Civil Action1998

MAN FONG HANG v. MAN PING NAM AND OTHERS

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51957-EN-2006-03-18

MAN FONG HANG v. MAN PING NAM

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HCA 7935/1998

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 7935 OF 1998

____________________

BETWEEN

	Man Fong Hang (文晃恆) (The Surviving Administrator of The Estate of Man Mou Hei (文戊喜) also spelt asMan Mo Hei, Man Mau Hei and Man Mo Hiand also known as Man Hei (文喜)	Plaintiff
	and
	Man Ping Nam（文炳南）， Man Ying Lam（文英林）,and Man Leung（文良）	Defendants

____________________

Coram : Before Mr. Registrar C. Chan in Chambers

Date of Hearing : 9 March 2006

Date of Judgment : 18 March 2006

_______________

J U D G M E N T

_______________

1. This is a taxation matter. After the substantive hearing, the parties came back to me and asked me to make further ruling. The taxation hearing of the bill of costs submitted by the Plaintiff against the 1^st Defendant and 2^nd Defendant has a long history. It commenced on 2^nd November 2004 and the last hearing was on 6^th January 2006.

2. Before the lunch break on the last day, I indicated that if the taxation progressed at that speed, it might take another day. I asked parties whether they could agree more or even worked out a settlement in accordance with the tenor of my rulings on items that I had taxed. In the afternoon they informed me that certain agreement or understanding had been reached. Details were not yet finalised. I recorded the agreement by announcing it as set out below:

(a) I have taxed the different items as shown on the bill.

(b) The parties will agree among themselves the figures of the “untaxed items”.

(c) The parties will agree and calculate the final figures of the different items of the whole bill including:

(i) the items that have been covered by the interim allocatur (with deletion of the parts which I allowed to delete in the review);
(ii) the items that I have taxed on 5^th January & 6^th January 2006; and
(iii) the untaxed items that will have been agreed but not yet recorded.
(iv) If the parties could not agree on any of the items or figures, liberty to apply.
(v) If the parties could agree upon all the figures, allocatur be issued.
(vi) By consent the parties undertake not to appeal against the decision made by the Registrar in the review;
(vii) The costs of the review be to the Defendant assessed in the sum of $10,000 which could be used to set off the allowed costs of the Plaintiff under the bill.

3. I was essentially told at the hearing the whole bill including the untaxed items could be agreed.

4. Subsequent to that, the Plaintiff raised 11 additional items amounting to $254,000 to ask the Defendants to consider. The Defendants insisted that they thought the agreement was in full and final settlement of all the Plaintiff’s claim for costs and refused to consider the additional items.

5. Both parties came to me and asked me to adjudicate on the matter. I asked the parties to frame and agree upon what are the issues that they want me to adjudicate. After a short adjournment, I was told that the parties had only one issue before me, that is: “whether the Plaintiff is able to add to the taxation bill the items as set out in exhibit “AY-1” referred to in the affirmation of Amy Kim Mi Yuen filed on 7^th March 2006 in support of this application.”

6. The documents that parties agreed to rely on as evidence are the following:

(a) The bill submitted for taxation with item 2225 agreed in the sum of $7,200 and item 2227 $4,133.

(b) The Affirmation of Amy Kim Mi Yuen filed on 7^th March 2006 with exhibits.

(c) Letter dated 14^th February 2006 from Messrs. Baker & McKenzie to the Registrar enclosing a list of items to be included.

(d) Letter dated 16^th February 2006 from Messrs. Peter Mo & Co. to the Registrar enclosing a copy letter of 11^th February 2006 to Messrs. Baker & McKenzie.

(e) Letter dated 20^th February 2006 from Messrs. Baker & McKenzie to the Registrar.

(f) Copy letter dated 24^th February 2006 from Messrs. Baker & McKenzie to Messrs. Peter Mo & Co.

7. I told the parties that I would not allow further evidence to be adduced for the purpose of hearing that issue. My decision could be either (a) in the negative, that may bring the matter to an end or (b) in the positive, that the items should be included in the bill which has to be taxed unless otherwise agreed and in such case I will give directions. Both agreed to the arrangement.

8. Mr. Poon for the Plaintiff invited me to examine the different items submitted: they are items that could not have anticipated when the bill was filed with the Court for taxation. To a certain extent, I agree but some I do not, for example, collating bundles (item 220(d)) and preparation for substantive hearing (item 226(a)). Do those additional items overlap with the items on the bill? I do not wish to comment at this stage.

9. Mr. Poon also submitted that it is a common practice to add these items at the end of the taxation hearing. I must say my view is different. The common practice is that the law costs draftsman anticipates certain items that will be incurred and they build them into the bill but without figures. If, as in this case due to unexpected lengthy taxation hearing, they are not included, the law costs draftsman of the receiving party will remind the Court as well as the other side that such items will be raised and be dealt with at the end of hearing.

10. I share Mr. Cheung’s concern that there is unending assessment if the parties are not frank and candid, and put all the cards on the table. In this case the Plaintiff had not anticipated that there were so many hearings and directions. It is understandable that these items have not been included in the bill. However, the Plaintiff should on the last day of hearing raise these items or at least put the other side on notice that there are such sums to be charged. The Plaintiff has not done so.

11. From the evidence before me, the first time that the Defendants learnt about it was in the letter dated 13^th January 2006 from the Plaintiff’s solicitors to Mr. Cheung, the law costs draftsman for the Defendants. The letter mentioned the additional items and asked the Defendants to agree the figures after concession was given.

12. My understanding of the agreement as reflected in my record set out in paragraph 2 above is that the parties will agree among themselves the figures of “untaxed items”. Does the term “untaxed items” go as far as to include the additional items?

13. I was not privy to the conversation at the time of the negotiation. One thing I am sure after reading the correspondence is that no one mentioned about the additional items. As no one had mentioned them, it is difficult to say that “the untaxed items” covers the additional items.

14. Mr. Cheung argued that the agreement reached on that day was meant to be a full and final settlement. This might be the intention of the Defendants when they reached an agreement with the Plaintiff on the formula. Had this intention been conveyed to the Plaintiff at that time? I do not know it. Unfortunately, Ms. Yuen at that time for the Plaintiff did not alert Mr. Cheung about the forthcoming additional items.

15. Another point Mr. Cheung raised is that the claims set out in the list of additional items had already been included in items 2225 and 2227 and agreed in the sums of $7,200 and $41,333 respectively. Item 2225 is for reviewing files and preparing bundle for taxation hearing. I cannot say the agreed sum of $7,200 or the original claim of $12,000 (calculated from the agreed sum) is low. As to the other item 2227, for attending taxation hearing, the agreed sum of $41,333 looks reasonable: it represents over 40 hours of the court attendance by the law costs draftsman. Surely, Mr. Cheung who appeared before me throughout was aware that Mr. Poon was present at the beginning of the taxation hearing and addressed me. Whether I would allow his costs for attendance is another matter.

16. Mr. Poon submitted that the additional items were properly incurred and some were incurred in compliance with the Court’s direction. I could only say that they were actually incurred. Everyone should be aware of them. Whether they were properly incurred for the purpose taxation on a party and party basis is a matter for taxation.

17. I am not asked to decide whether the agreement reached on the last day of the hearing is meant for full and final settlement of all the claims for costs by the Plaintiff. I leave that open. I find that the additional items were actually incurred by the Plaintiff. On the basis that I make no finding on whether the agreement reached is meant for full and settlement, in normal circumstances the additional items should be added. Accordingly, I rule that the Plaintiff is able to add to the taxation bill the items as set out in the exhibit “AY-1”.

18. I give the following directions for taxation of those items:

(a) within 14 days upon receipt of this decision the Defendants file and serve a list of objections to those additional items;

(b) I set the matter down for taxation with an estimated time of 30 minutes.

19. As to costs, it is my finding that the Plaintiff’s law costs draftsman should have alerted and brought to the Defendant’s attention of these additional items but she had not done so. Had it been done this hearing would not have been necessary. Although I have made a ruling in favour of the Plaintiff on the issue framed, I consider it right to depart from the usual rule that costs follow the event. I make costs order nisi under Order 42 rule 5B(6):

(a) That each party pays its own costs in respect of the application;

and (b) That this order shall become absolute 14 days after this judgment is handed down.

(Christopher C. Chan)
Registrar

Mr. A. Poon of Messrs. Baker & McKenzie for Plaintiff.

Mr. A. Cheung, Law Costs Draftsman, instructed by Messrs. Peter Mo & Co. for the 1^st and 2^nd Defendants.

23415-EN-2004-03-26

MAN FONG HANG v. MAN PING NAM AND OTHERS

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HCA007935G/1998

HCA 7935/1998

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 7935 OF 1998

____________

BETWEEN
	MAN FONG HANG (文晃恆) (the surviving administrator of the estate of MAN MOU HEI (文戊喜) also spelt as MAN MO HEI, MAN MAU HEI and MAN MO HI and also known as MAN HEI (文喜) )	Plaintiff

	AND

	MAN PING NAM (文炳南)	Defendants
	MAN YING LAM (文英林)
	and MAN LEUNG (文良)

____________

Coram: Hon Lam J in Chambers

Dates of Hearing: 17 March 2004

Date of Decision On Costs: 26 March 2004

____________________

DECISION ON COSTS

____________________

1. For reasons given in my judgment of 11 December 2003, I ordered judgment be entered in favour of the Plaintiff in the sum of $2,756,354.39 by way of equitable compensation and interest thereon. I also ordered certain accounts be taken and the Defendants do pay to the Plaintiff the sums found to be due on the taking of such accounts. As regards costs of the action, there is no dispute that the Defendants should pay the Plaintiff's costs. However, the Plaintiff sought costs on indemnity basis. This was resisted by the 1st and 2nd named Defendants. As for the 3rd named Defendant, he did not give any instructions to his solicitors in respect of the question of costs and as a result, his solicitor did not have any comments at the hearing on 17 March 2004.

2. The legal principles as to the award of costs on indemnity basis are not in dispute. Mr Fung relied on a number of authorities. I do not find it necessary to go through all the cases cited. The leading case is Sung Foo Kee Ltd v Pak Lik Co. [1996] 3 HKC 570. The Court of Appeal endorsed some dicta in English cases on the subject and it would serve no useful purposes for me to recite the same again this Decision. Suffice to say that I have directed myself to the principles set out therein.

3. Another Court of Appeal decision referred to by Mr Fung was Choy Yee Chun v Bond Star Development Ltd [1997] 1 HKLRD 1327. That case underlined that an award of costs on indemnity basis can be made against an unsuccessful defendant or respondent. It was also relied upon by Mr Fung as authority for the proposition that the court is entitled to have regard to antecedent conducts of the parties in determining the appropriate basis of costs to be awarded.

4. In my view, the starting point is that to justify an award on indemnity basis, there must be some special features. But the discretion is unfettered and it must be exercised with reference to the facts of the case.

5. The special features relied upon by Mr Fung can broadly be categorized as follows,

(a) ulterior and improper motive with an oppressive game plan;
(b) conduct of the defence in a scandalous, vexatious and oppressive manner that constitute an affront to the court;
(c) defence conducted in bad faith and as personal vendetta with cross-examination of Plaintiff's witnesses on irrelevant matters.

6. On ground (a), Mr Fung referred to the obstructive and hostile stance taken by the Defendants in the release of the Plaintiff's entitlement to sale proceeds. Legal proceedings in the form of HCMP 2163 of 1998 was instituted by the Defendants under Order 85 Rule 2. That culminated in the decision of Yuen J (as she then was) on 21 October 1999. He urged this court to conclude that the Defendants were embarking on an oppressive game plan and these were conducts aiming at pressurizing the Plaintiff to sign some waiver letters. Mr Fung also took this court to the correspondence between the solicitors to demonstrate that different attitude was displayed by the Defendants after the Plaintiff indicated that he would not sign the waiver letters.

7. It seems to me that is a submission more relevant to the question of costs of HCMP 2163 of 1998 than the costs of this action. The alleged ulterior motive would be ulterior to that action although the same could be said in relation to the resistance of the summary judgment application in this action. The hostile attitude of the Defendants towards the Plaintiff had been referred to at the hearing before Yuen J. But Yuen J held in her judgment of 21 October 1999 that there was a confusion at that stage as to the identity of the party who was entitled to receive the payment and the Defendants were acting properly in coming to court to ask for an order before the making of payment. Yuen J therefore ordered that the Defendants could have their costs payable out of the trust fund insofar as such costs being limited to costs that would have been expended by a trustee doing no more than putting claimant beneficiaries to proof. The parties are bound by this decision as there is no appeal against the same.

8. Moreover, according to what was said in a letter dated 7 May 1998 from Messrs David Y Y Fung & Co., the representative from the Plaintiff's camp had claimed to be the registered manager of Man Mou Hei Tong at the appointment for collection of cheques on 6 May 1998. That was plainly wrong as Yuen J found at p. 12 of her judgment that the Tong had never been registered. In such circumstances, how could this court criticize the Defendants through their solicitors insisting on proper evidence as to title before the release of trust fund? In view of that, this court cannot regard the institution of HCMP 2163 of 1998 as part of an improper game plan.

9. I turn to consider the submission that pressure was exerted by the Defendants on the Plaintiff to sign the waiver letters. On the material before me, I am not prepared to go so far as inferring from the correspondence between solicitors that the Defendants were trying to stifle the Plaintiff's claim in demanding the said letters to be signed. Having regard to the resources and professional representation available to the parties and the relationship between the parties at the material time, it was highly unlikely that the Plaintiff's claim could be stifled.

10. In the letter dated 5 May 1998 from Messrs David Y Y Fung & Co. to Messrs Au, Kong & Tang, the Defendants through their solicitors intimated that they would pay the money into court if those in the Plaintiff's camp declined to sign the waiver letters. Whilst that might delay the release of the money for some time, in the circumstances of the present case, it would not affect the determination of the Plaintiff in pursuing the claims in this action.

11. Whilst it is correct to say that the Defendants were acting in a rather unfriendly manner towards the Plaintiff in adopting such a course, I think it is within the bounds of normal litigious hostility.

12. Moving on to ground (b), Mr Fung relied on several features in the conduct of the defence case in the course of the action,

(a) failure to give proper discovery;
(b) Man Leung stayed away from trial;
(c) Interference of Man Tin Sung by Man Ying Lam;
(d) Man Ping Nam and Man Pak Wan disbelieved by court;
(e) Man Ping Nam committed forgery and/or gave false testimony about the meeting of 16 March 1997.

13. On discovery, Mr Fung focused on two classes of documents in his oral submissions. The first is in respect of the Disputed Letter dated 30 July 1994 from the managers to the District Office enclosing the reply slips to the 1994 Circular. My findings are at Paragraphs 122 to 125 of my judgment. I also remind myself as to the role of MFT and Man Ping Wai in the genesis and handling of the Disputed Letter, the 1994 Circular and the reply slips. There is no evidence before the court to suggest that the Defendants had kept copies of these documents. This could not excuse them from failing to include these documents in their list of documents since the obligation of discovery extends to documents which have been in the possession, custody or power of the party. However, bearing in mind the role of MFT played in relation to these documents (and MFT is obviously very much involved in this action in the Plaintiff's camp), I do not think the omission to include the same in the Defendants' lists of documents was done with a view to conceal those documents. Since the original of these documents were in the files of the District Office and MFT had knowledge of the same, any attempt to conceal the same was doomed to fail.

14. Mr Fung directed the attention of this court to some correspondence between solicitors about the discovery as to these documents. The Defendants had through their solicitors disputed the existence of these documents. Forensically that must tie in with the defence case that those documents were prepared without the consent or knowledge of the Defendants. In my judgment of 11 December 2003, I specifically found against the Defendants on this point. But I would regard the non-admission by the Defendants as to the existence of these documents in the discovery stage as part and partial of this line of defence. I will therefore consider whether this feature justifies an award of cost on indemnity basis under the umbrella of the Defendants giving untruthful evidence at the trial.

15. The second class of documents referred to by Mr Fung were the documents relating to the sub-sale to System Link. He relied on some correspondence between the solicitors to contend that the Defendants must have access to these documents since their solicitors made reference to those terms in their letters. It has to be remembered that Messrs David Y Y Fung & Co. also acted for System Link some time after the sale in the attempts to evict the tenants or occupiers. It is therefore not surprising that the firm had acquired some knowledge as to the terms of the sub-sale. It does not follow that the Defendants were in possession, custody or power of copies of those documents. The Plaintiff had surmised that by virtue of those references to the terms of the sub-sale in the correspondence, the Defendants must have copies of those documents in their possession. In a letter dated 31 January 2002, Messrs David Y Y Fung & Co. had denied on behalf of the Defendants that they were in possession of such documents. The Plaintiff did not feel able to seek specific discovery in view of that. There is nothing that emerged in the course of the trial that would take this surmise on the part of the Plaintiff further. This point has no merit.

16. The absence of Man Leung had caused some hiccups at the beginning of the trial. Some time was spent on applications arising out of this episode. However, having regard to the circumstances leading to his absence and the results of those applications, I do not think that could constitute vexatious conducts or otherwise justifies costs on indemnity basis for the entire action.

17. As regards the allegation that Man Ying Lam interfered with Man Tin Sung before he gave evidence, I have not made any finding in my judgment. It is unnecessary for me to do so for the purpose of resolving the Plaintiff's claims. Should I do so for the purpose of determining the basis of award of costs? In my judgment, I should not do so. First, this is a serious allegation and I would hesitate to make a finding against Man Ying Lam without giving him another opportunity to give evidence if he so wishes. Mr Chong informed this court that this issue is of such marginal relevance that Man Ying Lam was advised not to give evidence in order to save costs and time. As it turns out, those advising Man Ying Lam was correct in their assessment in this regard. I perceive an element of unfairness if I were to make such a serious finding against him in this Decision (with possible ramifications other than on question of costs). Second, in m view, even if such allegation were established, it would not justify an award of costs for the entire action on indemnity basis. Bearing in mind the scope of the evidence of Man Tin Sung, it would be quite disproportionate to do so. The proper remedies against the tampering of witness lies in motion for contempt of court or alternatively criminal proceedings. Although it could be a relevant factor in determination on costs, in the present context, its relevance is limited.

18. I have highlighted various unsatisfactory aspects of the evidence of Man Ping Nam in my judgment. Paragraph 73 of my judgment summarized the position. Man Pak Wan's evidence was dealt with in Paragraphs 130 to 132. In Choy Yee Chun at p. 1336B to C, Stock J (as he then was) said,

"Of course there will in most litigation be evidence which a court rejects, and it is far from rare that a court will find that evidence has been deliberately untruthful. Such a finding will not necessarily in itself warrant an order for costs upon either of the bases alternatives to party and party taxation. But there will be cases --- and it is true that they will be the exception and not the rule --- where the conduct of a party in a case is of a more venal kind, where the conduct of the litigation has in some sense been wicked, and in such a situation the exceptional power can quite properly be applied."

19. Subject to what I shall say in respect of the conduct of the defence regarding the meeting of 16 March 1997, I do not find the conduct of the defence at the trial exceptionally hostile or vexatious. Mr Chong submitted that the central issues of the case are whether the Defendants sold the land at an undervalue and whether they had discharged their duties of due diligence. To those, I would add the defence intimation at an early stage that they would also rely on the relief under Section 60 (although it was not pleaded). On the question of discharge of duties and Section 60 relief, the background leading to the sale is relevant. Hence, I would not lessen the significance of Man Ping Nam's evidence. However, I cannot say the defence is so devoid of merit that the resistance of the Plaintiff's claim was conducted in bad faith or by way of personal vendetta. After all, the Plaintiff did not succeed to the full extent. The equitable compensation that I awarded to him is less than the amount he sought. Nor do I consider this to be a case where the defence has been conducted in an oppressive manner.

20. As regards the tampering with the minute of 16 March 1997, Mr Fung referred this court to the decision of Yam J in Wang Din Shin v Nina Kung, HCAP 8 of 1999, 30 January 2003. In that case, indemnity costs was awarded in favour of the plaintiff on indemnity basis on the ground that the defendant was probably the author of a forged will. Each case must depend on its own facts and it would, in my view, not be correct to regard that case as deciding as a matter of law that whenever a losing party had knowingly relied on forged document, he should be liable for costs on indemnity basis.

21. I do not agree with the submissions of Mr Chong that the meeting of 16 March 1997 was not an issue which the court needed to decide. The Defendant plainly relied upon what happened at that meeting. A late re-amendment to the Defence was made on 18 August 2003 to introduce a plea specifically related to that meeting (see Paragraph 20(6) of the Re-amended Defence). Further, in the course his oral testimony, Man Ping Nam referred to this meeting as his authority to sell the land. Both sides called a number of witnesses to testify about this meeting.

22. I would not repeat what I have said in my judgment concerning the defence evidence about this meeting and Man Ping Nam's addition to the minute. In my judgment, the conduct of defence in respect of this part of the case was so vexatious and scandalous that it constituted an affront to the court. But for those additions to the minute, it seems to me to be unlikely that such a case would be run. Mr Chong relied heavily on this minute in his application for leave to re-amend on 15 August 2003. Without such addition in the minute, this court would probably have refused leave to amend. All these underlined the impact of these additions to the minute on the conduct of the trial.

23. As regards the Plaintiff's contention that the cross-examination of Man For Tai by Mr Chong over irrelevant matters was actually by way of personal vendetta (viz. ground (c) in Paragraph 5 above), it is always a matter of degree and sometime the distinction between matters relevant to motive or credit and totally irrelevant matters can be a fine one. Mr Chong barely persuaded me that those matters were relevant on Man For Tai's role in the 1994 Circular and his credibility generally. I therefore do not regard this as a feature justifying an award of costs on indemnity basis.

