Lee Charles Goon Lok v. Lee Kwok Ching and Others

HCA 2366/2015

[2025] HKCFI 2444

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 2366 OF 2015

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D E C I S I O N

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I.  INTRODUCTION

1.Before me are two Summonses filed by the Plaintiff on 19 November 2024, one for an application to re-amend the Amended Writ of Summons and the Amended Statement of Claim (the “Re-Amendment Application”) and the other for leave to adduce expert evidence on the market value of the subject properties in the present case (the “Valuation Evidence Application”).

II.  PROCEDURAL HISTORY

2.This action was commenced almost a decade ago. On 13 October 2015, the Plaintiff issued the Writ of Summons with a general indorsement. On 4 November 2015, the Plaintiff issued the Amended Writ of Summons.

3.On 11 November 2015, the Plaintiff filed the Statement of Claim.

4.On 1 February 2016, the 1^st, 2^nd, 4^th, 5^th and 6^th Defendants filed their Defence.

5.On 17 February 2016, the 3^rd Defendant (“D3”) filed his Defence.

6.On 25 February 2016, the Plaintiff filed his Reply to D3’s Defence and Reply to the 1^st to 6^th Defendant’s Defence respectively.

7.On 17 February 2017, D3 filed his Notice to the 1^st and 2^nd Defendant pursuant to Order 16 Rule 8.

8.On 12 March 2021, the 1^st, 2^nd, 4^th and 5^th Defendants (“D1245”) filed their Amended Defence (by which time, the 6^th Defendant had dropped out of the picture for reasons not relevant for the present purposes).

9.On 15 June 2021, D3 filed his Amended Defence.

10.On 19 July 2021, D3 issued a D3’s Statement of Claim against the 1^st and 2^nd Defendants.

11.On 23 September 2021, the Plaintiff filed his Amended Reply to the D1245’s Defence.

12.On 30 September 2021, the 1^st and 2^nd Defendant filed their Defence to D3’s Statement of Claim.

13.On 27 April 2023:-

(1)  the Plaintiff filed his Witness Statements as well as his Expert Opinion;

(2)  D1245 filed their Witness Statements as well as their Expert Opinion; and

(3)  D3 filed his Witness Statement.

14.On 7 December 2023, D3 filed his Supplemental Witness Statement.

15.On 4 January 2024, the Plaintiff filed the Amended Statement of Claim.

16.On 12 January 2024, D1245 filed their Re-Amended Defence.

17.On 29 January 2024, the Experts’ Joint Statement prepared by the Plaintiff’s expert and D1245’s expert was filed.

18.On 22 February 2024, D1245 filed their Supplemental Witness Statements.

19.On 25 April 2024, D3 filed his Re-Amended Defence.

20.On 20 August 2024, leave to set down within 60 days was granted to the Plaintiff.

21.On 18 October 2024, D3 applied for leave to amend his pleadings.

22.On 30 October 2024, upon the Plaintiff’s application, leave to set down be extended until 20 November 2024.

23.On 11 November 2024, D3 filed (1) D3’s Amended Notice to the 1^st and 2^nd Defendants pursuant to Order 16 Rule 8 and (2) D3’s Amended Statement of Claim against the 1^st and 2^nd Defendants.

24.On 19 November 2024, the Plaintiff issued Summonses for respectively the Re-Amendment Application and the Valuation Evidence Application, which are now before me.

25.On 26 November 2024, upon the Plaintiff’s application, leave to set down was extended until 24 December 2024, failing which D1245 shall have leave to set down within 14 days thereafter.

26.On 24 December 2024, the Plaintiff did not set down the matter for trial.

27.On 6 January 2025, D1245 set down the matter for trial.

28.On 18 February 2025, Pre-trial Review and Trial dates were fixed to take place on 6 February 2026 and to commence on 6 May 2026 respectively.

29.On 24 February 2025, the 1^st and 2^nd Defendants filed their Amended Defence to D3’s Amended Statement of Claim against them.

30.On 22 April 2025, D3 filed his Reply against the 1^st and 2^nd Defendants.

III.  PARTIES

31.Before Wai Kwong (the “Deceased”) passed away on 23 February 1992, he had been the sole manager of one Li Wa (or Wah) Fuk Tso (the “Tso”). After he passed away, the Deceased’s sons, namely the 1^st and 2^nd Defendants and D3 became the sole managers of the Tso. The 1^st Defendant is the eldest son.

32.The 4^th Defendant is a company incorporated in Hong Kong acquired by the 1^st and 2^nd Defendants and D3 as the only shareholders. They remained the only shareholders until 28 December 2000 when D3 transferred all his shares to the Plaintiff.

33.The 5^th Defendant is a company incorporated in Hong Kong by the 1^st and 2^nd Defendants as the only shareholders.

34.The 6^th Defendant is a company incorporated in the British Virgin Islands and is under the 1^st and 2^nd Defendants’ control and management.

IV.  PLAINTIFF’S CLAIM

35.The Plaintiff’s claim concerns the properties of the Tso. In essence, the plaintiff’s claim is that:-

(1)  The 1^st and 2^nd Defendants and D3 have since 10 March 1992 been the registered managers of the Tso.

(2)  Between 23 February 1992 and 26 March 1996, the 1^st and 2^nd Defendants and D3 were the only living members of the Tso.

(3)  On 27 March 1996, the Plaintiff was born, being the son of D3.

(4)  During the period mentioned in §(2) above when the 1^st and 2^nd Defendants and D3 were the only living members, they caused various disposals of the properties of the Tso (the “Properties”) to the 3^rd to 6^th Defendants.

