1 and D2 that his passport had expired and he was unable to attend.

56.  On 30 May 2016, D1 and D2 met P at RHC. Ms Winnie Wong and Ds’ sister were also present. P, D1 and D2 signed the documents transferring the G/F and the 2/F to D1 and D2 respectively. As for the 1/F, P agreed it should remain vacant until the transfer to D3. D1 later informed D3 of what P had agreed at the meeting.

57.  D1 denied that P ever asked him to assist in contacting D3.

58.  In June 2016, D1 discovered that the 1/F had been rented out to the Tenant at a monthly rent of $10,000 without D3’s consent.

59.  On 1 September 2016, as D3’s passport still had not been renewed, D3 executed the 2016 POA in Brazil in favour of D1, granting him power to act as D3’s attorney for the transfer of the 1/F.

60.  Around mid-September 2016, D1 travelled to Hong Kong from Brazil with the 2016 POA and attempted to persuade P to transfer the 1/F to D3 through D1 as his attorney, but P refused.

61.  In view of P’s refusal, around September 2016, Ds instructed LKL to issue demand letters to P seeking transfer of the 1/F to D3 and payment of rent collected by P.

62.  From October 2016 to September 2017, LKL issued several demand letters requesting the Tenant to pay rent to D1 as D3’s attorney. However, the Tenant refused to do so and withheld payment of rent pending clarification of ownership. D1 alleged that he received only $10,000 from the Tenant in 2017, which had been used to settle D3’s share of LKL’s legal fees in issuing those demand letters.

63.  Despite repeated demands, P refused to transfer the 1/F to D3.

64.  In or around August 2017, D1 and D2 came to Hong Kong to meet Ms Winnie Wong at RHC to enquire about rental payments from the Tenant and to see if she would help resolve the 1/F transfer, since by then D3 had obtained a new passport and could come to Hong Kong if P was amenable to executing the transfer documents. Ms Winnie Wong told them that P refused to accept the validity of the 2016 POA and did not confirm whether or not he still intended to transfer the 1/F to D3.

65.  On 5 September 2017, D3 signed the 2017 Declaration stating that D1 had full powers to represent him in handling matters relating to the 1/F. Despite the clear confirmation of D3’s intentions, P still refused to transfer the 1/F or pay over the rents he had received.

66.  In or around March 2018, D1 informed D3 that the lease of the 1/F had been terminated. D3 was determined to prevent P from leasing out the 1/F again without his consent and authorised D1 and D2 to take possession of the 1/F on his behalf.

67.  On 11 March 2018, D1 and D2 took possession of the 1/F and changed the lock on the Gate.

68.  On 9 April 2018, JYJL requested D1 and D2 to open the Gate to allow them entry to the House. D1 and D2 refused and JYJL called the police. After investigation, the police considered that it was a family dispute and did not take any further action.

69.  In March 2019, D1 and D2 received the Writ of Summons in the present case from JYJL. When D3 became aware of the present case, he executed the 2019 POA, granting D1 the full powers to act as his attorney in relation to the dispute concerning the 1/F, including powers to take possession of the 1/F, sign agreements for sale and purchase and assignments for the transfer of ownership of the 1/F, and to defend the proceedings brought by P.

D2’s evidence

70.  Initially, D2 did not provide a witness statement because D1 and D3 would give evidence at the trial. More importantly, he suffered from severe atopic dermatitis and required long-term medical treatment. His treating physician had expressly advised against undertaking such a lengthy journey, which took no less than 44 hours from his residence in Brazil to Hong Kong.

71.  However, it was D2’s understanding that since around 2025, D3 had faced immense pressure from P and/or P’s relatives, who asked him not to attend the trial. D2 did not know the details but D3 shut nearly all points of contact and means of communication with D1 and D2.

72.  In or around May 2025, LKL arranged for copies of the court documents to be sent to D3 by DHL, but he refused to receive them. LKL also contacted D3’s Brazilian lawyer but received no reply.

73.  In the circumstances, notwithstanding his health problems and difficulties, D2 decided to prepare a witness statement and testify at trial.

74.  Turning to the events in the present case, D2’s evidence is that, in or around 2010, P engaged in discussions with Moo Senior concerning the transfer of the House (which was being constructed on the Lot) to Ds. On 12 March 2010, P travelled from England, and Moo Senior and D1 from Brazil to sign the Written Agreement in Hong Kong.

75.  D2 was not present when the Written Agreement was signed. However, he agreed to exercise the Option to defer the transfer by five years. Although the transfer was deferred, given that the $3 million consideration had been paid to P at that time and that P had agreed to provide unconditional assistance in transferring the House, it was D2’s understanding that Ds became the beneficial owners of the Lot and their respective floors pending transfer.

76.  In or around November 2010, P informed D2 that a Certificate of Compliance in respect of the Lot had been issued on 15 October 2010.

77.  In or around November 2015, D1 contacted P to request transfer of the House to Ds, as the five-year period had lapsed. However, P refused to meet and used various excuses to delay the transfer. After repeated demands, P eventually agreed to meet Ds in Hong Kong on 30 May 2016.

78.  After consulting with D1, D2 came to Hong Kong to attend the meeting. D3, who was also residing in Brazil, informed D2 that he was unable to come to Hong Kong as his passport had expired and that it would take some time to obtain a new one. Nevertheless, D3 still wished P to proceed with the transfer of the 1/F.

79.  On 30 May 2016, D1 and D2 met P at RHC, in the presence of Ms Winnie Wong and their sister. P, D1 and D2 signed the documents transferring the G/F and the 2/F to D1 and D2 respectively. As D3 was not present, the 1/F could not be transferred at the same time. P stated that he needed to discuss with D3 to determine how to proceed. P agreed the 1/F should remain vacant and should not be rented out until the transfer was completed.

80.  D2 denied that P had requested his assistance in contacting D3. D2 said that he was willing to assist if P asked.

81.  In or around June 2016, D1 discovered that P had leased out the 1/F to the Tenant.

82.  On 1 September 2016, D3 executed the 2016 POA in favour of D1. In mid-September 2016, D1 came to Hong Kong with the 2016 POA and sought to persuade P to transfer the 1/F to D3 but P refused.

83.  In view of P’s refusal, Ds instructed LKL to send a letter dated 27 September 2016 demanding P to transfer the 1/F to D3 within 14 days, but P still refused. LKL also sent letters demanding the Tenant to pay rent to D1, but the Tenant refused.

84.  In or around August 2017, D2 came to Hong Kong with D1 to meet Ms Winnie Wong. By that time, D3 had obtained his new passport and could come to Hong Kong if P agreed to transfer the 1/F to him. Ms Winnie Wong told them that P refused to accept the validity of the 2016 POA and did not confirm whether or not he still intended to transfer the 1/F to D3.