24. All in all, apart from costs dealing with the meeting on 16 March 1997, I do not think there are exceptional features in this case to render it appropriate to order costs on indemnity basis. For reasons given, the position is different in respect of the dispute about the meeting on 16 March 1997. Although Mr Fung did not ask for indemnity costs in respect of part of the trial instead of the whole action, I do not think that should fetter the discretion of this court provided that I can be certain that there would not be any injustice to the Defendants. I have already heard full arguments from the parties concerning the forgery point and the conduct of the defence case generally. Apart from the question of apportionment or quantum, I do not see what further submissions the Defendants could make in respect of indemnity costs regarding costs incurred by the Plaintiff in dealing with the meeting of 16 March 1997.

25. In the circumstances, what I propose to do is to order as follows,

(a) the Defendants shall pay the Plaintiff's costs of the action;
(b) insofar as the Plaintiff's costs in dealing with the meeting of 16 March 1997 is concerned, such costs will be taxed on indemnity basis;
(c) save as to (b), the Plaintiff's costs shall be taxed on party to party basis;
(d) liberty to parties to file written submissions within 14 days on the question of apportionment as between (b) and (c) or quantum of (b) including submissions on whether this issue should be left to the Taxing Master.

26. I will also make a costs order nisi that the Plaintiff shall have the costs of the hearing on 17 March 2004 on party to party basis.

	(M H Lam)
	Judge of the Court of First Instance
	High Court

Representation:

Mr Patrick Fung, SC instructed by Messrs Baker & McKenzie, for the Plaintiff

Mr K M Chong & Mr Ernest Koo, instructed by Messrs Peter Mo & Co., for the 1st and 2nd Defendants

Mr Wong Chor Wan, of Messrs Christine M Koo & Ip, for the 3rd Defendant

25588-EN-2003-12-11

MAN FONG HANG v. MAN PING NAM AND OTHERS

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HCA 7935/1998

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 7935 OF 1998

____________

BETWEEN
	MAN FONG HANG (文晃恆) (The surviving administrator of the estate of Man Mou Hei (文戊喜) also spelt as Man Mo Hei, Man Mau Hei and Man Mo Hi and also known as MAN Hei (文喜))	Plaintiff

	AND

	MAN PING NAM (文炳南), MAN YING LAM (文英林), and MAN LEUNG (文良)	Defendants

____________

Coram: Hon Lam J in Court

Dates of Hearing: 21, 22, 23, 24, 25, 28, 29, 30 July,11, 12, 13, 14, 15 August,1, 2, 3, 4, 5, 8, 9, 10, 11 September and 10 October 2003

Date of Last Written Submissions: 31 October 2003

Date of Judgment: 11 December 2003

_______________

J U D G M E N T

_______________

Parties and background

1. The Plaintiff in this action is the surviving administrator of the estate of Man Mou Hei. On 21 October 1999, Yuen J (as she then was) handed down a judgment in this action and a related action HCMP 2163 of 1998. According to the decision in that judgment, Man Mou Hei was an owner of 1.5 shek (石) in Man Shek Chung Wui (文石涌會) ["the Wui"].

2. The Defendants are the registered managers of the Wui. Until the sale in August 1997 which I shall refer to in greater detail later, the Wui was the owner of a large piece of land in Lot No. 763 in Demarcation District No. 99 in San Tin, Yuen Long. It is a very large piece of land with an area exceeding 3 million square feet. The agreements made by various parties in 1997 referred to a registered area of 3,328,855.20 square feet and this was used for the calculation of purchase price. The land was held under a Block Government Lease and the user permitted under the terms of the Block Government Lease was for agricultural purposes. The land was actually mainly fish ponds.

3. At the material time, it was subject to the San Tin Outline Zoning Plan No. S/YL-ST/1 dated 24 June 1994. Under that plan, the land was zoned for "conservation area" purposes. According to the Notes to that Zoning Plan, for land zoned as "conservation area", agricultural use and on-farm domestic structure would always be permitted. Redevelopment of an existing house may be permitted but such redevelopment, other than a New Territories exempted house as defined in the Notes, shall not result in a total redevelopment in excess of the plot ratio, site coverage and building height of the existing house. Further, any filling of ponds shall not be undertaken without the permission of the Town Planning Board.

4. The land is also near to the Mai Po area. Hence, in the explanatory statement attached to the Notes, it was stated that conservation of the Mai Po Nature Reserve imposed a constraint on development. New development should not be allowed unless it can be demonstrated that it would have minimal adverse impact on the ecological well-being of the Mai Po Nature Reserve. More specifically, in Para. 8.7.2 and 8.7.3 of the explanatory statement, it was said,

"The area covered by the "CA" zone is intended to give added protection to the Mai Po Nature Reserve from urban development ..."
"Accordingly, new development will normally not be allowed unless it is required to support the conservation of the area's natural features and scenic qualities."

The land was within one of the Deep Bay Buffer Zones referred to in a set of administrative guidelines issued by the Planning Department in early 1990s in respect of development in the vicinity of Mai Po Nature Reserve.

5. The statement was not part of the plan and had no statutory force. However, it provided some reference as to the planning intention and considerations behind the plan.

6. The land is close to the border and a substantial portion falls within the Frontier Closed Area Boundary. That presented another development constraint as noted in Paragraph 6.2.5 of the explanatory statement.

7. The Wui had been set up a long time ago. The evidence before me did not show when and by whom was the Wui founded. However, it is clear that the Wui had been the owner of the land when the British took over the New Territories. Hence, the Wui was named as the owner of the land in the relevant Block Government Lease. It is common ground that it was a Wui formed by some Man clansmen who had been living in San Tin for many generations. It is said that they were the descendants of Man Tin Cheung (文天祥) although I have not heard specific evidence as to that.

8. There is also no dispute that although the Wui is a Chinese customary institution for landholding recognized by law under Section 15 of the New Territories Ordinance, it is not the same kind of institution as a Tso in the sense that it is not a customary Chinese family trust with a focal ancestor and members comprised of all male descendants of that focal ancestor. Rather, it is more in the nature of clansmen co-operative society in pooling their resources to hold land together with the management of the land placed in the hands of managers of the Wui. Although no expert evidence had been adduced before me concerning the nature of a Wui and there is no evidence about the constitution of the Wui when it was founded or formed many years ago, general information as to the nature of a Wui can be taken from the judgment of Deputy High Court Judge A Cheung (as he then was) in Man Ping Nam v Man Mei Kwai, HCA 9852 of 1998, 1 February 2002 and the judgment of the Court of Appeal in the same case in CACV 193 of 2002, 11.12.2002. That case was about another Wui formed by the Man clansman at San Tin, viz. Man Sham Chung Wui and Man Ping Nam (one of the Defendants in the present action) is also the manager for that Wui. Even so, I agree that the relevance of that decision should be restricted to what was said in that case as to Wui generally known under Chinese custom.

9. Interest in the Wui was divided into 32 Shek (which is also called Tin Chung (田種) or Dan Chung (擔種)). According to the various lists of members which had been filed with the District Office (Trial Bundle C3 at p. 140, 169, 185 and 210) and a table contained in a purported authorization document in 1992 relied upon by the Defendants (Core Bundle at p. 100 to 103), members of the Wui included several Tsos (祖) and one Tong (堂) and another Wui (長生會). No evidence had been adduced before me as to the specific memberships of these Tsos, Tong and Wui. But it has been suggested by counsel and accepted by witnesses that if the indirect interest of those who are members of these Tsos, Tong and Wui are taken into account, a large number of Man's clansmen at San Tin had an interest in the Wui. There is also evidence that some of these clansmen had been living overseas for quite some time. In 1997, the managers held beneficial interests in the Wui (either in their individual's names or with others or even in the name of another Tso) as follows,

Man Ping Nam : 1 Shek
Man Ying Lam : 3.5 Shek
Man Leung : 1.75 Shek

10. Although Man Ping Nam had become a manager of the Wui since 1949, the affairs of the Wui was mainly handled by another manager Man Yat Kwai 文日葵 ["MYK"] (also known as Man Sze Hing 文泗慶) until the latter's death on 1 February 1992. MYK was also appointed in 1949. The other two defendants were appointed as managers at a later stage: Man Leung was appointed in 1984 (approved by the District Officer in 1985) whilst Man Ying Lam was appointed in 1991. Man Ping Nam left Hong Kong in 1952 and returned in 1978. Between those years, he lived in England.

11. MYK was a brother of the Plaintiff. Another brother of the Plaintiff who was very much involved in the events leading to the sale of the land was Man For Tai ["MFT"]. Like Man Ping Nam, MFT had been living in England and returned to Hong Kong in 1978. He became the chairman of the San Tin Rural Committee in 1978 and remained so until March 1999. Man Ping Nam was the vice chairman of the San Tin Rural Committee. Prior to their return to Hong Kong, MFT worked together with Man Ping Nam in promoting the Man Clansman Association in England.

12. The present dispute is in respect of the sale of the land in 1997. The idea of selling the land had been discussed for quite some time. On 22 March 1992, the Wui held a meeting in which it was resolved that the land would be sold and the managers were authorized to apply to the District Office for approval for the intended sale. The resolution also stated that once approval was obtained, another meeting would be convened to discuss the details about the sale whilst the members could consider the appropriate price in the meantime. It also stipulated that the land would be sold on the basis that it would be sold to the highest bidder ("以價高者出售為原則").

13. In fact, prior to that meeting, before the death of MYK on 1 February 1992, the managers (including MYK) had written a letter dated 21 January 1992 to the Yuen Long District Officer asking for approval for the sale of the land (see Bundle C3 p. 201). Although the Plaintiff was not present at the meeting of 22 March 1992, his nephew Man Fung Wing (a son of MYK) was present and he reported to MFT as to what happened at the meeting. At that time, MFT was looking after the interest of Man Mou Hei in the Wui.

14. A formal application was made by the managers to the District Officer on 31 March 1992 for approval. In late July 1992, the District Officer received a letter dated 24 July 1992 from the Man Clansmen Association in England through the Hong Kong Office in London. In that letter, the chairman and vice chairmen of that association raised objection to the sale on the ground that the mode and procedures of the sale were not specified. They highlighted the point that since some of the owners were Tsos and Tong and the interest of a lot of people were involved, they demanded wider consultation and transparency regarding the sale. They demanded a reserve price be set and the sale must be conducted openly to achieve sale to the highest bidder.

15. Afterwards, there were a lot of negotiations and meetings between various parties concerning the method of sale and procedures to be adopted. MFT was involved. A solicitor Mr George Yip of Messrs Robert Wang & Co was consulted. Mr Yip rendered his advice in a letter dated 2 October 1993 and repeated the same in a Chinese letter dated 13 October 1993. A circular letter ["the 1994 Circular"] was issued in the name of the managers on 20 June 1994 which set out 6 points governing the intended sale and members were invited to indicate their agreement or disagreement to the same by using reply slip at the bottom of the circular. Some reply slips were returned and submitted to the District Office as evidence of consent by the members to the mode of sale. I need to come back to the events surrounding the 1994 Circular in greater detail later as there are a lot of controversies regarding the same. But it is quite clear from the evidence (including the records kept by the District Office and the testimony of the officers involved who gave evidence before me) that the District Officer had taken these reply slips into account when he considered the application for approval.

16. One of the member Man Chiu Pui 文照培 had comments about one of the 6 points in the 1994 Circular and some time was taken up in attempts to resolve the difference. However, the attempts were not fruitful and according to the observations recorded in the minutes in the files of the District Officer the managers were not keen to resolve that difference. At the same time, another interested person Man Kam Tong 文錦堂lodged a complaint against the District Office to the Commissioner for Administrative Complaint. In a report issued in August 1995, the Commissioner criticized the District Office in processing the application for approval. The Commissioner took the view that the District Officer should not be concerned about the mode of sale.

17. Eventually, the District Officer issued his consent for the sale of the land on 10 June 1996. The consent was valid for a period of six months. No sale was achieved within that six months and the consent was extended on 28 December 1996 up to 10 June 1997.

18. Some offers were received by the managers in early 1997 and a meeting of the Wui was held on 16 March 1997. There are disputes as to what happened at that meeting but it is common ground that the meeting was disrupted by extraneous events. I shall come back to this meeting later.

19. There was no follow-up in respect of the offers and on 26 May 1997, Mr George Yip acting as solicitor for the Wui wrote to the Yuen Long District office requesting for another extension of the consent. The extension was granted on 15 August 1997 after several reminders by Mr Yip. That letter extended the validity of the Consent to 10 December 1997.

The sale of the land in 1997 and its sub-sale

20. On 4 August 1997, the three managers entered into three Chinese provisional agreements selling their respective interests in the Wui as stated above to a company called Earning Youth Investments Limited ["Earning Youth"]. The price was $10,500,000 per Shek which was worked out by counsel to be about $101 per square foot. Deposits were paid at the time when these provisional agreements were signed. A cheque in the sum of $3,500,000 was issued in favour of Man Ping Nam, another cheque in the same amount was issued in favour of Man Leung, and two cheques were issued in favour of Man Ying Lam, one in the sum of $4,000,000 and one in the sum of $3,000,000. The total sum was $14 million.

21. By another Chinese provisional agreement bearing the same date, viz. 4 August 1997 ["the Provisional Agreement"], the managers agreed in the name of the Wui to sell the land to Earning Youth at the total price of $336,000,000 (calculated at $10,500,000 per Shek with 32 Shek altogether). According to the terms of this agreement, a deposit of $10 million had to be paid on the same day. A cheque dated 4 August 1997 was issued by one Siu Shing Chung in favour of the Wui as payment of that deposit.

22. A further deposit in the sum of $23,600,000 was required to be paid under the Provisional Agreement on the signing of a formal agreement within 3 weeks from the date of the Provisional Agreement. In view of the fact that the extension of the consent from the District Officer was still pending at that time, the Provisional Agreement stipulated that a further deposit of 20% in the sum of $67,200,000 were to be paid within 3 weeks after the vendors notified the purchaser that the extension had been obtained. Completion was to take place within 6 months from the issue of the extension of the consent.

23. Clause 5 of the Provisional Agreement provided that on the date of completion, the purchaser would pay a sum of $6,675,710.40 to one San Tin Man Sze Families Fund (新田文氏家族基金) ["the Donation"]. The managers said this was meant to be a donation for the promotion of the welfare of all the Man's clansmen in San Tin. The Plaintiff contended that this was intended at that stage to be a secret profit for the managers.

24. Clause 6 of the Provisional Agreement stated that the purchaser must buy and the vendors must sell. It is therefore quite clear that the parties intended the Provisional Agreement to be an immediately binding agreement.

25. As mentioned, the extension of the consent was granted on 15 August 1997. On 21 August 1997, Earning Youth entered into a Chinese sale and purchase agreement with another company called System Link Development Limited ["System Link"] for the sub-sale of the land to the latter at the price of $134 per square foot and the total price was $446,066,597. The date of completion was stipulated to be 14 February 1998. It was stated that Earning Youth sold as confirmor based on the Provisional Agreement. Reference was made to the grant of extension of consent by the District Officer in this agreement. System Link was and is a subsidiary of a subsidiary of Henderson Land Development Company Limited ["Henderson"]. Henderson was and is, of course, one of the largest property development companies in Hong Kong.

26. On 22 August 1997, the managers executed a conditional agreement for the sale of the land to Earning Youth ["the Conditional Agreement"]. Although the extension of the consent had already been granted by that time, the Conditional Agreement recited incorrectly that extension had not yet been granted and that agreement was subject to and conditional upon the extension being granted. A period of 12 months was given under the Conditional Agreement for the extension to be issued, failing which Earning Youth would have the option to cancel the transaction. Clauses 11 and 12 of the Conditional Agreement referred to the Donation. It was provided that upon receipt of the Donation, the managers undertook to hold the same on trust for the members of the Man family living in or connected with San Tin. A formal agreement for sale and purchase was executed in escrow at the same time as the execution of the Conditional Agreement. A further deposit in the sum of $23,600,000 was paid by Earning Youth to the Wui on 22 August 1997.

27. That formal agreement between the Wui and Earning Youth was later dated 25 August 1997 ["the Formal Agreement"]. Clause 6 of the Formal Agreement provided that the sale was subject to existing tenancies. Copies of seven tenancy agreements were annexed to the agreement. Clause 30(i) referred to the Donation as "amount or value of any other consideration which ... has been agreed to be paid or given to any person for or in connection with the agreement" and it was said to be an ex-gratia payment.

28. On 8 September 1997, Earning Youth and System Link executed a formal agreement regarding the sub-sale ["the Sub-sale Agreement"]. Clause 4 provided that vacant possession would be given on completion. Clause 36 referred to the Donation and made it clear that such Donation remained as the obligation of Earning Youth. Clause 37 is of some significance,

"Notwithstanding anything to the contrary, it is hereby expressly agreed that if the Vendor shall upon completion be unable to deliver vacant possession of the Property to the Purchaser, the Purchaser shall have the right to deduct a sum calculated at HK$10 per sq. ft. from the balance of purchase price on such portion of the area of the Property which vacant possession cannot be delivered and the said amount so deducted shall be stakeheld with Messrs Yam & Company as security for the delivery of vacant possession of the Property. In the event of the Vendor failing to deliver vacant possession of the said portion of the Property to the Purchaser within twelve months from the date of completion, the said amount shall be absolutely forfeited to the Purchaser and without prejudice to the Purchaser's right and remedies against the Vendor."

Completion were to take place on 8 December 1997 or such date as the purchaser may request provided that the purchaser could prove and obtain an extension for sale from the District Officer on or before 1 December 1997, but in any event not more than 6 months from 15 August 1997.

29. By December 1997, it was quite apparent that Earning Youth could not procure vacant possession to be delivered. Another agreement was executed between Earning Youth and System Link on 9 December 1997 ["the Supplemental Agreement"] as a supplemental agreement to the Sub-sale agreement. The completion date was varied to 10 December 1997. Instead of paying the full purchase price, it was agreed that a sum of $241,857,710.40 was to be paid on completion. The balance in the sum of $64,208,886.60 was to be dealt with under Clause 4 of the Supplemental Agreement,

"
(a) The balance of the Purchase price in the sum of HK$64,208,886.60 shall be paid by the Purchaser to the Vendor upon,
(i) the Purchaser obtaining written permission or approval from the relevant Government authority to modify or change the existing user of the Property to other user so that the value of the Property shall at least be equivalent to the value of land of equivalent size permitted for the use of open storage of containers; and
(ii) the Vendor delivering or procuring to deliver vacant possession of the Property to the Purchaser after receipt of written demand from the Purchaser requiring the Vendor to do so.
(b) Notwithstanding anything contained in Clause 4(a) above, if the [Vendor] fails to deliver or procure to deliver vacant possession of the Property or any part thereof to the Purchaser, so long as the said written permission or approval from the relevant Government authority as mentioned in Clauses 4(a)(i) has been obtained by the Purchaser, the Purchaser shall upon expiration of 18 months from the date of receipt of the said written demand by the Vendor pay the said balance of Purchase Price to the Vendor deducting therefrom as liquidated damages a sum calculated Dollars Ten (HK$10.00) per square foot on the area of such portion of the Property vacant possession of which the Vendor fails to deliver or procure to deliver."

30. It is to be noted that the requirement for permission from the Government authority to modify the user of the land to one which would render the value of the land to commensurate with that of land of the same size for open storage was something new. There was no such requirement under the Sub-sale Agreement. Under Clauses 16 and 17 of the Sub-sale Agreement, no warranty was given by Earning Youth as to the development or redevelopment potential of the land and no warranty was given as to the inclusion of the land in any lay-out or redevelopment plans under the Town Planning Ordinance.

31. Clause 37 in the Sub-sale Agreement was deleted pursuant to Clause 5 of the Supplemental Agreement.

32. Completion took place on 9 December 1997, the same day as the date of the Supplemental Agreement. This was against the background that the last extension by the District Officer for the consent was only up to 10 December 1997. By that time, there had been oppositions from quite a number of people who claimed they had interests (either direct or indirect interests) in the Wui and the District Officer had been alerted to such oppositions. Although an application for a further extension was made on 11 November 1997 by a solicitor firm acting for the managers, there was no guarantee that such further extension would be granted in those circumstances. In late August 1997, the District Office had at one stage considered the withdrawal of the consent. In the end, based on legal advice, the Liaison Officer of the District Office told the aggrieved members that they should try to resolve the matter with the managers by legal proceedings. The District Office was also aware that injunction proceedings were contemplated by the members and there was an application for inspection of documents in the District Office file by a solicitor firm acting for certain members in November 1997.

33. Apart from the deposits paid to the Wui which I have mentioned above, another deposit in the sum of $67,200,000 was paid by Earning Youth on 8 September 1997. Up to 8 September 1997, Earning Youth had received deposits from System Link in the total sum of $140,000,000. Deducting the deposits it paid to the Wui (including the $67,200,000), Earning Youth retained a sum of $39,200,000 ($140 million minus the $100,800,000 deposit paid to the Wui). Of course, this does not take into account of the $14 million paid to the managers as deposits for the purchase of their own interests in the Wui.

34. On completion, the amounts that should be paid to the Wui were $235,200,000 (balance of the purchase price) and $6,657,710.40 (the Donation). The total added up to $241,857,710.40. However, the managers agreed to the deferral of the payment of the Donation to 14 February 1997 and this was recorded in a letter dated 9 December 1997 from the solicitor acting for the Wui to the solicitor acting for Earning Youth. Man Ping Nam said in his evidence under cross-examination that the managers agreed to accept a post-dated cheque of 14 February 1998 for the Donation because Mr Siu of Earning Youth requested the same. According to Man Ping Nam, Mr Siu said he wanted to wait for clearance of the cheques from System Link on completion as Earning Youth did not have sufficient fund.