(5)  The disposals of the Properties (in total, 25 landed properties) were invalid due to lack of consideration and frauds. In particular:-

(a)  Between 20 April and 29 September 1993, 8 landed properties (“Properties 1 to 8”, defined with reference to the item numbers in Schedule 1 to the Amended Statement of Claim) were transferred to the 4^th Defendant without actual consideration passed to the Tso.

(b)  Between 9 October 1994 and 17 February 1995, 8 further landed properties (“Properties 9 to 12 and 16 to 19”) were transferred to the 5^th Defendant without actual consideration passed to the Tso.

(c)  Between 3 October 1994 and 8 February 1995, 3 landed properties (“Properties 13 to 15”) were transferred to D3 without actual consideration passed to the Tso, and D3 subsequently sold Properties 13 to 15 for a total sum of HK$24,000,000.

(d)  On 18 November 1996, two properties (“Properties 20 to 21”) here were transferred to the 6^th Defendant without actual consideration passed to the Tso.

(e)  Between 30 September 1993 and 25 November 1996, four properties (“Properties 22 to 25”) here were sold to independent third parties for a total sum of HK$23,581,200.

(6)  The 1^st and 2^nd Defendants and D3, as registered managers of the Tso, were fiduciaries and trustees vis-à-vis all members of the Tso, including future members not yet born. Thus, as at the various disposals, they owed fiduciary duties and the like to the Plaintiff as well, even though the plaintiff was not yet born.

(7)  By causing such disposals, the 1^st and 2^nd Defendants and D3 breached such duties.

(8)  For the land lots remaining in the Tso, the same were let out for rental income but the 1^st and 2^nd Defendants and D3 have failed to give account for the rental income.

V.  D1245’S DEFENCE

36.D1245’s defence is, in summary:-

(1)  By 1992, D3, being a habitual gambler and constantly in debt, had from time to time demanded the 1^st and 2^nd Defendants on behalf of the Tso to advance monies derived from the rental income on the properties of the Tso for him to repay his debts.

(2)  In late 1992, with a view to avoiding quarrels over the use of rental income on the properties among between the 1^st and 2^nd Defendants on the one hand and D3 on the other and to protecting the 1^st and 2^nd Defendant’s shares of the Tso, the 1^st and 2^nd Defendants and D3 reached an oral agreement (the “1992 Oral Agreement”). By the 1992 Oral Agreement, the Tso would sell the bulk of the Properties of the Tso to a limited company held in equal shares by the three of them for generating rental income for the purpose of the Tso and sharing the sale proceeds of the properties if they would be sold.

(3)  The 4^th Defendant is such a limited company incorporated in 1993 pursuant to the 1992 Oral Agreement.

(4)  The sale of Properties 1 to 8 to the 4^th Defendant in 1993 were carried out under the unanimous consent of the 1^st and 2^nd Defendants and D3 pursuant to the 1992 Oral Agreement. D1245 aver that the sale proceeds to the Tso were distributed among the 1^st and 2^nd Defendants and D3.

(5)  Further, in September and October 1993, outside the 1992 Oral Agreement, Properties 24 and 25 were sold to independent third parties, and the sale proceeds were used to pay the costs of obtaining grant of probate in respect of the estate of their father Lee Wai Kwong, who was the former manager of the Tso, and to pay various liabilities and expenses of the estate.

(6)  In late 1993, continuing his gambling habit, D3 continued demanding money from the 1^st, 2^nd and 4^th Defendants. As a result, the 1^st and 2^nd Defendants and D3 reached oral agreements (respectively, the “1993 Oral Agreement”) whereby they agreed to cause the Tso to sell another batch of the Properties (consisting of 11 landed properties), whereunder:-

(a)  Properties 13 to 15 were sold to D3 himself;

(b)  Properties 9 to 12 and 16 to 19 were sold to the 5^th Defendant held by the 1^st and 2^nd Defendants on the other; and

(c)  The allocation of these properties was determined taking into account the personal debts D3 owed to the 1^st and 2^nd Defendants (although it is not clear from the pleadings how much was exactly owed and whether “taking into account” means set-off or deduction or simply “taking into account”).

(7)  D1245 aver that the sale proceeds of Properties 13 to 15 would be distributed to D3 while those of Properties 9 to 12 and 16 to 19 would be distributed to the 1^st and 2^nd Defendants.

(8)  After the 1993 Oral Agreement, D3 continued his gambling habit and demand for money. By May 1995, D3 sold Properties 13 to 15 he had obtained under the 1993 Oral Agreement for a total sum of HK$23,200,000.

(9)  In 1995, D3 decided to get married in Canada.

(10)  In 1995, the 1^st and 2^nd Defendants and D3 entered into an oral agreement (the “1995 Oral Agreement”) whereby they agreed that the Tso would sell the remaining 4 of the Properties, that is, Properties 20 to 23, to the 1^st and 2^nd Defendants for HK$3,000,000, with proceeds distributed only to the 1^st and 2^nd Defendants but not the 3^rd Defendant, who would forgo his 1/3 share in the amount of HK$1,000,000. Such arrangement would be treated as D3’s repayment of debt then owed to the 1^st and 2^nd Defendants in the approximate amount of HK$1,000,000.

(11)  Pursuant to the 1995 Oral Agreements, Properties 22 to 23 sold to a developer and Properties 20 to 21 to the 6^th Defendant.

(12)  Therefore, the disposals of the Properties were supported by consideration and no fraud was involved.

(13)  Properties 20 to 23 were transferred subsequent to the birth of the Plaintiff, and were all disposed of with the unanimous consent of the 1^st and 2^nd Defendants and D3, D3 being who was the head and decision maker of the fong to which the Plaintiff belonged as a minor.

(14)  The remaining Properties were transferred prior to the birth of the Plaintiff.