85.  On 5 September 2017, D3 signed the 2017 Declaration but P still refused to transfer the 1/F to D3.

86.  In or around March 2018, D1 and D2 informed D3 that the lease of the 1/F had been terminated. D3 was determined to prevent P from renting out the 1/F again without his consent and authorised D1 and D2 to take possession of the 1/F. Later, D1 told D2 that he had on 11 March 2018 took possession of the 1/F and changed the lock on the Gate.

87.  On 9 April 2018, JYJL attempted to enter the 1/F but was unable to do so because they could not open the Gate. They requested D1 to provide the new key. D1 refused and JYJL called the Police. D2’s wife was also present at the scene. The Police did not take any action after hearing from both sides.

88.  In March 2019, D1 and D2 received the Writ of Summons from JYJL and decided to defend P’s claim. Upon learning of the Writ, D3 executed the 2019 POA in favour of D1.

EVALUATION OF EVIDENCE

89.  The law on assessing the credibility of witnesses is well settled and neatly summarised by Deputy Judge Eugene Fung SC (as His Lordship then was) in Hui Cheung Fai v Daiwa Development Ltd, HCA 1734/2009, 8 April 2014 at §§77-83 as follows:-

(a) Contemporaneous documents and documents which came into existence before the problems in question emerged are of the greatest importance in assessing credibility;

(b) In deciding whether to accept a witness’ account, importance should be attached to the inherent likelihood or unlikelihood of an event having happened, or the apparent logic of events;

(c) Regard should be given to the consistency of the witness’ evidence with the undisputed or indisputable evidence, and the internal consistency of the witness’ evidence;

(d) Care should be taken in drawing conclusions about truthfulness and reliability solely or mainly from the appearance of a witness or from the assessment of a witness’ character; and

(e) Witnesses’ credibility should be tested by reference to the objective facts proved independently of their testimony, and regard should be given to their motives and to the overall probabilities.

Credibility of P

90.  Having considered all the evidence before the Court, I do not regard P as a reliable witness because of the following reasons.

91.  The main complaint advanced by Ds is that P has persistently failed to transfer the 1/F to D3. In cross-examination, P repeatedly said that he was willing to do so and accepted that, given that the $3 million consideration had been fully paid, the transfer would have been made to Ds immediately upon execution of the Written Agreement if Ds had not exercised the Option.

92.  However, P denied that he had wrongfully refused to transfer the 1/F to D3. He insisted that the transfer of the 1/F was subject to two pre-conditions, namely (a) D3’s personal attendance to execute the transfer documents; and (b) settlement of “outstanding fees” by D3.

93.  As for the first condition, he alleged that Moo Senior had specifically instructed him that the transfer could only be made when Ds appeared in person (“見人至俾”), and relied on this alleged instruction as the reason why he refused Ds’ requests to effect the transfer pursuant to the POA or through LKL.

94.  It is however noted that the alleged instruction from Moo Senior was not pleaded, not mentioned in P’s witness statements, and emerged for the first time only during cross-examination.

95.  More importantly, P’s assertion that D3’s personal attendance was a pre-condition of transfer is inconsistent with his own conduct. For example, when LKL demanded P to transfer the 1/F to D3 in 2016, P instructed RHC to prepare a draft Deed of Gift and send it to LKL for comment. There was no suggestion at that time that the Deed of Gift could only be executed if D3 were physically present in Hong Kong.

96.  Likewise, when LKL later sent P a copy of the 2019 POA and again demanded transfer of the 1/F in 2019, P did not respond by asserting any requirement of personal attendance. Instead, he asked for a certified copy of the POA for legal advice. If, as P now alleges, the transfer could only be made upon D3’s personal attendance pursuant to Moo Senior’s specific instructions, one would have expected him simply to reply that no transfer could take place in D3’s absence. It would be totally pointless to request a certified true copy of the 2019 POA to verify the validity or enforceability in Hong Kong if the reason for P’s refusal was in fact that D3 had to be physically present.

97.  In my view, P’s alleged requirement of D3’s personal attendance for the transfer is no more than a recent invention made to attempt to evade the liability of his failure to transfer the 1/F to D3. I reject P’s evidence on the said alleged requirement.

98.  Regardless of whether the alleged requirement of D3’s personal attendance is accepted or not, P’s evidence concerning the 2019 POA itself also seriously undermines his credibility.

99.  P gave two reasons as to why he refused to accept the 2019 POA. First, he alleged that the copy of the 2019 POA received was of “poor quality as the letters printed on it could barely be legible”. Secondly, as the 2019 POA was executed in Brazil, he was concerned with its validity and enforceability in Hong Kong.

100.  As for the first reason, P had failed to produce the allegedly illegible copy of the 2019 POA, even though he had produced LKL’s letter dated 17 October 2019, which enclosed the aforementioned illegible copy. On the other hand, the copy of the 2019 POA provided by Ds is of good quality and legible. Further, there was no complaint in JYJL’s reply dated 23 October 2019 about the copy of the 2019 POA being illegible. In that letter, JYJL merely requested a certified true copy of the 2019 POA “for legal advice”. In these circumstances, I reject P’s evidence that the copy of the 2019 POA he received was illegible.

101.  As for the second reason, P said under cross-examination that he expected the 2019 POA to bear “a lot of stamps”, but there was only one stamp on it and its image was blurred. I do not understand the basis for P’s expectation that a valid 2019 POA must carry “a lot of stamps”. In any event, if P genuinely doubted the enforceability of the 2019 POA in Hong Kong, one would expect him to seek legal advice from JYJL about the copy of the 2019 POA received from LKL (which, for the reasons already given, I have rejected his claim that the document was illegible), rather than simply refusing to accept it on the basis of a subjective and unexplained impression of how the document ought to look.

102.  In my view, P’s request for a certified copy of the 2019 POA was no more than a tactic to delay the transfer of the 1/F, and his purported concern about the validity and enforceability of the POA was an explanation manufactured for the purposes of these proceedings, designed to provide a veneer of justification for his delay.

103.  As for the second pre-condition for transfer, P relied on clause 2(b) of the Written Agreement and alleged that the “site levelling cost” (“地盤平整費”) was outstanding. However, when asked how much the site levelling cost was, P said he did not know as he had never done the calculation. He said he would calculate the costs and discuss the matter with D3 when he saw D3.

104.  Clause 2(b) concerns “construction cost, site levelling cost, and all construction project cost” (建築費、地盤平整費及一切建築工程費). P’s evidence was that the $3 million paid by Moo Senior covered only the construction cost and the construction project cost, but not the site levelling cost.

105.  As a matter of common sense, site levelling work would ordinarily be carried out before construction commences, and it is inherently unlikely that $3 million would cover the construction cost and all construction project cost but exclude only the site levelling cost.

106.  Moreover, by the time of trial, construction of the House had been completed for more than 15 years (the Certificate of Compliance was issued on 15 October 2010). If the site levelling cost was genuinely outstanding, there is no obvious reason why P would not have calculated the amount and sought recovery, not only from D3, but also from D1 and D2 when P met with them for the transfer the G/F and 2/F in 2016. However, P accepted that he did not ask D1 or D2 to pay any “outstanding fee” at the time of those transfers.

