PANG PING KONG AND OTHERS v. PANG KAM LUN AND OTHERS

HCA 2273/2018

[2025] HKCFI 1464

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 2273 OF 2018

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J U D G M E N T

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A.  BACKGROUND

1.  This is the trial of the plaintiffs’ claim against the 1^st defendant for breach of fiduciary duties, against the 2^nd and 3^rd defendants for knowing receipt and dishonest assistance, and against all 3 defendants for conspiracy to injure by unlawful means. These claims arise from a sale and purchase transaction back in 2012 concerning Lot No.1512 in Demarcation District No.91, North, New Territories (“Lot 1512”).

B.  UNDISPUTED AND INDISPUTABLE FACTS

2.  The following facts are either undisputed or indisputable.

B1.   Pang’s family, Pang’s family trust and the plaintiffs

3.  Prior to 3 April 1992, a total of 9 lots of land in Demarcation District No. 91, North, New Territories (“the Lots”)  and another piece of land in Demarcation District No. 51 were absolutely owned by Pang Shuk Shau (or Sau)  (彭叔壽)  (“Father”).

4.  The Lots included Lot 1512 and Lot No. 1585 (“Lot 1585”)

5.  Pang Shuk Shau (or Sau)  was the father of the 1^st plaintiff (“P1”), the 2^nd plaintiff (“P2”), the 3^rd plaintiff (“P3”), Pang Ching Pui (彭清培)  (“Ching Pui”), the 5^th plaintiff (“P5”), Pang Ping Fook (彭炳福)  (“Ping Fook”), Pang Ching Fuk (彭清福)  (“Ching Fuk”), Pang King Fuk (彭敬福)  (“King Fuk”), Pang Ping Cheung (彭炳祥)  (“Ping Cheung”)  and Pang Fuk Cheung (彭福祥).

6.  By a Deed of Gift dated 3 April 1992, Ping Fook, Ching Fuk and King Fuk became the registered co-owners of the Lots as tenants in common in equal shares.

7.  By a Declaration of Trust dated the same date (“the Declaration of Trust”), Ping Fook, Ching Fuk and King Fuk declared that they shall hold, inter alia, the Lots upon a trust for sale for the benefit of themselves and 7 other named beneficiaries (“Other Beneficiaries”)  as tenants in common in specified shares (“the Trust”).

8.  The Other Beneficiaries include, inter alia, P1, P2, P3, Ching Pui and P5 (collectively, “the 5 Beneficiaries”).

9.  Ching Pui died on 29 October 2017, and was survived by, inter alia, his son, i.e. the 4^th plaintiff (“P4”).

B2.  The defendants

10.  The 1^st defendant (“D1”)  and the 2^nd defendant (“D2”)  were the sons of Ping Fook, and hence grandsons of Pang Shuk Shau (or Sau).

11.  D2 is D1’s younger brother.

12.  D2 is now around 51 years old.  He left Hong Kong and settled in the United Kingdom at about the age of 16, but has spent more time in Hong Kong since around 2015.

13.  D3 is a limited company incorporated in Hong Kong.  D2 has been the sole shareholder and sole director of D3 since around October 2012 the latest.  D2’s wife, Wong I Wa (王懿華)  (“D2’s Wife”), has at all material times been D3’s company secretary.

B3.  D1’s dealings with the Trust after Ping Fook’s death

14.  Ping Fook passed away on 5 August 2009.

15.  Pursuant to Grant No. HCAG 013474/2010 dated 26 January 2011, D1 (as the sole executor named in Ping Fook’s last will)  obtained Probate to administer Ping Fook’s estate.  By virtue of the executorship, D1 has succeeded to Ping Fook’s legal ownership in Lot 1512.

16.  D1 became one of the joint account-holders and one of the joint authorised signatories, together with Ching Fuk and King Fuk, in respect of the bank account Nos. 0126xxxxxx2333 (saving)  and 0126xxxxxx9468 (current)  maintained with Bank of China (Hong Kong)  Limited, into which the rental income and net sale proceeds derived from the sale of properties under the Trust were deposited.

17.  D1 also became the book-keeper of the accounts and financial records in relation to the properties under the Trust.

B4.  Sale of Lot 1585 in 2012

18.  In about February 2012, Lot 1585 was sold.

19.  D1’s name appeared, together with Ching Fuk’s and King Fuk’s names, as the vendor, under the sale and purchase agreement and the assignment for the sale of Lot 1585.  D1 also signed the said sale and purchase agreement in April 2012 and the said assignment in June 2012 together with Ching Fuk and King Fuk as the vendor.

20.  Lung Sum Estate Agency (龍深地產公司)  (“the Estate Agency”)  and its handling estate agent, namely Madam Poon Mo Kuen Joe (潘慕娟)  (“Poon”)  acted as the estate agent for both the vendor (i.e. D1, Ching Fuk and King Fuk)  and the purchaser in the transaction regarding Lot 1585.

B5.  Sale of Lot 1512 in 2012/2013

21.  In around mid-2012, D2 instructed Poon to act as his agent and consultant in the purchase of Lot 1512, including conducting negotiation with the stakeholders of Lot 1512 on D2’s behalf.

22.  The negotiation in respect of the sale of Lot 1512 (“the Negotiation”)  began in around April 2012 / mid-2012.

23.  In around September 2012, a meeting was held in a restaurant in Sheung Shui which was attended by, inter alia, Poon, Ching Fuk, P1, P2 and D1.

24.  On 8 November 2012, Ching Fuk and King Fuk (as the vendor)  entered into a provisional sale and purchase agreement for the sale of Lot 1512 at the consideration of $6.6 million with D3 (as the purchaser)  (signed by Wong Kam Wa)  and the Estate Agency (as the agent).   

25.  On 22 November 2012, D1, Ching Fuk and King Fuk (as the vendor)  entered into 6 sets of sale and purchase agreements at the total consideration of $6.6 million with 6 different persons named as the respective purchasers in respect of 6 portions of land to be carved out from Lot 1512:-

(1)  Portion of Lot 1512 intended to be carved out as Section A (“Section A”)  was sold to one Vong Sio Lon (王兆麟)  at the consideration of $1 million;

(2)  Portion of Lot 1512 intended to be carved out as Section B (“Section B”)  was sold to one Law Ka Chun Jacky (羅家駿)  at the consideration of $1 million;

(3)  Portion of Lot 1512 intended to be carved out as Section C (“Section C”)  was sold to one Lam Nga Shan (林雅珊)  at the consideration of $1 million;

(4)  Portion of Lot 1512 intended to be carved out as Section D (“Section D”)  was sold to one Leung Lai Fan (梁麗芬)  at the consideration of $1 million;

(5)  Portion of Lot 1512 intended to be carved out as Section E (“Section E”)  was sold to one Wong Kam Wa (王錦華)  at the consideration of $1.6 million; and

(6)  Portion of Lot 1512 intended to be carved out as Remaining Portion (“RP”)  was sold to D3 at the consideration of $1 million.

26.  In fact, the said Vong Sio Lon, Law Ka Chun Jacky, Lam Nga Shan and Wong Kam Wa are relatives of D2’s Wife, whereas Leung Lai Fan was a friend of D2’s Wife.

27.  On 8 January 2013 (i.e. the day before the execution of the Assignments), P2 and P3 requested D1 face-to-face to cancel the sale of Lot 1512 despite the fact that compensation would be payable to the purchaser.

28.  By a Deed Poll dated 9 January 2013 and registered with the Land Registry by Memorial No. 13040200310060, Lot 1512 was divided into 6 sections, namely Sections A – E and RP.

29.  Also on 9 January 2013, D1, Ching Fuk and King Fuk (as the vendor)  executed 6 sets of assignments in relation to Lot 1512, by which:

(1)  Section A was assigned to Vong Sio Lon under the Assignment registered with the Land Registry by Memorial No. 13040200310072;

(2)  Section B was assigned to Law Ka Chun Jacky under the Assignment registered with the Land Registry by Memorial No. 13040200310083;

(3)  Section C was assigned to Lam Nga Shan under the Assignment registered with the Land Registry by Memorial No. 1304200310091;

(4)  Section D was assigned to Leung Lai Fan under the Assignment registered with the Land Registry by Memorial No. 13040200310101;

(5)  Section E was assigned to Wong Kam Wa under the Assignment registered with the Land Registry by Memorial No. 13040200310111; and

(6)  RP was assigned to D3 under the Assignment registered with the Land Registry by Memorial No. 13040200310123.

B6.  Subsequent sale and dealings of Sections A – E of Lot 1512

30.  On 13 May 2013, Sections A – D of Lot 1512 were further assigned at the same considerations as those paid for the acquisition from the Pangs, by the relatives or friend of D2’s Wife (as the case may be)  to 4 indigenous villagers of Kai Leng (雞嶺村)  (“the 4 Liu Villagers”), who remained the registered owners of Sections A – D as at the date of commencement of the present action:-

(1)  Section A was assigned by Vong Sio Lon to Liu Kai Ping under the Assignment registered with the Land Registry by Memorial No. 13061000160135;

(2)  Section B was assigned by Law Ka Chun Jacky to Liu Kwong Ming under the Assignment registered with the Land Registry by Memorial No. 13061000160147;

(3)  Section C was assigned by Lam Nga Shan to Liu Wai Hey under the Assignment registered with the Land Registry by Memorial No. 13061000160150; and

(4)  Section D was assigned by Leung Lai Fan to Liu Wai Lun under the Assignment registered with the Land Registry by Memorial No. 13061000160166.

31.  The assignments of Sections A – D of Lot 1512 from the relatives or friend of D2’s Wife to the 4 Liu Villagers is part of D2’s development project of Lot 1512.

32.  On 13 October 2014, Section E was assigned by Wong Kam Wa to D3 under the Assignment registered with the Land Registry by Memorial No. 14111200220064 at the consideration of $1,000,000, which is $600,000 lower than the consideration paid for acquiring Section E from the Pangs.

33.  D3 remains the registered owner of RP.

34.  Planning permissions for building Small Houses on Sections A – D were applied for and obtained:

(1)  Planning permission for Section A was approved with conditions on 9 May 2014 with extension of time limit approved on 20 February 2018;

(2)  Planning permission for Section B was approved with conditions on 13 December 2013 with extension of time limit approved on 27 November 2017;

(3)  Planning permission for Section C was approved with conditions on 9 May 2014 with extension of time limit approved on 20 February 2018; and

(4)  Planning permission for Section D was approved with conditions on 9 May 2014 with extension of time limit approved on 20 February 2018.

35.  Subsequently, building licences for Small Houses were granted to:-

(1)  Liu Kai Ping in respect of Section A on 5 November 2020. Pang Ying Kai signed the same as a witness;

(2)  Liu Kwong Ming in respect of Section B on 9 August 2023.  D2 signed the same as a witness;

(3)  Liu Wai Hey in respect of Section C on 28 September 2023.  D2 signed the same as a witness;

(4)  Liu Wai Lun in respect of Section D on 30 May 2024.  D2 signed the same as a witness.

B7.  Revelation of D2 as the real buyer of Lot 1512

36.  Between March and April 2018, Poon contacted P1 by WhatsApp messages and there were exchanges of audio messages between the two of them.  During these exchanges:-

(1)  Poon revealed to P1, inter alia, that D2 was the real buyer of Lot 1512 and his plan to build Small Houses thereon.

(2)  Poon further informed P1 that D1 had all along been aware of D2’s involvement prior to the completion of the sale of Lot 1512.

37.  As a result, in early April 2018, some of the family members including, inter alia, P1, P2, P4, Ching Fuk and King Fuk, attended two family meetings at Ching Fuk’s home and confronted D1 and D2 about the previous sale of Lot 1512:

(1)  D1 attended the first family meeting (“the First Meeting”). At that meeting, P1 passed to D1 two sheets of papers setting out the beneficiaries’ complaints against both D1 and D2 (“the Complaint Sheets”)  and read out part of the contents written thereon.  As the Complaint Sheets show, the complaint against D1, who was regarded by the beneficiaries as one of the trustees of the Trust, was particularly serious. P1 also played some of the said audio messages between him and Poon at the meeting.

(2)  D1, D2 and their mother Lam Yun Ping (林潤萍)  (“Madam Lam”)  (among others)  were present at the second family meeting (“the Second Meeting”).  What transpired at this meeting is heavily disputed by the parties and will be further discussed below.

B8.  After commencement of the present action

38.  In about October 2018, at the request of the plaintiffs, a full and proper account of the Trust was given to Pang Chun Wai (彭震威), the beneficiary under the will of Ping Cheung, one of the Other Beneficiaries.

C.  THE PLAINTIFFS’ CASE

39.  The plaintiffs’ case may be summarised as follows.

40.  After Ping Fook’s death on 5 August 2009 and D1’s succession to his father’s legal ownership in, inter alia, Lot 1512 and Lot 1585 by reason of D1’s sole executorship, D1 became a trustee of the Trust.