(15)  As a matter of Chinese customary law:-

(a)  The Plaintiff has no interest or standing to commence the present action, given that (i) in relation to those disposals prior to his birth, no duties could be owed to an unborn member of the Tso, and (ii) in relation to those disposals subsequent to his birth, the 3^rd Defendant as his father on behalf of the Plaintiff gave the consent;

(b)  The Plaintiff has no right to raise objection or commence legal action in relation to the disposals of the Properties against D3 being his father and the 1^st and 2^nd Defendants being his paternal uncles; and

(c)  The Plaintiff has no interest in the sale proceeds distributed before his birth.

VI.  D3’S DEFENCE

37.D3 (that is, the Plaintiff’s father)’s defence is that:-

(1)  After the Deceased passed away on 23 February 1992, the 1^st Defendant, as the eldest son, had been the de facto family head and assumed a dominant role in managing the Tso’s affairs. D3 only acted in accordance with the 1^st Defendant’s instructions.

(2)  The 1^st Defendant made representations to the 2^nd Defendant and D3 to the effect that:-

(a)  It was likely that there would be change to the Chinese customary law after 1997 such that female descendants would also be entitled to beneficial interests in the Tso’s properties, and in the circumstances, if the 1^st Defendant, the 2^nd Defendant and D3 would pass away before the birth of any direct male descendant of the Tso, the Tso would become extinct with its properties devolved to distant relatives of the Lee family through the female descendants (“D1’s 1^st Representation”); and

(b)  The Tso’s properties could be transferred out with unanimous consent of the 1^st and 2^nd Defendants and D3, being the only managers of the Tso (“D1’s 2^nd Representation”).

(3)  Out of respect for the 1^st Defendant as the eldest brother and his dominant role in managing the Tso’s affairs, D3 agreed to cause the Tso to transfer Properties 1 to 8 to the 4^th Defendant, whose affairs were under the 1^st Defendant’s control.

(4)  In 1994, D3 moved to Canada. The 1^st Defendant told D3 that Properties 9 to 12 and 16 to 19 should be transferred to the 1^st and 2^nd Defendants on the one hand and Properties 13 to 15 to D3 on the other hand (who subsequently sold Properties 13 to 15 for HK$23,200,000). Again, out of respect for the 1^st Defendant as the eldest brother and his dominant role in managing the Tso’s affairs, D3 agreed.

(5)  In mid-1996, the 1^st Defendant told D3 that the Tso’s agricultural lands (Properties 20 to 23) were not of much use, and that the 1^st and 2^nd Defendants could buy D3’s share in those lands for HK$4,000,000. D3 agreed, since he needed money and relying on the 1^st Defendant as the person controlling the Tso’s affairs.

(6)  In relation to the respective disposals of Properties 24 and 25 in 1993, the assignee of Property 24 was a close family friend and the assignees of Property 25 were the cousin of the 1^st and 2^nd Defendants and D3’s mother and the cousin’s daughter.

VII.  D3’S CLAIM AGAINST 1^ST AND 2^ND DEFENDANTS

38.D3, in his dual capacity of a co-manager and a member of the Tso, claims against the 1^st and 2^nd Defendants for contribution and/or indemnity. D3’s claim against the 1^st and 2^nd Defendants is, in gist:-

(1)  Acting in reliance on D1’s 1^st and 2^nd Representations, D3 consented to the disposals of Properties 1 to 19.

(2)  In 2015, D3 came to discover that the 1^st and 2^nd Representations were false in that:-

(a)  The Chinese customary law did not change after 1997;

(b)  No land should be transferred out of the Tso except in “exceptional and/or compelling” circumstances, and the unanimous agreement of the 1^st and 2^nd Defendants and D3 was not sufficient.

(3)  The 1^st Defendant knew that the 1^st and 2^nd Representations were false, or reckless as to the truthfulness, given that the 1^st Defendant was the patriarch of the family and therefore was or ought to have been well versed with the relevant Chinese customary law. The 1^st Defendant should also know that it was a mere rumour that properties would devolve to female descendants, and that there were not “exceptional and/or compelling” circumstances that justified the disposals.

(4)  The disposals to the 4^th, 5^th and 6^th Defendants at nil consideration constituted a detriment to the Tso and/or breach of fiduciary duty by and 1^st and/or 2^nd Defendants and/or D3.

(5)  In mid-1996, the 1^st Defendant made representation to D3 (“D1’s 3^rd Representation”) that a third party was interested in acquiring 3 agricultural lands for HK$12,000,000 and that the 1^st and 2^nd Defendants could acquire D3’s share in those lands for HK$4,000,000.

(6)  Acting in reliance on D1’s 3^rd Representation, D3 consented to the Tso’s disposal of the agricultural lands.

(7)  In 2015, D3 came to discover that D1’s 3^rd Representation was false in that:-

(a)  Properties 20 and 21 were transferred to the 6^th Defendant for HK$2,491,632, the 6^th Defendant not being a third party because it was held by the 1^st and 2^nd Defendants to the exclusion of D3;

(b)  Properties 22 and 23 were transferred to a developer for HK$11,325,600; and

(c)  So the total amount far exceeded HK$12,000,000.

(8)  The 1^st Defendant knew that D1’s 3^rd Representation was false since he instructed a Canadian lawyer to prepare the documentation for the transfer of Properties 20 to 23 and he knew that there were no exceptional and compelling circumstances that would justify the transfers.