107.  P explained that he had asked D1 and D2 to pay the outstanding site levelling cost when he transferred the G/F and the 2/F to them in 2016. However, they said that they had no money, and P had no alternative but to transfer those floors to them even though they failed to settle the alleged outstanding site levelling cost.

108.  I do not accept P’s evidence. If P had asked D1 and D2 to pay the site levelling cost as alleged, it would mean that he must have calculated the outstanding amount. Otherwise, it is difficult to see how D1 and D2 could have said that they had no money to pay when they did not even know what amount was allegedly outstanding.

109.  Further, as mentioned above, when LKL demanded that P transfer the 1/F in 2017, P simply instructed RHC to prepare a Deed of Gift, and there was no mention of any outstanding expenses which D3 was required to pay before the transfer could take place. The position was the same when LKL renewed its request for transfer in 2019. These events seriously undermine P’s evidence that the settlement of the alleged outstanding (but unquantified) site levelling cost was a pre-condition for the transfer of the 1/F to D3.

110.  In my view, the alleged outstanding site levelling cost is just another excuse, akin to the alleged pre-condition of D3’s personal attendance. Both of these so-called “pre-conditions” for transfer were fabricated by P to a veneer of justification for his refusal to transfer the 1/F to D3.

111.  In addition to the above, there are other internal inconsistencies in P’s evidence. For example, in his supplemental witness statement, P made a positive assertion that D3 had never authorised D1 or D2 to take possession of, or otherwise deal with, the 1/F. Under cross-examination, however, he changed his position and said that he simply did not know whether D3 had authorised or permitted D1 or D2 to use the 1/F.

112.  Another example of inconsistency is P’s evidence about D2’s assistance in contacting D3. In his witness statement, P alleged that both D1 and D2 refused to assist him in getting in touch with D3 and even gave a reason for their refusal (namely, a dispute between the two branches of the family over the distribution of Moo Senior’s estate). Under cross-examination, however, he accepted that D2 did in fact agree to assist him in contacting D3.

113.  To conclude, I am of the view that P’s evidence is totally unreliable.

Credibility of D1 and D2

114.  Mr Kwan attacked the credibility of D1 and D2 by reference to some inconsistencies in their evidence.

115.  In relation to D1, Mr Kwan pointed out that:-

(a) In his witness statement, D1 said that “In June 2016, I was in Hong Kong living on the Ground Floor of the House and was surprised when one Ms Fong moved to the First Floor”, whereas under cross-examination D1 said that, upon the transfer of the G/F to him on 30 May 2016, he discovered that the G/F had already been occupied by a tenant, that he therefore stayed at the 1/F, and that the G/F tenant subsequently entered into an eight-month tenancy agreement with him, paying rent and remaining in occupation until 2018 when D1 allegedly took possession of the G/F; and

(b) Under cross-examination, D1 asserted that he had held keys to the 1/F since 2010 (before execution of the Written Agreement) and that he was entitled to access the House because it was “family property”.

116.  While I accept that there are inconsistencies in D1’s evidence on the two matters identified above, I do not consider that they materially affect his credibility. In my view, where D1 was living when he first realised that the 1/F had been let to the Tenant and how or when he obtained keys to the 1/F are trivial matters of little importance, and I see no obvious reason why D1 would wish to lie about them. By contrast, the problems and inconsistencies in P’s evidence all concern the key issues in dispute in the present case.

117.  I also note that, in LKL’s letter dated 12 September 2017, it was alleged that P had rented out the G/F and the 2/F from June 2010 to March 2016 and he was accountable for the rent during that period. In light of that correspondence, I am more inclined to regard the inconsistencies in D1’s evidence as the product of confusion or imperfect recollection about the occupancy status of the different floors at various times, rather than deliberate fabrication. D1 was more than 70 years old at the time of trial, and some degree of confusion about detail is understandable.

118.  As to D2, Mr Kwan submitted that:-

(a) In cross-examination D2 claimed to have brought a power of attorney executed by D3 to the meeting on 30 May 2016, but the undisputed fact is that the relevant power of attorney was executed on 1 September 2016 (i.e. the 2016 POA) after that meeting; and

(b) In his witness statement, D2 expressly admitted that rent from the Tenant had been received, whereas in cross-examination he denied having received rent from the Tenant.

119.  I do not accept that D2’s credibility is significantly undermined by his mistaken suggestion that he brought the 2016 POA to the meeting on 30 May 2016. According to D2, he and D1 came to Hong Kong in or around August 2017 with the 2016 POA and sought to persuade P to transfer the 1/F to D3, but P refused. Given that D2 was also over 70 years old at the time of trial, I am more inclined to regard the inconsistency as the product of confusion between the 30 May 2016 meeting and his trip to Hong Kong in August 2017. In any event, I can see no real advantage that Ds would gain by D2 falsely claiming to have produced such a document at the earlier meeting.

120.  As for the criticism about the rent received from the Tenant, D2 said in his witness statement that “we received only one payment of HK$10,000 in 2017 on behalf of [D3], which was applied to [D3]’s share [of] legal fees incurred in engaging [LKL]”. In my view, that statement is not inconsistent with his oral evidence that he did not receive rent from the 1/F for his own benefit when the single payment of rent was spent on D3’s share of legal costs.

121.  As noted above, D2 had not intended to give evidence because of his medical condition. He only agreed to testify at trial, against medical advice, after LKL had lost contact with D3. I agree with Mr Cheung that D2’s willingness to attend and give evidence at the trial despite his health difficulties enhances the credibility of his evidence.

122.  I also take into account P’s admission that D2 did agree to assist him in contacting D3.

123.  Taken as a whole, I find D1 and D2 to be honest witnesses. I accept their evidence and find that:-

(a) When the Option was exercised, D1 and Moo Senior (on behalf of D2 and D3) did not agree to the Additional Term that P could use and enjoy the House as the sole owner for his own benefits until the transfer. Instead, P did promise that he would keep the House vacant;

(b) At the meeting on 30 May 2016, P did agree that the 1/F should remain vacant and should not be rented out until the transfer to D3 was completed; and

(c) P had never sought assistance from D1 and D2 to contact D3. D1 and D2 had never refused to assist P in contacting with D3.

ISSUE 1: WHETHER P IS A TRUSTEE HOLDING THE 1/F ON TRUST FOR D3

124.  Mr Cheung submitted that, as a starting point, it is D1 and D2’s position that P is and was at all material times a trustee under an express trust. Alternatively, the Written Agreement gives rise to a vendor-purchaser constructive trust.

125.  Mr Kwan argued that no trust could be created by the Written Agreement.

Legal principles

126.  Mr Cheung submitted that the law on express trust was well-settled.

127.  In determining whether an express trust has been created, the Court may take into account events occurring both before and after the alleged creation of the trust, including the parties’ conduct, as part of the overall evidential picture; Poon Kai Ming v Li Tung Cheung Martin [2020] HKCFI 3139 at §12 per DHCJ MK Liu.