41.  Alternatively, by assuming the role and participating in the subsequent dispositions of, inter alia, Lot 1512 as a trustee, D1 was subject to the same duties and obligations as were attached to Ping Fook’s office as a trustee.

42.  In particular, after Ping Fook’s death, D1 had assumed the most active role amongst D1, Ching Fuk and King Fuk in managing and handling the assets of the Trust (including Lot 1512).  This was the case as Ching Fuk and King Fuk were old and had resided in the UK for most of their life, while D1 is a younger family member and has all along lived in Hong Kong.

43.  During the Negotiations for the sale of Lot 1512, D1 represented to one or more of the 5 Beneficiaries from around April to September 2012 (collectively, “the Representations”)  that[1]:

(1)  A Mainland Chinese investor (“the Purported Investor”)  was interested in acquiring Lot 1512 for the purpose of investment and property speculation;

(2)  The Purported Investor’s increased offer of $6.5 million was the best price on offer and the best price the Trustees could obtain in the market.

44.  Acting in reliance of and induced by D1’s Representations as aforesaid, the 5 Beneficiaries agreed for Lot 1512 to be sold to the Purported Investor at the total consideration of $6.6 million.

45.  However, the Representations turned out to be false.  In particular:

(1)  The Purported Investor was in fact D2, not any Mainland Chinese investor;

(2)  The purpose of acquisition of Lot 1512 by the Purported Investor was for self-profit by D2 – D3, not for investment and property speculation.

46.  Accordingly, the plaintiffs contend that the series of dispositions of Lot 1512 as described above formed part of a scheme devised by D2 and jointly implemented with the assistance of, inter alia, D1 and D3, to extract Lot 1512 from the Trust for the purpose of self-profit by D2 – D3 to the exclusion of, inter alia, the 5 Beneficiaries under the Trust (“the Scheme”).

47.  D1 had acquired knowledge from his younger brother D2, inter alia, that D2 was the real buyer of Lot 1512.

48.  In carrying out the Scheme, D1 made the aforesaid false Representations to the 5 Beneficiaries and/or concealed from them the true identity of the buyer of Lot 1512 (i.e. D2).

49.  Accordingly, D1 has acted in breach of trust and/or fiduciary duties with respect to the sale of Lot 1512.

50.  If the 5 Beneficiaries had been made aware of the facts and matters in, inter alia, [45] – [46] above, they would not have agreed to the sale of Lot 1512, whether at $6.6 million or at all.

51.  The plaintiffs further claim against D2 in knowing receipt and/or dishonest assistance as it was unconscionable for him to beneficially receive the relevant sections of Lot 1512, and/or he dishonestly assisted in D1’s breach of trust and/or fiduciary duties.

52.  In addition, all defendants should be held liable for conspiracy to injure by unlawful means, as they conspired together to injure the 5 Beneficiaries and/or concealed such wrongdoings from them.

53.  As a result, the 5 Beneficiaries have suffered substantial loss and damage in that Lot 1512 was disposed of from the Trust at a significant undervalue.

54.  In relation to the First Meeting and the Second Meeting, it is the plaintiffs’ case that while D1 was present in both meetings, he had never denied thereat of his knowledge at the material time about D2 being the real buyer of Lot 1512.  Neither did D2 do so in the Second Meeting.

55.  The plaintiffs further relied on what Pang Siu Sim (sister of D1 and D2)  (“Siu Sim”)  told P3 when she paid a personal visit to P3 in the UK in June 2018.  According to P3, Siu Sim admitted, inter alia, that D2 had informed his mother and other siblings (including D1)  prior to the disposition of Lot 1512 of his plan to acquire the same, and D1 was asked by his mother not to disclose D2’s plan to the Other Beneficiaries (including the 5 Beneficiaries).

D.  THE DEFENDANTS’ CASE

56.  The defendants’ case may be summarised as follows.

57.  The defendants denied the plaintiffs’ allegations entirely. Generally, it is the defendants’ common case that the transaction was a result of commercial negotiations conducted at arm’s length.  Further, the transaction was in fact led by P1 and Ching Fuk on behalf of all the beneficiaries of the Trust, and they were at all material times well aware of the development potential of Lot 1512.

58.  It is D1’s case that, after the grant of Probate, he became one of the tenants in common of the remaining Trust properties together with Ching Fuk and King Fuk (i.e. the surviving trustees of the Trust). However, despite the grant, he was not expressly appointed to take over the trusteeship, and he did not handle any matter of the Trust until he was requested by Ching Fuk and King Fuk to join in and effect the sale of Lot 1585.  He was since then habitually requested by them to assist in managing the lands under the Trust.

59.  Further, D1 had no knowledge of D2’s involvement in the transaction.  He did not know that the 5 individuals named in the Sale and Purchase Agreements and Assignments in relation to the sale of Lot 1512 were relatives / friend of D2’s Wife, nor did he know of the subsequent further transactions of the said piece of land.

60.  The allegations of false representations are entirely denied by D1. It is D1’s case that: -

(1)  P1, Ching Fuk and Ping Cheung were desirous to sell the lands held under the Trust.  After the sale of Lot 1585, Ching Fuk further instructed the Estate Agency to scout for potential selling opportunities for Lot 1512, which led to the Negotiation starting in mid-2012;

(2)  The Negotiation was fully and actively involved by P1 and Ching Fuk, among the other beneficiaries of the Trust.  As the prime concern was the price, none of the beneficiaries expressed any concern about the identity of the potential buyer;

(3)  The plaintiffs (in particular P1)  and Ching Pui, were at all material times well aware that only indigenous villagers of the Sheung Shui District Rural Committee were eligible to apply for the building of a Small House but none of them was eligible to apply for the same;

(4)  Immediately before the signing of the provisional sale and purchase agreement in relation to Lot 1512, it was agreed between the 5 Beneficiaries and the representative of the Estate Agency on behalf of the buyer that the price be agreed at $6.5 million but the said price was further increased to $6.6 million at the request of P1 and/or Ching Fuk.

61.  In the circumstances, it is D1’s case that the assignments were in fact made at the request and direction of all the beneficiaries under the Trust.  Hence, the plaintiffs are estopped from claiming against him for the reliefs sought.  Even if any such fiduciary duties are owed by D1 to the plaintiffs, such duties had not been breached and have been loyally discharged, and there was no secret profit made by him from the disposition of Lot 1512.

62.  On the other hand, it is D2’s case he had never disclosed his business affairs to D1.

63.  The sale and purchase of Lot 1512 at $6.6 million was the fruit of a series of negotiations conducted at arm’s length, where the plaintiffs at all material times had full knowledge of the market value and development opportunity of the land.

64.  It is also the positive case of D2 and D3 that:-

(1)  Subsequent to the completion of the sale and purchase of Lot 1585, D2 was approached by Poon about the intention of Ching Fuk and the beneficiaries of the Trust to sell Lot 1512;

(2)  Upon the commercial advice of Poon, D2 instructed her to negotiate on his and D3’s behalf;

(3)  To maintain that the transactions would be conducted at arm’s length, D2 had never disclosed to D1, whether directly or indirectly, his intention to purchase Lot 1512 and any related matters.

E.  THE ISSUES

65.  The parties agreed in the course of the trial that the issues to be tried are as follows:

(1)  Was D1 at all material times subject to the same duties and obligations as were attached to Ping Fook’s office as a trustee of the Trust? In particular, inter alia:

(1.1)  After the death of his late father Ping Fook, did D1 succeed to Ping Fook’s office as a trustee of the Trust?

(1.2)  Did D1 assume the role and participate in handling the matters of the Trust in the capacity of a trustee? 

(1.3)  Did D1 initiate and lead the dispositions of the lands under the Trust?

(1.4)  What involvement did D1 have in the negotiation and the eventual sale of Lot 1512, and whether D1 acted in the capacity of a trustee?

(1.5)  Did the beneficiaries, in particular P1 and Ching Fuk, rely on D1 to act on their behalf in the negotiation of the sale of Lot 1512, and if so to what extent?

(2)  Did D1 at all material times owe fiduciary duties to the 5 Beneficiaries, and if so what were the contents of these fiduciary duties?

(3)  Did D1 act in breach of trust and/or fiduciary duties in respect of the disposition of Lot 1512 from the Trust in 2012 to 2013?

(4)  Without prejudice to the generality of Issue (3)  above:

(4.1)  Did D2 devise a scheme and jointly implement it with the assistance of, inter alia, D1 and D3, to extract Lot 1512 from the Trust for the purpose of self-profit by D1, D2 and/or D3 to the exclusion of the beneficiaries under the Trust, including the 5 Beneficiaries?[2]

(4.2)  Did D1 know that D2 was the true buyer and/or about D2’s said scheme before the sale of Lot 1512?

(4.3)  Did Siu Sim confess to P3 in 2018 about D1’s relevant role and knowledge in the sale of Lot 1512?

(4.4)  Did D1 make the Representations before the sale of Lot 1512?

(4.5)  Did the 5 Beneficiaries, in particular P1 and Ching Fuk, know of the development potential of Lot 1512 prior to its sale?

(5)  As regards D2:-

(5.1)  Was it unconscionable for D2 to beneficially receive the relevant portions of Lot 1512 pursuant to the said disposition?

(5.2)  Further or alternatively, did D2 dishonestly assist D1’s breach of trust and/or fiduciary duties in connection with the said disposition?

(6)  Are D1, D2 and D3 (or any two of them)  liable for the tort of conspiracy to injure by unlawful means, by conspiring and/or combining together to injure, inter alia, the 5 Beneficiaries and/or to conceal such wrongdoings from them as a result of which the 5 Beneficiaries were injured?

(7)  What is the market value of Lot 1512 as at (i)  8 November 2012 (i.e. the date of the provisional sale and purchase agreement for the sale of Lot 1512)  and (ii)  6 January 2025 (i.e. the date of the first day of the trial herein)?  Was Lot 1512 in fact sold at a substantial / significant undervalue?

(8)  In view of the above, what (if any)  relief should be granted, including but not limited to an account of profits, equitable compensation and/or damages?

66.  Be that as it may, by the time of the Closing Submissions, it is apparent that the plaintiffs’ main complaint against D1 has been narrowed down to the allegation that he has concealed the fact that D2 was the real buyer of Lot 1512.

67.  The plaintiffs also do not maintain their allegation that it was D1 who initiated and led the dispositions of the lands under the Trust.

68.  Hence, Issues (1.3)  and (4.5)  are no longer live issues.  Issue (4.4)  is confined to the representations on the Purported Investor and on “best price”. 

69.  Moreover, judging from the way the case was argued by the plaintiffs in their Closing Submissions, it seems that Issue 4.1 has been subsumed into Issue 6.  I will therefore disregard issue 4.1 and do not treat it as a separate issue.

F.  CREDIBILITY AND RELIABILITY OF WITNESSES

70.  In Hu Lan v David Golden [2023] HKCFI 873, this Court held that:

“36. When I consider the credibility of various witnesses who had given evidence in court, I shall take the following matters into account:

(a)  Generally speaking, contemporaneous written documents and documents which came into existence before the problems in question emerged are of the greatest importance in assessing credibility;

(b)  Importance should be attached to the inherent likelihood or unlikelihood of an event having happened, or the apparent logic of events;

(c)  The court will also attach importance to the consistency of the witness’ evidence with undisputed or indisputable evidence, and the internal consistency of the witness’ evidence. The latter type of consistency is often tested by a comparison between the witness’ oral testimony and his or her witness statement;

(d)  The court should consider a witness’ motive for deliberately not giving truthful testimony.  For example, telling the truth may prejudice his interest, or a just determination of the litigation may affect his interest;

(e)  It is essential to have regard to the entirety of a witness’ evidence. A witness can make mistakes, but the mistakes do not necessarily affect other parts of his evidence. Likewise, a witness may lie. However, lies themselves do not mean necessarily that the entirety of that witness’ evidence is to be rejected.  A witness may lie in a stupid attempt to bolster his case, but the actual case nevertheless remains good irrespective of the lie;

(f)  On the other hand, where it is shown that a witness has been discredited over one or more matters to which he has testified, this fact is relevant to the assessment of his overall credibility; 

(g)  While the court is entitled to take demeanour into account when assessing testimony, it should be borne in mind that demeanour can be deceptive and is therefore to be approached with care.”

71.  In the present case, when I assess the credibility and reliability of witnesses, I should also bear in mind the following features:

(1)  the key events happened back in 2012 and 2018 respectively;

(2)  many of the witnesses are of old age;

(3)  all witnesses come from the same family, and therefore it is unavoidable that there would have been discussions among them all these years about this case.

72.  As a result, what Coleman J said in Yu Man Fung Alice v Chiau Sing Chi Stephen (HCA 1584/2012, unreported, 23 December 2020, [2020] HKCFI 2923)  is particularly relevant:

“53.   […] evidence based on recollection of what was said in an undocumented conversation which occurred so long ago is inherently problematic.  It is, however, perhaps only in the last decade or so that courts have consistently properly recognised the fallibility and potential unreliability of human memory.