(9)  Further, all the transfers formed part of a family arrangement affecting members of the Tso and a family, divesting the Properties to the prejudice of D3 as a living member and all the future members. Therefore, the 1^st and 2^nd Defendants owed a duty to make full and frank disclosure of material information and/or facts to D3, including:-

(a)  The market value of the Properties;

(b)  Properties 13 to 15 were transferred to D3 at a combined value of less than the combined value of Properties 9 to 12 and 16 to 19 transferred to the 5^th Defendant;

(c)  D3 was excluded from the value of the Tso’s Properties, while Properties 20 to 21 were transferred to the 6^th Defendant to the exclusion of D3;

(d)  Before the disposal of the Properties, D3 was at all material times entitled to benefit from approximately 1/3 of the total value of all properties of the Tso including but not limited to their rental value; and

(e)  Upon the disposal of the Properties, D3’s entitlement has diminished to only 1/3 of the shares in the 4^th Defendant and his ownership of Properties 13 to 15, while the 1^st and 2^nd Defendants’ entitlement has substantially increased.

(10)  Based on the cause of action of misrepresentation and failure to make full and frank disclosure, D3 claims contribution and/or indemnity against the 1^st and 2^nd Defendants.

(11)  In addition, D3 claims as a member of the Tso against the 1^st and 2^nd Defendants: -

(a)  The purpose of the Tso is to (i) preserve intact the lands of Li Wah Fuk mainly to ensure reverence would be paid to Li Wah Fuk; (ii) prevent the Tso’s properties from being alienated; and (iii) allow enjoyment of Tso’s properties indefinitely by living and future male descendants for their lifetimes;

(b)  As managers, the 1^st and 2^nd Defendants and D3 owed fiduciary duties to account to members of the Tso, manage and maintain the Tso and its properties for the benefit of its existing and future members, and act in good faith and in the best interests of the Tso;

(c)  The 1^st and 2^nd Defendants breached such duties in making D1’s Representations, in their failure to make full and frank disclosure, in transferring the properties to the 4^th, 5^th and 6^th Defendants at nil consideration, and excluding D3 from his entitlement to the properties transferred to the 5^th and 6^th Defendants. As a result, D3 has suffered loss.

VIII.  BROAD ISSUES

39.Therefore, the issues in respect of the Plaintiff’s claim against all the Defendants are, broadly:-

(1)  Whether the Plaintiff has standing to commence the claim under the Chines customary law;

(2)  What were the duties owed by the 1^st and 2^nd Defendants and D3 as the Tso’s managers to its members;

(3)  Under what circumstances the 1^st and 2^nd Defendants and D3 as the Tso’s managers to its members could dispose of the Properties (for example, unanimous consent of the 1^st and 2^nd Defendants and D3? Exceptional and compelling circumstances?)

(4)  Whether the disposals were caused by fraudulent breach of trust; and

(5)  Whether the 1^st and 2^nd Defendants and D3 should give account for the rental income derived from Properties 26 to 36 over the years.

40.The issues in respect of D3’s claim against the 1^st and 2^nd Defendants are, broadly:-

(1)  Whether D1’s Representations were false; and

(2)  What were the duties owed by the 1^st and 2^nd Defendants and D3 as the Tso’s managers to its members; and

(3)  Whether the 1^st and 2^nd Defendants breached such duties owed to D3 as a member.

IX.  RE-AMENDMENT APPLICATION

41.In the Re-Amendment Application, the proposed amendments which D1245 oppose can be categorised into:-

(1)  Self / Fair Dealing Claims; and

(2)  Undervaluation Averment.

42.For the unopposed proposed amendments, I shall give leave and costs of and occasioned by such amendments be to D1245 and D3 to be taxed in any event.

A.  Self / Fair Dealing Claims

43.The Self / Fair Dealing Claims consist of §§6(d) and (e), 18B, 18C, 21(h1) and Schedule 9 mentioned in §18B of the draft Re-Amended Statement of Claim.

44.§6(d) and (e) of the draft Re-Amended Statement of Claim pleads:-

“6. As the managers of the Tso, the 1^st to 3^rd Defendants were, and still are, fiduciaries and trustees in that at all material times, they owed duties analogous to fiduciaries and trustees towards the Tso and all members of the Tso inclusive of the Plaintiff which duties include:-

(d) to avoid conflict;

(e) to avoid self-dealing.”

45.§18B of the draft Re-Amended Statement of Claim pleads:-

“18B. Further, the Plaintiff avers each of the disposals referred to in paragraphs 10, 12, 14, 16 and 18 above were respectively at an undervalue or substantial undervalue to the prejudice of the Tso and its members. Subject to further expert assessment of the corresponding market value of the properties at the time of their respective disposals, the Plaintiff avers the disposals were at undervalue by about 5% up to 226% as summarized in the 9^th Schedule hereof. For the avoidance of doubt, the 1^st to 3^rd Defendants and each of them are also put to proof that the disposals are fair-dealings.”

46.For “the disposals referred to in paragraphs 10, 12, 14, 16”, concerning, respectively:-

(1)  Properties 1 to 8 transferred to the 4^th Defendant;

(2)  Properties 9 to 12 and 16 to 19; Properties 13 to 15 transferred to the 5^th Defendant; and

(3)  Properties 20 to 21 transferred to the 6^th Defendant;

the Plaintiff himself pleads that no consideration was given to the Tso, although considerations were still stated in the respective assignments, while it is D1245’s case that sale proceeds were still distributed.

47.For the disposal referred to in paragraph 18 of the draft Re-Amended Statement of Claim, they were disposals of Properties 22 to 25 to third parties between 30 September 1993 and 25 November 1996 for a total sum of HK23,581,200.

48.§18C of the draft Re-Amended Statement of Claim pleads:-

“18C. Still further, the Plaintiff avers each of the disposals by the 1^st to 3^rd Defendants as managers of the Tso referred to in paragraphs 10, 12, 14 and 16 above were tantamount to self-dealing.”