128.  Further or alternatively, Mr Cheung submitted that P was at all material times a trustee under a constructive trust:-

(a) A vendor-purchaser constructive trust arises whenever there is an agreement for the sale of property of which equity would grant specific performance. It is one of the ways in which effect is given to the maxim that equity treats as done that which ought to be done; LA Micro Group (UK) Ltd v Frenkel [2025] AC 1442 at §1 per Lord Briggs JSC (with whom Lord Hodge DPSC, Lord Sales, Lord Burrows and Lord Richards JJSC agreed); and

(b) Such a trust could arise even in circumstances where the contract assigning a landed property is defective; Lead Properties Ltd v Secretary for Justice [2022] HKCFI 3297 at §14 per Recorder William Wong SC.

129.  Mr Cheung further submitted that it was well-established that:-

(a) A bare trust is one in which the trustee holds the trust fund (or trust asset) for a beneficiary absolutely. The beneficiary is the beneficiary of the trust fund (or trust asset) and has the right to wind up the trust and call for the transfer of the trust fund (or trust asset) to the beneficiary (or to someone else at the beneficiary’s direction);

(b) The trustee has no true discretion as to whether to retain or return the trust fund (or trust asset) if it is demanded;

(c) That said, where there are competing proprietary claims, undischarged present or contingent liabilities, uncertainty as to the nature of the underlying interests or some other complication, the trustee may be justified in temporarily retaining the assets pending resolution of those issues; and

(d) Absent such complications the trustee cannot, as a matter of trust law, withhold the trust fund (or trust asset) from the beneficiary against the beneficiary’s wishes; In the Matter of Wealthtek LLP (in Special Administration) [2024] EWHC 2520 (Ch) at §16 per Mr Justice Rajah).

130.  Further, as analysed clearly by Deputy District Judge Amy Chan in Tong Kwok Keung v Tong Kwok Kee, DCMP 2470/2014, 30 January 2015 at §§29-33; also the Court of Appeal’s dicta on a trustee’s duty to hold the property in furtherance of the trust (a charitable trust therein) in Tsung Tsin Association v Lai Kwok Wai [2022] HKCA 1409 at §11 per Cheung JA:-

(a) A trustee “must be guided by the trust instrument and the rules of equity”;

(b) In that connection, it is trite law that the trustee in whom property is vested is compelled in equity to hold the property for the benefit of the beneficiary, or for some legally enforceable purposes other than his own. In the case of trust arising by operation of law, the trust is imposed upon the trustee to “prevent him from benefiting unconscionably from his ownership of the property”;

(c) When a trustee is exercising his trustee power, the question depends on whether what he proposes to do is in furtherance of the trust or in breach of his fiduciary duties. The trustee has to prove, inter alia, that the power is exercised for legally enforceable purposes other than promoting the trustee’s own personal interest; and

(d) The fact that the trustee has a better title than the defendant is not sufficient in itself.

131.  In the same vein, a trustee cannot exercise a power conferred upon him capriciously; Law Shuk Hoi v Lo Lok Fung Kenneth [2010] 4 HKLRD 316 at §§ 11, 18 & 19 per Johnson Lam J (as His Lordship then was).

132.  There was no disagreement from Mr Kwan on the above principles.

Express trust

133.  It is Mr Cheung’s submissions that there was no problem with certainty of the subject matter and the certainty of the object in the present case.

134.  Insofar as the intention is concerned, Mr Cheung submitted that:-

(a) P under cross-examination confirmed that D3 was the ultimate owner of the 1/F, and that was his intention at the time of the Written Contract although, according to him, that was subject to the payment of some outstanding expenses;

(b) P indeed confirmed in his pleadings and during cross-examination that he intended to transfer the 1/F to D3 such that D3 would become a full legal and beneficial owner; and

(c) The intention to confer benefit on D3 was therefore extremely clear.

135.  In this regard, Mr Cheung drew my attention to Kirill Ace Stein v Eugene Jaffe [2025] EWHC 2334 (Ch) at §71:-

“Although conceptually speaking the three certainties are separate, they can seldom in practice be segregated. In the present case, assuming that there was an intention to create a trust, there can be little doubt as to the second and third certainties …”

136.  Mr Kwan’s argument is that an express trust requires a clear, present and unequivocal intention to hold property on trust and the Written Contract did not evince such intention. Mr Kwan argued that:-

(a) The Written Agreement was not framed as a trust instrument. Properly construed, it was a sale / construction / assignment arrangement;

(b) Further, a trust by its nature did not depend on future performance; and did not suspend beneficial ownership pending the occurrence of future events. However, the Written Agreement expressly contained conditions, obligations, payments, and future performance;

(c) However, it was P’s evidence that the transfer was conditional upon reimbursement of expenses and other payments; and the quantum of such payments remained unresolved; and completion therefore never occurred;

(d) Thus, it was fundamentally inconsistent with any intention to divest beneficial ownership immediately. It demonstrated that P had never intended to hold the property on trust pending unresolved conditions; and

(e) At its highest, the evidence relied upon by Ds shows only a conditional and future intention to transfer title upon fulfilment of outstanding obligations. That was legally insufficient to constitute an express trust.

137.  With respect, I do not agree with Mr Kwan’s submissions:-

(a) It is important to note that the subject matter of the Written Agreement was the Lot, and the Written Agreement was a sale and purchase of the Lot. There was no provision making the transfer conditional upon any future event such as the completion of construction of the House;

(b) Under clause 2 of the Written Agreement, the costs and fees for which Ds were responsible could be divided into two categories.

(c) The first category comprised costs relating to construction of the House. P accepted in evidence that the $3 million consideration included the construction cost and the construction project cost, and I have rejected his assertion that it did not cover the site levelling cost. In light of P’s admissions and my finding, there are no outstanding costs in relation to the construction of the House;

(d) The second category comprised fees relating to the transfer of the Lot, such as legal fees, stamp duty, Government premium, and similar items. Those fees only fell due when the transfer of the property took place, and they were payable to third parties (such as lawyers, surveyors and public authorities), not to P;

(e) By contrast, it is not disputed that the $3 million consideration had already been fully paid at the time of the Written Agreement. P himself admitted that, since the consideration under the Written Agreement had been fully paid, he would have transferred the Lot to Ds immediately upon signing the Written Agreement had they not exercised the Option; and

(f) In these circumstances, I agree with Mr Cheung that Ds had fulfilled all obligations owed to P under the Written Agreement as soon as it was signed, and that the intention was that the benefits of the Written Agreement would be conferred on Ds (including D3) immediately.

138.  In Re Lehman Brothers International (Europe) (In Administration) [2010] EWHC 2914 (Ch), Mr Justice Briggs held at §§225(iv), 235 and 245 that a trust does not fail for want of certainty merely because its subject matter is at present uncertain, if the terms of the trust are sufficient to identify its subject matter in the future. Therefore, the fact that the House did not exist at the time of the Written Agreement did not prevent the creation of an express trust.