35. What was allegedly said by Mr Siu did not accord with the actual position. Earning Youth should not be short of fund to pay the Donation. According to Mr Allan Yam, the solicitor acting for System Link in the conveyancing transaction who gave evidence before me, System Link actually calculated with Earning Youth the amount payable to Earning Youth on completion by reference to the sum payable by Earning Youth to the Wui. Hence, it was precisely $241,857,710.40 that was payable by System Link to Earning Youth on completion. That already took into account of the Donation.

36. On 9 December 1997, when completion took place and the managers executed an assignment in the name of the Wui in favour of System Link, the Wui was only paid a sum of $214,233,125 by a cheque from Messrs Yam & Co., the solicitors acting for System Link. The other monies payable on completion were actually paid as follows,

(a) a sum of $3,360,000 (again by a cheque of Yam & Co.) was paid over to the solicitors acting for the Wui and utilized for payment of commission allegedly due to one Ferdinand Group Limited under a commission agreement dated 4 August 1997;
(b) a sum of $3,606,875 (again by a cheque of Yam & Co.) was paid over to the solicitors acting for one member of the Wui, Man Shing Lee 文勝利 in respect of that member's shares for stakeholding pending litigation with regard to such shares;
(c) the deposits in the total sum of $14,000,000 paid by Earning Youth to the managers on 4 August 1997 for the sale of their own interests in the Wui were used to set off against liabilities of Earning Youth to the Wui on completion.

37. I do not know whether the managers had actually deposited the $14,000,000 and interest earned thereon between 4 August and 9 December 1997 into the bank accounts of the Wui. The managers had not given full discovery of the bank statements of the Wui.

38. At the same time, based on the split cheque instructions set out in a letter dated 9 December 1997 from the solicitors acting for Earning Youth, Yam & Co. issued five cheques to make up the $241,857,710.40. I have already referred to three of those cheques. The other two cheques were one in favour of Messrs King & Co., the solicitors for Earning Youth in the sum of $482,674.30 and the other one was in the sum of $20,175,036.10 in favour of Earning Youth. Hence Earning Youth should have sufficient fund to pay the Donation in December 1997.

39. Although the managers claimed that the Donation was paid into the bank account of the Wui, again due to the refusal of the managers to give full discovery of the bank statements, one cannot verify when the Donation had been paid into the account of the Wui and whether interest generated thereon since 14 February 1998 had been kept in the account.

40. According to the evidence of Mr Yam, Earning Youth did not fulfill the conditions set out in Clause 4 of the Supplemental Agreement and the balance of $64 million odd was therefore not paid by System Link.

The complaints of the Plaintiff

41. The Plaintiff alleged that the Defendants acted in breach of their duties as trustees and managers of the Wui in the sale and the grounds of the complaints were pleaded in Paragraph 37 of the Re-re-re-re-amended Statement of Claim. It should be mentioned that the Plaintiff had abandoned their reliance on an alleged offer from Messrs Andy Lo & Co. The Plaintiff's complaints can be grouped under four broad categories,

(a) the Defendants failed to inform and consult members of the Wui about the sale;
(b) the Defendants made a secret profit and members of the Wui were deprived of the Donation;
(c) the Defendants failed to obtain the best price for the land and sold the same at an undervalue;
(d) the Defendants failed to render proper account regarding the sale.

42. In respect of the first category of complaints (comprising of sub-paragraphs (i), (ii), (iii) and (vi) of the particulars set out under Paragraph 37), the Plaintiff's case was that the Defendants were bound by the Articles in the Land Entitlement Books issued by the Wui to each of the members as well as the 1994 Circular.

43. In respect of the Donation, the Plaintiff's case as set out in the final submissions of Mr Fung SC (counsel for the Plaintiff) was that it was initially intended to be a secret profit for the Defendants. The court's attention was drawn to a number of suspicious circumstances regarding the Donation and the Plaintiff invited this court to draw adverse inference against the Defendants. The Plaintiff contended that with the investigation into the matter, monies derived from the Donation or may be some of it were retained in bank accounts of the Wui. However, as mentioned, the Defendants did not give full discovery as to the bank statements and it cannot be verified whether the full amount of the Donation together with all interest therefrom remained in the bank accounts of the Wui. In any event, the Defendants were obliged to give a full account of the Donation and its interest.

44. In respect of the third category of complaints, the Plaintiff further averred that the Defendants did not sell the land by tender or public auction and did not obtain the advice of any competent valuer on the market price of the land. The Plaintiff's expert Mr CK Lau of Jones Lang Lasalle valued the land at $466,000,000 at the material time.

45. In respect of the fourth category of complaints, the Plaintiff contended that the so-called Chinese statements of account rendered by the Defendants were inadequate and it was submitted that the Plaintiff was entitled to examine the supporting documents and then to seek to falsify or surcharge the account if there are sufficient grounds for so doing. Three specific items were highlighted by Mr Fung in his oral closing submissions,

(a) a sum of $1,000,000 allegedly paid to Messrs David Y Y Fung & Co as solicitors fees for the sale;
(b) a sum of $3,360,000 paid to Ferdinand Group Limited as commission;
(c) interests earned in respect of the sale proceeds.

46. In addition, on 28 July 2003, counsel for the Plaintiff handed to the court as well as those acting for the Defendants a list setting out the information and documents sought by the Plaintiff as to dealings regarding the proceeds of sale.

47. In terms of relief, the Plaintiff did not ask for the sale to be set aside. The Plaintiff confined his prayers in the Re-re-re-re-amended Statement of Claim to accounts, inquiry and "damages" for breach of trust. In the Amended voluntary particulars, the Plaintiff further identified the "damages" or equitable compensation as the difference between the market price of the land and its sale price of $336,000,000 and the Donation. There was also an alternative calculation for damages based on the difference between the sub-sale price and the sale price. As owner of 1.5 Shek out of a total of 32 Sheks, the Plaintiff claimed 1.5/32 share of these sums together with interest.

The case of the defence

48. The Defendants accepted that they were trustees and as such owed duties towards the Plaintiff. However, Mr Neoh SC submitted that the duty is subject to Section 15 of the New Territories Ordinance. He contended that the effect of that section was that the Defendants were trustees for sale with full power to dispose of the land subject to the consent of the Secretary for Home Affairs. Reading that in conjunction with Section 13 of the Trustee Ordinance, Mr Neoh said that the Defendants had a statutory discretion in respect of the mode and manner of sale. Hence, the Defendants were under no duty to take account of the wishes of the beneficiaries in this exercise of discretion unless there is proof of bad faith.

49. The Defendants denied that the Articles in the Land Entitlement Books were binding on them. Nor did they recognize the effect of the 1994 Circular. Counsel submitted that in any event, the resolution passed in March 1992 was sufficient authority to sell given by the members of the Wui to the Defendants. In short, the Defendants said they were not obliged to consult members of the Wui as to the sale after they had that authority and the consent of the District Office.

50. Further, the Defendants averred that they had held a meeting of the Wui on 16 March 1997 informing the members as to offers received from various solicitors firms in early 1997. It was alleged that at that meeting, the members authorized the Defendants to proceed with negotiations for sale of the land.

51. In respect of the Donation, the Defendants pleaded in Paragraph 20(5) of the Re-Amended Defence that the money was at all material time and still is held under the Wui's name at a fixed deposit account kept with Heng Sang Bank. That is obviously incomplete. In a letter dated 19 July 2003, solicitors for the Defendants informed solicitors for the Plaintiff that the monies were kept in two separate bank accounts, one with the Bank of China and the other one with Heng Sang Bank.

52. In his Final Submissions, Mr Neoh submitted that the Donation was not a secret profit as alleged by the Plaintiff and disclosure had been made about the setting up of the fund to some members of the Wui.

53. Counsel further submitted that the purpose of the Donation was to create a benevolent fund so as to retain the social structure of the Man clan at San Tin and as such, the Donation was for potentially charitable purposes and the Defendants were not obliged to make a distribution. He contended that it was arguable that based on Clauses 11 and 12 of the Conditional Agreement, the Donation was a settlement with charitable object and its disposal cannot be resolved in the present action. He submitted that the Secretary for Justice should be a party to any proceedings concerning the disposal of the Donation in her capacity as Parens Patriae. These points were not pleaded in the Re-amended Defence.

54. Regarding the allegation of sale at an undervalue, the Defendants called an expert Mr Gilbert Yuen of Vigers Hong Kong Limited to give evidence to the effect that the market value of the land at the material time was $283,000,000 (at about $85 per square foot). That was based on the existing use of the land. An alternative valuation based on the use of the land for open storage purposes in the sum of $336,000,000 was also given. Mr Neoh agreed that the latter valuation was irrelevant because at the material time, the Wui did not obtain the necessary permission or approval for using the land for open storage purposes.

55. Mr Neoh advanced three propositions in connection with the duty of the Defendants regarding sale of the land,

(a) the Defendants were only required to fetch the best available price in the market and not a price indicated by a valuation;
(b) the Defendants had a discretion under Section 13 of the Trustees Ordinance to choose the mode of sale, provided that the requirement in (a) is met;
(c) in any event, provided that the Defendants acted honestly and reasonably in the sale, they ought to be relieved under Section 60 of the Trustees Ordinance.

In the Re-amended Defence, there is no plea for relief under Section 60. Be that as it may, Mr Neoh submitted that the Defendants were not obliged to seek any professional advice as to valuation nor obliged to sell the land by way of public auction or tender. He urged this court to conclude that the Defendants had acted honestly and reasonably and if necessary granted relief under Section 60. Although there was reference to Chinese notes signed by members holding 25 Shek acknowledging that they had no claim in law against the Defendants, Mr Neoh fairly accepted at the trial that these Chinese notes could not by themselves give rise to any defence to the Plaintiff's claim as the Plaintiff had not executed the same.

56. It was submitted that the Defendants had gone through a price discovery process in the discharge of their duty as managers and trustees in respect of the sale with due consultation of the members of the Wui. Mr Neoh summarized the material facts in Annexure 2 to his Final Submissions. The Defendants also relied on two letters of authorization signed by some members of the Wui in 1992 agreeing to sell the land at not less than $60 and $65 per square foot respectively.

57. Mr Neoh argued that in mid 1997, there was no serious offer (and he submitted that the offers received by the managers in early 1997 were mere probing offers) and there was uncertainty about the further extension of the consent by the District Officer. He also urged the court to bear in mind that this was a very large piece of land with restrictions on its use and the number of potential purchasers was very limited. The Defendants could not give vacant possession on completion. It was against such background that the Defendants received the offer of about $101 per square foot from Earning Youth. That was the highest offer which the Defendants had ever received. The Defendants were prepared to sell their own interests in the Wui at that price and entered into agreements to that effect. They then sold the land of the Wui at the same price plus the Donation. Mr Neoh submitted that it was wise for the Defendants to take a bird in hand when there was none in the bush. He argued that in the circumstances of the case, the Defendants had exercised due diligence in the sale. Based on certain statistics and index set out in the report of Mr Lau, Mr Neoh submitted that the property market had topped out in August 1997 and if the Defendants had delayed in accepting the offer, the market would have turned drastically.

58. In respect of the sub-sale, Mr Neoh argued that it was a very different sale because by the time of the sub-sale by Earning Youth to System Link, the extension of consent had been granted and Earning Youth agreed to give vacant possession on completion.

59. It was also submitted that the sub-sale could not be relied upon as a comparable to gauge to market price for the land at the material time. Mr Neoh invited the court to regard Henderson and thus System Link as a purchaser with special interest due to Henderson's Nam Sang Wei project. He also submitted that it would not be possible for the Defendants to deal directly with Henderson or System Link because the Defendants could not give vacant possession by 10 December 1997, nor could they be certain that extension of the consent would be granted at the time of the Provisional Agreement.

60. In respect of the duty to account, Mr Neoh said that interim and final accounts had been rendered by the Defendants in writing. There was no demand for verification of the accounts prior to the institution of the present action and in Annexure 6 to his Final Submissions, Mr Neoh tried to demonstrate that the contents of those accounts were supported by contemporaneous documents amongst the trial bundles.

61. In respect of interests, Mr Neoh submitted that as a result of the judgment of Yuen J on 21 October 1999, the Plaintiff had been paid his share of entitlement with interest. Since the Plaintiff is not suing as representative of other members of the Wui, he was not entitled to further account or interest.

62. It would be convenient for me to dispose of this last point at this juncture before I discuss and analyze the other points since it could be dealt with relatively shortly. With respect to Mr Neoh, it is quite obvious that this is a false point. The relevant chronology is as follows. At the hearing before Yuen J in October 1999, the relevant Statement of Claim before Her Ladyship was the Re-amended Statement of Claim of 14 October 1999. There was no specific prayer for account in that document. The Plaintiff claimed, inter alia, the sum of $15,549,195 as his share of the sale proceeds and interest thereon pursuant to Section 48 of the High Court Ordinance. On 5 March 1999, the Plaintiff issued a summons in this action seeking summary judgment in respect of these two claims. In another set of proceedings, viz. HCMP 2163 of 1998, the managers as plaintiffs in effect sought directions from the court pursuant to Order 85 Rule 2 concerning the disposal of the $15,549,195. In the context of that set of proceedings, the managers undertook to the court on 10 September 1998 that they would pay into court the sum of $15,549,195 with interest earned thereon being attributable to that account from the date of receipt to the date of payment. Pursuant to that undertaking, a sum of $15,893,801.80 was paid into court by the managers on 17 September 1998. Yuen J heard the two sets of proceedings together in October 1999, including the summary judgment application in this action. On 21 October 1999, Yeun J made an order for summary judgment in favour of the Plaintiff and ordered the payment out of the $15,893,801.80 to the Plaintiff.

63. Since there was no prayer for account at that stage and no account had been rendered as to how the $15,893,801.80 represented the full amount of principal and interest in respect of the $15,549,195, this could not have been an issue decided by Yuen J in her judgment of 21 October 1999. Is the Plaintiff barred by the order for summary judgment and the payment out to seek an account in respect of the interest element? In my judgment, the answer is "No". I fail to see how there could be such a bar when there cannot be any application of the principle of res judicata whether in the narrow sense or in the wide sense (see Johnson v Gore Wood [2001] 2 WLR 72 and Ray Chen v Anita Wan Ching Lam HCA No. 4582 of 2001, 9 May 2002). Mr Neoh did not suggest any abuse of process on the part of the Plaintiff in pursuing the claim for account regarding interest in his submissions. There was nothing to suggest that the Plaintiff had ever accepted the payment out of $15,893,801.80 as full discharge of the Defendants' duties as trustees, in particular the duty to render proper accounts, both as to the principal as well as interest. Bearing in mind the chronology and the circumstances of the case, there cannot be any abuse of process for the Plaintiff to seek an account as to the interest after the summary judgment had been entered in his favour. I therefore reject this argument.

Relevant factual findings pertaining to the Defendants' discharge of their duties in the sale of the land

64. Quite a number of witnesses had been called during the trial and they have been cross-examined extensively. I have re-read all my notes of the evidence in my deliberation and it would be sufficient for me to refer to the essential parts of the relevant evidence in the discussion of each specific issue below. I do not find it necessary to deal with all matters raised in cross-examination as a lot of them only touch upon peripheral matters (e.g. motive of MFT in taking part in discussion and the business interests of some of the witnesses and steps allegedly taken by them to further their interests) which have no direct bearing on the issues that I have to resolve in this action.

65. Concerning the duty of reasonable care and skill on the part of the managers, I shall discuss the law at greater detail below. The crucial question is whether the Defendants had discharged their duties in fetching a proper price for the sale of the land. Although consultation of the members would be relevant, it is not the acid test under the general law. It is not disputed that no resolution had been passed for approving this particular sale to Earning Youth at this particular price. In my judgment, the following are the key factual issues that I have to resolve before I could properly assess whether the Defendants had met the standard of an ordinary prudent man of business in the process of entering into the agreement,

(a) whether the Defendants had gone through a process of price discovery since 1992;
(b) whether the Defendants had retained George Yip of Messrs Robert Wang & Co to advise the Wui on the sale procedures and the extent to which the Defendants acted in accordance with such advice;
(c) whether the Defendants had agreed to the proposal set out in the 1994 Circular and what was the reason for the Defendants' failure to act in accordance with the same subsequently;
(d) whether the Defendants had obtained the approval from the members of the Wui to sell the land at a price above $96 per square foot at the meeting of 16 March 1997.

Although some of these incidents happened quite some time before the sale in 1997, they formed part of the factual matrix in the background which I should take into account in assessing the facts and circumstances at the time when the trustee had to act and matters known or ought to have been known to the trustee at that time. They are also relevant to the issue of Section 60 relief insofar as the Defendants could pray in aid of that without any pleadings.

66. In addition, issues relating to the Donation are pertinent to the bona fide of the Defendants (a relevant consideration for Section 60 relief) and how the Donation came about and its true nature have to be considered. If the Donation was part of the "price" under the 1997 sale, that would increase the unit price for the sale to a level higher than $101 per square foot.

67. Before I embark on a discussion of my relevant factual findings and reasons for the same, it would be necessary for me to deal with the credibility of two principal witnesses who have given evidence at the trial, MFT and Man Ping Nam. As regards my assessment of the credibility of the other witnesses, I will discuss the same in the context of my reference to their evidence in my factual findings.

68. Two officers from the District Office who had been involved in this case were called to give evidence at the trial. Understandably, due to the lapse of time and change of posts, in many respects they could not have much recollection of the details and needed to refer back the records in the District Office files. They have given the court some assistance in understanding how the office operated regarding Tso and Tong affairs. I find both of them to be truthful and reliable witnesses and I am grateful for their assistance. As mentioned, the District Office files had been produced as exhibit and it contained very detail contemporaneous records relating to the developments in the Wui and the managers' dealings with interested parties and the District Office. The two officers who gave evidence had confirmed the accuracy of these records insofar as the same were made or compiled by them although it is accepted that some of the minutes only gave a summary of the relevant incidents instead of verbatim record of what was said. I am satisfied that the minutes captured the gist of what transpired. These records, as far as they related to matters which the officers making the same had first-hand knowledge thereof, could in my judgment serve as a primary source of reference in assessing the oral testimony of the witnesses.

69. MFT's evidence in chief was contained in four witness statements (at Trial Bundle B p. 1, 29, 275 and 289 respectively). I shall refer to his evidence about the Land Entitlement Books later. For present purposes, the other important aspects on which he had given evidence are the negotiations between the parties and the discussions with the District Office as to the Section 15 consent and the sale procedures, the meeting with George Yip, the 1994 Circular, the events after the members learnt of the sale in 1997. Some of his evidence was mere recitation of what were recorded in the contemporaneous documents. There are however two matters on which his evidence supplemented what were recorded in such documents: (a) the meeting with George Yip; and (b) the genesis of the 1994 Circular. His evidence in respect of the meeting with George Yip is in serious conflict with the oral evidence of Man Ping Nam. For the reasons given below, Man Ping Nam did not impress me as an honest witness. I have no hesitation in preferring MFT's evidence to that of Man Ping Nam. I find the evidence of MFT on these two matters to be in line with contemporaneous documents. Further, given the circumstances leading to these incidents as evidenced by the minutes in the District Office files, I am of the view that the account given by MFT is inherently more probable despite the defence's attack on the motive of MFT about his involvement in the events leading to the issue of Section 15 consent by the District Officer.

70. Mr Chong spent a lot of time during his cross-examination of MFT in an attempt to demonstrate that MFT was trying to serve his personal interest in formulating the sale procedures and in order to achieve that MFT had tried to stall the grant of Section 15 consent. Mr Chong also alleged that MFT collaborated with Man Ping Wai and Man Luk Sing in acquisition of interest in various Wui or land in San Tin (including Man Shek Chung Wui) for some financial backers. Mr Chong explored at length the transactions between MFT and one Neweast Investments Ltd in 1997 regarding interests in Man Shui Tong Wui (文水塘會) which also held land in San Tin.

71. MFT denied that he had any connection with developers when he took part in the drafting of the 1994 Circular. He denied he collaborated with Man Ping Wai and Man Luk Sing in their earlier acquisition activities. He accepted that at a later stage, he had dealings with an agent who worked for a developer and in 1997 he did enter into transactions with Man Ping Wai and Man Luk Sing. In respect of the drafting of the 1994 Circular, MFT said it was drafted by him together with Man Ping Wai and it was then passed to the managers for their comments. MFT did not personally contact the managers for that purpose. That was done by Man Ping Wai. However, MFT was able to say that the draft had been amended 3 or 4 times. The final draft was produced in June 1994. MFT also agreed that the Chinese letter of 30 July 1994, the signatures of the managers on which was disputed, was drafted by him and Man Ping Wai. He said the letter was drafted to assist the managers in formulating the conclusions derived from the reply slips. He said after the documents were drafted, he had not handled the same. He returned the reply slips signed by him to Man Ping Wai. He regarded Man Ping Wai as the middleman between him and the managers because at that time, he was not on good terms with the managers.

72. Despite the efforts of Mr Chong, I am not persuaded that MFT had been working in collaboration with Man Luk Sing and Man Ping Wai regarding their acquisition exercise way back in 1992. On the other hand, MFT did accept that he had personal interest in the matter as he was indirectly a beneficiary through the estate of Man Mou Hei. MFT also admitted that whilst he had no connection with developers in 1994, he had a chance to team up with a developer in order to earn the commission. Therefore one cannot say in drafting the 1994 Circular, he was acting without any regard to his private interest. But that was an opportunity that could be seized upon by every member of the Wui and I accept MFT's evidence that there were a lot of members wishing to take advantage of such opportunity.