49.§21(h1) of the draft Re-Amended Statement of Claim pleads:-

“21. The disposals referred to in paragraphs 10, 12, 14 and 16 above were made in fraudulent breach of trust on the part of the 1^st to 3^rd Defendants and their assignees knowingly assisted in their fraudulent breach of trust.

Particulars

(h1) Further and if the matters pleaded at paragraph 2(1)-(23) of the Amended Statement of Claim of the 3^rd Defendant against the 1^st and 2^nd Defendants are so found by the Court such that the 3^rd Defendant had been misrepresented and/or misinformed by the 1^st and 2^nd Defendants in dealing in or disposal of the land and premises referred to in paragraphs 10, 12, 14, 16 and 18 above, there were no true unanimous consent and/or informed consent amongst the managers of the Tso in those dealings or disposals at all, and/or that the dealings or disposals were not fair dealings.”

A1.  Merits of the Self / Fair Dealing Claims

50.In opposing the Self / Fair Dealing Claims, D1245’s submissions are:-

(1)  Both the experts on the Chinese customary law, namely, Dr Patrick Hase for the Plaintiff and Professor Michael Palmer for D1245 take the view that the idea of “conflict of interest” is “underdeveloped or unknown” under the Chinese customary law; and

(2)  Therefore, the self-dealing or fair-dealing claim, founded upon the idea of “conflict of interest”, cannot sustain.

51.First, it is not so clear that both experts agree that there is no concept of conflict of interest in Chinese customary law. It is important to read the whole paragraph of the opinion. §71 of the Experts’ Joint Statement, with which Dr Hase for the Plaintiff agrees, Professor Palmer, for D1245, states:-

“In Chinese Imperial statutory and customary law the concept of trust was unknown. Imperial statutory law was primarily concerned with specifying punishments to be applied when the law was broken. Civil law matters were primarily dealt with by customary norms. The hierarchical and authoritarian nature of traditional Chinese society, however, encouraged only limited constraints on the managers of tso estates. Good governance ideas such as conflict of interest in officeholding were underdeveloped or not known. Larger organizations might have some written rules on management matters, but these were not necessarily detailed or comprehensive. Since the early twentieth century management of tso estates has been primarily a matter for the New Territories Ordinance rather than traditional Chinese law and custom as such. The Ordinance also does not specify managers’ fiduciary issues, although clearly what is now Section 15 of the Ordnance is intended to protect tso members from dishonest managers. So, managers do bear fiduciary duties to members, but the precise nature of those duties has not been spelled out in the Ordinance.”

52.It is, in my view, no clear statement to the effect that there cannot be room for the self-dealing or fair-dealing rule. The most one can take is (1) the concept of conflict of interest is “underdeveloped or unknown”; (2) members are to be protected from dishonest managers; and (3) the New Territories Ordinance does not specify the precise nature of the fiduciary duties owed by the managers to the members.

53.Further, in §28 of Experts’ Joint Statement, Dr Hase, for the Plaintiff, points out that:-

“At para 24 of his Report, states that the consent of the District Officer does not by itself legitimize transactions in tso property, and if the intention of sale is not in the interests of descendants, then consent, if given by the District Officer, would be improper. It is the District Officer’s positive duty not to give consent unless the New Territories Customary Law is complied with, and especially that there are compelling reasons for the sale to proceed, and that this is in the best interests of the tso as a whole. The land belongs to the tso, that is, the Ancestor (tso means “Ancestor”), not the Managers. Many sales are demonstrably and immediately improper, as, for instance, a sale which would disinherit a significant group of the members, or which would benefit the managers at the expense of the rest of the members, or which was clearly fraudulent, or where it was clear that the members at large had not been informed of the proposed sale and given the opportunity to object…” (emphasis added)

54.Although this opinion in §28 is expressed on whether the District Officer would give consent to certain transactions, this still is relevant to what duties a manager owes. If a District Officer is not supposed to give consent in such a situation where the transaction would benefit the mangers at the expense of the rest of the members, it is in my view arguable that the managers themselves have a duty not to put themselves in such a situation in the first place. At least, this only shows that the concept of conflict of interest is underdeveloped, rather than completely unknown.

55.Second and in any event, the legal proposition that the manager of a Tso is in the nature of a trustee has been so consistently held by Hong Kong courts that there is no room for challenge: see Ho Kang Yau v Ho Chun Wing [2011] 3 HKLRD 491 at §§20-21 per Cheung JA; Man King Chuen, Man Chiu Fook, Man Paul Shuiwind and Man Kam Wing and Ors v The Personal Representative(s) of Wai Tze Hang Alex, deceased and Anor [2023] HKCFI 1435 at §§255-256 per Keith Yeung J. As such, even taking the submissions of Mr Timothy Lam, counsel for D1245, to the highest that the contents of fiduciary duties depend on the context, this is still a fact-sensitive matter and it is at least very arguable that a manager of a Tso should not put himself in conflict of interest and therefore, the self-dealing rule and the fair dealing rule also apply to a manager of a Tso.

56.Therefore, in my view, the claim based on self-dealing rule and/or fair dealing rule is not bound to fail. This view is subject to my agreement with Mr Lam’s submissions for D1245 that there cannot be any self-dealing or unfair dealing in respect of Properties 22 to 25 which were sold to independent third parties.

A2.  Reason for delay

57.Against the procedural history recounted above, there is no doubt that the Re-Amendment Application is inordinately late. I should also say that against such procedural history, the Court should be robust in the case-management.

58.The Plaintiff seems to explain the inordinate delay by reference to change of legal team, as a result of which the current legal team advised the Plaintiff that the Re-Amendment Application is necessary. However, it is trite that in general, change of legal team is not a good reason. There is also no explanation why the Re-Amendment Application could not have been made with the previous legal team.