139.  As such, I am of the view that an express trust was created when the Written Agreement was signed, and that P thereafter held the Lot on trust for Ds, with D3 entitled to the beneficial interest corresponding to the 1/F.

Constructive trust

140.  Given my finding on the express trust, it is strictly speaking unnecessary for me to deal with Ds’ alternative case on constructive trust. However, in deference to the parties’ submissions, I would continue to deal with it for the sake of completeness.

141.  Mr Cheung submitted that:-

(a) What P attempted to argue was that the Written Contract could not possibly create a constructive trust because there were still outstanding obligations on D3’s part, such that unless and until D3 discharged such obligations, D3 could not be a beneficiary;

(b) However, if P were right in this regard, no vendor-purchaser constructive trust could ever arise because in a vast majority of cases the balance of the purchase price would have to be paid by the purchaser at a later stage of completion;

(c) Further, whether the Written Contract was specifically enforceable or not should be judged at the time of contract formation, taking into account the nature of the contract.

(d) In this regard, P accepted during cross-examination that Moo Senior would have the funds to pay all the outstanding expenses for Ds if needed, and hence the parties’ intention underlying the Written Contract must be that the same will be specifically enforceable; and

(e) Furthermore, it defies common sense for P to state on the one hand that he would transfer the 1/F to D3 when he met D3 in Hong Kong but on the other hand argued that the Written Contract was not specifically enforceable. Properly analysed, specific enforceability concerned whether D3 could enforce the promise against P without having to be satisfied by mere monetary damages. If P was telling the truth that he would transfer the 1/F to D3 in any event, P cannot at the same time argue that the Written Contract was not specifically enforceable.

142.  Focusing on the question of whether the Written Agreement was specifically enforceable, Mr Kwan submitted that:-

(a) A vendor-purchaser constructive trust arises only where there exists a contract which equity would specifically enforce;

(b) At the time of the Written Agreement, the House did not exist. The Written Agreement was, in substance and effect, a contract to build, not a contract for the immediate sale of an existing property. Where the subject matter of a contract does not yet exist, the contract is not specifically enforceable at inception, and no vendor–purchaser trust can arise at that time. Therefore, the present case therefore falls squarely outside the vendor–purchaser trust doctrine;

(c) Even if it were argued that a trust could arise at a later stage when the House was completed, such a trust would still depend on the contract being specifically enforceable at that later point in time. It is undisputed that material contractual obligations remain outstanding on D3’s part, including payment of contractual sums and transaction expenses, including (i) legal fees, stamp duty, and other transfer-related costs; (ii) addressing outgoings, rents and rates which have been paid by P from 2010 to 2025; and (iii) execution of assignment and related documents. Therefore, the written contract was not specifically enforceable; and

(d) Crucially, D3 did not give evidence and there exists no evidence whatsoever to show that he is ready, willing, and able to perform his outstanding contractual obligations. Therefore, the Written Contract is not enforceable in equity in practice.

143.  Once again, I do not accept Mr Kwan’s submissions.

144.  First, Mr Kwan’s argument that the subject matter of the Written Contract did not exist when it was signed and therefore it was not specifically enforceable at inception is factually incorrect because, as I have already pointed out, the subject matter of the Written Agreement was the Lot.

145.  Furthermore:-

(a) P’s evidence was unequivocal that he would have immediately transferred the Lot to Ds upon execution of the Written Agreement had they elected not to exercise the Option;

(b) Had such a transfer been made immediately after the Written Agreement was signed, Ds would have become co-owners of the Lot. As the $3 million consideration, which I have found to cover all construction-related costs, had already been paid, P would still have been obliged to construct the House after the transfer of the Lot. Once construction was completed, it would then have been for Ds to regulate the division of their respective interests in the Lot and the House, if they so wished, by executing a deed of mutual covenant (“DMC”) among themselves;

(c) In the present case, since the Option had been exercised and the House had been built by 30 May 2016, the transfer was effected in a different way, namely, P and D1 first executed a DMC, notionally dividing the Lot into three undivided shares and allocating one share to each floor of the House, and P then assigned to each of D1 and D2 a one-third undivided share in the Lot together with the sole and exclusive right to use, occupy and enjoy the G/F and the 2/F respectively;

(d) Had D3 come to Hong Kong with D1 and D2 on 30 May 2016, P could and would have transferred to him a one-third undivided share in the Lot together with the sole and exclusive right to use, occupy and enjoy the 1/F; and

(e) In those circumstances, I fail to see any basis on which P can now contend that D3 was not entitled to seek specific performance of the Written Agreement. In my view, it is clear that the Written Agreement was specifically enforceable from the moment it was signed and therefore equity would grant specific performance. The pre-condition for a vendor–purchaser constructive trust is accordingly met.

146.  Secondly, insofar as Mr Kwan’s argument that the Written Agreement was not specifically enforceable because of the alleged obligation on the part of D3 to settle the outstanding cost:-

(a) I repeat what I have said about this issue when I discuss the case of express trust. In short, based on P’s admission and my finding, there is no outstanding fee in relation to the construction of the House, and D3’s obligation to pay other transfer-related fee is owed to third parties and would occur when the transfer takes place, but not before;

(b) As for the outgoings, rents and rates which have been paid by P from 2010 to 2025, those expenses should in principle be paid from the rent received by P first and, if there was any shortfall, P could recover the same from D3. Be that as it may, the fact that P had incurred expenses in managing the 1/F does not mean that he could refuse to transfer the same to D3 when demanded; and

(c) Thus, I reject Mr Kwan’s argument that the Written Agreement was not specifically enforceable because of outstanding obligations on the part of D3.

147.  As to Mr Kwan’s argument that there is no evidence to show that D3 is ready, willing, and able to perform his outstanding contractual obligations, I agree with Mr Cheung that, before LKL lost contact with D3, he had done all he could by, inter alia, executing the 2016 POA, the 2017 Declaration, the 2019 POA, instructing LKL since 2016, joining the present proceeding and signing the Statement of Truth of the D’s Re-Amended Defence and D3’s Counterclaim. I also accept the evidence from D1 and D2 that D3 has all along been ready, willing, and able to complete the transfer.

148.  By the aforesaid reasons, I answer Issue 1 in favour of Ds and find that P is a trustee holding the 1/F, or more precisely a one-third of the undivided share with the sole and exclusive right to use the 1/F, on trust for D3 pursuant to the Written Agreement.

ISSUE 2: WHETHER P SHOULD BE DEBARRED FROM BEING AWARDED ANY JUDICIAL REMEDIES IF AND WHEN P IS A TRUSTEE

149.  Mr Cheung submitted that this issue, particularly in the context of trespass and nuisance, depends substantially on the nature of the equitable restraints on P as a trustee and P’s trustee/fiduciary powers.