73. Man Ping Nam is obviously an untruthful and unreliable witness. On several important aspects of the case, he gave evidence which is inconsistent with his previous statements. No good explanation was advanced for such self-contradictions. In several important aspects highlighted below, his evidence was also inconsistent with contemporaneous records and his conduct at the material time.

74. By way of example, his case has changed dramatically with regard to what happened at the meeting of 16 March 1997. Initially, in his first witness statement made on 12 April 1999, no reference was made to this meeting in March 1997. Instead, he referred to a meeting in May 1997 (he subsequently said no such meeting took place in his Third Supplemental Statement of 27 August 2003) at which MFT seized the opportunity to enquire about the 1994 Circular. He said in paragraph 24 of his 1999 statement that the purpose of the meeting was not to discuss matters relating to sale of the land. In his supplemental statement of 24 April 2002, he said in Paragraph 24 that in view of the signing of the Letter of Authorization in 1992, the managers decided that there was no need to convene another meeting to discuss the sale. The whole tenor of his evidence in this supplemental statement was that there was no further meeting of the Wui since 1992 to discuss the sale of the land. He emphasized in Paragraph 42 that after the submission of the application for approval to the District Office, although several meetings of the Wui had been held, none of those were for discussion of sale of the land. Again no mention was made of the meeting of 16 March 1997.

75. The first time Man Ping Nam alleged that the members of the Wui authorized them in the meeting of 16 March 1997 to sell the land was in his Second Supplemental Statement made on 4 July 2003. Hence, there appears a shift of his case as to what he regarded as the source of the managers' authority to sell the land. When he was cross-examined by Mr Fung on 3 September 2003, he contended that his authority was derived from the meeting of 16 March 1997.

76. No explanation has been offered by him as to why he failed to refer to this significant meeting in his earlier statements or pleadings (the plea related to this meeting was only added by way of re-amendments on 15 August 2003). It is difficult to accept that he could have forgotten about such an important meeting, particularly when the managers had in their possession a minute book of the Wui (produced as exhibit D-29) and there was a minute of this meeting. They only needed to refer back to it to refresh their memory as to its date and what happened thereat.

77. The minute for this meeting was recorded by Man Ping Nam. On comparison with other minutes in the minute book, this minute for 16 March 1997 was in an unusual format. In the other minutes, the resolutions passed in the meetings were all recorded after the signatures of those attending the meetings. However, the minute for 16 March 1997 did not contain any resolution after the signatures. Instead, in the preamble, apart from the usual reference to the date of meeting it was written as follows,

"商討政府批出本會批准書准許本會出售即将够期買賣與否請各業主彼出意見交由三位司理人處理此事。" (My underscoring)

The characters underlined by me were written with a different pen. The other characters were written in blue whilst these characters were written in black.

78. In cross-examination, Mr Fung suggested to Man Ping Nam that those characters in different ink were added subsequently to bolster the case of the defence. Mr Man denied and explained that there was a change of pens because the original one ran out of ink. He maintained that the whole passages before the signatures were all written at the same time and they were written before the meeting started.

79. I cannot accept this explanation and I have no doubt whatsoever that there was no truth in it. The same blue pen was used to write the next adjacent items in the minute, viz. the record of the date, time and place of the meeting. Man Ping Nam said on 4 September 2003 in his own answer to Mr Fung's question that these items were written at the same time. When his attention was drawn to these apparent difficulties with his evidence, he at first said that those items were already written down. When Mr Fung further asked him whether he was suggesting that those were written down before the characters in black, Mr Man disagreed and then said he could not remember.

80. Further, from the context, the characters in black "交由三位司理人處理此事" were an awkward continuation of what had been written immediately before. The earlier part of the sentence seems to be the agenda which the meeting was to discuss, namely asking for opinions from the members as to whether the land was to be sold. In contrast, the phrase which comprised of these characters in black appeared to be a resolution of or conclusion reached in the meeting that the matter would be left to the three managers for handling.

81. As mentioned, the recording of a resolution or conclusion reached in a meeting at the preamble of a minute was not the useful format adopted by the managers in their minutes. Man Ping Nam said the whole preamble had been written before the meeting started. I ask rhetorically how could he predict the result of the meeting and record the alleged conclusion reached in the meeting at the preamble.

82. It is quite clear to me that those characters in black were added at a later stage and Man Ping Nam was aware of that. He was aware that no resolution had been passed at that meeting. He admitted under cross-examination by Mr Fung on 3 September 2003 that no resolution had been passed in that meeting. He said Man Wai Cheong was the only person who said at the meeting that the managers should be authorized to sell the land and there was no voting on this. He confirmed such evidence again on 4 September 2003 and he said during the meeting someone started to quarrel.

83. In the light of that, it is difficult to understand how he could regard what happened at this meeting as authorization by the members to the managers to sell the land and instruct his lawyers to plead in Paragraph 20 (6) of the Re-amended Defence that the managers were told at the meeting by members to proceed with negotiations for sale. What he said in Paragraph 4 of his Second Supplemental Statement of 4 July 2003 in the following terms could not be the truth,

"在會議上，...各出席會員經商議後一致同意交由我們三位司理人去出售該土地。" (my emphasis)

Yet, he adopted the same in his evidence in chief without any qualifications.

84. After he was cross-examined by Mr Fung about different pens being used for writing the relevant passage in the minute of 16 March 1997, Man Ping Nam recognized the weakness of his case in this respect and resorted back to his original case that his authority stemmed from the March 1992 resolution and letter of authorization in order to tone down the significance of the unsatisfactory aspect of his evidence concerning 16 March 1997.

85. Another important aspect where Mr Man changed his evidence was about what he told the Liaison Officer at the District Office on 24 April 1993. According to the minute kept by the District Office (M82 at Trial Bundle C3 p. 38) Mr Man contacted the officer and told the latter that he, as manager of the Wui, would consult a solicitor on the sale and he would sell the lot by tender through a solicitor. He also intimated he thought that sale by tender through solicitor was a fair way to sell the lot with highest price.

86. When Mr Fung cross-examined him about this conversation, at first Mr Man admitted that he had told the Liaison Officer that he would consult a solicitor about sale by tender through solicitor. In the next answer, however, he denied that he had mentioned tender to the officer and he said all along he did not like tender. A little later, when he was referred to M87, he admitted on 6 May 1993 he did tell the officer that the lot would be sold by tender through solicitor and the procedures were being worked out. He also admitted that on 3 August 1993, he told the officer that the fair procedure of sale was being worked out by his solicitors as recorded in M120.

87. Mr Man also changed his evidence about the role of Mr George Yip, what happened at a meeting in Mr Yip's office on 9 September 1993 and his knowledge as to Mr Yip's advice in a letter dated 2 October 1993 and a Chinese letter dated 13 October 1993. In his first witness statement filed on 12 April 1999, he said the managers instructed Mr Yip for general legal advice on matters touching upon the sale of the land (Para. 16). Later, Mr Yip moved to another firm, Messrs Or, Ng & Chan, and in paragraph 21 of that statement, Mr Man said that firm handled the extension of consent as the Wui's solicitor. In Paragraph 22, Mr Man said the following,

"The Defendants had instructed Messrs Robert W H Wang & Co., Messrs Or, Ng & Chan and Messrs Sinclair Roche & Temperley respectively because Mr George KB Yip worked for these firms successively."

Hence, quite obviously, Mr Man regarded Mr Yip as acting in his professional capacity in such dealings concerning the Wui. That also seems to be the understanding of Mr Yip as reflected in the letters he wrote to the Defendants and to others on behalf of the Wui.

88. In his Third Affirmation of 26 February 2001, Mr Man said Mr Yip was his friend and he consulted him about the affairs of the Wui casually. He referred to the meeting in September 1993 and said he attended the same. He also referred to the two letters issued by Messrs Robert Wang & Co in October 1993. Mr Man therefore changed his case about the capacity in which Mr Yip had been involved in the matter.

89. In his supplemental statement in Chinese dated 24 April 2002, Mr Man again emphasized that he only consulted Mr Yip as a friend and Mr Yip was not instructed to act for the Wui or the managers (Para. 31 of the statement). As regards the meeting in September 1993, he said it was just an occasion where Mr Yip gave some free legal advice. He said he was present together with MFT, Man Bun and a Mr Yeung (MFT's secretary) at Mr Yip's office where the meeting took place (Paras. 32 and 33). He also made observations about what happened at the meeting. He again referred to the two letters issued by Mr Yip in October 1993.

90. In his subsequent statements (dated 4 July, 27 August and 3 September 2003) filed shortly before trial and during the trial, he did not deem it necessary to correct what he had said in these respects.

91. It therefore came as a surprise when Mr Man testified under cross-examination on 4 September 2003 that he did not attend the meeting on 9 September 1993 because the office of Mr Yip was too small and he stayed outside the room as he did not want to listen to what the others discussed at the meeting. He said the only thing he told Mr Yip before the others went into the room to have the meeting was that the managers did not like to have a sale by tender. He said he had no knowledge about what was discussed at the meeting. He seemed to be suggesting that his role on that occasion was simply to bring MFT there and introduce him to Mr Yip. According to Mr Man's testimony in the witness box, he waited outside the room for about half an hour to 40 minutes and then when the other people came out, he left with Man Bun.

92. I also find Mr Man to be extremely evasive when Mr Fung questioned him on 4 September 2003 about the letters of advice from Mr Yip. He kept saying he could not remember about the letters and even feigned ignorance about the Chinese letter of advice dated 13 October 1993 despite his attention drawn to the fact that he had handed a copy of that to MFT as evidenced by M137 in the record of the District Office. He then said he had a little impression. Upon clarification sought by the court, he said he had not seen this letter before 4 September 2003. It is quite obvious to me that Mr Man was not telling the truth and he was trying to avoid questions about the letter. As Mr Fung subsequently demonstrated by cross-examination, Mr Man had to admit that the managers had not follow the advice of Mr Yip in the letter.

93. On 5 September 2003, when Mr Fung asked Mr Man about this letter of 13 October 1993 again, he agreed that Mr Yip gave him the letter because he told Mr Yip that he could not read English. When he was asked to confirm that he did receive the English letter of advice of 2 October 1993, he became evasive again and said he could not remember. He also changed his evidence about whether Mr Yip had charged anything in respect of his service regarding the sale of the land of the Wui. At one stage he said the charges of Mr Yip were purely for his own private matters and had nothing to do with the Wui. Shortly thereafter, he retracted that evidence and said he could not remember. He said one lump sum of $30,000 had been paid to Mr Yip and he could not say whether this covered the letters as well. Despite observations by Mr Fung as to no discovery being made regarding such payment and the receipt issued by Mr Yip, up to the end of the trial the defence did not produce the receipt nor explain for such omission.

94. Mr Man maintained in the witness box that Mr Yip was only acting as a friend and the Wui had not formally retained him as their solicitor to handle the sale of the land. This is contradicted by his first witness statement, and inconsistent with the letters of advice written by Mr Yip in October 1993, the correspondence between Messrs Robert Wang & Co and Messrs K C Tsang & Co in November and December 1993 (see Para. 43 of Supplemental Statement of Man Ping Nam of 24 April 2002), the letter from Messrs Or Ng & Chan to the District Office on 25 November 1996 (C3 p. 461) and letters dated 26 May, 17 June, 4 July and 12 August 1997 from Messrs Sinclair Roche & Temperley to the District Office. This stance is also inconsistent with the tenor of a letter dated 3 July 1993 written by the managers to the District Office (Bundle C3 p. 335). It was stated by the managers in the said letter,

"有關出讓該土地程序本會已交由(王惟翰律師樓)葉建鑣律師依據香港法例辦理所有手續"

95. As regards the 1994 Circular, Man Ping Nam said in his first witness statement of 12 April 1999 that the circular was prepared by MFT and when the managers signed the same before copies were distributed to the members, the words "不同意" in the reply slips had been crossed out. He said the managers did not receive any reply slip and therefore they believed that the members did not agree with the proposal in the circular. In Paragraph 24, he said MFT seized the opportunity of a meeting held in May 1997 to raise discussion about the 1994 Circular.

96. In Paragraph 34 of his supplemental statement of 24 April 2002, Man Ping Nam corrected himself and said the words "不同意" had not been crossed out when the managers signed the circular. He denied he had signed any reply slips. He said in Paragraph 40 of that supplemental statement that MFT and other members had never mentioned the 1994 Circular after the managers did not receive any reply and no-one requested discussion of the same by the Wui. That was apparently contradictory to what he said in Paragraph 24 of his first witness statement. It was also inconsistent with the minutes of the District Office that recorded discussions about the 1994 Circular on a number of occasions prior to the issue of the consent by the District Officer.

97. Amongst the documents in the files of the District Office were two letters dated 30 July 1994 purportedly written from the managers to the District Officer. The first one was at Bundle C3 p. 397. I shall call this the Undisputed Letter because Mr Man admitted in his evidence on 4 September 2003 that the letter was in fact issued by the managers. I would set out the contents of this letter below,

"敬啓者:本人就新田文石涌會物業第九九約七六三地段出售事，實屬重大，根據以往慣例，獲得超過大半数業主以上，通過贊同，而本人則接受有関業權人訂出買賣形式，本人認為取得公平合理，進行交易，以維護業權人利益，對上述物業出售，纯屬本人贊同意見，謹此提供台端鉴察懇請能早日批准為荷。"

98. The second letter of the same date was at Bundle C3 at p. 398. On the face of it, this was a letter from the managers to the District Officer informing the latter as to the result of collection of members' view on sale procedures by way of the 1994 Circular. It purported to report that more than half of the members agreed to the sale procedures set out in the 1994 Circular. The reply slips returned from the members were also enclosed to this letter and sent to the District Office. They were kept in the file of the District Office. In his supplemental statement of 24 April 2002, Man Ping Nam said in paragraph 39 that he could not remember whether this letter had been signed by the managers. I shall call this the Disputed Letter.

99. In his Second Supplemental Statement of 5 July 2003, Man Ping Nam asserted in Paragraph 2 that the proposals in the 1994 Circular had never been mentioned, discussed or adopted at any meeting of the Wui. He said all along he thought the proposal had not been adopted by the Wui and it was not implemented.

100. If that were so, it is difficult to understand what the managers referred to in the Undisputed Letter when they said they would abide by the mode of sale set by the members in the following phrase: "而本人則接受有関業權人訂出買賣形式". It seems quite clear to me that by this phrase, the managers were referring to the proposal in the 1994 Circular. I have no hesitation in rejecting Man Ping Nam's evidence that it was only a reference to sale to the highest bidder. That was too imprecise to be described as a mode of sale. It was also too much a co-incidence that the 1994 Circular was distributed and reply slips were collected around the same time as the date of the Undisputed Letter. The correlation between the two is clearly evidenced by M189 recording Man Ping Nam's promise on 20 July 1994 to send to the District Office the reply slips collected by the managers.

101. Further, what he said is inconsistent with his own conducts in dealing with the District Office. There were meetings at the District Office after the reply slips were filed on 1 August 1994. One interested person who had made a number of complaints to the District Office was Man Kam Tong. A meeting was held in early August 1994 in which Man Ping Nam, Man Ying Lam and Man Kam Tong was present. According to M193 in the file record of the Liaison Officer, Man Ping Nam made the following points at that meeting,

"Mr Man Ping-nam stress that he was fair to all beneficiaries and he had no dealings with Mr Man For-tai. All the procedure to sell the land would be handled by solicitor once DO's consent was given. He also said that there's no beneficiary objection to sale at the return slip at [the Disputed Letter and its enclosure]. He requested this office should approve the application as almost all the beneficiaries had no objection (including Man For-tai at [one of the reply slip])."

When he gave evidence, the writer of this minute Mr Ng Ho Lun said Man Ping Nam said on that occasion that amongst the return slips, there was no objection.

102. Another interested person who had some concern about the 1994 Circular was Man Chiu Pui. He did not like the restriction imposed under clause (1) of the circular that only members could tender. He made that clear in his reply slip and he brought up the matter with the District Office. The Liaison Officer discussed with Man Ping Nam about that objection and this was recorded in several minutes, e.g. M198, M202, M206, M207, M209, M211, M213, M220, M223 and M226. A letter dated 30 November 1994 was sent by the District Office to the managers asking for information as to progress as to revision of the sale procedures. The managers responded by a letter dated 3 December 1994. Hence, Man Ping Nam was clearly aware of what was being discussed. If the 1994 Circular was not regarded by all concerned as having been adopted, it is difficult to see why it was necessary to talk about revision. The simple answer to Man Chiu Pui's complaint would be that the Wui had not adopted any restriction as to potential tenders.

103. It is noteworthy that in the records of the District Office, despite reference made to the procedure set out in the 1994 Circular on a number of occasions, one cannot find any indication or suggestion that any one of the managers had ever complaint to the District Office that the reply slips sent to the office were not collected by the managers and the members actually did not agree with the proposals set out in the 1994 Circular. According to M257, after the members learnt of the sale and complaint to the District Office, a meeting was held at the District Office on 2 September 1997. The three managers were present. At that meeting, MFT queried the managers about their failure to follow the procedure in the 1994 Circular. The response of a manager was that they forgot about the same. There was no suggestion on the part of the managers that the 1994 Circular had not been approved by the members and the reply slips were not proper indication of the will of the members. Man Ping Nam was evasive when Mr Fung cross-examined him about this meeting. He was not in a position to dispute what was recorded in the minute.

104. When Man Ping Nam was cross-examined in the witness box about why he put down his name on the 1994 Circular before it was dispatched to members if he did not agree with its contents, at one stage he was reluctant to admit he had signed it. This was somewhat different from his stance in his witness statements. He seemed to suggest that his name on the circular (viz. the signature in the capacity of manager as distinct from his signature on the reply slips) was not put down by him. It was only when Mr Fung put the contents of his witness statement to him that he admitted that he and his co-managers signed the circular.

105. To account for his writing his name on two reply slips (he made a distinction between signing at the space for signature and putting down his name within the brackets at the reply slip), Mr Man said in the course of his cross-examination on 4 September 2003 that a meeting was held and copies of the 1994 Circular were placed on a table. Every member got a copy and put down his name on it. He could not tell the court the date of that meeting but he said the meeting was held by the managers and about 20 to 30 people were there. He also took a copy and wrote down his name. At the meeting, some members expressed the view that the procedures set out in the 1994 Circular was neither fair nor proper. Since he did not sign in the space provided in the reply slip for signature, he regarded the same as of no effect. Afterwards, he put his copy back onto the table. He did not know how these reply slips came to be sent to the District Office. He took another copy back to his home to read.

106. The assertion that a meeting of the Wui had taken place to consider the 1994 Circular is inconsistent with Mr Man's case set out in his Supplemental Statement and Second Supplemental Statement. It is also inconsistent with the stance adopted by his counsel Mr Chong in cross-examining MFT. Mr Chong had questioned MFT for the reason why no meeting was held to discuss the proposals on mode of sale instead of just dispatching to the members a copy of the 1994 Circular. Counsel also suggested certain motive on the part of MFT to avoid the holding of a meeting to discuss the mode of sale. There is also no record of such a meeting in the minute book of the Wui, exhibit D29. In my view, it is inherently improbable that the members still put down their names in the reply slips even though they did not agree with the proposal set out in the 1994 Circular. An examination of the reply slips filed with the District Office shows that different dates of signature were recorded. This established that they were not signed on a single occasion. It is also inherently improbable that the managers did not dispose of the reply slips after the meeting if they did not represent the wishes of the members. In my judgment, Man Ping Nam was clearly making up this story in the witness box about a meeting where the members put down their names on the reply slips.

107. Examined against the background and events leading to the drafting of the 1994 Circular (as reflected in the records of the District Office, including M173, M183, M189, letter dated 21 June 1994 from the District office to the managers, letter dated 4 July 1994 from the managers to the District Office), it is plain to me that at that stage it was the common intention of MFT and the managers to have some preliminary written consensus as to the sale procedures that could hopefully be endorsed by the members. That was necessary because the District Office had asked them to sort out the differences on the sale procedures and the application for Section 15 consent was held in abeyance in the meantime (see M90, M95, M129, M133, M138, M158 and M173). Mr Fung had asked Man Ping Nam about M189 and Mr Man admitted that he had told the Liaison Officer about the circular and promised that once the reply slips were collected, the managers would forward the same to the District Office.

108. All these unsatisfactory aspects of the evidence of Man Ping Nam are in relation to crucial factual disputes in this case. As demonstrated, it is not a mere wrong recollection as to details of insignificant events. In the circumstances, the inevitable conclusion I reach is that Man Ping Nam is not a truthful witness. I cannot rely on his evidence except the admissions made by him against the interest of the Defendants.

Retainer of George Yip, the extent to which the Defendants did not follow his advice and reasons thereof

109. For reasons already given, based on the evidence of MFT and the contemporaneous documents, including the letters written by George Yip and the representations made by the managers to the District Office as recorded in the files of the District Office, I find as a fact that between 1993 and 1997, Mr Yip was instructed to act for the Defendants and the Wui concerning the sale of the land in his professional capacity and the two letters of advice in October 1993 were written by him in the course of such relationship. Mr Yip was clearly assisting the managers and the Wui in getting the consent from the District Officer.