59.The Plaintiff also seems to hop on the amended plea at §2(22) of D3’s Amended Statement of Claim against the 1^st and 2^nd Defendants filed on 11 November 2024 to say that the Re-Amendment Application was based on this amended plea introduced only so late. I do not accept this explanation because:-

(1)  The plea at §2(22) is made in the context of the full and frank disclosure obligation in family arrangement.

(2)  With or without the recent introduction of the amended plea at §2(22) of D3’s Amended Statement of Claim against the 1^st and 2^nd Defendants, the self-dealing rule and the fair-dealing rule could still have been pleaded in relation to the transactions in favour of D1245. As Mr Tony HH Chow, counsel for the Plaintiff, himself points out, the burden lies upon the 1^st and 2^nd Defendants to prove the consent was an informed consent to the transactions: see Ng, Rose Kai Ching & Ors v Liang Yum Hing Howard & Anor [2023] HKCFI 1867 at §130, and thus in my view, the Plaintiff did not have to wait till §2(22) of D3’s Amended Statement of Claim against the 1^st and 2^nd Defendants to come to a view that a claim based on fair-dealing rule is viable.

(3)  In any event, self-dealings are obvious from the transactions themselves (save and except for Properties 22 to 25 sold to independent third parties).

60.Therefore, in my view, the recent introduction of the amended plea at §2(22) of D3’s Amended Statement of Claim against the 1^st and 2^nd Defendants cannot serve any or any good reason for the inordinate delay.

61.For the same reason, I also do not accept that D3’s Reply to the 1^st and 2^nd Defendants’ Defence to D3’s Amended Statement of Claim is the reason for the inordinate delay.

62.For the above reasons, I find that there is no good reason for the inordinate delay.

A3.  Prejudice

63.As mentioned above, the Pre-trial Review shall take place on 6 February 2026, and the trial shall commence on 6 May 2026 with 13 days reserved. This is about one year away.

64.The Plaintiff submits that the trial dates would not be affected by the amendments, as there are no additional facts. I disagree.

(1)  D1245 would have to be given a chance to file a supplemental expert report on Chinese customary law on whether the self-dealing rule or the fair-dealing rule or the like is applicable to a manager of a Tso under the Chinese customary law.

(2)  While the Plaintiff says, for the fair-dealing rule, there was no informed consent due to failure to inform D3 of the true market value, whether there was informed consent or not does not depend solely on whether the true market value was disclosed. This could be an important consideration, but the Court has to examine all the relevant circumstances objectively. This would in turn depend on what the 1^st and 2^nd Defendants would plead in relation to informed consent. It is fair to say that there may be more factual allegations pleaded and more factual evidence adduced.

(3)  In this regard, it is wrong for the Plaintiff to say that the plea of lack of informed or full consent was already pleaded in D3’s Reply to the 1^st and 2^nd Defendants’ Defence to D3’s Amended Statement of Claim, and so no additional factual allegations and additional factual evidence would surface. Whatever D3 would like to take such reply to mean in the claim between D3 and 1^st and 2^nd Defendants, one thing is clear: this cannot constitute a cause of action against the 1^st and 2^nd Defendants, because causes of action must be pleaded in Statement of Claim but not Reply: see Music Score Ltd v HBC Ltd, HCA 11077/1994, 8 June 2006 at §§20-21 per Lam J. Thus, D1245 are perfectly entitled to have addressed such plea not as relevant to any cause of action. It would be another matter if now such lack of informed consent would be relied upon for establishing a claim based on self-dealing or fair-dealing.

(4)  It is reasonable to say that at least one more day would be needed for the above in the trial.

65.The trial is a year away, and it is easy for the Court to reserve one more day for this, especially if parties’ lawyers would confirm that the legal teams would be available for one or even more days. However, my concern is that this one- or even two-day estimate is made only at the start of this new claim based on self-dealing or fair dealing. It would not be surprising that there would be further interlocutory matters on this and/or that more than one day would be thought to be needed. Prejudice arises in this sense that the parties as well as the Court would be caught in undesirable uncertainty as to the parameters of the dispute already set down and fixed for trial. Caught in such uncertainty, the parties as well as the Court could not have a reasonable estimate on how much resources should be spent on the uncertain dispute. Unless there is good reason (for example, given the complexity of the case or length of evidence, parties would reasonably expect to take more time to prepare written closing submissions and thus a day or two would have to be added for oral closing submissions some time after the end of evidecne), the Court should not be expected to reserve more days for a trial the dates of which have already been fixed. This would be contrary to the purpose of setting down the matter of trial. Also, parties should not take advantage that the trial is far away. If the parties could take such advantage so easily, there would be little purpose served by all the case-management directions made in the proceedings.

66.This must be the position for long cases and short cases. If it is relevant at all, I would say that this position must be stronger for long cases – for long cases, the matters are usually complicated, and thus more proper preparation is expected all along the proceedings. Late applications would likely disturb preparation already done. Therefore, while bearing in mind that the primary aim in exercising the Court’s powers is “to secure the just resolution of disputes in accordance with the substantive right of the parties”: see Order 1A rule 2(2), the Court should be cautious against allowing such substantive amendments as the present ones after the matter has been set down for trial and the dates for trial have been fixed, no matter how far away the trial will take place, especially when there is no good reason for the delay.

A4.  Conclusion

67.Having considered the lack of good explanation for the inordinate delay and the prejudice as I have found above, I disallow the Self / Fair Dealing Claims.