Bare trustee

150.  Mr Cheung argued that the duty on P’s part as trustee is a simple one of completing the formality to transfer the legal title to the beneficiary. Legally, it means that the trust is a bare trust.

151.  It is well-established that:-

(a) A bare trust is one in which the trustee holds the trust fund (or trust asset) for a beneficiary absolutely. The beneficiary is the beneficiary of the trust fund (or trust asset) and has the right to wind up the trust and call for the transfer of the trust fund (or trust asset) to the beneficiary (or to someone else at the beneficiary’s direction);

(b) The trustee has no true discretion as to whether to retain or return the trust fund (or trust asset) if it is demanded;

(c) That said, where there are competing proprietary claims, undischarged present or contingent liabilities, uncertainty as to the nature of the underlying interests or some other complication, the trustee may be justified in temporarily retaining the assets pending resolution of those issues; and

(d) Absent such complications the trustee cannot, as a matter of trust law, withhold the trust fund (or trust asset) from the beneficiary against the beneficiary’s wishes.

See In the Matter of Wealthtek LLP (in Special Administration) [2024] EWHC 2520 (Ch) at §16 per Mr Justice Rajah.

152.  A summary of the relevant principles was also provided in Eugene Jaffe at §72, where the English High Court stated very clearly that:-

“… The trust would also be a bare trust, being a relationship where (i) the nominee or bare trustee holds property on behalf of a (usually single) beneficial owner; (ii) the nominee or bare trustee has no active powers of investment, other than to deal with the relevant asset as instructed by the beneficial owner; and (iii) save where it would be illegal to do so, the nominee or bare trustee must deal with the asset as instructed by the beneficial owner: [Kazakhstan] Kagazy plc v Zhunus [2021] EWHC 3462 (Comm) at [273].” (emphasis added)

153.  The above is particularly so when the trite principle that the beneficiary rather than the trustee is the true owner of the property is properly taken on board; Kazakhstan Kagazy plc v Zhunus [2021] EWHC 3462 (Comm) at §273.

154.  As analysed by Deputy District Judge Amy Chan in Tong Kwok Keung v Tong Kwok Kee, DCMP 2470/2014, 30 January 2015 at §§29-33:-

(a) A trustee “must be guided by the trust instrument and the rules of equity”;

(b) Thus, it is trite law that the trustee in whom the property is vested is compelled in equity to hold the property for the benefit of the beneficiary, or for some legally enforceable purposes other than his own. In the case of trust arising by operation of law, the trust is imposed upon the trustee to “prevent him from benefiting unconscionably from his ownership of the property”;

(c) When a trustee is exercising his trustee power, the question depends on whether what he proposes to do is in furtherance of the trust or in breach of his fiduciary duties. The trustee has to prove, inter alia, that the power is exercised for legally enforceable purposes other than promoting the trustee’s own personal interest; and

(d) The fact that the trustee has a better title than the defendant is not a sufficient answer in itself to the issue of whether power is exercised for legally enforceable purposes.

See also the Court of Appeal’s dicta on a trustee’s duty to hold the property in furtherance of the trust (a charitable trust therein) in Tsung Tsin Association v Lai Kwok Wai [2022] HKCA 1409 at §11 per Cheung JA.

155.  In the context of a bare trust, “the nominee or bare trustee must deal with the asset as instructed by the beneficial owner”; Eugene Jaffe at §72; In the Matter of Wealthtek LLP (in Special Administration) at §16.

156.  Relying on the above principles, Mr Cheung argued that since P as a bare trustee “must deal with the asset as instructed by the beneficial owner” and “must be guided by the trust instrument and the rules of equity”:-

(a) P cannot, and should not be allowed to, act against the wishes and best interest of D3 as beneficiary.

(b) Even when P is technically the legal owner of the 1/F, P is able to retain that legal title only because of his position as a trustee / fiduciary of the 1/F, and hence any power arising from that legal title should also be subject to equitable restraints, including the nature (and restraints) pertaining to a bare trust and trustee/fiduciary power. In other words, it is overly simplistic for P to place undue emphasis on the legal title technically still held by him, and ignore all the equitable restraints pertaining to a trust/fiduciary relationship.

157.  Mr Cheung further submitted that:-

(a) During cross-examination, P stated that the rental income and other recoveries from the 1/F belonged and would belong to him as the legal owner. In other words, P commenced the present action to seek recoveries not for D3, but for P himself, although he said he might consider sharing some with D3;

(b) P never enquired with D3 whether D3 would support the commencement of a legal action against D3’s own brothers, D1 and D2 (who were and are in fact licensees of D3). Even after D3 joined in the present proceedings and indicated his stance (as confirmed by D3’s Statement of Truth), P never ascertained the intention of D3 through LKL, and instead pressed ahead with the present action against D1, D2 and D3;

(c) Further, there is sufficient and adequate evidence establishing that D3 had permitted and/or authorised D1 and/or D2 to use, occupy and enjoy the 1/F. Although P had made a positive assertion in his supplemental witness statement that D3 had never authorised D1 or D2 to occupy the 1/F, he changed his evidence under cross-examination to say that he simply did not know;

(d) As such, P should be debarred from being awarded judicial remedies because of the aforementioned maxim, and because P’s conduct amounts to breaches of trust and/or fiduciary duties and this does not entitle anyone to judicial remedies. If judicial remedies were awarded to P because of his breaches in conduct, this would leave the Ds in an unfair position where they would have to go against P in a separate action for disgorging the wrongful gain obtained by him in these proceedings; and

(e) The above analysis and conclusion are consistent with the long-standing equitable maxim that “persons should not be permitted to take advantage of their own wrongs”, recently applied in Naumburger v Berger [2021] NSWSC 903 at §§164-169.

158.  In reply, Mr Kwan submitted that Mr Cheung’s argument was unsustainable because of the following:-

(a) A bare trust arises only where the beneficiary is absolutely entitled, and the trustee is under an immediate and unconditional obligation to transfer upon demand. Where the trustee is lawfully entitled to say “not yet”, the trust cannot be characterised as a bare trust;

(b) In the present case, (i) the Written Contract permitted deferral of transfer for at least five years; (ii) transfer was in fact delayed for approximately that period; (iii) P remained registered owner and in possession pending completion; and (iv) mandatory contractual obligations remained outstanding. Such an arrangement is fundamentally inconsistent with a bare trust, which presupposes immediate transferability at the beneficiary’s election;

(c) The parties’ conduct confirms this. P openly let out the G/F and 2/F between 2010 and 2016 and retained the rental income. Ds did not pursue repayment for many years. This prolonged inaction is wholly inconsistent with the position of a beneficiary under a bare trust;

(d) The outstanding contractual payments are mandatory, not optional. The relative size of those payments are legally irrelevant. Equity does not disregard contractual conditions merely because the remaining balance is modest;

(e) Accordingly, even if some trust existed (which is denied), it could not have been a bare trust. The authorities relied upon by Ds concerning the duties of bare trustees are therefore inapplicable; and

(f) Ds’ reliance on In the Matter of Wealthtek LLP is misplaced. That authority recognises that where there are competing claims, undischarged liabilities, or uncertainty as to entitlement, a trustee is justified in retaining assets pending resolution. The present case falls squarely within those recognised exceptions.