110. Based on MFT's evidence, which I prefer to the evidence of Man Ping Nam, I further find as a fact that the meeting of 9 September 1993 took place in the manner as deposed by MFT. The meeting was held against the background that at that stage there were disagreements between the parties as to mode of sale and this was an obstacle to the issue of consent by the District Office. Man Ping Nam did participate in the meeting. The purpose of the meeting was to seek legal advice on the sale procedures. At that stage, Man Ping Nam had not yet told Mr Yip that there would not be any sale by open tender and the sale had to be by private treaty. Mr Yip was told to draft some procedures for the Wui's consideration (see letter dated 30 September 1993 from MFT to the District Office at Bundle C3, p. 341 and M129 at C3 p. 59). The managers only gave the instruction of sale by private treaty to Mr Yip after the meeting. Hence, as MFT learnt about that when a copy of the Chinese letter of advice was given to him, he was angry and felt that his time had been wasted. MFT then worked in the direction of drafting his own counter-proposal for sale by tender and this led to the 1994 Circular (see M140 at Bundle C3 p. 64).

111. The two letters of October 1993 did not give any advice as to the ascertainment of proper price for the sale. They only focused on the need to have a resolution from the members of the Wui authorizing the sale by way of private treaty instead of public auction. Mr Yip also suggested in the letters that the resolution should stipulate general conditions to be included in draft agreement for sale and there could also be specific guidelines to ensure a fair, open transaction without setting restrictions that would defeat flexibility.

112. Although initially Man Ping Nam tried to suggest in the course of his testimony a meeting had been held in accordance with the advice of Mr Yip, when he was asked to pinpoint such meeting by reference to the minutes recorded in the minute book of the Wui, he admitted that no such meeting had been held. Mr Man explained that no such meeting was held because there was no offer for the purchase of the land. That was factually not correct. On 16 November 1993, Messrs K C Tsang & Co. wrote to Messrs Robert Wang & Co. making an offer on behalf of a Mr Lee Hau Shing for purchasing the land at $92 per square foot. Based on the evidence before me, I find that the real reason why no meeting had been held in accordance with the advice of Mr Yip was that in late 1993 and early 1994, MFT and the managers could not agree on the mode of sale. The managers were aware that MFT insisted on sale by tender. There was a period of lack of action due to communication breakdown. Eventually, MFT came up with a proposal together with Man Ping Wai in the form of the 1994 Circular.

113. I will deal with the implications of the managers' failure to follow the advice of Mr Yip later in the discussion of their liabilities after dealing with the law on the subject. However, it follows from my above findings that,

(a) the managers were advised that if they were to sell by private sale, they should hold another meeting to have a clear mandate from the members for sale by private treaty and the resolution should set out the relevant guidelines to ensure the sale was conducted fairly and openly;
(b) the managers were aware of objection from MFT as to sale by private treaty and counter-proposal was formulated in the form of 1994 Circular;
(c) the managers had access to legal advice regarding the proper steps to be taken in respect of the sale.

114. Before I move on to another topic, I would also mention the circumstances under which another solicitor was engaged to act for the Wui in place of Mr Yip concerning the sale. In this connection, my finding is based on the evidence from Man Ping Nam under cross-examination. A firm called Messrs David Y Y Fung & Co. ["DYYF"] was retained by the Wui to handle the sale in 1997. Mr Man said DYYF was introduced to the managers by Mr Wong Sui Ming, the representative of the intended purchaser. Before that, the managers had no dealings with DYYF and the matter had all along been handled by Mr Yip despite his change of firms. After some unconvincing answers given by Mr Man as to the reasons for the change of solicitors, he finally admitted that DYYF was retained because it was a firm Mr Wong liked. Hence, it was the purchaser who selected the solicitor to act for the Wui.

115. I also note that there was no explanation from the managers as to why they did not follow the advice of Mr Yip to hold a meeting when they decided to sell the land to Earning Youth. Man Ping Nam justified that by saying that there was no serious offer. However, he did not tell the court why this advice was not followed when a firm offer was made by Earning Youth. I cannot accept the submission by Mr Neoh that the 1992 resolution served that purpose already. Read as a whole, the 1992 resolution was only a preliminary authorization to apply for consent from the District Officer. It clearly and expressly envisaged that further meeting would be held to discuss the details of the sale. Further, given the long lapse of time and other developments in the interim period, it would be absurd to suggest that the two documents signed by some of the members in 1992 could serve as sufficient authorization for the actual sale in 1997. The resolution of 1992 and the Letter of Authorization setting a reserve price at $60 per square foot contained references to "以價高者出售為原則" "價高者得". These suggested that the members had a process of competitive bidding in mind.

116. For the reasons given below, what happened on 16 March 1997 could not assist the managers in this regard.

The managers' role in the 1994 Circular and their knowledge as to the views expressed in the reply slips

117. Apart from Man Ping Nam and MFT, several other witnesses gave evidence about the 1994 Circular. They included Man Chiu Pui, Man Kwun and Man Wai Cheong. Mr Chong also cross-examined Man Tai Sang about the same.

118. I have already referred to the evidence of MFT and Man Ping Nam and the records of the District Office which are relevant to this issue. It is useful to recap by referring back to M158, 173, 183 and 189 of the minutes kept by the District Office with regard to the genesis of the 1994 Circular.

119. Man Chiu Pui's evidence is also important. According to him, he got his copy of the 1994 Circular from Man Ping Nam and after he signed it, he returned the same to Man Ping Nam. He also specifically noted on his reply slip that the tender should be open to all persons interested to bid for the land instead of restricting to existing members. In this respect, his view was not the same as MFT. This showed that members were given genuine opportunity to canvass dissenting views in the exercise. As mentioned, Man Chiu Pui was so concerned that he brought the subject up with the District Office and meetings with the managers were organized by the District Office to deal with the point. I find Man Chiu Pui to be a straight- forward man and I accept his evidence.

120. As regards the evidence of Man Kwun and Man Wai Cheong in respect of the 1994 Circular, taking to the highest, they only show that Man Ping Wai had played a part in the distribution of the 1994 Circular and collection of the reply slips. This was in fact in line with MFT's own evidence about what he did with his own reply slip. I was, however, unable to accept Man Wai Cheong's evidence that he did not read the contents of the circular when he signed the same. Man Kwun said Man Wai Cheong read the circular for about 10 minutes before he signed it. Further, the only objection Man Wai Cheong could give in the witness box about the proposal in the 1994 Circular was the requirement to pay $10 million deposit. This objection seems to me to be unreal. Man Wai Cheong accepted that it was usual in conveyancing transaction to require the payment of a deposit in order to protect the interest of the vendor. Bearing in mind the scale of this transaction, $10 million was an entirely reasonable deposit. I find as a fact that Man Wai Cheong had full knowledge of and agreed to the contents of the 1994 Circular when he signed the reply slip.

121. Man Tai Sang's evidence did not have much significance on this aspect of the case apart from showing that 文淡耕祖 and 文享裕祖did not execute any reply slip.

122. There is no dispute that the 1994 Circular and the Disputed Letter was drafted by MFT and Man Ping Wai. On the evidence before me, I find that the managers had clear knowledge about the preparation of the 1994 Circular and they had at least consented to the distribution of the same to the members to collect their views. They were well informed by others as its progress. Hence, in the dealings with the District Office, they reported about the progress on several occasions. On 20 July 1994, Man Ping Nam told the Liaison Officer that the circular setting out the procedure of sale had been drafted and issued to members for their reply. He also promised to forward the reply slips to the District Office (see M 189).

123. It is not necessary to determine the extent to which they had contributed to the contents of the circular. Suffice to say that they were aware of its contents before they put down their names on it in their capacities as managers prior to its distribution. I also find that both Man Ping Nam and Man Ping Wai had taken part in the distribution process. Given the fact that the 1994 Circular was issued in the name of the managers (and they were aware of that), they could and would certainly stop the distribution of the circular if they did not agree to the exercise. I therefore infer that Man Ping Wai assisted in the distribution and collection of reply slip with the consent of the managers.

124. There is a dispute at the trial as to whether copy of the 1994 Circular faxed to the District Office on 26 July 1994 was sent on behalf of Man Ping Nam. On the face of it, it was faxed on behalf of Man Ping Nam. The covering page was in the handwriting of the secretary to the San Tin Rural Committee Mr Cheung Hiu. Unfortunately, Mr Cheung had passed away. MFT was the chairman of that Rural Committee and Man Ping Nam was the vice chairman. Hence, it could be either one of them who instructed Mr Cheung to fax the document. The fax was sent from a fax machine of the Tun Yu School and Man Ping Wai's brother was the principal of that school. Mr Chong suggested that Man Ping Nam had no access to that fax machine. In the end, given my conclusion in the last paragraph, it does not matter very much whether this was done at the specific instructions of Man Ping Nam or Man Ping Wai. The managers could not have been ignorant about that.

125. The same is applicable with regard to the Disputed Letter. The managers were aware of the results embodied in the reply slips when they wrote the Undisputed Letter. Given the promise to the Liaison Officer on 20 July 1994, the managers had committed to collect the reply slips and forward the same to the District Office. If they had not done so through the Disputed Letter and its enclosures, it is inexplicable that they apparently did nothing about it and never reported to the District Office that the exercise had been unsuccessful due to lack of response. In fact, as demonstrated above, the managers acted subsequently on the basis that the District Office was aware of the result of the exercise. Given that the reply slip of Man Chui Pui was collected by Man Ping Nam, I cannot believe that the managers played no part in the collection of the reply slips and the forwarding of the same to the District Office. On balance, I find as a fact that the Disputed Letter together with its enclosures were approved by the managers and they were sent to the District Office with their connivance. It matters not whether they were sent together with the Undisputed Letter.

126. In Annexure 1 to his final submission, Mr Neoh did an analysis of the reply slips and contended that the reply slips did not show an approval of the proposal in the 1994 Circular by a majority of the members of the Wui and they could not be equated with a resolution passed by the majority. I shall reserve my discussion on the legal effect of these reply slips to the later part of this judgment. It can be observed, however, that was not the stance of the managers in the Undisputed Letter and the Disputed Letter of 30 July 1994. They took the view that the reply slips represented an approval by the majority as to the procedures set out in the 1994 Circular. It was on that basis they dealt with the District Office immediately after July 1994.

The meeting of 16 March 1997

127. Apart from Man Ping Nam, several other witnesses gave evidence about what happened on 16 March 1997. I have already explained why Man Ping Nam's evidence is inherently unreliable and implausible. For reasons given, I do not feel able to place any weight on the statement in black ink in the minute for this meeting.

128. Before I deal with the oral testimonies of the other witnesses, I shall refer to some contemporaneous documents. On the face of a copy of a letter dated 21 February 1997 from Leung Kin & Co. making an offer for the purchase of the land (at Core Bundle p. 434), Man Ying Lam wrote the following after 16 March 1997,

"曾在16/3/97招集業主開會，未開會前，有廿幾個青年持棍棒在惇裕堂前的空地結果開會半途開不成" (my emphasis)

Man Ying Lam was recording that in the middle of the meeting of 16 March 1997, it could not be held due to the presence of 20 odd youngsters holding rods at the open space outside the ancestral hall before the meeting started. Although Man Ying Lam has filed witness statements in this case and he was present throughout the trial, he chose not to give evidence in the witness box. Hence, this court does not have the benefit of his explanation as to why he wrote that sentence and what did he mean by in the middle of the meeting it could not be held. But that sentence clearly conveyed the message that no conclusion was reached at the meeting.

129. There was no reference to that meeting in the records of the District Office. It is noteworthy that when they were faced with complaints raised by many members or people having indirect interests that no meeting had been held for approving the sale of the land in late August 1997 (see M 255 Para. 2 and letters at Bundle C4 p. 483, 484, 487, 500-502, 503-4 and 509-510) the managers maintained that no meeting was necessary. They also made no reference whatsoever to this meeting of 16 March 1997 when they were interviewed by the District Office on 30 August 1997 and subsequently responded to those objectors on 2 September 1997 (see M257).

130. The defence called Man Pak Wan to support its case as to authorization given to the managers to sell the land at the meeting of 16 March 1997. He was also present in court when Man Ping Nam gave evidence about the meeting. When he was asked by Mr Fung to tell the court in his own words as to what happened at the meeting, he gave a version quite different from what was said in his witness statements. At first he said he did not know what happened and all-in-all nothing happened. Then there was a quarrel between Man Mei Kwai (文美桂) and Man Dei Lim (文砥廉). He later said the managers mentioned about offers from solicitors at $90 odd. He did not quite remember whether any resolution had been passed at the meeting. In re-examination, he said about 20 to 30 members agreed to the price offered by the solicitors happily because it was a high price. However, when questioned by the court, he also said he agreed with what Man Ping Nam told the court in witness box as to what happened at the meeting and that the only person who mentioned about the managers authorized to sell the land was Man Wai Cheong.

131. Man Pak Wan had a motive to support Man Ping Nam because he had signed a Chinese acknowledgement note on behalf of 文淡耕祖 in favour of the managers when he collected文淡耕祖's share of the proceeds of sale of the land. That note purported to exonerate the managers from liabilities arising from the sale. At least one member of 文淡耕祖, Man Tai Sang, felt aggrieved about that.

132. On the whole, I do not find Man Pak Wan to be a reliable witness.

133. The Plaintiff also called several witnesses to establish that no resolution had been passed at the meeting of 16 March 1997 to authorize the managers to sell the land. On the other hand, Man Sung Chi (文送池) accepted that the managers had told the members at that meeting offers from solicitors were received. He said chaos developed shortly after that. He could not remember whether the prices offered had been mentioned. The evidence of Man Tin Sung (文天宋) is to similar effect although his estimate of the length of the meeting seemed to be longer. Both of them mentioned in their statements MFT was present at that meeting and he raised query about sale by tender. However, Man Tin Sung was apparently not too sure about what was said by MFT under cross-examination. That was however consistent with what was said by Man Ping Nam in Paragraph 24 of his first witness statement although he mixed up the date of the meeting. Mr Chong suggested to these witnesses in his cross-examination that the offer letters from the solicitors had been circulated to the members at the meeting. The witnesses disagreed. It turned out that Mr Chong had taken a false point because Man Ping Nam admitted in his own evidence under cross-examination on 4 September 2003 that the letters were merely placed on the table and he had not passed those around.

134. I do not find the evidence of other witnesses on this meeting to be of much assistance.

135. Having considered all the evidence, my finding is that no resolution had been passed at the meeting to authorize the managers to sell the land without further consultation of the members. Neither was it the consensus reached at the meeting. Even assuming a member uttered words to such effect (and on the evidence, I am not even satisfied this had been said), it by no means represent the concluded view of all the members or a majority of members present at that meeting. I further find that the meeting did last for some time before it was disrupted by the quarrel between Man Mei Kwai (文美桂) and Man Dei Lim (文砥廉). During the meeting, the managers reported to the members about the offers received from the solicitors and the impending expiry of the consent from the District Office. On the balance of probabilities, I find that the managers had at least mentioned the price of $96 per square foot offered by Messrs Leung Kin & Co. I also find that MFT was present at the meeting and he raised query about sale by tender and the procedures set out in the 1994 Circular. Soon after that, the quarrel between Man Mei Kwai (文美桂) and Man Dei Lim (文砥廉) arose and the meeting could not continue. No conclusion was reached about the sale of the land at the meeting.

136. I further find that the managers knew that they could not derive their authority to sell the land from what happened at the meeting of 16 March 1997. Hence, there was no reference to this meeting when they were challenged about the sale in late August and early September 1997 and no reliance was placed on this meeting in their initial witness statements or pleadings.

Had the managers undergone a price discovery process?

137. In Annexure 2 to his final submission, Mr Neoh set out what he described as summary of material facts regarding price discovery process. With respect, I do not think the matters referred to in the summary can properly be regarded as a price discovery process. It is more accurate to describe it as a chronology of some salient events between 1992 and 1997 for the preparation of sale of the land. However, those events were not positive steps taken by the managers to ascertain the market price of the land at the relevant time. Apart from the applications for consent from the District Office and extension thereof and the meeting and documents signed by some members in 1992, the Annexure referred to several offers from solicitors. But apparently no follow-up action had been undertaken by the managers. Some of the events set out in that chronology were only supported by the evidence of Man Ping Nam, e.g. items 12, 15, 17, 18 and 19. Due to my misgivings about his evidence, I attach no weight to the same.

138. Mr Neoh submitted that from the chronology, it could be seen that the availability of the land for sale had been known to the market since 1992. That might be true. However, one cannot equate that with a price discovery process. The crucial question is what had the managers done to ascertain the market price of the land so as to satisfy themselves that the sale to Earning Youth in 1997 was at a proper price. I do not accept that it is sufficient for the managers just to sit and wait for offers from interested buyers after the spread of news about the land being available for sale. Hence, it is necessary to consider what they had done to familiarize themselves with the price level of the land in 1997.

139. Once the relevant question is identified, the answer is clear. Several offers had been received by the managers from various solicitors firms in early 1997. According to Man Ping Nam, the managers did not do anything to follow-up with these offers although he found the offer price $96 per square foot attractive. He said they just waited to see if the solicitor would send another letter. When Mr Fung asked him on 4 September 2003 why the managers did not respond to see if the intended purchaser would be willing to increase the price, Man Ping Nam simply answered that they had no solicitors. As explained above, at that time George Yip was acting for them and there was simply no merit in this excuse. In the end he had to accept there was nothing to stop the managers from contacting Messrs Leung Kin & Co. He said the managers were waiting for the news to be spread through the villagers although he had no idea how the news would be spread to Messrs Leung Kin & Co. That, in my view, is a very passive mode of following up with an attractive offer. Mr Man then said the managers did not think the offer was "actual" enough to warrant the managers to ring up the solicitor to check whether there would be a higher offer.

140. Although Mr Man testified that he had consulted some local agents, that was in 1994 and 1995 and these agents apparently did not yield any results and offered no specific advice as to the market price of the land in 1997.

141. Mr Fung had cross-examined Mr Man on 5 September 2003 as to his knowledge about the market. From the answers given, it is obvious that Mr Man did not possess much knowledge in that regard. He said he never knew what a valuation firm was. The only thing he had referred to in gauging the market price for the land was the offer from Messrs Leung Kin & Co. at $96 per square foot. He confirmed that he only used that offer as a comparison with the offer from Earning Youth at the end of his evidence in response to some questions by the court. He said this was how he purported to achieve sale to the highest bidder (價高者得).

142. Mr Man was however aware that at the material time some developers were acquiring land at San Tin and the land of文水塘會and 元屋圍 were sold at a price much higher than $100 per square foot. Mr Man said the land of the Wui was different because it was within the Frontier Closed Area Boundary. However, in view of the offers from the various solicitors firms in early 1997, the managers must have known that there were competing potential purchasers for the land.

143. Mr Man explained that sale by tender was not that common for sale of Tso or Wui's land in the New Territories. I am prepared to accept that although that could not be a reason for reducing a manager's duty in ascertaining the proper price of the land before a sale. The same observation can be made regarding Mr Neoh's submission that the price offered by Earning Youth was the highest offer received by the managers so far (disregarding some probing offers).

144. According to Mr Man's own evidence, the managers did not bargain with the representatives of Earning Youth in respect of the price. Man Ping Nam said Wong Sui Ming was introduced to the managers by Man Ying Lam. Man Ying Lam made it clear that he found the price very attractive and he would sell his share in the Wui at this price. He even intimated that he would resign as manager if necessary. After discussion, the other two managers followed suit and agreed to sell respectively their own interest in the Wui to Earning Youth. Man Ping Nam said there was no bargaining because the managers found the price to be very good. It was after the managers had agreed to sell their respective interests in the Wui that they negotiated with Earning Youth for the sale of the whole piece of land held by the Wui. Again they did not bargain about the price. The managers seemed to be eager to sell at that price.

145. According to Man Ping Nam, after the sale was agreed and payment of deposit, the parties sat down to have tea and at that stage the managers requested a donation at $2 per square foot as charity. It was only about 2 or 3 days later that the representative of Earning Youth replied on that. If there were so, it was difficult to see why provision for such a donation was already included in the Provisional Agreement of 4 August 1997 unless that agreement was signed on a later date. Mr Man could not explain for this discrepancy. I have serious doubt about the genesis of the donation and I shall discuss more about that later. For the present purpose, even if the request for donation could be regarded as a negotiation, that was only minimal effort on the part of the managers.

146. All along, the managers had not sought advice from lawyers or surveyors on how to ensure proper price was achieved in the sale of the land. Yet the managers were quite willing to pay large fees in respect of the sale. A commission of $3,360,000 was paid to a company called Ferdinand Group Limited although Man Ping Nam could not explain why the Wui should be liable for that when, according to his evidence, it was Wong Sui Ming who approached Man Ying Lam on behalf of Earning Youth instead of the Wui engaging Wong Sui Ming as an agent. Man Ping Nam agreed that the three managers did not have to pay any commission for the sale of their respective interests to Earning Youth. Moreover, Man Ping Nam said at the time when the sale was agreed, agency fee was not mentioned. I cannot see what services had been rendered by Ferdinand Group Limited in favour of the Wui. I also find the handwritten Chinese Commission Agreement dated 4 August 1997 to be extremely suspicious in the light of Man Ping Nam's testimony that it was only after the sale was executed, Wong Sui Ming asked for a commission and the sum was deducted from the money payable to the Wui by Messrs David Y Y Fung & Co. on 11 December 1997. The Wui also paid Messrs David Y Y Fung & Co. a fee of $1,000,000 as costs on account for the conveyancing transaction. There was no reason why the Wui could not afford to engage a surveyor to advise the managers as to the proper price level of the land.

147. All in all, it is quite clear to me that the managers did not take any active steps to ascertain the proper price for the sale of the land in 1997 and I find as a fact that when they decided to accept the offer of Earning Youth, they solely based their judgment on the fact that this offer was higher than the offer of $96 per square foot and they found the same to be attractive to themselves. But the lack of enthusiasm regarding the $96 offer on the part of the managers indicates that the managers sensed that there was room for increase in that price. Since Man Leung and Man Ying Lam chose not to give evidence, I can only assess the managers' market knowledge by reference to Man Ping Nam's testimony. I find that at the material time, the managers did not possess sufficient knowledge about the market condition to form a proper and informed opinion as to the proper price level for the land.