54.  In Gestmin SGPA SA v Credit Suisse (UK)  Ltd [2013] EWHC 3560 (Comm)  at §§16-20, Leggatt J made certain observations on the point, to which he also returned in the Blue v Ashley case.  Those observations have commended themselves to a number of other judges, including judges in Hong Kong: see, for example, Sarah Sally Chan-Kent v Chim Sau Ching [2019] HKCFI 3066 at §45.

55.  In the Blue v Ashley case at §68, Leggatt J also referred to a paper published by two academic psychologists, Howe and Knott ‘The fallibility of memory in judicial processes: Lessons from the past and their modern consequences’ (2015)  Memory, 23, 633 at 651-3.  He also footnoted, but did not make any extensive reference to, the book by the psychologist Schacter ‘How the Mind Forgets and Remembers: The Seven Sins of Memory’ (2001).

56.  The various judicial and academic observations would bear repetition at some length, but I shall attempt to restate them in more compressed form:

(1)  While everyone knows that memory is fallible, we are often unaware of the full extent to which our own and other people’s memories are unreliable.

(2)  Common and related errors include supposing that (a) the stronger or more vivid a recollection, the more likely it is to be accurate, and (b) the more confident a person is of their recollection, the more likely it is to be accurate.

(3)  But memory is not a mental record fixed at the time of the experience, then fading gradually over time.  So it is a misconception that memory operates like a camera or video device making a fixed and chronological record of an experience.

(4)  Rather, memories are fluid and malleable, being constantly rewritten whenever they are retrieved.

(5)  What gets encoded into memory in the first place is determined by what a person attends to, what they have already stored in memory, and their expectations, needs and emotional state.

(6)  This information is subsequently integrated or consolidated with other information already stored in a person’s long-term, autobiographical memory.

(7)  What is subsequently retrieved from that memory is determined by the same multitude of factors, and additionally by what drives the recollection of the event.

(8)  What is retold about an experience depends on the person to whom one is talking, and what the purpose is of remembering that particular event.

(9)  What gets remembered is reconstructed from the remnants of what was originally stored, taking account of whatever has already been forgotten or any interference from any new experiences across the interval between storing and retrieving a particular experience or event.

(10)  So the content of memory for experiences involves active manipulation, integration with pre-existing information, and reconstruction of that information.

(11)  Memory is particularly vulnerable to interference and alteration when a person is presented with new information or suggestions about an event in circumstances where his or her memory of it is already weak due to the passage of time.

(12)  Therefore, and in addition, the process of civil litigation itself subjects the memories of witnesses to powerful biases.

(13)  First, such witnesses often have a stake in a particular version of events.  This is obvious where the witness is a party or has some type of loyalty to a party to the proceedings.

(14)  Secondly, other subtler influences come into play, perhaps from the process of preparing a witness statement and coming to court to give evidence for one side in the dispute.  The natural desire to assist, or not prejudice, the party calling the witness, and the desire to give a good impression in a public forum, can be significant (even if unconscious)  motivating forces.

(15)  Considerable interference with memory is also introduced in civil litigation by the procedure of preparing for trial.  A witness is asked to make a statement, often (as in this case)  when a long time has already elapsed since the relevant events.  The statement is usually drafted for a witness by a lawyer who is inevitably conscious of the significance for the issues of the case of what the witness does or does not say.

(16)  The witness statement is made after the witness’s memory has been ‘refreshed’ by reading documents.  Yet those documents themselves often include statements of case and other argumentative material, as well as documents not previously seen by the witness, or documents which came into existence after the events which the witness is being asked to recall.

(17)  The witness statement may go through several iterations before it is finalised.

(18)  Months or even years later, the witness will be asked to re-read his or her statement and review documents again before giving evidence in court.

(19)  The effect of the process is to establish in the mind of the witness the matters recorded in his or her own statement and other written material, whether they be in fact true or false, and to cause the witness’s memory of events to be based increasingly on this material and later interpretations of it, rather than on the original experience of the events.

(20)  There is also a powerful tendency for people to remember past events concerning themselves in a self-enhancing light.

(21)  It is also not uncommon for witnesses to deceive themselves in what are essentially honest but nonetheless false recollections.

57.  These matters do not mean that human memory is simply unreliable.  Often, memory is reliable.  However, it is also fallible, and so when assessing reliability, it is important to have in mind what causes that fallibility.

58.  Therefore, in a case such as the present case, it seems to me that a sensible approach may be to limit (or at least be cautious about)  the reliance placed on the witnesses’ individual recollections of what was said in conversations, and to give more weight and make factual findings on inferences drawn from any documentary evidence as well as known or probable facts, in particular objective facts.

59.  Documents which are likely to be helpful are those contemporaneous documents which may describe not only what was going on, but also the motivation and state of mind of those concerned.  Documents passing between the parties themselves can be important, but in some cases ‘internal’ documentation may also greatly assist.

60.  In most cases, the credit of a witness on matters not germane to the litigation is unlikely to be helpful, and the demeanour of witnesses is not a reliable pointer to honesty or accuracy.  Witness evidence, written and oral, is obviously not without purpose; but, its principal uses are to allow scrutiny of any documentary record and to evaluate the witness’s motivations, personality and working practices.

61.  Evaluation of a witness’s evidence may, depending on the particular circumstances, also include having regard to factors such as: evasive and argumentative answers, tangential speeches avoiding the question, blaming legal advisers for pleadings, disclosure and evidence shortcomings, self-contradiction, internal inconsistency, shifting case, new evidence, and selective disclosure: see Painter v Hutchison [2007] EWHC 758 (Ch)  at §3.  There may be other factors in any particular case, but this list gives important and helpful guidance.  As will be seen, some of them are rather pertinent to this case.

62.  An examination of the consistency of conduct and documents and motives will, therefore, likely be helpful.  As long as it is recognised that there is also a risk of potential (perhaps unconscious)  bias in the identification of them, it is the inherent probabilities and likelihoods which will be of greater assistance in deciding what, on the balance of probabilities, actually happened.”

73.  In support of their case, the plaintiffs (except P5)  have given evidence in Court.  They have also called Ching Fuk as a factual witness.  On the other hand, D1, D2, King Fuk and Siu Sim have given evidence for the defendants. 

74.  I will consider their credibility generally in turn below.  

F1.  P1

75.  It goes without saying that a witness should, in his witness statement, provide his own account of the relevant events independently, and his independent recollection should not be coloured or tainted by recollection of others.  

76.  However, a striking feature of the evidence of P1, P2 and P3 is that their witness statements are nearly identical.

77.  A similar situation was found in Ho Sin Ying v. Chan Yui Ling (HCA 90/2010, unreported, 13 July 2012), in which DHCJ Saunders had made the following observations[3]:

“58. […] where witness statements are presented to the court which are substantially identical, it will often be unlikely that the court will be able to place any weight at all on either witness.

[…]

60. Too often solicitors forget that the purpose of a witness statement is for the witness to ‘tell their story’ to the court. The pre-prepared, pre-filed, witness statement is a substitute for the evidence in chief of a witness. The only proper way in which such a witness statement can be taken is for a solicitor to sit with the witness and question the witness, in the same way as evidence would have been elicited in the past in chief. From the answers to the questions the narrative, or ‘the story’, is built up in the form of a witness statement.

61. The fact that our system now requires full disclosure of a party’s case, in part by the exchange of witness statements prior to the trial, is not a license to solicitors to tailor or engineer witness statements in order that they may corroborate each other. If they do so, it will be transparent, as it is in this case, and it is likely that the court will reject the evidence of the witnesses.

62. Mr Chong sought to justify the identical paragraphs by saying that:

‘It is common in the legal profession that witness statements are prepared by solicitors upon the instructions given by the witnesses. The presentation of one’s evidence in a witness statement such as the choice of words, phrases, expressions and formatting preferences is usually a matter of style determined by solicitors who know much better than the witnesses as to the relevance and weight of different events and matters.’

63. With respect to Mr. Chong, that is no answer. It is right that solicitors know better than witnesses the relevance and the weight of different events and matters. That knowledge will define the questions that are asked of the witness in the course of the preparation of the witness statement. I accept that a solicitor may determine the formatting of a witness statement.

64. But it is not for a solicitor to ‘choose’ the words, phrases, or expressions in a witness statement. Those are all matters for the witness. Where witness statements are identical it is difficult if not impossible to believe that the witnesses have independently provided, what Mr Chong correctly described as, the ‘raw materials’ for the preparation of the witness statement.

78.  With respect, I agree with his Lordship’s observations. 

79.  In the present case, what is even more worrying is that all of P1, P2 and P3 have to make the same correction to their respective witness statements during their examination-in-chief, namely, to correct the Purported Investor’s last offer from $6.6 million to $6.5 million. Taking into account what transpired from the trial, I am of the view that this is not a simple typing mistake, rather, the author of those witness statements has not taken into account the undisputed fact that the eventual contractual price was actually not proposed by the buyer but P1 himself (who, having received the last offer of $6.5 million, counter-offered $6.6 million).  The question is how come neither P1 nor P2 could spot this mistake when they signed the witness statement (P3 was admittedly not in the meeting physically when this counter-offer was made by P1).  I tend to think that this suggests that the witnesses have either conferred together about what they would include in their evidence, or they just follow what one another said to be the factual situation, or they simply signed whatever that was presented for them to sign, and that the drafter had prepared the statements out of a common template. 

80.  In my view, that explains why there were so many occasions when P1’s viva voce evidence was inconsistent with his 1^st witness statement.

81.  I will therefore give little weight to P1’s 1^st witness statement. 

82.  Given how the plaintiffs run their case, the content of P1’s supplemental witness statement is largely irrelevant.

83.  Turning to P1’s oral evidence in Court, he had given this Court an impression at the beginning of the cross-examination that he was very defensive to the extent that he was not quite truthful.  For example:

(1)  He did not accept that the way Father distributed his assets demonstrated that Father preferred his sons over his daughters.  However, given the fact that each son in the Pang family is entitled to 1/8 of Father’s estate while each daughter is only entitled to 1/24 thereof, the opposite must be true;

(2)  He also denied that he knew whether Small Houses could be built on Lot 1585 when it was sold.  However, if he had no idea on this simple fact, there was no way that he could decide at which price Lot 1585 should be sold.  It is highly improbable.

84.  Having said that, apart from the above, I find that he is generally credible in his oral evidence.

F2.  P2

85.  For the same reason as explained in Section F1 above, I give little weight to P2’s witness statement.

86.  In relation to P2’s oral evidence, I am of the view that it is generally speaking credible.  An important factor which leads to this conclusion is that she had from time to time given evidence which is unfavourable to the plaintiffs’ case, and it seems to me that that must be part of the reason why the plaintiffs had to drop so many allegations of misrepresentations against D1.

F3.  P3

87.  Again, P3’s 1^st witness statement should be given little weight for the reason which I explained above.

88.  As far as P3’s oral evidence is concerned, she has mixed up certain events probably because of her old age.  For example, she stated that D2 was present when the $6.5 million offer was made at the Dao Heung Restaurant, and she tried to corroborate this part of her evidence by saying that she walked quite close to him when they left.  However, it is undisputed by all others that D2 was not present in this meeting, and more importantly, according to P3’s own evidence, she was not even in Hong Kong at the material time. 

89.  This Court should therefore be cautious when considering her evidence.

90.  The most important part of her evidence concerns Siu Sim’s alleged confession made to her at her home in UK.  P3 has made a supplemental witness statement which does not have the same problem as her 1^st witness statement.  I will discuss this part of the evidence in Section G7.5 below.

F4.  P4

91.  A very large part of P4’s witness statement is identical to that of P1 – P3’s 1^st witness statement.  I will not pay regard to that part of P4’s witness statement.

92.  However, it turns out that the most important part of P4’s oral evidence is not about what he said in his witness statement, but about what was discussed in a family meeting held on the Ching Ming Festival in 2018 (the Second Meeting), which P4 explained at some length during re-examination.

93.  I shall further analyse the evidence of the parties in relation to this family meeting below.  At this juncture, what I would like to deal with is the defendants’ complaint that P4’s evidence in this regard was only given in re-examination, and as a result, the defendants’ counsel had had no chance to cross-examine him in this regard.  On my part, I do not think it is a fair criticism:

(1)  The question which led to P4’s detailed explanation as to what happened in the Second Meeting was legitimately asked by the plaintiffs’ counsel.  Indeed, the defendants’ counsel did not raise any objection against such a question;

(2)  It was confirmed by D1 that P4 was present in both the First Meeting and the Second Meeting.  It was also confirmed by D2 that P4 was there in the Second Meeting.  King Fuk also mentioned in his witness statement that P4 was present in at least one of the meetings (he did not specify which, but it seems to be the First Meeting).  In other words, there is no reason why the defendants’ counsel did not know P4’s presence at such meetings.  If he considered it necessary to cross-examine P4 on such meetings, he was at liberty to do so.  Put it in another way, it was his own choice (whether for tactical reason or otherwise)  not to do so;

(3)  In D1’s witness statement, he only spent 1 paragraph on the First Meeting and did not mention about the Second Meeting at all.  D2 was also completely silent on what happened in the Second Meeting.  In such circumstances, I do not think it is fair for the defendants to complain that P4 (or any other plaintiffs’ witnesses)  had failed to include such content in his/their witness statement(s).