159.  With respect, I do not accept Mr Kwan’s submissions:-

(a) Whilst the Written Agreement contained an Option to defer the transfer by five years, the exercise of that Option was entirely within Ds’ discretion and P had no say in whether or not it was exercised. The mere fact that the Option was exercised and that the 1/F remained registered in P’s name is neither here nor there;

(b) As noted above, Ds instructed LKL to issue the letter dated 12 September 2017 demanding P to return rental income in respect of the G/F and 2/F for the period between 2010 and 2016;

(c) I have already found that the transfer of the 1/F to D3 is not subject to settlement of any “outstanding fees”;

(d) It is P’s own evidence that he is willing and ready to transfer the 1/F to D3, and I have rejected his allegation that there were any pre-conditions for such transfer. Thus, there is no competing claim between P and D3 in respect of the beneficial interest in the 1/F; and

(e) In these circumstances, there is no basis for P’s submission that he was lawfully entitled to say “not yet” to D3’s request for transfer.

160.  By reason of the aforesaid, I agree with Mr Cheung that P is a bare trustee. I further agree that, in addition to the evidence of D1 and D2 which I accept, there is sufficient and adequate evidence showing that D3 had authorised D1 and D2 to occupy the 1/F:-

(a) The authorisation was evidenced by the 2016 POA, 2017 Declaration and the 2019 POA. The latter two documents were provided to P through LKL. P did not challenge the authenticity of these documents at the trial;

(b) Prior to the commencement of these proceedings, P did not seek to consult D3, even though D3 was represented by LKL, in relation to matters concerning the transfer of the 1/F;

(c) D3’s authorisation was further reinforced by his Statement of Truth in which D3 confirmed that he had authorised D1 and D2 to occupy and use the 1/F. There is no allegation that D3’s signature was forged or invalid. Notwithstanding that clear expression of D3’s intention, P continued to pursue his claim against D1 and D2;

(d) Moreover, although in his supplemental witness statement P made a positive assertion that D3 had never authorised D1 or D2 to occupy the 1/F, under cross-examination he changed his position and said that he simply did not know whether D3 had given such authorisation; and

(e) I therefore find that D3 had since 2018 authorised D1 and D2 to occupy the 1/F.

161.  In such circumstances, I agree with Mr Cheung that P’s claim against D1 and D2 in the present case is for his own personal interest and not for the benefit of D3. Therefore, judicial remedies should not be granted to P for his act which is against the best interest of D3.

162.  Given the above findings, it is strictly speaking unnecessary for me to consider Mr Cheung’s submissions on the alternative scenario where P is not a bare trustee. However, in deference to the very detailed and thorough submissions of both Mr Cheung and Mr Kwan, I will briefly deal with them as follows.

Constructive trustee

163.  Mr Cheung submitted that, even assuming that the trust in question is not a bare trust, it is a long-standing rule that a trustee cannot exercise a power conferred upon him capriciously and cannot exercise such a power for improper purposes. In the event that there is a “fraud on power” or improper exercise of power, the Court is entitled not to lend support (in the form of judicial remedy) to the trustee.

164.  The law on the restraints of a trustee’s exercise of power can be summarised as follows:

(a) A trustee cannot exercise a power conferred upon him capriciously; Law Shuk Hoi v Lo Lok Fung Kenneth [2010] 4 HKLRD 316 at §§11, 18 & 19 per Hon Johnson Lam J (as His Lordship then was);

(b) As summarised by the Privy Council in Grand View Private Trust Co Ltd v Wen-Young Wong [2022] UKPC 47 at §56 (per Lord Richards, with whom Lord Hodge, Lord Sales, Lord Burrows and Lady Rose agreed):

“In the past, the proper purpose rule was generally referred to as “fraud on a power”, a phrase that is still sometimes used. However, as repeatedly made clear in the authorities, it is not confined to cases involving some reprehensible conduct on the part of a trustee or other fiduciary but extends to any case where a fiduciary power is used for a purpose not falling within the purposes for which the power has been conferred, even though the trustee may have acted in good faith and genuinely with a view to benefiting the beneficiaries …”

(c) An exercise of fiduciary power for an improper purpose can potentially render the exercise void or voidable, as stated by the Privy Council at Grand View Private Trust Co Ltd at §122:

“122. For the reasons given above, the Board concludes that the challenged decision was taken by the GRT trustee for an improper purpose … As regards the consequence in law of this conclusion, there has been debate as to whether the exercise of a fiduciary power for an improper purpose renders the exercise void or voidable, as to which see Pitt v Holt at para 62 (Lord Walker), but the parties are agreed that in the present case the consequence is that the challenged decision was void.”

(d) Similar conclusion was also reached by the English High Court in Ticehurst v Harbour Fund II LLP [2022] EWHC 3053 (Comm) at §79:

“In these circumstances, and on the basis of the evidence before me, I have concluded that any power of appointment was not exercised for a proper purpose, and would have been void for that reason as well (on the basis set out in Lewin, [30-066]).”

165.  It was argued by Mr. Cheung that:-

(a) In the context of litigation commenced by a trustee for an improper purpose (viz. to obtain remedies for him personally), the Court is entitled to reach a conclusion that no judicial remedy should be awarded to the trustee as plaintiff, for otherwise the Court may in effect be condoning a breach of trustee’s and/or fiduciary duties.

(b) The above accords with common sense and equitable principles, bearing in mind that a fiduciary (and hence trustee) owes a duty of “undivided loyalty” to its principal beneficiary: see China Forestry Holdings Co Ltd v Top Wisdom Overseas Holdings Ltd [2021] HKCFI 2761 at §33 per Peter Ng J.

166.  On the premise of the aforesaid arguments, Mr Cheung invited the Court to refuse to lend support (in the form of judicial remedy) to P, in light of the fact that the present action is part and parcel of P’s breach of trustee and/or fiduciary duties.

167.  On the other hand, Mr Kwan submitted that Ds’ argument failed at the threshold:-

(a) The doctrine relied on by Ds arises only where a fiduciary exercised a discretionary fiduciary power for an improper purpose. But in the present case, P did not bring the present proceeding as a trustee or claim against D1 and D2 in exercise of a trust power. Instead, the proceedings were brought in his capacity as the legal owner of the 1/F who had possession all along until it was taken away from him unlawfully by D1 and D2. It was the lawful enforcement of possessory rights infringed by third parties, and originated from the unlawful taking of possession of the 1/F by Ds. The cause of action existed independently of any trust;

(b) Further, D3 never had possession and had no right of self-help. Proceedings against D1 and D2 were therefore lawful and orthodox. The fact that P might benefit personally from remedies flowing from possession did not render the proceedings improper. This was not a case of misuse of fiduciary discretion to defeat a trust; and

(c) P’s purpose was proper, i.e. to recover possession and restrain interference pending judicial determination. Strategic or commercial consequences do not convert lawful enforcement into improper purpose.