The Donation

148. Man Ping Nam said in his oral evidence that he had conceived the idea of setting up a San Tin Man Sze Families Fund (新田文氏家族基金) since 1993. However, he had not put the idea to members except having some private discussions with a few of them. The idea had never been raised or discussed in any meetings of the Wui. The reason he gave was that he was not certain whether the purchaser would agree to make such a donation.

149. In my view, that is not a valid reason. The causal connection between the sale of the land and the Donation is self-evident. It is obvious that but for the sale of the land, the purchaser would not make such a donation. The Donation was a term in the Provisional Agreement and I find as a fact that this was part of the bargain when the managers agreed to sell the Wui's land to Earning Youth. In this connection, I reject Man Ping Nam's evidence that the request for donation was only made subsequent to the conclusion of the Provisional Agreement. I hold that although it was called a Donation, it was part of the consideration given by the purchaser in purchasing the land. This was acknowledged by the parties in Clause 30 (i) of the Formal Agreement. The Donation was in substance part of the proceeds of sale. The effective sale price paid by Earning Youth was therefore $336,000,000 plus $6,657,710.40. I am sure that but for the request of the managers for this $6,657,710.40 to be characterized as a Donation, Earning Youth would be quite willing to pay the whole sum as purchase price. In effect, what the managers did was to set aside part of the sale proceeds for setting up this San Tin Man Sze Families Fund. Hence, there was no reason why the idea of setting up such a fund could not be discussed by members in a meeting of the Wui before any agreement on the part of a purchaser.

150. Man Ping Nam said in his evidence in chief on 1 September 2003 that his idea was to preserve the Wui and hoped to set up a kindergarten in its name with this fund. If there were money left, he said he wished to establish an elderly centre. He also said that the fund was to promote the welfare of all those surnamed Man at San Tin. Mr Neoh submitted that this court should take into account of the fact that virtually all members of the Man clan at San Tin had a direct or indirect interest in the Wui and it was against Chinese custom and tradition to cause disintegration of the Wui. Counsel further suggested that the Wui was very much part of the social structure of the Man clan in San Tin. Reference was also made to the application form filed by the managers with the District Office in 1992. The reasons for sale of the land was stipulated by the managers as follows,

"本會業權人要求出售本會名下物業DD 99 LOT 763 解決其子侄龐大教育經費及建造房屋用途，本會司理人召集業權人全体大會一致通過上述物業出售，並將所得之[款]項依其所佔之業權分派，交回其業權人，自行處理。" (my emphasis)

151. I do not believe Man Ping Nam's avowed plan for setting up such a fund since 1993. Quite apart from the reasons I have given for finding him utterly unreliable as a witness, the application in 1992 was actually inconsistent with such plan instead of supporting him as asserted by counsel. The words highlighted by me showed that the intention of the parties were to have all the sale proceeds distributed amongst the members in accordance with their shares in the Wui for their own disposal. There was no suggestion that part of the proceeds would be set aside to set up a trust fund for promoting the welfare of the Man's clan in San Tin.

152. If Man Ping Nam had such a plan all along, it is surprising that this had not been raised or discussed in any of the meetings of the Wui between 1992 and 1997. There was also no reference to that in the meeting with George Yip or in his letters of advice. Nor was there any discussion about such a fund in the lengthy course of the dealings between the managers and the District Office. In fact there was no reference to the Donation on 30 August 1997 when the District Office interviewed the managers regarding the sale in midst of complaints (see M257). When some of the disgruntled members questioned the managers about the sale at Yuen Long District Office on 2 September 1997, the managers did not reveal that a fund would be set up with the Donation (see Bundle C4 at p. 511-513 and M257). They also did not refer to the Donation or the fund in their letter dated 29 September 1997 notifying the members of the sale and the two statements of account rendered to the members after the sale.

153. The defence did not call any witnesses to corroborate the assertion of Man Ping Nam that he had discussed the setting up of the fund with others prior to the sale in 1997. I find as a fact that the managers had not mentioned about the intention of setting up of a welfare fund with a donation solicited from the purchaser prior to the sale in August 1997.

154. Based on the evidence of Man Tai Sang, my finding is that news about the Donation and the setting up of a fund was spread in San Tin in about two to three months' time after the sale. As to how the news came to be spread, Man Tai Sang did not provide us with much information.

155. Man Chiu Pui was more specific in this regard. He said after the sale, one of the managers Man Leung came to him and asked him to collect the money. When Man Chiu Pui expressed dissatisfaction with the sale, Man Leung told him about the fund and suggested to put him in charge of that so as to appease him.

156. Man Ping Nam said he had told several people about the Donation after the money was received. The only one he named in court was a person who had since passed away. In any event, it was at a very late stage that the money was received. As mentioned, the managers agreed to a deferral of the payment of the Donation to February 1998.

157. Mr Neoh argued that the Donation was no secret as it had been recorded in the Provisional Agreement and Formal Agreement. However, as far as the evidence shows, copies of those agreements were not shown to the members.

158. The purpose for the setting up of this fund and how it would operate was unclear. Man Tai Sang asked rhetorically in the course of his evidence who would be in charge. After hearing all the evidence, I still do not have any clear answer to that. If it was intended to be money belonging to the Wui and as such placed in the control of the managers, it is difficult to see why it was necessary to put under the name of a separate fund and be placed under a separate bank account. The rules for the operation of this fund had not been drafted and the purposes for which the fund could be utilized had not been spelt out clearly in any document. Clause 11 of the Conditional Agreement referred to the money being "used and applied for the welfare and benefit of the members of the Man Family living in or connected with San Tin". But Clause 12 referred to a trust in favour of "the members of the Man Family living in or connected with San Tin". The two appears to be in conflict, one seems to be a purpose trust whilst the other seems to be a trust in favour of a class of beneficiaries. In any event, the descriptions of the purpose and the class of beneficiaries are very general. Man Ping Nam said he had no idea how these provisions came to be included in the Conditional Agreement and the managers had not given instructions to the solicitor to draft these provisions.

159. Although the circumstances surrounding the Donation were dubious, I am unable to make a finding that the managers intended to reap the same as a secret profit for themselves. That was a very serious allegation involving dishonesty on the part of the managers and the court must have very cogent evidence before it comes to such a conclusion.

160. On the other hand, I do not accept that the managers were at liberty to set aside part of the proceeds of sale in the name of setting up a welfare fund without the consent of the members. As I said, the Donation was part of the consideration paid by the purchaser and by demanding the same be paid as donation instead of as part of the purchase price, the managers in effect deprived the members of their shares in this $6,657,710.40. I do not think Man Tai Sang's evidence supported the defence contention that the Wui was an institution having the same characteristics as an ancestral Tso. He was uncertain in that regard. In particular, I am not satisfied by his evidence (solicited by Mr Chong by way of cross-examination) that there was any Chinese custom which prevents the disintegration of a Wui and the managers had a duty to take step to prevent that. No expert evidence had been produced by parties on such Chinese custom and it was not a point raised in the pleadings. When Mr Chong cross-examined Man Tai Sang in that regard, I queried whether this was a point open on the pleadings and I heard such evidence only on a de bene esse basis. In the end, in view of my conclusions below, the pleading point becomes academic.

161. The fact that no-one raised objection to the idea of selling the land which was the only property of the Wui and no-one demanded for measures to be in place to avoid the disintegration of the Wui after the land were to be sold were indications that there was no such Chinese custom. The provisions in the Land Entitlement Book (irrespective of their legal effect of which I shall discuss below) also evidenced that members contemplated that land of the Wui could be sold with the approval of the majority. On the evidence before me, interests in a Wui could be transferred and sold to outsiders. The managers had no qualm about selling their own interests to Earning Youth in August 1997. On the evidence before me, the Wui was more in the nature of an institute of co-ownership in land for better management of common resources than an institute for ancestral remembrance like a Tso. Each member had a well-defined share in the land. There is no evidence to suggest that income from the land had been used for the general welfare of Man clansmen in San Tin. Income derived from the land had always been distributed to the members in accordance with their shares (see Para. 3 of the first witness statement of Man Ping Nam). In the absence of evidence, whether expert evidence or otherwise, I am not satisfied that there was any Chinese customary rule that authorize the managers of a Wui to deploy the proceeds of sale for the general welfare of clansmen without approval from the members. In fact, Man Tai Sang's evidence is to the contrary. He said if a fund for promoting the welfare of clansmen were to be set up, the proper course was to seek the approval of the members at a meeting before doing so.

162. Upon sale of the land, the subject matter of the trust was converted into the sale proceeds. Even assuming (without deciding) that Sections 13 and 15 of the New Territories Ordinance were still applicable after sale, given the nature of the Wui and its past practice and the available evidence before me as stated above, I cannot discern any Chinese custom that alter or modify the managers' powers and duties as trustees under the common law in respect of the proceeds of sale. As such, they were obliged to render proper account and distribute the proceeds in accordance with the shares of the members. This was in line with how the managers perceived what they were to do with the proceeds in their application to the District Office in 1992 highlighted above. Thus, they acted without proper authority when they asked the purchaser to pay part of the purchase price by way of donation for setting up a welfare fund which had not been approved by the members.

163. In view of this, it is not necessary to deal with the argument of Mr Neoh that by virtue of Clauses 11 and 12 of the Conditional Agreement, the Donation was in effect a settlement by Earning Youth and a trust had been set up on those terms when the money was paid in February 1998. Even assuming (again without deciding) that were correct as a matter of strict legal analysis from a proprietary point of view, this would not prevent the Plaintiff from claiming against the Defendants for personal remedies in respect of their breach of duties as trustees in relation to the Donation that should have been treated as part of the purchase price and distributed to the members accordingly. And this is precisely the claim advanced by the Plaintiff in the present action. The same applies to the ancillary relief for an account as to the interest generated from the Donation.

Duties of due diligence and reasonable care on the part of the managers in selling the land under the general law

164. The most substantial claim of the Plaintiff is the claim for compensation based on the allegation that the sale was at undervalue. Mr Fung accepted that if the court were to find that the sale by the Wui to Earning Youth was at the best price that could be fetched by the Defendants at the material time, the allegations concerning failure to inform and to consult members or to get their approval for the sale, even if established, would not sound in any compensation awarded in favour of the Plaintiff in the present action. The Plaintiff did not seek to set aside the transaction.

165. It is a question of fact whether the sale price of $336 million plus the Donation was the best price available at the material time. Before I deal with that, I propose to analyze the duties the Defendants in respect of the sale. On the material before me, the duties could be considered on two levels: firstly, under the general law; secondly by reference to the terms of the trust. I shall first consider the duties under the general law. In the next section, I shall consider to what extent such duties were modified or varied by the terms of the trust.

166. Counsel have referred to a number of authorities on the duties of a trustee in the exercise of power of sale. Mr Fung referred to certain passages from Underhill & Hayton, Law of Trusts and Trustees. The passages he cited were from the 16th Edition which stated the law by reference to the Trustee Act 2000. In particular, regarding the trustee's duty to exercise reasonable care and skill, such duty has become statutory under Section 1 of that Act in respect of specified cases. We do not have the same statutory provision in Hong Kong. I therefore find it more appropriate to refer to Article 54 at p. 545 of the 15th Edition of that textbook. Mr Neoh referred me to Snell's Equity, 13th Edn. at Para.12-07. I have also referred to Lewin on Trusts, 17th Edn., Para. 34-01A. Counsel also referred to a number of cases which I shall discuss below insofar as necessary.

167. Based on those authorities, my understanding of the general law is as follows. It is common ground that the Defendants were under a duty to get a proper price for the sale of the land. It may be more precise to say that the proper price should represent the true market value of the land (see Cuckmere Brick v Mutual Finance [1971] 1 Ch 949 at p. 966F). The duty is not an absolute one. It is a duty to use due diligence and reasonable care in the management of the trust property which an ordinary prudent man of business would exercise. Hence, if the sale were eventually found to be at undervalue despite due diligence and reasonable case, the trustee would not be liable. That is an objective standard. The court would test the conducts of the trustee against that of an ordinary prudent man of business instead of the standard actually adopted by the trustee in the conduct of his affairs. However, the court would apply that test against the facts and circumstances at the time when the trustee had to act and with reference to matters known or ought to have been known to the trustee at that time. Hence, the duty is not discharged merely by showing that the trustee acted in good faith and with sincerity (see Medforth v Blake [2000] Ch 86). The duty is a duty in equity rather than a common law duty (see Tse Kwong Lam v Wong Chit Sen [1983] 1 WLR 1349).

168. Mr Fung contended that there is a more specific duty in terms of obtaining proper advice as to valuation and mode of sale. He referred to a passage in Underhill & Hayton (at p. 549-550 of the 15th Edn.),

"If trustees for sale fail in reasonable diligence in inviting competition, or if they contract to sell under circumstances of great improvidence or waste, they will be personally responsible, and the onus of proving that they acted reasonably is upon them. It is, therefore, the duty of trustees for sale to inform themselves of the real value of the property and to fix a reserve price, and for that purpose to employ, if necessary, some independent experienced person to value it. Planning permission or planning potential should be emphasized in the sale particulars. But if they perform this duty, they will not be responsible if the beneficiaries seek to impeach the sale as improvident."

He also referred to a dicta of Jessel MR in Re Cooper and Allen's Contract for Sale to Harlech (1876) 4 Ch D 802 at p. 815-6 and the judgment of the Privy Council in Tse Kwong Lam v Wong Chit Sen [1983] 1 WLR 1349 at p. 1355 to 1359.

169. On the other hand, Mr Neoh submitted that a trustee has a discretion in respect of the mode of sale and he is not bound to seek advice from valuation expert. He relied on Wilton v Hill (1855) 4 WR 66 to advance the proposition that the duty was to sell at the best price reasonably obtainable in the market instead of fetching a price equal to or higher than a valuation.

170. For my part, I would not go so far as saying that a trustee must always obtain independent and proper advice before he can properly sell a trust property. The ultimate issue, in my judgment, is whether the trustee acted with due diligence and exercised reasonable care as expected from an ordinary prudent businessman. Obviously, the circumstances of the case have to be taken into account and there may be cases where a trustee could reasonably decide that it is unnecessary to do a valuation before sale. However, it is instructive to bear in mind the observations of Megarry VC in Cowan v Scargill [1985] 1 Ch 270 at p. 289B to C, (which I find to be equally applicable here although it was said in a context other than sale),

"[The duty of care] includes the duty to seek advice on matters which the trustee does not understand ... and on receiving that advice to act with the same degree of prudence. This requirement is not discharged merely by showing that the trustee has acted in good faith and with sincerity. Honesty and sincerity are not the same as prudence and reasonableness. ... Accordingly, although a trustee who takes advice ... is not bound to accept and act on that advice, he is not entitled to reject it merely because he sincerely disagrees with it, unless in addition to being sincere he is acting as an ordinary prudent man would act."

171. As to the mode of sale, I agree with Mr Neoh that a trustee is not bound to sell by auction or public tender. Again it depends on the circumstances of the case. This must follow from the test formulated by reference to the ordinary prudent man. There are many people who sell their property by private treaty. No-one can suggest merely because they do not sell by auction or public tender, they do not act prudently. The actual decision by the Privy Council in Tse Kwong Lam v Wong Chit Sen [1983] 1 WLR 1349 is a reminder that public auction may not guarantee the true market value of the property being obtained. The court has to assess all relevant factors in deciding whether a trustee has discharged his duty and the mode of sale and his reason for choosing that particular mode are relevant.

172. Tse Kwong Lam also highlighted the importance of properly marketing the property before the sale. This is the same as invitation for competition. A trustee is obliged to consider competing offers (see Buttle v Saunders [1950] 2 All ER 193; Cowan v Scargill [1985] 1 Ch 270 at p. 288). In my judgment, prudence would normally dictate that reasonable steps should be taken to promote interests and competitions in potential purchasers (see also Lewin on Trusts, 17th Edn. Para. 37-32). Mr Neoh was however correct in urging this court to bear in mind that the trustee must balance protracted negotiations against the risk of losing a deal altogether in the exercise of his power. He referred to this dicta of Wynn-Parry J in Buttle v Saunders [1950] 2 All ER 193 at p. 195D to F,

"It would, however, be an unfortunate simplification of the problem if one were to take the view that the mere production of an increased offer at any stage, however late in the negotiations, should throw on the trustees a duty to accept the higher offer and resile from the existing offer. For myself, I think that trustees have such a discretion in the matter as will allow them to act with proper prudence. I can see no reason why trustees should not pray in aid the common-sense rule underlying the old proverb: 'A bird in the hand is worth two in the bush.' I can imagine cases where trustees could properly refuse a higher offer and proceed with a lower offer. Each case must, of necessity, depend on its own facts."

173. I think this is yet another dimension the court must have regard to in the overall determination as to whether the trustee has acted in accordance with the standard of an ordinary prudent man in the management of his affairs.

174. So far I have considered the duty of a trustee under the general law. Is there any difference in respect of the duty of a manager of a Tong or Wui? I do not see any justification for suggesting Section 15 of the New Territories Ordinance absolves a manager from any aspect of this duty to exercise reasonable care or reduce his responsibility in this regard. Nor does Section 13 of the Trustee Ordinance have such effect.

175. Parties have not adduced any expert evidence on Chinese customary law before me. Nor did counsel draw my attention to any rules of Chinese customary law which might have a bearing on this aspect of the duty of the Defendants.

Any modification of the duties by the constitution of the Wui or the agreements of the parties?

176. As mentioned, there is no evidence before me as to the constitution of the Wui when it was formed. The Plaintiff however relied on some articles set out in the Land Entitlement Books issued by the Wui since 1981. It was contended that those articles had been adopted by members of the Wui as rules governing the Wui's affairs and the managers should be bound by them. The Land Entitlement Books were devised by MYK when he was the manager of the Wui and borne the primary duty in running the Wui's affairs.

177. It is not disputed that there had not been any formal meeting of the Wui in which resolution was passed to adopt the articles as rules governing the Wui's affairs. The Plaintiff argued that the members had by conduct adopted these articles and the facts and matters relied upon by the Plaintiff were pleaded in paragraphs 1 and 2 of the Answers to Request for Further and Better Particulars of the Re-re-Amended Statement of Claim dated 10 August 2000. These were supported by the evidence of MFT (see Paras. 4 to 13 of his Supplemental Witness Statement of 19 January 2002). Man Tai Sang (文泰山) and Man Chiu Pui (文照培) also gave some evidence in this respect.

178. When Mr Chong cross-examined these witnesses, he did not challenge their factual evidence concerning the Land Entitlement Books. What he sought to demonstrate was that the Land Entitlement Books were devised by MYK and there was no meeting of the Wui formally adopted the articles.

179. In his Final Submissions, Mr Neoh contended that in the absence of any resolution passed by the Wui adopting the articles, they could not have any legal effect until each and every member of the Wui agreed to the adoption of the same to change the term of the trust. He further submitted that the matters relied on by the Plaintiff were ambiguous and no more than evidence of the entitlement of individual member in respect of the land holdings of the Wui.

180. Whilst some of the matters relied upon by the Plaintiff constituted no more than the fact that the Land Entitlement Books had been treated as somewhat akin to documents of title (their production was required for collection of income, transfer of title and they had to be surrendered on collection of proceed of sale), there were matters which showed that the articles had been regarded by the Defendants as rules governing the affairs of the Wui. In particular, after the death of MYK, the Defendants issued Land Entitlement Books containing the same articles to a number of members and acted in accordance with those articles in the distribution of income and the transfer of membership. It is difficult to see why the Defendants would include these Articles in the Land Entitlement Books issued by them unless they regarded the same as binding in respect of the affairs of the Wui. Man Ping Nam did not give any explanation as to the contrary in his evidence. Further, when Man Ping Nam sought advice from Mr Yip, he gave a copy of the Land Entitlement Book to Mr Yip (see Paragraphs 9 and 10 of the 3rd Affirmation of Man Ping Nam filed on 28 February 2001 and the letters of advice by Mr Yip in October 1993). Upon the receipt of the advices from Mr Yip, Man Ping Nam did not challenge Mr Yip's understanding that the Land Entitlement Book contained the constitution governing the Wui.

181. In respect of the sale of the land, one of the articles, Article 3, in the Land Entitlement Books, stipulated that the managers had no authority to sell the land and a sale had to be determined by the majority of the members in a meeting of a Wui. The Plaintiff relied on this article to argue that there is a duty to consult the members in any sale of the land.

182. There is no other article relevant on the question of sale and neither party suggested that the articles in the Land Entitlement Books in any way reduced the duties of the Defendants under the general law as analysed above. Hence, whatever the determination of this court is on the binding nature of the articles, it could not be relied upon to reduce the duties of the Defendant as stated in the above section. In this regard, Mr Neoh did not submit otherwise.

183. Hence, this question as to the legal effect of the articles in the Land Entitlement Books is only relevant in the context of the duty of the Defendants in obtaining the approval of the members of the Wui as to the sale of the land. Article 3 provided that the approval of the majority was a prerequisite to any sale (and expressly stated that objection from a minority would not be effective).

184. Although there was no formal resolution adopting the Articles, based on the matters relied upon by the Plaintiff, I am satisfied that it could be inferred that the parties had been dealing with each other on the basis that the Articles were binding on them. The Land Entitlement Books were produced whenever rents were collected by a member and meetings were held in accordance with Article to discuss the sale of the land. It is quite obvious that the resolution in March 1992 could only have been passed on the basis that the Defendants had to obtain the approval of the members for the sale of the land. Otherwise, the reference to further meeting being held to discuss matters concerning sale would be meaningless since the managers could simply ignore the same. It is important to note that without such resolution, it was unlikely that the Defendants could make a proper application for the consent from the District Officer. Also, without such a resolution, it was unlikely that the members would sign the two authorizations of 1992.