F5.  Ching Fuk

94.  Ching Fuk understandably could not recollect quite a number of matters when he was cross-examined.

95.  I also found that he always did not answer questions directly or had misunderstood the questions. 

96.  However, I do not think he intentionally did the above by reason of evasiveness.  In my view, it is likely that it was because of his old age (he is over 83 years old)  that he had performed in such a way. I have had this view because it is obvious that he had on various occasions given answers which were apparently unfavourable to the plaintiffs’ case.

97.  Therefore, I find him to be someone who was trying his best to assist the Court but he was not a totally reliable witness. The Court has therefore to be cautious when considering his evidence.

F6.  D1

98.  I must say that this Court was quite impressed when D1 started to give evidence under cross-examination.  He was straight forward.  He answered questions quickly and directly.  He also did not hesitate to give answers which were not favourable to his own case.

99.  However, when time went by, the answers which he gave became more and more unreasonable and illogical.  Sometimes he had to take a long time before he could answer a question.  At some other times he seemed to be unable to understand even straight forward and simple questions which I do not think he as a matter of fact really not being able to comprehend, rather, I tend to think he was buying more time to consider how to answer so as to achieve the best result.  Further, he became more evasive.

100.  As a result, it is my finding that generally speaking he is not a credible witness.  I will further analyse his evidence in different appropriate Sections below.

F7.  D2

101.  I have no hesitation in finding that D2 is an incredible witness.  He was very evasive, and did not answer straight forward questions right away.  Like D1, he also claimed not being able to understand certain questions asked by the plaintiffs’ counsel even though those questions were easy to comprehend.  He was also inconsistent in his evidence.  To me, it is clear that D2 had a lot to hide, and that is the reason why he had chosen to act in the witness box in the way he did.  Indeed, in order to avoid giving truthful answers, he had provided quite a lot of apparently incredible and unreasonable evidence.

102.  For the present purpose, I only need to cite a few examples as follows:

(1)  He refused to accept that he had indirectly facilitated the sale of Lot 1585 even though he admitted that it was he who provided Poon with the telephone number of Ching Fuk so that she could negotiate with Ching Fuk directly;

(2)  He refused to admit that he was a good acquaintance with Poon, even though he caused his wife to be the guardian of Poon’s daughter in UK;

(3)  He said when Poon asked him whether he had money to buy Lot 1512 for development purpose, Poon did not specify (and  he did not know)  what development she was talking about.  This is incredible because the building of Small Houses costs much more than the development of the land, for example, as a carpark.  Without knowing what exactly the development was about, he could not have realistically assessed whether he had the financial power to undertake the development, especially when he said, upon hearing Poon’s invitation to buy the land, he thought the cost to be involved was very high. It is incredible for him not to enquire immediately what the proposed development was about in the light of such high costs;

(4)  It was even more unreasonable when he said in Court that he did not know the details of the proposed development and the costs to be involved even when he agreed to Poon’s suggestion to buy Lot 1512;

(5)  It must also be a lie when he said that he sold Lot 1512 to the 4 Liu Villagers because he had changed his development plan.

F8.  King Fuk

103.  The defendants’ counsel accepted that King Fuk, given his age, was confused with some of the past events that happened some 6 to 12 years ago and that his evidence was not entirely accurate when coming to details.

104.  I am of the view that this is an understatement.

105.  The fact is that he has contradicted his own witness statement at quite a number of places.  In relation to 2 paragraphs thereof[4], he even said that they were “invented” by others and they were not what he intended to say.

106.  I would therefore place little weight on his witness statement.

107.  In relation to his oral evidence in Court, while he was still quite sharp despite his old age, some of his evidence were puzzling in the sense that they were clearly not the truth, for example, he stated that:

(1)  D2 did not attend the First Meeting/Second Meeting;

(2)  During the First Meeting/Second Meeting, a video recording (as opposed to audio recording)  of Poon was played, and he could see Poon’s face in the recording.

108.  The above are plainly contrary to all other undisputed evidence given by the other witnesses.

109.  While I do not think King Fuk was deliberately telling lie in Court, I am of the view that the Court has to be extremely cautious before accepting his oral evidence.

F9.  Siu Sim

110.  Siu Sim’s evidence relates predominantly to the face-to-face discussion between her and P3 about D1’s role and knowledge during her visit to P3 in the UK in June 2018. 

111.  Whether I should accept her evidence depends on the inherent probability of the matter, which I will further discuss in Section G7.5 below.

G.  DISCUSSION

G1.  Issues 1.1 and 1.2

112.  These 2 sub-issues read:

(1.1)  After the death of his late father Ping Fook, did D1 succeed to Ping Fook’s office as a trustee of the Trust?

(1.2)  Did D1 assume the role and participate in handling the matters of the Trust in the capacity of a trustee? 

113.  In relation to the question of whether D1 did take up Ping Fook’s office as trustee upon his demise, the defendants’ counsel submitted that there are 2 periods of time in concern.  The first period, it was suggested, is between Ping Fook’s death to D1’s taking up the work of book-keeping and becoming a joint account holder in April 2012, and thereafter is the second period.

114.  Without disrespect to counsel, I am of the view that there is no need to spend time on looking into what D1 did in the so-called first period, because it is crystal clear that D1 had been acting as a de facto trustee of the Trust from 19 April 2012 onwards.  As explained by Lord Sumption SCJ in Williams v. Central Bank of Nigeria [2012] 3 All ER 579, a de facto trustee refers to persons who have lawfully assumed fiduciary obligations in relation to trust property, but without a formal appointment.  I hold that D1 was such a trustee because:

(1)  D1 accepted in Court himself in his evidence that he had taken Ping Fook’s place to become a trustee of the Trust;

(2)  On 19 April 2012, D1, Ching Fuk and King Fuk have opened a saving account and a current account with the Bank of China for the purpose of handling money of the Trust, and since then D1 had been the book-keeper of the accounts and financial records in relation to the Trust. Insofar as it is D1’s argument that he was only acting upon the instructions of the other 2 trustees (and implying that he only acted as their agent), I reject such a submission, because if he purely acted as their agent, there was no need to open a bank account with his name included as one of the account holders. It should be noted in this regard that before Ping Fook’s demise, there was another joint name account of the Trust (with Ping Fook, Ching Fuk and King Fuk as account holders).  Hence, it is clear that D1 had taken his father’s place as a trustee of the Trust;

(3)  Ching Fuk and King Fuk had passed to D1 a briefcase which contained important documents concerning the Trust, and D1 then kept the briefcase at his home.  Again, if D1 was only “helping out” as Ching Fuk/King Fuk’s agent to manage the accounts and ledgers of the Trust, there was no need (and in fact inappropriate)  for them to let D1 keep the said suitcase;

(4)  D1 also accepted in cross-examination that he was one of the persons who had authority to decide how the money of the Trust should be spent.  This apparently is contrary to his allegation that he only assumed an administrative role.

115.  In other words, by the time when the Negotiation (for the sale of Lot 1512)  took place, D1 had already assumed the role as a de facto trustee of the Trust.

G2.  Issue 1.3

116.  The question raised under this sub-issue is whether D1 initiate and led the disposition of the lands under the Trust.

117.  This is no longer a live issue because the plaintiffs’ counsel accepted during Closing Submission that there is no evidence that D1 initiated and led the disposition of the lands under the Trust.  At most it could only be said that he was involved in the whole process. 

118.  Be that as it may, in my view, this has no bearing on the issue of liability.

G3.  Issue 1.4

119.  Under this sub-issue, the questions are what involvement did D1 have in the negotiation and the eventual sale of Lot 1512, and whether D1 acted in the capacity of a trustee.

120.  There is undisputed evidence from D1 that, in the course of the Negotiations for the sale of Lot 1512, D1 had direct contact with Poon over the telephone for a few times and passed on information from Poon about the intended buyer’s offers to the beneficiaries.

121.  D1’s counsel tried to play down his role and paint a picture as if he was just a messenger in terms of conveying what Poon told him to his uncles and aunties.  I do not accept this argument:

(1)  According to D1’s evidence, Poon had the telephone number of Ching Fuk, and she did directly contact Ching Fuk in the course of the Negotiation.  If D1 was a nobody, Poon would not have contacted and informed him about the intended buyer’s offer, especially when Poon had informed Ching Fuk the same already;

(2)  In D1’s oral evidence, he stated that since the other beneficiaries treated him as a trustee of the Trust, therefore he conveyed Poon’s offer to them.  In my view, this shows that D1 had accepted to act as a trustee;

(3)  If D1 considered that he had nothing to do with the Negotiation, he would have told Poon that there was no need for her to contact him and inform him about the latest offer made by the intended buyer. However, he had never done so.

122.  Moreover, it is also D1’s evidence in Court that, after the provisional sale and purchase agreement for the sale of Lot 1512 had been signed, he kept the vendor’s copy with the other important documents of the Trust in the same briefcase under his sole safekeeping.

123.  With all the above in mind, I am of the view that D1 must be acting as a de facto trustee of the Trust during the sale of Lot 1512.

G4.   Issue 1.5

124.  The sub-issue here is whether the beneficiaries (in particular P1)  and Ching Fuk, relied on D1 to act on their behalf in the negotiation of the sale of Lot 1512, and if so to what extent.

125.  At the stage of Closing Submission, I told Mr Chan for the defendants that I was wondering whether this issue would still be relevant in the event it is this Court’s finding that D1 was indeed acting in the capacity of a trustee in the sale process of Lot 1512.  Mr Chan initially argued that this issue is still relevant in such circumstances.  However, upon reflection, he accepted that if this Court finds issue 1.4 in the plaintiffs’ favour, then D1 should have a duty to disclose to the plaintiffs that D2 was the real buyer behind the scene (on the assumption that D1 had such knowledge at the material time).  Given that concession, I do not think further discussion on Issue 1.5 is required.

G5.  Issue 2

126.  The question here is whether D1 at all material times owed any fiduciary duties to the 5 Beneficiaries, and if so what the contents of these fiduciary duties were.

127.  Mr Chan for the defendants accepted that if the Court’s finding is that D1 was at the material time a de facto trustee of the Trust, then he naturally would owe fiduciary duties to the plaintiffs.

128.  As summarized by Millett LJ (as Lord Millet then was)  in Bristol & West Building Society v Mothew [1998] Ch 1, at 18A-C:-

“A fiduciary is someone who has undertaken to act for or on behalf of another in a particular matter in circumstances which give rise to a relationship of trust and confidence. The distinguishing obligation of a fiduciary is the obligation of loyalty. The principal is entitled to the single-minded loyalty of his fiduciary. This core liability has several facets. A fiduciary must act in good faith; he must not make a profit out of his trust; he must not place himself in a position where his duty and his interest may conflict; he may not act for his own benefit or the benefit of a third person without the informed consent of his principal. This is not intended to be an exhaustive list, but it is sufficient to indicate the nature of fiduciary obligations.”

129.  In the context of sale of trust properties, a trustee has an overriding duty to obtain the best price which he can for the beneficiaries, notwithstanding that he may already be under a moral obligation to sell to someone else: Buttle v Saunders [1950] 2 All ER 193, at 195D-H.

130.  Insofar as the no-conflict and no-profit rules are concerned:

(1)  The underlying rationale has been explained by Leggatt LJ (as he then was)  in Al Nehayan v Kent [2018] 1 CLC 216, at [159] as follows:-

“[…] The essential idea is that a person in such a position is not permitted to use their position for their own private advantage but is required to act unselfishly in what they perceive to be the best interests of their principal. This is the core of the obligation of loyalty which Millett LJ in the Mothew case [1998] Ch 1 at 18, described as the ‘distinguishing obligation of a fiduciary’. Loyalty in this context means being guided solely by the interests of the principal and not by any consideration of the fiduciary’s own interests. To promote such decision-making, fiduciaries are required to act openly and honestly and must not (without the informed consent of their principal)  place themselves in a position where their own interests or their duty to another party may conflict with their duty to pursue the interests of their principal. They are also liable to account for any profit obtained for themselves as a result of their position.”

(2)  The test is whether a reasonable man looking at the relevant facts and circumstances of the particular case would think that there was a real and sensible possibility of conflict: HSBC Trustee (Hong Kong)  Ltd v Secretary for Justice [2001] 1 HKLRD 529, at 537C–538G (per Hartmann J).

(3)  While purchases by close relatives of the trustee are not completely prohibited, they have been disallowed in a number of cases, including purchase done at an undervalue.  Before embarking on such a sale, a prudent trustee will consider seeking the consent of the beneficiaries or the directions and if necessary the sanction of the Court: Lewin on Trusts (20^th ed; 2020)  (“Lewin”), at §46-022.