168.  With respect, I am not persuaded by Mr Kwan’s argument.

169.  The main problem in Mr Kwan’s submissions is that they artificially separate P’s roles as legal owner and as trustee, and focused only on the former while ignoring the latter. In my view, that approach is fundamentally flawed. It is my finding that that P holds the 1/F on trust for D3. Therefore, his legal title cannot be exercised independently of his fiduciary obligations, and any use of that title must be assessed against his duty to act for D3’s benefit.

170.  Once it is accepted that P is a trustee, it means that he is not entitled to treat the 1/F as if it were his own asset and to litigate as a freeholder unconstrained by fiduciary duty. His actions must be judged against his obligation to hold and manage the property for D3’s benefit. On that basis, P’s claim to evict D1 and D2, who occupy as D3’s licencees with D3’s express authorisation, is fundamentally inconsistent with his role as trustee and cannot be characterised as a proper exercise of any trust power.

171.  As for argument that D3 had no right to self-help, Mr Kwan relied on the following passage in Powell v McFarlance (1977) 38 P & C 452 at 476:-

“In my judgment it is consistent with principle as well as authority that a person who originally entered another's land as a trespasser, but later seeks to show that he has dispossessed the owner, should be required to adduce compelling evidence that he had the requisite animus possidendi in any case where his use of the land was equivocal, in the sense that it did not necessarily, by itself, betoken an intention on his part to claim the land as his own and exclude the true owner. The status of possession, after all, confers on the possessor valuable privileges vis-à-vis not only the world at large, but also the owner of the land concerned. It entitles him to maintain an action in trespass against anyone who enters the land without his consent, save only against a person having a better title to possession than himself. Furthermore, it gives him on valuable element of protection even against the owner himself. Until the possession of land has actually passed to the trespasser, the owner may exercise the remedy of self-help against him. Once possession has passed to the trespasser, this remedy is not available to the owner, so that the intruder’s position becomes that much more secure; if he will not then leave voluntarily, the owner will find himself obliged to bring proceedings for possession and for this purpose to prove his title.” (emphasis by Mr Kwan)

172.  With respect, Mr Kwan’s reliance on the passage he cited is misplaced. It is clear that the discussion there was in the context of adverse possession as between a squatter and a paper owner where no trust relationship existed.

173.  In any event, in my view, the real question is not whether D3 was entitled to exercise self-help. The question, as Mr Kwan himself framed it in his opening submissions, is whether D1 and D2’s occupation of the 1/F, with D3’s consent and authority, should be regarded as an “unjustifiable intrusion” upon the 1/F or as conduct which “unduly interferes with the use or enjoyment” of it.

174.  On the facts of this case, I agree with Mr Cheung that, given P is a trustee and D1 and D2 were and are D3’s licensees, P cannot establish the essential elements of the torts of trespass or nuisance. D1 and D2 occupy the 1/F as licensees of the beneficiary, with his express authorisation, and their occupation cannot in law be characterised as an unlawful interference with the trustee’s rights. P is therefore not entitled to the reliefs he claims.

175.  For completeness, even if P were able to establish the elements of trespass or nuisance at common law, I would in any event decline to exercise the Court’s equitable jurisdiction to grant injunctive relief in his favour. It would be inappropriate to grant equitable remedies to a trustee whose objective is to evict the beneficiary’s chosen licencees for his own benefit and thereby undermines the beneficiary’s enjoyment of the trust property.

176.  To conclude, I would answer Issue 2 in favour of Ds. Given my decisions on Issue 1 and Issue 2, it is unnecessary for me to deal with Issue 3 and I would proceed to Issue 4.

ISSUE 4: P’S “COUNTERCLAIM” AGAINST D3

177.  This issue concerns P’s “counterclaim” against D3 raised in the Re-Amended Reply and Defence to D3’s Counterclaim. In short, it is P’s alternative claim that, if the Court finds that D3 is entitled to the 1/F by virtue of a trust, P would seek an indemnity from D3 for costs and expenses allegedly incurred as D3’s trustee, namely: (a) legal expenses in bringing the present claim against D1 and D2; (b) general expenses for the conduct of the present case; (c) repair and maintenance of the 1/F; and (d) tax and utilities expenses said to have been paid on behalf of D3. Save for item (b) which P provides a figure of $150,000, his claim for other items is “to be assessed”.

178.  As regards items (a) and (b), given my findings that these proceedings have not been brought for the benefit of D3, but rather for P’s own interest and to challenge Ds’ occupation notwithstanding D3’s authorisation, I can see no proper basis on which P should be entitled to seek reimbursement of those legal and “general” costs from D3. They are not proper expenses incurred in furtherance of the trust.

179.  As for items (c) and (d), while there is some evidence that P has paid Government rents and rates from 2017 to 2025, there is no evidence at all as to any costs of repair and maintenance of the 1/F or any utilities expenses.

180.  In closing submissions, Mr Kwan did not provide any quantification of P’s “counterclaim”.

181.  I agree with Mr Cheung that the Written Agreement already contemplated that D3 would bear the miscellaneous expenses, and P’s own evidence was that he intended to discuss those items with D3 when the 1/F was transferred to him. Properly analysed, any question of contribution or reimbursement as between P and D3 in respect of such expenses is a matter for them to resolve at the time of completion of the transfer of the 1/F.

ADDITIONAL ISSUE: D3’S COUNTERCLAIM

182.  The only issue remaining is D3’s Counterclaim. D3 seeks various relief against P, including an order for specific performance; a declaration that P holds the 1/F on trust for D3 as beneficiary; and an order requiring P to transfer the 1/F to him, together with associated relief.

183.  However, D3 did not attend the trial and LKL have been unable to obtain instructions from him. I therefore do not know how D3 presently wishes to deal with the 1/F. In those circumstances, I do not consider it appropriate to grant any substantive relief such as specific performance or mandatory transfer orders in his absence. I am satisfied that it is sufficient, and appropriate, to make a declaration that P holds the 1/F on trust for D3 as beneficiary, and to leave it to D3 to consider, in light of that declaration, how he wishes to proceed.

DISPOSAL

184.  By reason of the aforesaid:-

(a) I dismiss P’s claim against D1 and D2, and his counterclaim against D3; and

(b) I allow D3’s counterclaim against P and grant a declaration that P holds the 1/F on trust for D3 as beneficiary.

185.  Costs should follow the event. I make an order nisi that P do pay Ds’ costs of this action, including P’s counterclaim against D3 and D3’s counterclaim against P and the reserved costs (if any), to be taxed if not agreed, with certificate for counsel. Any application to vary the costs order nisi should be made within 14 days from the date of this judgment.

186.  Lastly, it remains for me to thank Mr Kwan and Mr Cheung for their very helpful assistance to the Court.