185. Having conducted themselves on such basis, it would be unjust or unconscionable to allow the Defendants to renege on this common assumption because the members lost the opportunity of removing them as managers before the sale of the land. From the reaction of the members after they learnt about the sale in August 1997 as evidenced by their representations to the District Office (see their correspondence with the District Office during August and September 1997, in particular the letter of objection dated 25 August 1997 at Bundle C4 p. 509), one can readily infer that if the Defendants had indicated to the members before the sale of the land that they were not bound by the Articles and there was no need to consult the members regarding the same, it is most likely that the members would seek to remove them as managers.

186. It seems that counsel for the defence took a position different from the stance of Man Ping Nam. Counsel submitted that consent of the majority is not required for the sale of the land because of Section 15 of the New Territories Ordinance and the consent issued by the District Office. However, in the course of his evidence, Man Ping Nam had said a number of times his understanding was that the land could not be sold without the approval of the majority (see his evidence in the afternoon of 3 September 2003, just before lunch break on 4 September 2003 and when he was re-examined by his counsel Mr Koo on 5 September 2003). Hence, insofar as this requirement of approval of the majority for sale of the land is concerned, we have evidence from the mouth of Man Ping Nam that this was established practice. In Para. 13 of his Supplemental Witness Statement of 19 January 2002, Man For Tai also gave evidence that it was established practice that approval of the majority was required and affairs of the Wui had been conducted in accordance with the rules. There is also ample evidence that throughout the history of the matter from 1992, the members expected the managers to obtain the specific approval of the majority before a sale, see resolution of 22 March 1992, the 1994 Circular, the complaints of some members in late August 1997. These also constituted evidence of established practice. I therefore reject the submission of Mr Neoh in his supplemental skeleton of 23 October 2003 that there was no evidence to indicate the rules in the Land Entitlement Book were derived from established practice.

187. Hence, on the balance of probabilities, I find that Article 3 was derived from established practice and all members of the Wui regarded the same as binding on the managers. There was no need for the Wui to adopt the same by a formal resolution passed in a meeting.

188. Even if I were wrong in that regard, the principle of estoppel by convention could be applied. The law can be taken from the following dicta of Lord Steyn in Republic of India v India Steamship [1998] AC 878 at p. 913 E to G,

"It is settled that an estoppel by convention may arise where the parties to a transaction act on an assumed state of facts or law, the assumption being either shared by them both or made by one or acquiesced in by the other. The effect of an estoppel by convention is to preclude a party from denying the assumed facts or law if it would be unjust to allow him to go back on the assumption ... It is not enough that each of the two parties acts on an assumption not communicated to the other. But it was rightly accepted by counsel for both parties that a concluded agreement is not a requirement for an estoppel by convention."

See also Chitty on Contracts, 28th Edn., Vol. 1 Paras. 3-100 to 3-106.

189. On the evidence, it was a common assumption of all the parties interested in the present action, namely the Plaintiff and the Defendants, that Article 3 of the Land Entitlement Book was binding and the managers had to obtain the approval of the majority before they could sell the land. The evidence also showed that it was a common assumption of many members in San Tin. I do not consider there is any merit on the defence submission that there was no evidence as to the Land Entitlement Book being sent to overseas members. In this connection, the expression "overseas members" had to be understood in a loose sense encompassing those who were indirectly interested through a Tso or other institutional members. Since the Land Entitlement Books had to be produced for collection of income and surrendered for collection of sale proceeds, and bearing in mind the defence case that distribution of the sale proceeds had been made to all the members, it is reasonable to infer that each member had been issued with one. Copies of the same had been produced and were included in the trial bundles. Such common assumption was accepted by the managers and this was reflected in the minute of the meeting of 22 March 1992 and the 1994 Circular. For reasons already given, I hold that it was unjust to allow the managers to resile from that common assumption.

190. In the circumstances, all the elements of estoppel by convention are present. I hold that the Defendants are estopped from denying that Article 3 was binding on them and they were obliged to procure the consent of the majority regarding any sale of the land.

The law and practice in respect of Section 15 consent

191. Section 15 of the New Territories Ordinance has recently been considered by the Court of Appeal in Tang Man Kit v Hip Hing Timber Company Ltd, CACV 137 of 2002 and Man Ping Nam v Man Mei Kwai, CACV 193 of 2002, both of 11 December 2002. The focus of the Court of Appeal in those cases was whether consent from the District Officer was necessary regarding letting of land of a Tso or Tong. However, the underlying reasoning of the Court of Appeal suggests that Section 15 should not be construed as replacing or abrogating all the obligations of a manager under customary law. On the contrary, it should be taken as complimentary thereto. Hence, it is legitimate for a District Officer in an application for Section 15 consent to refer to the requirements under customary law in respect of a particular transaction concerning land in the New Territories.

192. In his Second Supplemental Submission of 31 October 2003, Mr Neoh relied on Light Ocean Investments v Enway Development Ltd [1994] 3 HKC 31 to advance the proposition that the power of the Defendants as managers to sell the land derives from Section 15 and the only prerequisite was the consent from the District Officer. It has to be remembered that that case concerned dispute between two parties concerning sale and purchase of certain Tso land. One party (the vendor) intended to acquire the Tso land from the Tso whilst the other party (the purchaser) agreed to sub-purchase from that party. Hence it was not a dispute between the managers and members of the Tso. The issue in that case focused on the construction of a particular clause in the agreement between the two parties. It was held that although the newly appointed managers had entered into an agreement for the sale of Tso land with the vendor, due to the fact that their appointment was not yet registered and the consent from the District Officer was not yet obtained before the deadline under the agreement, the requirement of that clause had not been satisfied. The issue as to whether Section 15 abrogated any requirement under customary law as between the managers and the members did not arise and the Court of Appeal needed not address the same. With respect, I do not think Mr Neoh can derive any assistance from p. 40 of the report of that judgment. I think what Litton JA (as he then was) said at that part of the judgment was describing the position as between the Tso and a third party. It has nothing to do with the position between the managers and the members.

193. Mr Neoh accepted that in practice, the Defendants had to consult the members of the Wui in respect of the sale of the land. This is because invariably, the District Officer would resolve any objection of members before he gave consent under Section 15 of the ordinance. The practice of the District Office was that upon receipt of an application for consent from the managers, they would post notices at the relevant villages inviting anyone having objection to the sale to put forward their objection to the District Office within one month. Regarding the Wui, such notices had been posted on 26 June 1992 and 9 October 1995.

194. That was in line with the view expressed by Dr Hayes quoted in Paragraph 54 of the judgment of Rogers VP in Tang Man Kit v Hip Hing Timber Company Ltd, CACV 137 of 2002, 11 December 2002,

"[The power of a manager under Section 15] was, on the face of it, very different from their limited powers under the customary law, which emphasized consultation and agreement before any sale or mortgage of trust properties. However the section also required the giving of notices and the consent of the land officer, so that, in practice, they continued to be as restricted in their actions as before, for their members usually insisted on consultation, and the district officers scrutinized every application for alienation."

195. However, there were different views as to the extent to which the District Officer should be involved in dealing with the objections from members. As mentioned the Commissioner for Administrative Complaints took the view that the District Officer should not be concerned about the mode of sale or the sale price. The stance of the District Officer was not that simple. From the internal minutes in the District Office files regarding the Wui (produced as exhibit P-1 and copied as Trial Bundle C3), it is quite obvious that between 1993 and 1994, different views were held and the District Office considered that in respect of this particular case, it was appropriate to withhold consent pending a consensus reached by the members as to the sale procedures. Mr Fung had taken the court through these records at length at the trial. I do not think it is necessary for me to go through the same in details in this judgment save as to highlight the following. In M 76 (I was told that M stands for minute), the Liaison Officer of San Tin apparently considered on 15 April 1993 that the process of sale was the Wui's internal affairs. After some developments, his superior however indicated on 11 May 1993 that the District Officer's approval would be held in abeyance pending the finalization of the details of the proposed sale (M90). M 95 of 20 May 1993 explained at greater length the stance of the Senior Liaison Officer ["SLO"] (which seems to be adopted by the District Officer, see M 96). Having regard to the potentially high value of the land and some members likely to compete with each other to seize the opportunity to act as agent with a view to gain commission, the SLO thought that sale procedure was expectedly the bone of contention. Hence, he regarded MFT's insistence of having a fair set of sale procedure as an objection. He considered that had to be resolved by a resolution passed by the majority of the Wui before consent from the District Officer could be properly granted. At M 216, it was recorded that at a meeting of 3 October 1994, the District Officer indicated to Man Ping Nam that the members had to compromise on the sale procedures in order to protect the interests of all of them.

196. That was also the stance of the District Office in the investigation by the Commissioner for Administrative Complaints (see his response to the observations of the Commissioner as set out in paragraph 29 of the report of the Commissioner at Trial Bundle C2 p. 263-4). The report of the Commissioner was released in August 1995. In the meantime, the District Office received the reply slips regarding the 1994 Circulars and had meetings with the managers in respect of the same. From M227 of 21 December 1994, the then SLO (a different one from the one who wrote M95) approached the matter by checking whether the reply slips could be taken as majority support for the sale. Later, with the release of the report of the Commissioner, the District Office proceeded with posting of notice (see M237).

197. It is not for me to overturn the conclusions of the Commissioner as to the complaints against the District Office in this judgment. However, I find the observations by the SLO in M95 entirely sensible bearing in mind the background of this particular case. Although usually a District Officer should not play an active role in respect of the sale procedures (since the trustee, instead of the District Officer, is the manager), in a case where the District Officer has reasonable grounds to believe or envisage that the sale procedures could cause difficulties and disputes between the members I see no reason why the District Officer should not be concerned with the same and making attempts to resolve such difficulties and disputes before granting his consent under Section 15.

198. It was suggested that because the members of the Wui had agreed to the idea of selling the land (as evidenced by the resolution of March 1992), the District Office should leave the sale procedures to them as they contemplated that such procedures would be worked out later after consent of the District Officer was granted. According to this view, the disputes as to the sale procedures should not be regarded as objection to the sale. I have reservations as to whether this is correct. Although conceptually, it is possible for a member to agree to the idea of selling the land without agreeing on the sale procedures, one might question whether such an agreement can be meaningfully regarded as a consent to the sale of the land. Without majority consensus as to the sale procedure, it was envisaged by the members that the land could not be sold. At the most, I think that such an agreement could only be taken as a conditional agreement limiting to authorizing the managers to apply to the District Office for consent to sell with a condition that sale procedures or details had to be approved in another meeting of the Wui in the future.

199. Mr Chan Wah Tim, the Liaison Officer in charge (Rural) Central at Yuen Long District Office between April 1994 and January 1998, testified that in dealing with Tso and Tong matters, the District Office sometime had to play a reconciliatory or mediatory role as it is important to preserve the harmony of the community or village or clan. They would sometime rely on the collaboration of some village elders, senior family members or other influential figures in the clan to sort out differences between individual members. In the processing of application for consent under Section 15, Mr Chan told the court that the District Office would consider the reasons for each objection instead of merely going by the majority rule. The District Office regarded that it had a responsibility in protecting the interest of all the beneficiaries / members and this was the rationale behind the posting of notices inviting objections to consent be sent to the office.

200. In the context of the present case, Section 15 consent was indeed granted by the District Officer. Thus, the relevant question is notwithstanding such consent, whether there was still a duty on the part of the Defendants to obtain the approval of the members of the Wui as to the sale. For the reasons given earlier, I hold that the Defendants had such a duty by reason of Article 3 of the Land Entitlement Book which was reinforced by the terms of the resolution passed in March 1992. This conclusion is in line with authorities (see the view of Dr Hayes quoted above; see also Tang Yau Yi Tong v Tang Mou Shau Tso [1996] 2 HKLR 212).

Had the managers discharged their duties in fetching a proper price?

201. Having regard to the principles of law and my factual finding set out above, I am of the view that the Defendants had utterly failed to meet the standard of diligence and reasonable care that an ordinary prudent man of business would exercise in the sale of the land. In short, they were in breach of their duties as trustees in that regard. The reasons are as follows.

202. The purchase price speaks for itself. It shows that the land was a valuable piece of property. A difference in a small percentage could mean a lot of money. Moreover, given the large number of persons having interest directly or indirectly in the sale proceeds, the Defendants should handle the sale more cautiously, especially when this particular sale had not been approved by a resolution passed by the majority in a meeting of the Wui. As admitted by Man Ping Nam and demonstrated by the approaches by various solicitors in early 1997, the Defendants were aware of competing interests. At the material time, the Defendants did not have any solid basis to believe that the price offered by Earning Youth (even taking into account of the Donation as part of the price) was in line with the market value of the land. The Wui could certainly afford the fees of a professional valuation and the Defendants had access to professional advisers. Had they asked their lawyers, whether George Yip or otherwise, I am sure that the lawyer would have no difficulty in introducing a professional surveyor to them. Common sense dictates that a valuation report should be obtained to cross-check the offer of Earning Youth before the Defendants committed the Wui to the sale. I cannot find any valid reason why the Defendants could not ask for time to do that, bearing in mind as at 4 August 1997, the extension of the consent had not yet been granted by the District Officer. In this connection, I find the observations of Megarry VC in Cowan v Scargill cited above to be apposite.

203. It is also plain to me that the Defendants had not marketed the land properly. Their failure to follow-up with offers from solicitors in 1997 and their lack of bargaining with Earning Youth as to the purchase price are indicative of their omission in this regard. On the evidence, given my reservations as to the credibility of Man Ping Nam and the absence of any concrete evidence about the marketing of the property in 1997, I am not satisfied that the Defendants had taken any positive steps to market the property. In my judgment, this is more significant than whether the land was to be sold by auction or by public tender instead of private treaty. If there were proper marketing, with effective steps taken to arouse the interest of potential purchasers and inviting offers from them, a sale by private treaty after due consideration of whatever offers received could be acceptable, especially after the offers had been cross-checked against proper valuation report.

204. But the Defendants had not taken any steps to contact any potential purchasers. I have already stated my findings as to the lack of efforts on the part of the managers to ascertain the proper price level for the land and their lack of sufficient knowledge of the market in 1997. All they did were sitting there to wait for approaches from purchasers. Given my doubt as to his credibility, I attach no weight to Man Ping Nam's evidence in the witness box that the managers had contacted certain local agents regarding the sale of the land. I note that Mr Neoh did not include those in Annexure 2 as part of his summary of material facts on price discovery process. In any event, those were events well before 1997 and could not assist the managers in respect of their sale in 1997. As to the oral representations from various members in respect potential offers in 1995 and 1996 mentioned in Man Ping Nam's witness statements (referred to in Annexure 2), even if I were to accept such evidence (which I do not), there were no follow-up actions by the managers. What happened was that as soon as Wong Sui Ming came along with the offer from Earning Youth, the managers personally felt that the price was right and they committed the Wui to the sale without further investigation or bargaining.

205. In my judgment, a lot more could be done to market the land with potential purchasers. Some measures for marketing were discussed in Appendix 4 to the report of Mr Lau Chun Kong of Jones Lang LaSalle dated 2 September 2003. In fact, all the managers needed to have done were to instruct a professional agent to undertake the work for them. As mentioned, the managers appeared to be quite willing to pay a large agency fee.

206. I do not think the "bird in hand" argument assists the Defendants. Due to the lack of active marketing of the land, I am not satisfied that this is a case where there was no bird in the bush. In fact, the evidence of offers received in 1997 indicated the contrary. As I have observed, there was no evidence to suggest that the Wui had to sell the land urgently in August 1997. At that stage, no-one knew that the property market would collapse in October 1997 and the managers certainly did not have that in mind when they agreed to sell in early August 1997. Further, there is no evidence to suggest that had the managers bargained with Earning Youth or took time to cross-check it by proper valuation report, the offer would be withdrawn. In fact, had the managers performed their duties in this respect diligently, they should already have taken steps to follow-up the offers in early 1997 and could have obtained proper valuation report before they were approached by Wong Sui Ming.

207. Mr Neoh argued that given the diametric opposite opinions expressed by the respective experts called by the parties to give evidence at the trial, it showed the highly judgmental nature of expert advice on market value. He submitted that if the Defendants had spoken to Mr Yuen before the sale, they would have been re-assured whilst they would be troubled by the advice of Mr Lau. Mr Neoh further submitted that the Defendants would not be justified in turning down the offer merely because of a higher valuation by Mr Lau (assuming they had such advice at that stage) because the opinion of Mr Lau, stripped of the reference to the sub-sale to System Link which was not available as a comparable prior to the sale to Earning Youth, depended on comparables which were so dissimilar that radical adjustment had to be made.

208. Despite its apparent attractiveness, I come to the conclusion that these arguments could not assist the Defendants. Mr Lau and Mr Yuen were retained respectively by the parties for the purpose of this litigation. Although expert witnesses were supposed to be independent even if their reports were prepared for the purpose of litigations, given the fact that valuation is an art with a considerable margin of difference in opinion rather than a science with absolute precision, it would be unrealistic to assume that the reports of the experts were not subtly influenced by the purpose of the exercise. I am not suggesting that an expert would compromise his independence or impartiality when he was retained by a litigant. However, an expert would naturally bear in mind that in preparing a valuation for the purpose of cross-checking a future or potential transaction, his potential liabilities towards his client would be quite different from the preparation of a valuation report for litigation. Hence, it would not be correct to assume that had the Defendants consulted expert prior to the sale to Earning Youth, they would not receive any useful advice in terms of market value of the land. More importantly, the expert could certainly give meaningful advice and suggestions as to the proper marketing of the land. Further, the Defendants should have consulted expert well in advance instead of doing that after the offer from Earning Youth was received. After the receipts of several approaches from solicitors in early 1997, they should have sought advice and there was ample time for them to do so.

209. In the circumstances of the present case, the fact that the Defendants also sold their personal interests in the Wui at a similar price does not take the defence case further. At the most, this is only relevant to show the honesty of the Defendants. However, as stated by Megarry VC, the duty is not discharged merely by showing that the trustee has acted in good faith and with sincerity. Honesty and sincerity are not the same as prudence and reasonableness.

210. The inherent drawbacks on the marketability of the land (e.g. restriction on its use, difficulty in giving vacant possession and the limited number of potential purchasers) are not excuses for doing nothing to market the same. As a matter of common sense, these would suggest that more vigorous marketing should have been done in order to achieve a proper price.

211. I therefore come to a clear conclusion that the Defendants were in breach of their duties of due diligence and reasonable care in fetching a proper price for the sale of the land.

The duty to consult members and to obtain the approval of the majority for the sale

212. For reasons given earlier, I hold that there was a duty on the part of the Defendants to obtain the approval of a majority of the members of the Wui before they sold the land. I do not consider the 1992 resolution and the letters of authorization as sufficient for that purpose. It is quite plain from the terms of the 1992 resolution that the members' approval for application to be made to the District Office was contingent upon a further meeting to be held to discuss details of the sale. Subsequent conducts of the managers and the parties as evidenced by the records of the District Office highlighted by me above showed that this was the common understanding. The Defendants had also received advice to such effect from George Yip. The Defendants had not given any valid justification for not following such advice.

213. Although I find that the Defendants were aware of the agreement to the proposal set out in the 1994 Circular by a significant number of members and they had acted on the basis that the same had been approved by a majority, I do not find it necessary for the resolution of the claims of the Plaintiff in this action to hold that the 1994 Circular had equal force as a resolution passed by the majority at a meeting of the Wui. Suffice for me to say that the Defendants should have been aware of a demand by at least a significant number of members for the sale to be conducted in that manner. This served at least to underscore the importance of holding another meeting of the Wui to ascertain the views of the members as to the offer from Earning Youth before the Defendants entered into the Provisional Agreement.

214. By reason of my finding on what happened on 16 March 1997, the inevitable conclusion is that the Defendants was in breach of the duty to seek the approval of the majority before they entered into the Provisional Agreement.

Consequences of the breach of duties

215. Two issues have to be considered in the light of my conclusions as to the breach of duties on the part of the Defendants.

(a) whether the breach caused any loss to the Plaintiff;
(b) whether the Defendants could pray in aid of Section 60 of the Trustees Ordinance to seek relief.

216. The Plaintiff did not seek to set aside the sale and to have the land restored to the Wui. Neither is he seeking to have the trust fund restored. He is only asking for equitable compensation in respect of his share in the Wui. The law as to equitable compensation was considered by the House of Lords in Target Holdings Ltd v Redferns [1996] 1 AC 421. Lord Browne-Wilkinson reviewed the nature of equitable compensation. At p. 432E to H, His Lordship had the following observations as to the fundamental principles governing compensation in equity,

"At common law there are two principles fundamental to the award of damages. First, that the defendant's wrongful act must cause the damage complained of. Second, that the plaintiff is to be put 'in the same position as he would have been in if he had not sustained the wrong for which he is now getting compensation or reparation:' Livingstone v Rawyards Coal Co (1880) 5 App Cas 25, 39 per Lord Blackburn. Although ... in many ways equity approaches liability for making good a breach of trust from a different starting point, in my judgment those two principles are applicable as much in equity as at common law. Under both systems liability is fault-based: the defendant is only liable for the consequences of the legal wrong he has done to the plaintiff and to make good the damage caused by such wrong. He is not responsible for damage not caused by his wrong or to pay by way of compensation more than the loss suffered from such wrong. The detailed rules of equity as to causation and the quantification of loss differ, at least ostensibly, from those applicable at common law. But the principles underlying both systems are the same." (my emphasis)

At p. 433G to H, His Lordship referred to the scenario where a trustee committed a judicious breach of trust by investing in an unauthorized investment and the trust made a profit out of it. Lord Browne-Wilkinson was of the view that no compensation would be payable because the breach had caused no loss to the trust fund. At p. 433H to 434A, it was said,

"... in each case the first question is to ask what are the rights of the beneficiary: only if some relevant right has been infringed so as to give rise to a loss is it necessary to consider the extent of the trustee's liability to compensate for such loss."