131.  In the context of the “no-conflict rule”, it is also clear that a fiduciary’s liability is strict.  In this regard, the learned editors of Snell’s Equity (35^th edition, 2025)  stated at §7-023 that:-

“[…] the fairness or otherwise of the transaction is generally not a relevant consideration, and ‘no inquiry on that subject is permitted’. Nor is it relevant whether any gain by the fiduciary was one that the principal could or could not have obtained.

The honesty or otherwise of the fiduciary is also irrelevant: a breach of fiduciary duty ‘may be attended with perfect good faith’. The fiduciary conflict rule ‘might be departed from in many cases, without any breach of morality, without any wrong being inflicted, and without any consciousness of wrong-doing. This does not mean that the rule can be departed from where the fiduciary does not act immorally; it means that the rule applies irrespective of considerations of morality.

[…]”

132.  In Leung Ping Chiu, Roy v Wai Wai Chen [2021] HKCA 941 at [187], the Court of Appeal cited with approval the Privy Council’s judgment in Brickenden v London Loan & Savings Co [1934] 3 DLR 465at 469 that:-

“When a party, holding a fiduciary relationship, commits a breach of his duty by non-disclosure of material facts, which his constituent is entitled to know in connection with the transaction, he cannot be heard to maintain that disclosure would not have altered the decision to proceed with the transaction, because the constituent’s action would be solely determined by some other factor […] Once the Court has determined that the non-disclosed facts were material, speculation as to what course the constituent, on disclosure, would have taken is not relevant.”

133.  Mr Chan for the defendants also accepted that, if D1 is found to be a de facto trustee of the Trust, and if he knew about D2 being the real buyer of Lot 1512 behind the scene before the completion of the transaction:

(1)  D1 was obliged to disclose D2’s involvement to the beneficiaries of the Trust;

(2)  D1 also had an obligation to correct the false representation of Poon that the buyer was a Mainland investor.

G6.  Issue 3

134.  Under this issue, the general question is: Did D1 act in breach of trust and/or fiduciary duties in respect of the disposition of Lot 1512 from the Trust in 2012 to 2013?

135.  The answer to this general question cannot be reached without consideration of the more specific questions which are listed under various sub-issues under Issue 4, out of which the most crucial question is whether D1 knew at the material time (i.e. before the completion of the transaction)  that D2 was the real buyer of Lot 1512.  I will therefore consider this sub-issue 4.2 first.

136.  I will come back to issue 3 after considering the sub-issues under Issue 4.

G7.  Issues 4.2 and 4.3

137.  There is admittedly no direct evidence that D1 had any knowledge that D2 was the real buyer of Lot 1512.  Therefore, this Court has to take into account the available evidence and consider whether any reasonable inference can be drawn in this regard.

138.  The plaintiffs relied on the following matters and submitted that such an inference can be drawn:

(1)  The strong bonding among Ping Fook’s family members;

(2)  D1’s dismissive attitude to P2 and P3’s suggested cancellation of the sale of Lot 1512 on the day before completion of the sale;

(3)  Poon’s revelation to P1 by WhatsApp in 2018;

(4)  D1 & D2’s reactions to the accusations made at the 2018 confrontational family meetings;

(5)  Siu Sim’s confirmation to P3 in the UK in 2018.

139.  I shall consider these matters in turn, and then decide at the end whether such an inference can be drawn.

G7.1 Family bonding

140.  It is undisputed that the bonding among D1’s siblings is strong.

141.  While a bad relationship among the family of D1 and D2 would tend to support a conclusion that D1 did not have knowledge about D2’s involvement in the purchase of Lot 1512, the reverse is not necessarily true.

142.  I therefore view this “strong bonding” as a neutral factor. 

143.  Indeed, even the plaintiffs’ counsel, in substance, did not ask the Court to infer that D1 had knowledge about the real identity of the buyer by reason of such strong bonding.  All they are arguing here in their Closing Submissions is that because of such good relationship within the family, D1 did not disclose the true facts to the beneficiaries including the plaintiffs. 

G7.2  The suggested cancellation of the transaction

144.  According to P2 and P3:

(1)  On the day before execution of the Assignments for the sale of Lot 1512, they paid a visit to King Fuk, who cried in front of them as he did not want to sell Lot 1512;

(2)  After such a visit, when they were walking back home, they bumped into D1.  As they really felt for King Fuk, they suggested to D1 that the sale should be cancelled;

(3)  D1 then asked P2 and P3 not to complicate the matters, and told them that the cancellation of the transaction would result in having to refund the deposit and to compensate the buyer by paying the same amount as the deposit.  D1 further asserted that two of the beneficiaries would not be able to afford the compensation;

(4)  P2 and P3 then replied that they could pay compensation on behalf of those two beneficiaries.

145.  D1 accepted that P2 and P3 did suggest to him on the day before the completion of the transaction that the sale should be cancelled.  However, he denied that he had ever asked them “not to complicate matters”.  On day 4 of the trial, he told the Court that:

(1)  Upon hearing their suggestion, he told them that if the transaction is cancelled, they would need to pay compensation to the buyer;

(2)  He did not say that 2 uncles would be unable to pay the compensation;

(3)  He could not be sure whether P2 and P3 did say that they could pay compensation for those 2 uncles who could not afford to pay compensation;

(4)  P2 and P3 did not say clearly what they wanted to do, even though he could see that they were serious about their suggestion of cancellation;

(5)  According to his understanding at the time, there were at least 3 beneficiaries who were minded to back-out from the sale;

(6)  At the end of his conversation with P2 and P3, he asked them to ascertain how many beneficiaries would like to cancel the transaction;

(7)  After that, D1 went home, and did not follow up the matters with P2, P3 or anybody else.  Neither did P2 nor P3 call him up and discuss on this matter further.

146.  On day 5 of the trial, D1 claimed that he recollected further details about what happened after P2 and P3 had made the aforesaid suggestion:

(1)  During night-time on the same day, D1 called Ching Fuk and told him about P2 and P3’s intended cancellation of the transaction.  D1 also proposed to Ching Fuk that a cancellation / forfeiture agreement for the sale should be prepared;

(2)  D1 then corrected himself, and said he did not call Ching Fuk in the night-time, but less than an hour after his conversation with P2 and P3;

(3)  In the telephone conversation, Ching Fuk agreed that a cancellation / forfeiture agreement be prepared, and that he would inform others;

(4)  The intention was that they would sign a cancellation / forfeiture agreement rather than an assignment on the following day.  Indeed, he had also decided that the transaction should not be proceeded with;

(5)  On the following day, there was no further discussion on cancellation of the transaction, which was duly completed.

147.  I take the view that D1’s evidence in this regard is totally incredible and I reject the same.  On the other hand, I accept P2 and P3’s evidence on how D1 reacted when they suggested that the transaction be cancelled.

148.  I do not accept D1’s evidence given on day 4 of the trial on how he reacted to P2 and P3’s suggestion because:

(1)  D1 was one of the trustees who had to execute the assignment on the following day.  It is therefore of utmost importance that he had to know whether he should or should not proceed with the execution on the next day in the light of P2 and P3’s indication.  Hence, it is inherently improbable that he would leave P2 and P3 to “find out how many beneficiaries would like to cancel the transaction” without following up on the matter with them;

(2)  D1’s evidence was that it was Ching Fuk and P1 who were the most eager and involved in the sale of Lot 1512.  Given the urgency of the matter, it is inherently improbable that D1 did not call them (or at least one of them)  up and convey to them P2 and P3’s request as well as what he had asked P2 and P3 to do (to find out how many beneficiaries would like to drop out from the sale transaction), so that at least Ching Fuk and/or P1 could follow up the matter.

149.  On the other hand, I do not accept D1’s evidence given on day 5 on this incident because:

(1)  If he had indeed called up Ching Fuk within an hour as alleged, he would not have forgotten about it, especially when he said that he himself had also decided to stop the sale transaction.  I am of the view that the fact that he did not mention about this matter on day 4 at all shows that he only invented the existence of this telephone call overnight;

(2)  His evidence on day 5 about the said telephone call is inherently improbable anyway:

(a)    D1 said he had decided that the sale transaction should be aborted because the minority should follow the decision of the majority.  However, since P2 and P3 had never confirmed how many other beneficiaries would like to cancel the transaction, there was no way that D1 could decide which side would be the “majority”;

(b)    D1’s evidence on Ching Fuk’s attitude does not sit well with his evidence that Ching Fuk was always eager to sell the lands under the Trust.  It is incredible that Ching Fuk would accept the suggestion of cancellation right away without even enquiring with P2 and/or P3 himself;

(c)  It is also inherently incredible that they would not discuss about how the compensation should be funded;

(d)  If the conclusion of the telephone conversation between Ching Fuk and D1 was that the transaction would be cancelled, it is inherently improbable that they would simply proceed with the execution of the assignment on the following day without even discussing about the matter concerning such cancellation.

150.  I therefore find that it is more likely than not that the evidence of P2 and P3 is the truth: when they made the suggestion to D1, D1 simply asked them not to complicate matters without taking the matter further, even though they had volunteered to pay compensation for those beneficiaries who could not afford it.

151.  It seems to me there are 3 possible reasons why D1 would have such an attitude:

(1)  As he is one of the beneficiaries (half of Ping Fook’s share), he did not want to bear the compensation himself;

(2)  He wanted to avoid any trouble of having to deal with a matter which had been decided on, namely, to sell Lot 1512;

(3)  He wanted to make sure that the transaction would be completed.

152.  Out of the above 3 possibilities, I do not think the compensation would play a part in affecting D1’s attitude, because if money was an issue, it is more likely than not that he would have raised that with P2 and P3.  Given he would be an innocent party in the sense that it was not he who was eager to drop out, it is reasonable for him to at least raise the matter with P2 and P3 for discussion.  Yet, he has not done so.

153.  Neither do I think the trouble of having to deal with a matter which had been decided would affect his attitude as such, because according to D1, Ching Fuk was the person who was always taking the lead in the sale of the lands of the Trust.  He could have asked him to follow up the matter. 

154.  I therefore find that it is more likely than not that D1 asked P2 and P3 “not to complicate the matter” because he himself was eager to see that the transaction could be completed.

155.  D1 had never suggested that he was eager to see that the lands under the Trust would be sold.  As to whether such lands should be sold, he always said he was indifferent and would follow the crowd. However, when P2 and P3 suggested that the transaction should be cancelled, he did not eager to find out how many beneficiaries would like to stop the transaction from being proceeded with.  This is quite different from his alleged attitude.

156.  Then why was he so eager to complete the sale? I am of the view that a possible reason is that he knew that D2 was the real buyer, and therefore he did not want to frustrate D2’s development plan. 

G7.3  Poon’s revelation

157.  The plaintiffs then relied on Poon’s revelation of D1’s knowledge of the fact that D2 was the real buyer.

158.  For this purpose, the transcripts of a number of Poon’s WhatsApp voice messages in around March to April 2018 have been placed before the Court.

159.  Poon revealed in those WhatsApp voice messages that, while she was in the course of organizing a large-scale Poon Choi (盆菜)  meal at Fanling Wai during Chinese New Year in 2018, she faced many objections as people from the Pang’s family thought that she had deceived the beneficiaries of the Trust in the sale of Lot 1512 and as a result she had earned millions of dollars from the transaction.  As she did not want to take the blame for D2, she contacted P1 on her own initiative in 2018 and told him what actually happened back then so that P1 and others could help her clarify that it was actually D2 who reaped a huge profit from the said transaction.  She also confirmed in her messages that D1 had knowledge about the identity of the real buyer even before the completion of the transaction. She further said that D2 had used his mother (Madam Lam)  to suppress D1 from disclosing D2’s identity to the beneficiaries of the Trust.

160.  The question here is the weight which the Court should attach on Poon’s WhatsApp messages which are hearsay evidence.

161.  In this regard, section 49 of the Evidence Ordinance (Cap.8, Laws of Hong Kong)  provides that:

“(1)  In estimating the weight, if any, to be given to hearsay evidence in civil proceedings the court shall have regard to any circumstances from which any inference can reasonably be drawn as to the reliability or otherwise of the evidence.

(2)  For the purposes of subsection (1), regard may be had, in particular, to the following—

(a)  whether it would have been reasonable and practicable for the party by whom the evidence was adduced to have produced the maker of the original statement as a witness;

(b)  whether the original statement was made contemporaneously with the occurrence or existence of the matters stated;

(c)  whether the evidence involves multiple hearsay;

(d)  whether any person involved had any motive to conceal or misrepresent matters;

(e)  whether the original statement was an edited account, or was made in collaboration with another or for a particular purpose;

(f)  whether the circumstances in which the evidence is adduced as hearsay are such as to suggest an attempt to prevent proper evaluation of its weight;

(g)  whether or not the evidence adduced by the party is consistent with any evidence previously adduced by the party.”