B.  Undervaluation Averment

68.The Undervaluation Averment are the first two sentences in §18B of the draft RASOC:-

“Further, the Plaintiff avers each of the disposals referred to in paragraphs 10, 12, 14, 16 and 18 above were respectively at an undervalue or substantial undervalue to the prejudice of the Tso and its members. Subject to further expert assessment of the corresponding market value of the properties at the time of their respective disposals, the Plaintiff avers the disposals were at undervalue by about 5% up to 226% as summarized in the 9^th Schedule hereof. For the avoidance of doubt, the 1^st to 3^rd Defendants and each of them are also put to proof that the disposals are fair-dealings.” (emphasis added)

69.This is relevant to the fair-dealing claim. As I have disallowed the Self / Fair Dealing Claims, this averment should also be disallowed. In any event, I cannot see how the market value could be relevant to the fair-dealing claim.

B1.  Merits of the Undervaluation Averment

70.§18B has to be read together with §21(h1) of the draft Re-Amended Statement of Claim, which I quote again:-

“21. The disposals referred to in paragraphs 10, 12, 14 and 16 above were made in fraudulent breach of trust on the part of the 1^st to 3^rd Defendants and their assignees knowingly assisted in their fraudulent breach of trust.

Particulars

(h1) Further and if the matters pleaded at paragraph 2(1)-(23) of the Amended Statement of Claim of the 3^rd Defendant against the 1^st and 2^nd Defendants are so found by the Court such that the 3^rd Defendant had been misrepresented and/or misinformed by the 1^st and 2^nd Defendants in dealing in or disposal of the land and premises referred to in paragraphs 10, 12, 14, 16 and 18 above, there were no true unanimous consent and/or informed consent amongst the managers of the Tso in those dealings or disposals at all, and/or that the dealings or disposals were not fair dealings.” (emphasis added)

71.§2(1)-(20) of D3’s Amended Statement of Claim are about D1’s 1^st, 2^nd and 3^rd Representations which D3 pleads were misrepresentations. §2(21)-(24) are about the 1^st and 2^nd Defendants’ failure to make disclosure in a family arrangement:-

“Ground 2: Material non-disclosure under family arrangement

(21) Further or in the alternative, given the transactions/assignments referred to in paragraphs 10, 12, 14, 16 and 18 of P’s ASOC form part of a family arrangement affecting family members and members of the Tso to the effect of divesting the Tso properties to the prejudice of the 3^rd Defendant as the existing member of the Tso and also future unborn members of the Tso and redistribute the share and/or entitlement of each of the 1^st, 2^nd and 3^rd Defendants as the only existing member of the Tso between the period of 23 February 1992 and 26 March 1996, there existed a duty on the part of the 1^st and 2^nd Defendants to make full disclosure of all material information and/or facts to the 3^rd Defendant;

(22) The 1^st and 2^nd Defendants failed to disclose the following material facts to the 3^rd Defendant. Further or alternatively, the 1^st Defendant misrepresented the following material facts to the 3^rd Defendant. The material facts include:-

(c) The market value of various properties of the Tso before the transactions/assignments referred to in paragraphs 10, 12, 14, 16 and 18 of P’s ASOC:-

(i) The stated consideration of Properties 13, 14 and 15 of the 1^st Schedule (i.e. the 5^th Schedule) transferred to the 3^rd Defendant under transactions/assignments referred to in paragraph 14 of P’s ASOC (i.e. HK$17,200,000) was substantially less than the combined stated consideration of Properties 9, 10, 11, 12, 16, 17, 18 and 19 of the 1^st Schedule (i.e. the 4^th Schedule) transferred to the 5^th Defendant (which was controlled and owned by the 1^st and 2^nd Defendants only) referred to in paragraph 12 of P’s ASOC (i.e. HK$52,600,000)”. (emphasis added)

72.It is necessary to know what he 1^st and 2^nd Defendants’ case is specifically in reply to this. In §20C.6 of their Defence to §2(22)(c) of D3’s Amended Statement of Claim, they plead:-

“20C.6 As to subparagraph (c):

(i) The plea of non-disclosure or misrepresentation of ‘market value’ of the properties of the Tso before the entering into transactions/assignments in paragraphs 10, 12, 14, 16 and 18 of the Main SOC is denied. The 1^st and 2^nd Defendants repeat Paragraphs 9 to 31 of the Main Defence…” (emphasis added)

73.The gist of §§9 – 31 of the “Main Defence”, that is, D1245’s Re-Amended Defence to the Amended Statement of Claim, has been set out under Part V – D1245’s Defence above.

74.Properly understood in context, in my view, there cannot be any complaint about misrepresentation of the market values. Neither D3 nor the Plaintiff has ever pleaded that the 1^st and 2^nd Defendants misrepresented any market values. In particular, if it would be so suggested, there is no plea that the considerations stated in the respective assignments had ever been represented as the market values. Nor can I see any plea what were misrepresented as market values. The only complaint is the 1^st and 2^nd Defendants’ failure to inform D3 of the market values at all. I cannot see how the valuation is relevant.

75.In §51 of the Skeleton Submissions of Mr Chow for the Plaintiff, he seems to suggest that the Undervaluation Averment is also related to the mangers’ duty to get a proper price for the sale of land, referring to Man Fong Hang v Man Ping Nam & Ors, HCA 7935/1998, 11 December 2003 at §167 per Lam J. However, the duty to get a proper price is not pleaded even in the proposed re-amendment. Further, as explained by Lam J in §167 of that case, if due diligence is proved, then the manager would not be liable. This would mean that if this duty is relied upon (putting aside that it is not pleaded), there may well be answers from the 1^st and 2^nd Defendants as to what due diligence had been taken, and this would in my view unfairly enlarge the scope of the trial. Hence, in my view, the Plaintiff cannot rely on this duty to get a proper price as a ground in support of the Undervaluation Averment.