162.  I proceed now to go through the factors set out in section 49(2)  of the Evidence Ordinance:

(1)  Reasonableness and practicality for the plaintiffs to adduce Poon as a witness – it was P1’s evidence that he had invited Poon to be a witness.  However, Poon’s reply was that she was scared to do so since D2 had sent triad member(s)  to talk to her beforehand.  On this reply, it was submitted by the defendants that it is unbelievable that D2 could have the assistance from triads given he had left Hong Kong for a long time and he only spent more time in Hong Kong since 2015.  On such submissions:

(a)  With respect, I am of the view that, as far as this factor is concerned, the defendants have focused on the wrong matter.  The issue is not whether Poon had indeed been threatened by triads.  Rather, the crux of the matter is whether Poon did refuse P1’s invitation to be a witness in this action.  If she did (which I accept, because I accept P1’s evidence), then I wonder what more the plaintiffs could have done. 

(b)  Insofar as it was said that D2 could not have any link with triads since he only came back to Hong Kong from time to time but did not stay in Hong Kong for long on each occasion before 2015, I reject such submission.  In my view, the fact that he did not stay long in Hong Kong before 2015 does not necessarily have any relation to the question of whether he had any links with triads. 

(c)  Moreover, Poon was complaining about threats from triads in around 2018.  Hence, again, the focus of the defendants’ submission was wrong.

(2)  Timing of the original statement – the WhatsApp messages were only sent in 2018.  Therefore they were not contemporaneous with the occurrence or existence of the matters stated.

(3)  Multiple hearsay – I am unable to decide whether Poon’s understanding on D1’s knowledge was given to her by D2 or not.  Although Poon, in her WhatsApp messages, alleged that she had direct communication with D1 which could show D1’s knowledge about D2’s involvement in the sale of Lot 1512, it is noted that Poon at the end of the day did not forward such messages to P1 at all. 

(4)  Motive to make misrepresentation on D1’s knowledge – it appeared from Poon’s WhatsApp messages that her main purpose of contacting P1 in 2018 was to clarify that (i)  she did not deceive the beneficiaries of the Trust; and (ii)  D2 was the real buyer of Lot 1512.  That being the case, there was no need (and therefore no motive)  for Poon to make any misrepresentation on D1’s role in the matter.  This is reinforced by the fact that Poon, while disclosing D1’s knowledge, did also say that (i)  D1 felt bad for having to conceal the identity of the real buyer; and (ii)  D1 refused D2’s offer to share profit with him.  If Poon was misrepresenting D1’s knowledge intentionally, she did not have to add the above which would tend to lessen his guilt.

(5)  Whether the WhatsApp messages had been edited, etc. – there is no suggestion that those messages had been edited nor made in collaboration with another.  However, they were created for a particular purpose, namely, to disclose the alleged truth to P1.

(6)  Circumstances in which the WhatsApp messages were adduced – there is no suggestion that the circumstances in which the WhatsApp messages were adduced as hearsay are such as to suggest an attempt to prevent proper evaluation of its weight.

(7)  Whether the WhatsApp messages were consistent with evidence previously adduced – there is no other previous evidence on D1’s knowledge and therefore this factor is inapplicable.

163.  Having considered the above factors, I am of the view that weight may be given to Poon’s hearsay evidence. 

G7.4  The confrontational family meetings

164.  It is undisputed that the First Meeting (held a few days before Ching Ming Festival in 2018)  and the Second Meeting (held on the day of Ching Ming Festival in 2018)  had indeed taken place.

165.  Some undisputed facts in relation to those 2 meetings had been set out in [37] above.

166.  I will look more closely at what happened in those 2 meetings in turn below.

G7.4.1  The First Meeting

167.  While P1 and P4 did give evidence on those family meetings, they did not explain clearly what D1’s response was in the First Meeting at all (in fact, it appears to me that P1 had only talked about the Second Meeting in his oral evidence).

168.  On the other hand, D1 had been cross-examined in detail as to what happened in the First Meeting.  In a gist, it was his evidence that:

(1)  The allegations made in the First Meeting (mainly by virtue of the Complaint Sheets)  were that:

(a)    he together with D2 deceived the beneficiaries and extracted Lot 1512 from the Trust;

(b)  D2 was the real buyer of Lot 1512;

(2)  D1 did not know that D2 was involved in the purchase of Lot 1512 until he received the Complaint Sheets;

(3)  He denied when he was asked whether he admitted his guilt;

(4)  He did not say anything about D2’s involvement in the purchase, neither did he suggest that he would ask D2 about the matter;

(5)  After his denial, as no one else added anything, he left the meeting.

169.  D1 also said that, after the meeting, he did not call up D2 for the purpose of enquiring with him what happened at all because D2 was coming back to Hong Kong soon.  D1 said he thought that he should talk about the matter with D2 face-to-face rather.

170.  The plaintiffs submitted that it was strange that D1 did not say at the First Meeting that he would check with D2 about his involvement in the purchase of Lot 1512 first before giving an answer to the allegation against D2.  On my part, I am not prepared to place too much weight on this aspect because, after all, D1 and D2 are brothers who were close to each other.  It is not unreasonable for D1 to react in the way he did at the First Meeting, even if he indeed had no idea about D2’s involvement beforehand. I do not think inference can be drawn by such reaction of D1.

171.  Having said that, I am not sure the same can be said about D1’s reaction after the First Meeting.

172.  From any view, the allegations against D1 were very serious.  This is particularly so when it was mentioned in the Complaint Sheets that the beneficiaries would report the matter to the Police.  If D1 had never had knowledge about D2’s involvement before the First Meeting, his decision to wait until D2 came back to Hong Kong appears odd – why didn’t he call up D2 right away, and at least confirm with D2 whether he was the real buyer of Lot 1512 behind the scene?  A possible answer is that he actually knew about that as a fact.  Therefore, there was nothing for him to confirm.

173.  D1 explained that he did not call up D2 and enquired about the matter because he wanted to scold D2 face-to-face.  However, even if so, that did not stop him from finding out the truth from D2 first. He could still scold D2 face-to-face upon the latter’s return to Hong Kong. D1’s explanation is therefore not convincing at all.

G7.4.2 Calling of the Second Meeting

174.  According to D1, after D2 had come back to Hong Kong, D1 had asked D2 if he was the real buyer of Lot 1512.  D1 also showed his frustration to D2 as D1 had become a scapegoat.  D2 admitted that he was the real buyer and said sorry to D1.  D1 then asked D2 to explain to the family members after grave-sweeping on the following day (i.e. Ching Ming Festival).  D2 replied that he would contact P4 the next day and convene a meeting at Ching Fuk’s home for that purpose.

175.  As a result, the Second Meeting was called.

G7.4.3  The Second Meeting

176.  According to P1 and P4, what happened in the Second Meeting (which was held in Ching Fuk’s home)  was that:

(1)  Initially, P1 played the audio recordings exchanged between Poon and himself.  In the recordings played, Poon asserted, inter alia, that:

(a)  D2 was the real buyer of Lot 1512;

(b)  D2 did not want the beneficiaries to know that he was the real buyer;

(c)  D1 had knowledge about D2’s identity as the real buyer; and

(d)  their mother did not want D1 to ruin D2’s plan.

(2)  P1 then asked D1 for an explanation.  D1 did not deny Poon’s allegations.  Neither did D1 ask D2 to give explanation to the beneficiaries.

(3)  Instead, D1 said that:

(a)  Lot 1512 was sold as the offer was acceptable; and

(b)  the buyer’s identity should not be a concern at all.

(4)  D2 then admitted that he was the real buyer of Lot 1512 for his own development.

(5)  The beneficiaries therefore proposed to have Lot 1512 put back into the Trust.  However, D2 rejected such a proposal right away as he had already spent much time and money on developing Lot 1512.

(6)  D2 further blamed the beneficiaries for being careless, and said that they could have discovered that he was the real buyer if they had properly investigated.

(7)  When D2 was about to leave Ching Fuk’s home, he even challenged the beneficiaries to sue him.

177.  On the other hand, according to D1:

(1)  He could not recall whether any WhatsApp audio messages between P1 and Poon had been played during the Second Meeting.

(2)  He and D2 denied being involved in the acquisition of Lot 1512.  Further, D2 asked the family members to find out the truth, instead of solely relying on Poon’s allegations.

(3)  D2 did not clarify that D1 had no knowledge of his identity as the real buyer.

178.  In D2’s oral evidence, he stated that:

(1)  The purposes of calling the Second Meeting were for him to:

(a)    admit to the beneficiaries of the Trust that he was the real buyer of Lot 1512;

(b)  clarify that D1 had no knowledge of D2’s involvement at the material time.

(2)  At the meeting, apart from doing the above, he had also explained to the beneficiaries why he chose not to have his real identity disclosed back in 2012.

(3)  No audio message of Poon had been played during the meeting.

(4)  He had refused P1’s request to put Lot 1512 under the Trust again because it was impossible – the land had already been sold and was not held under his own name.

(5)  He had not challenged the beneficiaries to sue him at all.

179.  I reject the evidence of D1 and D2 on the Second Meeting:

(1)  While the Second Meeting took place 7 years ago, it is amazing that the evidence of D1 and D2 could be so different.  In my view, the most likely reason for such discrepancy is that neither of them was telling the truth;

(2)  According to D1, one of the purposes of holding the Second Meeting was for D2 to clarify D1’s innocence.  However, according to D1, D2 did not do that at all, and that would defeat the said purpose.  What is more surprising is that D1 did not follow up the matter there and then or afterwards, and simply decided to leave the meeting without having his own name cleared;

(3)  It is also totally unbelievable that P1 did not play the audio messages of Poon in front of D2.  At the material time, those messages were the best evidence which the plaintiffs had in support of their allegations against D1 and D2.  There was no reason why P1 would decide not to play them (just like what he did in the First Meeting)  so as to demonstrate to D2 that he should admit his guilt;

(4)  I have also taken into account my finding that both D1 and D2 are incredible witnesses.

180.  On the other hand, the evidence of P1 and P4 on what happened in the Second Meeting makes much more sense, and I accept the same. 

181.  In my view, the most important feature of the Second Meeting is that D2 did not use the opportunity to clarify that D1 had no knowledge of his acquisition of Lot 1512 back in 2012.  This is more consistent with the fact that D1 had had such knowledge all along.

G7.5  Conversation between P3 and Siu Sim

182.  It is undisputed that P3 and Siu Sim had had a chat over the Lot 1512 incident at P3’s home in UK.  The question is what exactly had been said by Siu Sim during that meeting.

183.  According to P3:

(1)  Siu Sim confessed to P3 that, prior to the completion of the sale of Lot 1512, D2 had already informed Madam Lam (mother of D1 and D2)  and other siblings (including D1)  about his plan to acquire Lot 1512 and to develop the same.

(2)  Siu Sim further told P3 that D1 had been requested by Madam Lam not to disclose D2’s plan to the other beneficiaries before the completion of the sale of Lot 1512.

(3)  Siu Sim added that, acting out of simple-minded filial piety (“愚孝”)  towards his mother, D1 reluctantly followed Madam Lam’s instruction and concealed from the other beneficiaries the fact that D2 was the real buyer of Lot 1512 behind the scene. 

(4)  Siu Sim therefore asked P3 to forgive D1.

(5)  Siu Sim also mentioned that she knew that both D1 and D2 were wrong, but she hoped that the other beneficiaries would not bring legal proceedings against D1 and D2.

184.  On the other hand, Siu Sim told this Court that:

(1)  She had never made any confession as alleged by P3;

(2)  She only said to P3 that she did not want to see that the family members would have to resolve their disputes in Court and thereby incur a large amount of legal costs, and that they should sit down and negotiate;

(3)  She encouraged P3 and other beneficiaries of the Trust to have a direct conversation with D2.

185.  The question to ask is “whether it was Siu Sim or P3 who was telling the truth”.   In effect, this Court is asked to consider which of the following scenarios was more likely to be the truth:

(1)  Siu Sim, who had tried to resolve this family matter by being frank when she met P3 and by pleading for forgiveness on behalf of D1 and D2, has now no choice but to deny what she had said to P3 because otherwise it is likely that her brothers would fail in their defence of the plaintiffs’ claim; or

(2)  P3 had made use of the meeting which she had with Siu Sim and fabricated the alleged confession on the part of Siu Sim out of nothing.

186.  In my view, when considering which version of event is more likely to have happened, it should be borne in mind that P3 and Siu Sim had had an intimate relationship, which started all the way back in the early 1990s when Siu Sim went to UK to make enquiry about university studies. Their relationship was so good that Siu Sim would visit P3 every time she travelled to UK, and vice versa.  As admitted by Siu Sim, it was because of this close relationship that she would be quite care-free when she talked to P3.

187.  Bearing the above in mind, I hold the view that it is more likely than not that P3 was telling the truth in relation to the meeting in UK, and that Siu Sim had indeed confessed to P3 that D1 had had knowledge about D2’s development plan in respect of Lot 1512, and that D1 did not disclose the same to the beneficiaries of the Trust because of Madam Lam’s instructions. I also take the view that Siu Sim was telling the truth when she told P3 what happened. 

188.  When coming to this conclusion, I have considered the following matters.

189.  First, the close relationship between P3 and Siu Sim means that:

(1)  It was more likely that Siu Sim would make the confession.  As she admitted, she was quite care-free when she talked to P3. In my view, this is probably because she considered that even if P3 refused to forgive D1 and D2 as Siu Sim requested, P3 would not “betray” her in disclosing what she said to the other beneficiaries of the Trust;

(2)  It was less likely that P3 would fabricate a fact out of nothing against Siu Sim.

190.  Second, the defendants relied heavily on the fact that the alleged confession was not pleaded in the Statement of Claim but only in the Reply.  Neither did P3 mention this incident in her 1^st witness statement.  On the basis of these matters, it was suggested that that must be because the alleged confession by Siu Sim was a recent fabrication by P3.  In this regard, P3 explained that she had struggled whether she should disclose this matter in this action because that would adversely affect Siu Sim’s relationship with her family members.  P3 also stated that she initially also wanted to protection her relationship with Siu Sim.  However, she had had a change of mind subsequently because concealing such a matter would be unfair to the other beneficiaries.

191.  I accept P3’s explanation.  I do not think P3 is a person of such a bad character who would fabricate an event for the purpose of obtaining judgment against the defendants in this case.

192.  Third, it was submitted on behalf of the defendants that P3’s evidence is incredible generally and therefore the Court should not accept her evidence on the alleged confession. 

193.  I refer to Section F3 above in which I have found that P3 is generally speaking a credible witness.

194.  Fourth, the defendants’ counsel stated that P3’s allegation that the conversation was in private between herself and Siu Sim must be false because, at the material time, Siu Sim’s husband and P3’s daughter were also present.

195.  On my part, I do not see how this argument may assist the defendants, because there is no dispute that there was indeed a chat between P3 and Siu Sim at the material time.  

196.  Fifth, it was also argued that it is inherently improbable that Siu Sim would have made the alleged confession because this would in effect be supplying evidence to the plaintiff, especially when legal action was imminent.

197.  As I explained above, I am of the view that given the close relationship between P3 and Siu Sim, it is inherently probable that Siu Sim would consider it safe to do what she did – she could not imagine at the time that P3 would eventually decide to disclose openly what Siu Sim said to her in private.

198.  Sixth, it was further submitted by the defendants that the alleged usage of the words “愚孝” shows that P3 was in fact only repeating Poon’s representation rather than reciting what Siu Sim said, and that it is highly unlikely that Siu Sim would have used the same words. 

199.  With respect, those 2 Chinese words are not so special or unique that no one other than Poon could have used.  I therefore reject the defendants’ submissions in this regard.

G7.6  Conclusion

200.  Having considered all the above matters in the round, I hold that D1 had had knowledge that D2 was the real buyer of Lot 1512 before the completion of the transaction.

G8.  Issue 4.4

201.  The question under this issue is whether D1 had made the Representations before the sale of Lot 1512.

202.  At the stage of Closing Submissions, the representations which were relied on by the plaintiff had been narrowed down to the followings:

(1)  A Mainland Chinese investor was interested in acquiring Lot 1512 for the purpose of investment and property speculation;

(2)  The Purported Investor’s increased offer of $6.5 million was the best price on offer and the best price the Trustees could obtain in the market.

G8.1  The Purported Investor

203.  At the end of the day, it seems undisputed that Poon had indeed told the beneficiaries of the Trust that the buyer of Lot 1512 was a Mainland Chinese investor[5].

204.  According to King Fuk, all the beneficiaries were present when Poon made the above representation.  It can be inferred that D1 was also there at the time and that he did hear Poon’s representation. However, he did not correct Poon’s assertion there and then.

G8.2  The best price

205.  The plaintiffs’ case in relation to this alleged representation is quite confusing.

206.  It was pleaded in the Statement of Claim that:

“15. In order to procure them to quickly accept the Purported Investor’s said increased offer of HK$6,600,000, the 1^st Defendant contacted the 5 Beneficiaries from April to September 2012 and represented to them, inter alia, that:

[…]

15.2 The Purported Investor’s increased offer was the best price on offer and the best price the Trustees could obtain in the market;

[…]”

(emphasis added)

207.  In P1’s 1^st witness statement, he stated that:

“13. Acting in reliance on the following representations made by the 1^st Defendant at various times from the beginning of the negotiation of the sale of Lot 1512 in around April to September 2012, the 5 Beneficiaries (including myself)  eventually agreed to sell Lot 1512 at the price of HK$6,600,000:

[…]

(ii)  The Purported Investor’s increased offer of HK$6,600,000 was the best price on offer and the best price the Trustees could obtain in the market;

[…]”

(emphasis added)

208.  During P1’s examination-in-chief, he clarified that paragraph 13(ii)  of his 1^st witness statement should be corrected such that the representation of “best price” by D1 should be $6.5 million instead of $6.6 million.

209.  Similar evidence (correction)  has been given by P2 and P3.

210.  In the light of such change of evidence, the plaintiffs could not come up to proof of this part of their pleaded case.

211.  Indeed, such pleaded case does not make sense, because it is undisputed that the last offer of the buyer was $6.5 million, and that the price of $6.6 million was actually a counter-offer made by P1 on behalf of other beneficiaries. 

G9.  Issue 3

212.  Having considered the sub-issues under Issue 4, I now come back to the question – whether D1 had breached any fiduciary duties.

213.  The relevant legal principles have been set out in Section G5 above.

214.  As far as the concealment of the real identity of the buyer of Lot 1512 is concerned, Mr Chan for the defendants accepted that insofar as it is found by this Court that D1 had the knowledge before the completion of the sale of Lot 1512 that D2 was the real buyer, D1 must have the fiduciary duty to inform the beneficiaries of the Trust of the same.   However, he did not do that.

215.  Hence, D1 must be in breach of his fiduciary duties owed to the beneficiaries of the Trust.

216.  By the same token, D1’s failure to correct Poon’s misrepresentation that the real buyer of Lot 1512 was a Mainland Chinese investor must also be a breach of his fiduciary duties.

G10.  Issue 5.1

217.  As confirmed by the plaintiffs’ counsel at the stage of Closing Submissions, the plaintiffs would only pursue the claim of knowing receipt against D2[6].

218.  To succeed in this claim, the plaintiffs must show:

(1)  Firstly, a disposal of their assets in breach of D1’s fiduciary duty;

(2)  Secondly, the beneficial receipt by D2 of assets which are traceable as representing the assets of the plaintiffs; and

(3)  Thirdly, knowledge on the part of D2 that the assets he received are traceable to a breach of fiduciary duty.

(El Ajou v Dollar Land Holdings plc & Another [1994] 2 All ER 685, at 700f – g)

219.  As to the beneficial receipt by D2 of the trust assets:

(1)  The personal liability of the recipient in knowing receipt depends upon the plaintiff having a continuing equitable interest in the property when it reaches the hands of the defendant: Byers & Others v Saudi National Bank [2024] 2 WLR 237, at [97];

(2)  Receipt by a nominee of the defendant would also count as receipt by the defendant, at any rate where the defendant arranged for the transfer into the name of his nominee and the transfer gave him effective dominion and control: Lewin, at §42-053.

220.  Regarding D2’s knowledge, his state of knowledge must be such as to make it unconscionable for him to retain the benefit of the receipt: Thanakharn Kasikorn Thai Chamkat (Mahachon)  v Akai Holdings Ltd (No.2) (2010)  13 HKCFAR 479, at [127].

221.  On the facts of the present case:

(1)  The plaintiffs had sold Lot 1512 in the circumstances where D1 had, in breach of his fiduciary duties owed to the beneficiaries, concealed the fact that D2 was the real buyer of the land behind the scene;

(2)  D2 had obtained Lot 1512 which belonged to the plaintiffs.  On this matter, while the partitioned portions of Lot 1512 were transferred to different buyers (including D3 and friend and relatives of D2’s Wife), it is undisputed that they were all D2’s alter ego (see [25] – [26] and [29]).

222.  In relation to D2’s knowledge, it should be noted that this Court has found that:

(1)  Prior to the completion of the sale of Lot 1512, D2 had already informed Madam Lam and D1 about his plan to acquire Lot 1512 and to develop the same;

(2)  Madam Lam had requested D1 not to disclose D2’s plan to the other beneficiaries.

223.  Given the close relationship among the members of this family, I am of the view that it can be inferred that D2 knew that Madam Lam had asked D1 not to disclose his identity as the real buyer of Lot 1512.  This is particularly so because this must be a matter very important to D2 at the time, since, according to him, it was his deliberate decision to have his identity as real buyer concealed from the beneficiaries of the Trust.

224.  D2’s knowledge of D1’s breach of fiduciary duties must make it unconscionable for him to retain the benefit of the receipt.

225.  I therefore hold that D2 is liable for knowing receipt.

G11.  Issue 5.2

226.  The plaintiffs claim against D2 for dishonest assistance by reason of his inducement of D1’s breach of fiduciary duties. Their claim against D3 has been abandoned at the stage of Closing Submissions.

227.  In this regard, the plaintiffs must prove 4 elements:

(1)  there has been breach of trust or fiduciary obligation owed to the plaintiffs;

(2)  in which D2 has assisted or which he has procured;

(3)  D2 acted dishonestly; and

(4)  resulting in loss to the plaintiffs.

(Kwong Yi Ling v Lau Kwun Leung & Others [2021] HKCFI 2303, at [12])

228.  I am of the view that the plaintiffs’ claim of dishonest assistance against D2 is a non-starter, because they have not pleaded in their Statement of Claim any allegation of act of assistance / inducement / procurement on the part of D2.

229.  The plaintiffs’ counsel tried to salvage the plaintiffs’ case by referring this Court to paragraph 12.3 of the Amended Reply to the Defence of D2 and D3, in which it was pleaded that:

“Furthermore, after the Plaintiffs’ solicitors, Liu Chan and Lam, issued letters of demand to the Defendants in June 2018, one Pang Siu Sim (being the fourth daughter of Ping Fuk and one of the sisters of the 1^st and 2^nd Defendants)  paid a personal visit to the 3^rd Plaintiff in the UK. During that visit, Siu Sim verbally informed the 3^rd Plaintiff that:-

(a)  Prior to the dispositions of Lot 1512 as aforesaid, the 2^nd Defendant had already informed his mother and other siblings (including the 1^st Defendant)  of his plan to acquire Lot 1512 and the Scheme;

(b)  At the time, the 1^st Defendant was asked by his mother not to disclose the 2^nd Defendant’s plan and the Scheme to the Other Beneficiaries, including the 5 Beneficiaries, before the dispositions of Lot 1512; and

(c)  Acting out of his respect for his mother, the 1^st Defendant complied with her request and withheld from the Other Beneficiaries the fact that the 2^nd Defendant was the ultimate beneficial purchaser of Lot 1512.

Siu Sim also asked the 3^rd Plaintiff to forgive what the 1^st Defendant had done.”

(emphasis added)

230.  With respect, the effort of the plaintiffs’ counsel is futile:

(1)  It is trite that the purpose of a Reply is to respond to the Defence.  Therefore, it is well established that if a plaintiff would like to rely on a new cause of action, he has to amend his Statement of Claim rather than adding such a cause of action in his Reply.  The rationale is simple – the defendant must be given an opportunity to plead to such a new cause of action in his Defence, rather than having to seek leave to file another pleading subsequent to Reply.  In my view, this principle must also be applicable as far as an element of a cause of action is concerned.  Hence, while a cause of action has been pleaded but the plea is defective, the appropriate way to remedy the situation is to have the Statement of Claim amended;

(2)  In paragraphs 32 and 32.2 of the Statement of Claim, it has been expressly pleaded that D2 has dishonestly assisted D1 in the latter’s breach of trust and breach of fiduciary duties “by reason of their knowledge of and participation in the Scheme as particularised in paragraphs 18 to 20, 26 and 27 [of the Statement of Claim]”.  It is most unfair to D2 if the plaintiffs are permitted to rely on matters other than those covered by the said paragraphs;

(3)  Even if one is allowed to refer to paragraph 12.3 of the Amended Reply to the Defence of D2 and D3 (see [229] above), it is clear that the plaintiffs’ pleaded case was that it was Madam Lam who procured D1 not to disclose the identity of D2 as the real buyer of Lot 1512.  In the circumstances where Madam Lam was not pleaded as D2’s agent[7], there is no way that D2 could be held liable in this regard.

231.  I therefore dismiss the plaintiffs’ claim against D2 for knowing assistance.

G12.  Issue 6

232.  The issue here is whether D1, D2 and D3 (or any two of them)  are liable for the tort of conspiracy to injure by unlawful means, by conspiring and/or combining together to injure, inter alia, the 5 Beneficiaries and/or to conceal such wrongdoings from them as a result of which the 5 Beneficiaries were injured.