76.To complete the picture, at one point, Mr Chow, for the Plaintiff, made a fleeting submission that the Undervaluation Averment is also relevant to quantum. I accept the complaint lodged by Mr Lam, for D1245, that all along, the Plaintiff only mentioned that the Undervaluation Amendment would be relevant to liability, until Mr Chow mentioned this in his Skeleton Submissions dated 21 May 2025. In any event, there is no plea of particulars of loss even in the proposed re-amendment, while the relief “damages to be assessed” still remains unchanged. Putting aside that the relief is only for assessment of damages (and there is no order for split trial), questions like “is the loss measured by the difference of the market value and the actual sale price only as at the date of the transaction?” would be raised. D1245 may argue that the date of valuation should be the date of the Writ. In the absence of any plea of the loss, it would be unfair to simply rely on the Undervaluation Averment as a basis for loss. I could also foresee that if the Plaintiff would be permitted to do this, there would be consequential amendment to pleadings and/or more valuation evidence on different dates of valuation. This would, in my view, unduly enlarge the scope of the trial.

77.Insofar as there is any suggestion that it is necessary to try quantum in a separate trial, I do not accept. There is no application for an order of split trial, and in any event, I do not see any evidence before me to justify such an order, departing from the general rule that liability and quantum should be dealt with in one single trial.

B2.  Reason for delay

78.As explained above, the delay is inordinate. The reasons proffered by the Plaintiff are the same for the Re-Amendment Application, and therefore, I reject the same as bad reasons for the inordinate delay.

B4.  Prejudice

79.D1245 complains that there is significant room for subjective elements in land valuation, that unilateral land valuation would not be helpful and that D1245 should have his own land valuation, and this would prejudice the trial and divert resources for preparing for the trial. In my view, land valuation is a matter that comes to court day in day out, but still, D1245 would have to be afforded a chance to prepare their own valuation report, and there should be a without prejudice meeting to prepare a joint statement to narrow down any disagreement. It would require at least one day in addition to the original reserved dates for the trial. My concern expressed in §65 above applies with equal force here.

B5.  Conclusion

80.Having considered the little, if any, relevance of the Undervaluation Averment, the lack of good reason for the delay and the prejudice that would arise, I disallow the Undervaluation Averment.

X.  VALUATION EVIDENCE APPLICATION

81.The Valuation Evidence Application should rise and fall together with the Undervaluation Amendment.

82.It is here that Ms Lilian Ip, counsel for D3, comes forward to say that its plea at §2(22) of D3’s Amended Statement of Claim has to rely on the valuation evidence in the Valuation Evidence Application. Ms Ip went so far as to say that if I would disallow the Valuation Evidence Summons, D3 would have instruction to engage the same expert to prepare the same valuation report for his own use. However, as explained above, the plea, properly understood in context, can only be a plea complaining about lack of disclosure of the market values at all, rather than misrepresenting the market values. As such, what the market values were is irrelevant.

83.Further and in any event, there is no good reason for the delay, whether from the Plaintiff or D3. Prejudice would also arise as explained in §79 above.

84.Therefore, I dismiss the Valuation Evidence Application.

XI.  CONCLUSION

85.In the circumstances, I make the following order on the Amendment Summons:-

(1)  I allow those amendments of the draft Re-Amended Statement of Claim as set out in §44 of Mr Chow’s Skeleton Submissions described as “Not objected”;

(2)  I disallow §§6(d) and (e), 18B, 18C, 21(h1) and Schedule 9 of the draft Re-Amended Statement of Claim;

(3)  D1245 and D3 shall file and serve their respective Re-Re-Amended Defences only in response to the re-amendments allowed within 14 days;

(4)  The Plaintiff shall file and serve his respective amended Replies only in response to the re-re-amendments in the respective Re-Re-Amended Defences within 14 days thereafter;

(5)  Costs of and occasioned by the allowed re-amendments shall be paid by the Plaintiff to D1245 and D3, to be taxed if not agreed;

(6)  Costs of opposing the disallowed proposed amendments shall be paid by the Plaintiff to D1245 to be summarily assessed on paper, with a statement of costs limited to such costs to be lodged and served within 3 days from today, and a list of objection lodged and served within 3 days thereafter; and

(7)  There shall be no order as to costs of and occasioned by the disallowed proposed amendments as between the Plaintiff and D3.

86.On the Valuation Evidence Summons:-

(1)  I dismiss the Valuation Evidence Summons; and

(2)  The Plaintiff and D3 shall jointly and severally pay D1245 costs to be summarily assessed on paper, with a statement of costs limited to such costs to be lodged and served within 3 days from today, and a list of objection lodged and served within 3 days thereafter.

87.I order D3 to be jointly and severally liable to pay the costs because D3 has at the outset made it clear that he supports the Valuation Evidence Summons and (wrongly in my view, as explained above) he would need the valuation evidence in support of his plea at §2(22) of D3’s Amended Statement of Claim. During the submissions, written and oral, Ms Ip, for D3, also advanced submissions to reinforce the Plaintiff’s application. Further, as mentioned above, Ms Ip went so far as to say that if I would disallow the Valuation Evidence Summons, D3 would have instruction to engage the same expert to prepare the same valuation report for his own use. In such circumstances, D3 should not be allowed to escape from costs consequence simply by hiding behind the Plaintiff while de facto arguing for the Plaintiff’s application as if it is also D3’s own application.

88.Lastly, I thank counsel for their assistance.

Mr Tony HH Chow, instructed by Fu and Cheng, for the Plaintiff

Mr Timothy Lam, instructed by ONC Lawyers, for the 1^st, 2^nd, 4^th and 5^th Defendants

Ms Lilian Ip, instructed by Eddie Lee & Company, for the 3^rd Defendant