G12.1  The legal principles

233.  4 elements must be pleaded and proved on a claim of conspiracy to injure by unlawful means:

(1)  The agreement between two or more persons;

(2)  The intention to injure the plaintiff;

(3)  The acts that were carried out pursuant to the agreement and the stated intention;

(4)  The damage caused to the plaintiff.

(see Pido v Compass Technology Co Ltd [2010] 2 HKLRD 537, per Ma CJHC (as he then was)  at [17])

234.  In relation to the 1^st element, since conspiracies are usually concealed, the existence of an agreed mechanism can only be inferred from overt acts: Pido v Compass Technology (supra), at [25].

235.  Further, the tort requires an agreement, a combination, understanding, or concert to injure, involving two or more persons.  Of the various words used to describe a conspiracy, “combination” has been preferred to “agreement” on the ground that “agreement” might be thought to require some agreement of a contractual kind, whereas all that is needed is a combination and common intention: Clerk & Lindsell on Torts (24^th edition (2023)), §23-103.

236.  In relation to the 2^nd element, although intention could be a matter of inference, the facts and circumstances must be examined to see what inferences could be drawn: Jackson Xu Zhao Ze v Tsai Tim Yuen (CACV 117/2013, unreported, 10 April 2014), at [5].

237.  In respect of the 3^rd element, it is not necessary that every overt act is done by every conspirator, but the act must be done pursuant to the conspiracy.

238.  Breach of fiduciary duties, knowing receipt and dishonest assistance are capable of constituting unlawful means for the purpose of this cause of action: see, for example, FM Capital Partners Ltd v Marino [2018] EWHC 1768 (Comm), at [455] – [456]; Iranian Offshore Engineering and Construction Company v Dean Investment Holdings SA [2019] EWHC 472 (Comm), at [172].

G12.2  Application of the law

239.  As far as the 1^st element is concerned, I am satisfied, by reason of the findings made under Section G10 above, that it can be inferred that there must be an understanding between D1 and D2 that D1 would not disclose D2’s identity as the real buyer to the beneficiaries of the Trust. 

240.  As D2 has been D3’s sole shareholder and sole director since around October 2012 the latest, D3 must be taken to have joined in as a party to the combination.

241.  In relation to the 2^nd element, the plaintiffs argued that the defendants had the intention to injure the 5 Beneficiaries by depriving them of the opportunity to develop Lot 1512 and to sell the land at a higher price.

242.  In reply, the defendants argued that since none of the beneficiaries was entitled to develop Lot 1512 by building Small Houses in their own capacity anyway (and they all knew it), it simply cannot be said that the defendants had intended to injure the 5 Beneficiaries. 

243.  I accept the defendants’ submissions.  I cannot see how it can be said that, by concealing D2’s identity as the real buyer, the defendants had the intention to injure the plaintiffs.  This is particularly so, when the plaintiffs no longer maintained that there had been any misrepresentation on, for example, the development potential of the land.  The plaintiffs all along thought they were selling the land to a Mainland investor.  There is nothing which suggests that they considered that they were not entering into an arm’s length transaction, and, apart from to whom the land would be sold, they were selling Lot 1512 out of their own free will.  On the other hand, while the defendants did conceal the identity of the real buyer from the plaintiffs, what they did was only to act as if it were an arm’s length transaction.

244.  I therefore hold that the plaintiffs have failed to establish the 2^nd element.

245.  Neither do I think the plaintiffs were able to establish the 4^th element – damage caused to them.  They argued that this was proved because Lot 1512 was disposed of from the Trust.  With respect, I disagree.  This is because they did not dispose of the land for nothing, but at a price which they considered reasonable.  Indeed, the transaction price was offered by themselves.

G13.  Market value of Lot 1512

G13.1  Introduction

246.  Expert evidence has been adduced by both sides. The plaintiffs’ expert is Mr Lau Chun Hung Cliff[8] (“Mr Lau”), whereas the defendants’ expert is Mr Hui Wai Chun (“Mr Hui”).

247.  Initially, parties were given leave to adduce expert reports on the market value of Lot 1512 as at 8 November 2012 (the date of the provisional sale and purchase agreement in relation to the sale of Lot 1512 by the Trust)  (“the First Valuation”).

248.  The purpose of the First Valuation was to ascertain whether Lot 1512 had been sold at an undervalue.  However, in the light of the plaintiffs’ abandonment of certain of their allegations against D1, the plaintiffs’ counsel confirmed during Closing Submissions that the said valuation is no longer relevant for the purpose of this trial, save that the Court may take into account the respective experts’ approaches and evidence when deciding whether they are reliable experts, and use this as a yardstick when considering which of the Second Valuation should be accepted.

249.  At the Pre-Trial Review held on 3 October 2024, directions have been given for the experts to adduce supplemental expert reports on the up-to-date market value of Lot 1512 (“the Second Valuation”). As a result, Mr Lau has produced a report assessing the valuation of the land as at 21 November 2024, and Mr Hui has given his opinion on such value as at 6 November 2024.  While the 2 valuation dates are around 2 weeks apart, parties and their experts agreed that there was no substantial difference in the valuation, and that the Court may treat it as if both reports were providing valuation of the land as at 6 November 2024. 

250.  This Court would treat this latest valuation as the current valuation of the land, and would assess the quantum of equitable compensation according to the ultimately accepted valuation.

G13.2  Reliability of the 2 experts

251.  The Second Valuation conducted by the experts have produced quite different results:

(1)  Mr Lau opined that the current market value of Lot 1512, if sold on “As a Whole” basis, is $7.34 million; and that such a value, if sold on “Sub-Division” basis, is $7.51 million.

(2)  On the other hand, Mr Hui’s view was that no matter which basis is used, the current market value is only $4.3 million.

252.  Having considered the evidence of both experts, I take the view that Mr Lau’s opinion should be adopted.  I will set out my reasons below.

253.  Firstly, generally speaking, Mr Hui has appeared to me to be very argumentative.  I have a very strong impression that he was much more interested in defending his position rather than trying to assist the Court, even if, upon cross-examination, his position seemed to be indefensible.

254.  Secondly, Mr Hui was very evasive.  He always refused to answer directly the questions put to him, for the purpose, in my view, to avoid giving any answer which is unfavourable to the defendants (his clients).   Time and time again, he only repeated his own opinion in his own words, even if that means he had totally ignored the questions asked.

255.  Thirdly, what worried this Court most was Mr Hui’s lack of impartiality when he discharged his duty as an expert.  This was demonstrated when he was asked about whether the First Valuation should be done on vacant possession basis. It appeared that D2 had informed him that there was a tenant occupying Lot 1512. However, when Mr Hui was asked what he would do if, despite such an instruction, there was no information on the alleged tenancy at all, he said he would have to ask his clients whether he could do the valuation on vacant possession basis.  With greatest respect, this is a totally unacceptable approach.  This suggests that he was not minded to use purely his professional knowledge in assisting the Court, but to advance his clients’ interest. Regrettably, this answer in fact reinforces the impression which he had given to me in his other answers – he lacked the characteristic of impartiality which the Court required of experts.

256.  Fourthly, Mr Lau seemed to me to be much more objective and fair.  He had adopted comparables even though they are not favourable to the plaintiffs.  In my view, he is much more reliable.

257.  Fifthly, as far as the selection of comparables for the Second Valuation is concerned, it can be seen that the approaches adopted by the experts are different:

(1)  Mr Lau selected comparables which are farther away from D.D. 91 because those comparables are lands on which Small Houses could be built.  He’d rather do some adjustments afterwards;

(2)  Mr Hui preferred comparables which are in the locality of D.D. 91, even though the relevant transactions were conducted quite sometime ago, and his view was that adjustment could be done on the basis of the relevant ex-gratia compensation rates.  He had also chosen comparables which are “outside VE”, which have less development potential.

258.  I am of the view that many of the comparables adopted by Mr Hui are unsuitable because Small Houses simply could not be built thereon.  He was not comparing like with like.

259.  Further, it is difficult to do adjustment to the time factor because it is undisputed by the experts that there had been a change in the system of ex-gratia compensation rates in 2022. 

260.  Most importantly, Mr Hui has not provided in his supplemental expert report the calculations and adjustments which he had made to his selected comparables.  It is therefore unknown as to how he had come to his valuation of $4.3 million. 

261.  On the other hand, I accept Mr Lau’s opinion which is easily understood and reasonable. 

262.  I have therefore come to the view that the current market price of Lot 1512 should be valued as opined by Mr Lau as follows:

(1)  $7.34 million (sold on “as a whole” basis);

(2)  $7.51 million (sold on “sub-division” basis).

G14.  Relief

263.  To conclude, I have held that:

(1)  D1 was in breach of his fiduciary duties owed to the plaintiffs;

(2)  D2 is liable for knowing receipt.

G14.1  D1’s breach of fiduciary duties

264.  If a trustee’s breach of fiduciary duties resulted in a profit, equity will not allow the trustee to retain such profit but will require him to account for it, imposing a constructive trust.  Since the jurisdiction is not punitive, the trustee will not be made to account for more than he actually received as a result of his breach: Libertarian Investments Ltd v Hall (2013)  16 HKCFAR 681, at [83] (per Ribeiro PJ).

265.  Further or alternatively, beneficiaries are entitled to seek equitable compensation from the trustee, the purpose of which is to restore to them what has been lost as a result of the breach.  In Libertarian Investments Ltd v Hall (supra), Ribeiro PJ adopted at [96] the following summary of the rules relating to equitable compensation of McLachlin J in Canson Enterprises Ltd. v. Boughton & Co. [1991] 3 SCR 534:

“In summary, compensation is an equitable monetary remedy which is available when the equitable remedies of restitution and account are not appropriate. By analogy with restitution, it attempts to restore to the plaintiff what has been lost as a result of the breach, ie, the plaintiff's lost opportunity. The plaintiff’s actual loss as a consequence of the breach is to be assessed with the full benefit of hindsight. Foreseeability is not a concern in assessing compensation, but it is essential that the losses made good are only those which, on a common sense view of causation, were caused by the breach. The plaintiff will not be required to mitigate, as the term is used in law, but losses resulting from clearly unreasonable behaviour on the part of the plaintiff will be adjudged to flow from that behaviour, and not from the breach. Where the trustee’s breach permits the wrongful or negligent acts of third parties, thus establishing a direct link between the breach and the loss, the resulting loss will be recoverable. Where there is no such link, the loss must be recovered from the third parties.”

266.  As explained under Section G13, I have found that the value of Lot 1512 as at 6 November 2024 (which is taken as the value as at the trial date)  was $7.34 million (sold on “as a whole” basis).

267.  The plaintiffs submitted (and the defendants’ counsel did not argue otherwise)  that the quantum of equitable compensation which D1 shall pay the plaintiffs should be calculated as follows:

($7,340,000 – $6,600,000)  x 3/8[9] = $277,500

G14.2  D2’s knowing receipt

268.  If a claim for knowing receipt is established, the liability of the defendant is to make good to the trust (whose property has been transferred in breach of trust)  the money, or the value of the property, which has been received by the defendant, with interest.  Credit will be given to the consideration received by the plaintiff: Lewin, at §42-091 & §42-094.

269.  I agree with the plaintiffs’ submissions (which the defendants’ counsel did not dispute)  that the loss and damage suffered by the plaintiffs in this regard should be assessed based on the loss in value of each of the section(s)  of Lot 1512 regarded as having been received by D2, and therefore the sub-division basis of valuation should be adopted. 

270.  Following such an approach, since the valuation of Lot 1512 as of the second valuation date (as accepted by this Court)  was $7,510,000, the amount of equitable compensation payable by D2 for knowing receipt would be:

($7,510,000 – $6,600,000)  x 3/8 = $341,250

271.  I hold the view that $277,500 out of the said sum of $341,250 overlaps with the compensation payable by D1 to the plaintiffs.  Therefore, D1 and D2 should be jointly and severally liable for the sum of $277,500, and D2 should be liable for the additional amount of $63,750 ($341,250 – $277,500).

H.  ORDER

272.  I therefore order that:

(1)  The 1^st and 2^nd defendants shall be jointly and severally liable to pay the plaintiffs equitable compensation assessed at $277,500;

(2)  The 2^nd defendant shall pay the plaintiffs a further equitable compensation assessed at $63,750;

(3)  The 1^st and 2^nd defendant shall pay the plaintiffs interest on the above amounts at 1% above the prevailing HSBC HKD prime rate from 9 January 2013 to the date of judgment, and thereafter at the prevailing judgment rate until full payment.

I.  COSTS

273.  I make a costs order nisi that:

(1)  The 1^st and 2^nd defendants shall bear the plaintiffs’ costs of the action (including all costs reserved), with certificate for two counsel, to be taxed if not agreed;

(2)  The plaintiffs shall bear the 3^rd defendant’s costs of the action (including all costs reserved), to be taxed if not agreed.

274.  The above order nisi shall become absolute in the absence of application to vary (which, if any, will be disposed of on paper)  within 14 days hereof.