See also Canson Enterprises Ltd v Boughton & Co (1991) 85 DLR (4th) 129, in particular the judgment of McLachlin J cited by Lord Browne-Wilkinson in Target Holdings Ltd v Redferns at p. 438-9. After such citation, Lord Browne-Wilkinson said at p. 439B,

"Equitable compensation for breach of trust is designed to achieve exactly what the word compensation suggests: to make good a loss in fact suffered by the beneficiaries and which, using hindsight and common sense, can be seen to have been caused by the breach."

217. Mr Fung relied on the dicta at p. 434C to 435 C and submitted that the approach of equity is a but-for test. He emphasized that common law rules as to remoteness of damage and causation do not apply. That was said by reference to traditional trust and Lord Browne-Wilkinson said in later part of his judgment that it would not be correct to apply the same specialist rules to a bare trust where the rationale has no application.

218. Further, even in the context of a traditional trust, if the trust has come to an end, His Lordship held that the right of the beneficiary was no longer to have the trust duly administered. Restitution of the trust fund was no longer necessary and thus in an ordinary case the court should order payment of compensation directly to the beneficiary. At p. 435B, Lord Browne-Wilkinson said,

"The measure of such compensation is ... the difference between what the beneficiary has in fact received and the amount he would have received but for the breach of trust."

219. In the present case, given that the Plaintiff did not seek to set aside the sale and sale proceeds had been distributed, it must be taken that the original trust has come to an end. The Plaintiff's right in such circumstances is to be compensated for loss suffered by him which was caused by the breach on the part of the Defendants. As far as I can see, the failure on the part of the Defendants to obtain the approval of the majority is like the making of an unauthorized investment. If the investment was a profitable one, no loss had been caused and no compensation would be payable. In Target Holdings Ltd v Redferns, it was held that equitable compensation for a breach of trust should be assessed at the date of judgment and events after the breach up to the date of judgment could be taken into account (see p. 437C to H). Given the collapse of the property market, I do not think it could be seriously suggested that the land could be sold at a higher price today as compared with August 1997 and this was not the Plaintiff's case.

220. However, the Plaintiff's contention is that had the managers discharged their duties properly, the sale in August 1997 could have been made at a higher price. To support that argument, the breach in respect of the duty of due diligence and reasonable care is the relevant one although the other breach can be taken into account in respect of the consideration of Section 60 relief. The loss suffered by the Plaintiff could be identified as the difference between what he had actually received on account of the proceeds of sale and what he would have received if the Defendants had fulfilled their duties in fetching a proper price for the sale of the land in 1997.

221. Another way of putting it was by way of surcharge of the trust accounts. In Article 89, paragraph (2) of Underhill and Hayton's Law relating to Trusts and Trustees (16th Edn) p. 852, it was said,

"Where a trustee's conduct is authorized but he fails to comply with the duties imposed upon him or the standard of care required of him, then the trust accounts are surcharged with the extra amount the trust fund would have had but for his improper or negligent conduct unless he is protected by a clause exempting him from liability for such a breach of trust."

I think the same applies in the present context where the beneficiary is not seeking to restore the trust fund although the conduct was unauthorized.

222. The extent of loss (if any) is a question of fact and valuation evidence is relevant. Before I come to that, I shall deal with the question of Section 60 relief. Quite apart from the pleading point, I am of the view that bearing in mind the circumstances under which the Defendants committed the Wui to the sale in August 1997 as found by me, it is impossible for this court to grant any relief to the Defendants. Three requirements have to be satisfied under Section 60 before the court can exercise its discretion to grant relief,

(a) the trustees had acted honestly;
(b) the trustees had acted reasonably; and
(c) the trustees ought fairly be excused for the breach in question.

223. Mr Neoh submitted by reference to Re Turner [1897] 1 Ch 536 that the criteria was met if the trustee was as prudent as he would have been in relation to his own affairs (Para. 38 of his Final Submissions). He further contended that the standards under Section 60 are subjective ones and the rationale behind is that beneficiaries are stuck with the strengths and weaknesses of their trustees (Para. 12 of his Outline of Oral Submissions of 9 October 2003).

224. With the greatest respect, that cannot be correct as a matter of law. Whilst honesty must have a subjective element, the other two criteria must be assessed by the court objectively although the court would bear in mind all relevant circumstances of the case, including how the trustees dealt with their own affairs. I shall assume that the Defendants acted honestly. I do not think Re Turner [1897] 1 Ch 536 is an authority for the proposition that it would be sufficient if the trustee was as prudent as he was in relation to his own affairs. Mr Neoh also referred to Snell's Equity, 13th Edn. at p328. I note that Snell did not go so far as Mr Neoh submitted. It only said the following regarding Section 60 relief,

"The burden lies on the trustee to establish that he acted honestly and reasonably; he must at least show that he was as prudent as he would have been in relation to his own affairs."

225. Mr Fung referred me to the discussion of the requirement of reasonableness and whether the court thinks the trustee ought fairly to be excused in Underhill and Hayton's Law relating to Trusts and Trustees (16th Edn) p. 913-920. At p. 915, it was said,

"A trustee cannot be considered to have acted reasonably, if he has neglected to obtain skilled advice. Regard must be had to the estate of which he is a trustee. In a large estate it may be only reasonable that he should consult counsel of the first rank or apply for the directions of the court whereas it would be reasonable to insist upon all this where the estate is small. In such a case it may be reasonable to act upon the advice of a solicitor..."

226. At p. 916, Underhill and Hayton referred to the case of Wohlleben v Canada Permanent Trust (1976) 70 DLR (3d) 257 and observed that the standard might be different between a professional and a non-professional trustee. To that extent, I can take into account of the fact that the Defendants were not very sophisticated people and they had sold their own shares at the same price.

227. On the facts of the present case, even with the aforesaid allowance, I do not think the Defendants could satisfy me that they acted reasonably in the sale of the land. The value of the land was high and beneficiaries involved were large in number. The Defendants were aware of competition for acquisition of the land and they had access to legal advice. They were also aware of a proposal by at least some of the owners in terms of the 1994 Circular. The history of their dealings with some members and District Office also highlighted how controversial the sale could be and there were potential conflict of interests between different members (in term of commission relating to the sale of the land as observed by the District Office). In those circumstances, they should proceed with the matter cautiously. Yet they took it upon themselves to decide that the offer of Earning Youth was acceptable without inviting any competitions or seeking professional advice on the offer. Nor did they consult the members by a meeting as advised by George Yip. Neither did they attempt to bargain. There was a gross neglect on the part of the Defendants in performing their duties to fetch a proper price for the land. I find it hard to accept the submission that the Defendants were acting reasonably.

228. I also hold that it would not be fair to the beneficiaries to grant relief in the present case. Such a relief would deprive them of their remedies against the Defendants personally for compensation in respect of loss caused by the Defendants' neglect in their duties. Given the extent of neglect (and I would say it was neglect to the extent of being reckless) on the part of the Defendants, I do not think the breach of duties in the present case ought fairly to be excused.

Did the Plaintiff suffer any loss caused by the Defendants' breach of duties?

229. The crucial question is whether the Wui could have sold the land at a higher price had the Defendants properly discharged their duty of due diligence and reasonable care. Although valuation evidence had been adduced by both parties, for reasons given below, I do not think this is a pure valuation question and I do not adopt the valuation of either expert. It is basically a question to be determined by reference to the circumstances in August 1997. The ultimate question is on the balance of probabilities whether this court is satisfied that the land could have been sold by the Defendants at a higher price in August 1997 had they marketed the land properly and sought professional assistance in the matter.

230. The primary facts are as follows. The land was sold to Earning Youth at $336,000,000 plus a donation of $6,657,710.40. Earning Youth sub-sold the land within the same month to System Link at $446,066,597. There are differences in the terms of the two transactions, the most notable one being that the sale to Earning Youth was subject to tenancies whilst the sub-sale to System Link was with vacant possession. Although there was no mention of completion subject to tenancies in the Provisional Agreement, on the balance of probabilities, I do not think the Defendants had agreed with Earning Youth to deliver vacant possession.

231. In respect of this difference, System Link and Earning Youth had stipulated in Clause 37 of the Sub-sale Agreement that $10 per square foot should be withheld as security in case vacant possession could not be delivered. By Clause 4 of the Supplemental Agreement, a sum of $64,208,886.60 was deducted upon completion between these two companies. This is clear evidence that property with vacant possession would fetch a higher price and notwithstanding the analysis of the experts on a theoretical level about the effects of vacant possession (or the lack thereof, see the evidence of Mr Lau and Mr Togher) for a purchase of this nature, I prefer the evidence of actual transactions.

232. But was $10 per square foot or alternatively $64,208,886.60 the price tag for vacant possession? Under Clause 4 (a) of the Supplemental Agreement, the retention of $64,208,886.60 was for two purposes, only one of which related to vacant possession. The other related to the written permission or approval from the relevant Government authority to modify or change the existing user of the Property to other user so that the value of the Property shall at least be equivalent to the value of land of equivalent size permitted for the use of open storage of containers. There is no concrete evidence before me as to how the provision as to user came to be included. That seems to be an additional requirement because there was no such requirement under the Chinese provisional agreement dated 25 August 1997 and the Sub-sale Agreement between Earning Youth and System Link. Clause 16 (b) of the Sub-sale Agreement expressly stated that no warranty was given by Earning Youth as to the user of the land. There is also evidence from Mr Yam that by the time of the Supplemental Agreement, System Link was concerned about releasing money to Earning Youth and it was worked out that only a sufficient amount be released to enable Earning Youth to complete with the Wui. The balance was retained. I therefore do not regard $64,208,886.60 as an indication of the discount the market would give on account of lack of vacant possession.

233. The correspondence between solicitors acting for these two parties in the conveyancing transaction did not shed light on this. Mr Allen Yam, who was subpoenaed by the Defendants to give evidence at the trial, was acting for System Link. However, he testified that the negotiation for the variation was conducted directly between the representatives of his client and Earning Youth and he did not take part. Hence, he was unable to tell the court exactly how the question of user came up. Mr Yam thought that it had something to do with the delivery of vacant possession but not being privy to the discussion and without specific instructions from his client, he was unable to explain further the correlation between this and delivery of vacant possession.

234. Clause 4(b) of the Supplemental Agreement specifically catered for failure to deliver vacant possession after written approval was given for change of user. It provided for $10 per square foot on area of such portion of the land which Earning Youth could not deliver vacant possession to be deducted as liquidated damages. Mr Yam said the figure of $10 per square foot was based on instructions from his client and he had no idea how this figure was arrived at. He said he had explained to his client the implication of liquidated damages and they were aware that by agreeing to such a liquidated damages, they might not recover additional damages. This, in my view, should be considered in the light of the deployment of a similar argument by Earning Youth to resist extension of time for completion by reference to Clause 37 in a letter dated 1 December 1997 from Messrs King & Co. to Messrs Yam & Co. Mr Yam said counsel's advice had been sought by his client at that time. With the benefit of such advice, System Link decided to enter into the Supplemental Agreement with Clause 4(b) as safeguard for Earning Youth's failure to deliver vacant possession.

235. It has to be remembered that System Link was the subsidiary of Henderson. It was a well-informed developer with immense experience in the property market and had been acquiring land in the New Territories for quite some time. Hence, subject to the argument of Mr Neoh that it was a special interest purchaser, this court can infer that the terms on which it acquire the land would not be wide off the mark as compared with the market price. The price tag it put on vacant possession could be used as a reference as to how potential purchaser would adjust the price in relation to the factor of vacant possession bearing in mind that it was in the same category as the other potential purchasers for the land, viz. big developers with interest in land of large size in the New Territories for redevelopment purposes.

236. In Bwllfa & Merthyr Dare Steam Collieries (1891) Ltd v Pontypridd Waterworks [1903] AC 426, Lord Macnaghten said the following at p. 431,

"If the question goes to arbitration, the arbitrator's duty is to determine the amount of compensation payable. In order to enable him to come to a just conclusion it is his duty, I think, to avail himself of all the information at hand at the time of making his award which may be laid before him. Why should he listen to conjecture on a matter which has become an accomplished fact? Why should he guess when he can calculate? With the light before him, why should he shut his eyes and grope in the dark?"

The sub-sale to System Link is an accomplished fact. I see no reason why this could not be referred to as a comparable. Likewise, the fact that a deduction was made on account of inability to deliver vacant possession was plainly established by the terms of the Sub-sale Agreement and Supplemental Agreement.

237. In fact, Mr Lau relied strongly on the sub-sale as a comparable. As far as experts called by the defence is concerned, although only Mr Yuen was called, Mr Togher's comments in Paragraph 15 of his report supported the view that provided that one can be satisfied that the sub-sale was an arms length transaction, it could be used as a comparable. Mr Yuen was more cautious. At Para. 4.10 of his report of 15 July 2003, he said it was very controversial whether transactions of a property itself could be its own comparables. The reason he gave was that the transaction might not reflect its true value and the only example he gave was a fraudulent transaction. With the evidence now available as to the sub-sale, there is no doubt that it was not a fraudulent transaction nor was it a transaction between related parties. I see no reason to suggest that Earning Youth and System Link were not dealing with each other at arms length. However, after having the opportunity of reading documents pertaining to the sub-sale, Mr Yuen still maintained in Paragraph 1 of his report of 7 August 2003 that the sub-sale should not be regarded as a valid comparable because of the substantial reduction in price under the Supplemental Agreement on account of the failure to deliver vacant possession. I fail to see how that could be a valid reason. All that is required is to make adjustment by reference to the reduction.

238. In his evidence in chief, Mr Yuen was asked why he did not pay any regard to the sub-sale. He gave an answer which did not make any sense to me. He said there was a distinction between price and value. He said price was specific to a purchaser whilst the task of a valuer was to value the property on the assumption of perfect market condition. Yet very often, market condition, especially in the New Territories, was not perfect and therefore he had to refer to other comparables. I can understand all these except the last step. Both experts had furnished the court literature highlighting the differences between price and value and they were inserted into Bundle K2 p. 696 to 700. I do not find it necessary to engage in the debate on which textbook is more accurate. The short point is that even if one were to use another comparable, it would be the price of another transaction. Hence, Mr Yuen's answer did not really address the question. Further, it is a misconception to consider that just because the price of the sub-sale was used as comparable, one is actually equating price with value. A comparable remains as a comparable. There could still be adjustments.

239. This court therefore sought clarification from Mr Yuen at the end of his evidence about this point. He said he discarded the sub-sale not because it was not conducted under perfect market condition. He accepted that the factor of vacant possession could be dealt with by adjustment. He said he discarded the sub-sale because he had reason to suspect that sub-sale was by a purchaser with special interest. The only reason he gave was that Henderson was active in the area. That did not appear to me to be a sufficient ground for treating System Link as a special interest purchaser. Mr Yuen had agreed under cross-examination by Mr Fung that in 1996 and 1997, all big developers in Hong Kong acquired land in the New Territories to build up land bank for future developments.

240. Mr Neoh however had put forward other grounds (not referred to by Mr Yuen) to support his submission that System Link was a purchaser with special interest. He suggested that Henderson was known to have been active in packaging land or redevelopment and System Link was willing to purchase from Earning Youth despite full knowledge of the huge difference between price paid by it and the price agreed between Earning Youth and the Wui. He said it was in line with the modus operandi in relation to Henderson's acquisition in the sub-sale of comparable A2. Due to the restrictions on the land use and the planning intention set out in the Explanatory Memorandum, Mr Neoh submitted that a developer would have little prospect of putting the land to developmental use unless it was combined with other lands or were used in land exchange. He referred to the hearsay evidence of Mr Allen Yam that Henderson wished to use the land as a golf course and submitted that it was consistent with Henderson's Nam Sang Wei project which required land exchange. Counsel suggested that this could be achieved without necessarily seeking rezoning.

241. That was the theory put forward by Mr Neoh. However, the Defendants have not put before me any concrete evidence to support the theory. Mr Yam's was not informed of everything by his client and I find his evidence as to the intended use of the land as a golf course was too vague and general to support any inference that it must have something to do with the Nam Sang Wai project. As a matter of fact, I do not have any admissible evidence about the Nam Sang Wai project. Mr Neoh only referred to a textbook extract from Town Planning in Hong Kong by Mr Lawrence Wai-chung Lai to establish the details of the Nam Sang Wai project. Whilst that extract contained a detail account of Planning Appeal Case No. 13 of 1993, I am not satisfied that making citation from a book without any notice in advance (the extract was only included in a bundle placed before the court when Mr Neoh started his cross-examination of Mr Lau in the afternoon of 9 September 2003) was the proper way to prove a relevant factual issue. It has never been alleged in pleadings nor in witness statement nor in expert reports that System Link was a special interest purchaser.

242. To some extent, this was because the fact that System Link was a subsidiary of Henderson was only revealed in the course of the trial when Mr Allen Yam came to the court to give evidence about the sub-sale. It was at a very late stage that the defence decided to issue subpoena to Mr Yam. I said all these without any criticism against Mr Neoh because as I had already said in an earlier Ruling, Mr Neoh was only brought into the case very shortly before the trial commenced.

243. In any event, Mr Lau told this court that Nam Sang Wai was very far from the land. He estimated that the straight line distance was about 30 km. In the absence of any evidence from an officer of Henderson or System Link concerning the relationship between the Nam Sang Wai project and the purchase by System Link, on the present state of evidence, I do not feel able to draw an inference that the land was acquired by System Link for the purpose of the Nam Sang Wai project.

244. Further, in Para. 49 of his final submissions, Mr Neoh identified three attributes for the potential purchasers of the land,

(a) ability to afford to buy the land and other lands forming part of a development scheme;
(b) ownership or reasonable prospect of acquiring ownership of other pieces of land (whether contiguous or not to the land) forming the total development scheme;
(c) ability to devise and implement a development scheme which will comprise the land and other lands, which together will form a package which is likely to be acceptable to the Town Planning Board and the Lands Department.

These attributes could be fulfilled by quite a number of large developers who were interested in acquiring land in the New Territories in 1997. They were also the developers who were the potential purchasers of the land in question given its size and the amount of money to be involved. Hence these attributes provided no ground for regarding System Link as a special interest purchaser.

245. Having considered all the matters relied upon by Mr Neoh carefully, I am not persuaded that the sub-sale should not be taken into account by reason of System Link or Henderson having special interest in the acquisition.

246. In any event, the focus in the present case should be whether the Defendants would fetch a higher price for selling the land in August 1997 had they marketed it properly and sought professional advice regarding the sale. Hence, it does not matter whether System Link was a purchaser with special interest. What is important is whether the Wui could get a higher price for the sale of the land in the wake of such a potential purchaser, whether with special interest or otherwise. The primary question is what would have been the price achievable by the Wui in August 1997. Valuation evidence only serves to assist the court in answering that question.

247. Mr Neoh contended that the Wui would not be able to sell to System Link because it could not give vacant possession. Mr Yam also testified that Henderson would usually require vacant possession in its acquisition. I have some doubt about that as it might ultimately depend on how the vendor marketed the land and the overall package put forward. One might look at the matter from another angle: in this series of transactions Earning Youth assumed the risk of failure to deliver vacant possession which the Wui was not prepared to take up in August 1997. However, the question is not whether the Wui would be able to sell to System Link. The question is whether the Wui would get a higher price if it had marketed the sale properly with the assistance of professional advice. It does not matter whether the Wui could have sold to System Link directly. The Wui could have sold through a confirmor who took up the responsibility to secure vacant possession as in the present case. Or it might have other ways to resolve the inability to deliver vacant possession, say by selling at a lower price. It does not even matter whether the land would ultimately be sold to System Link or another developer. So long as this court is satisfied that the Wui could have sold at a higher price, the Defendants had to compensate the Plaintiff for his loss. The sub-sale serves as a useful comparable and adjustment had to be made on account of the Wui's inability to deliver vacant possession.

248. I do not attach any significance to the submission that on 4 August 1997, the extension of the consent from the District Officer had not yet been issued and it had taken a longer time for this extension to be processed as compared with previous one. As far as the records showed, there was no indication that the extension would not be approved on that occasion. Nor was there any indication that the Defendants anticipated any difficulty in getting the extension. In any event, as there was no urgency in the matter, there was no reason why the Defendants could not wait until the issue of the extension if that had a bearing on the price. I also fail to see how the uncertainty as to the extension (assuming it was uncertain on 4 August 1997) could have great impact on the price of sale by the Wui. Pending the extension, the agreement could only be a conditional one (see Light Ocean Investments v Enway Development [1994] 3 HKC 31). If the extension was refused, the transaction could not be effective as far as the Wui was concerned. The price must therefore have been set by the parties on the assumption that the extension would eventually be granted.

249. As to the valuation by the experts, I reject Mr Lau's valuation because he considered that there should not be any deduction on account of inability to deliver vacant possession. This is contradicted by actual evidence as embodied in the terms of the sub-sale. Further, although a number of comparables were referred to by Mr Lau in his reports, at the end he come to his valuation of $466,000,000 by adding 5% to the price of sub-sale on account of lack of proper marketing. From the particulars of adjustments set out in Para. 3.1 and Para. 3.2 of his Third Supplemental Report, one can see that even after adjustments, with the exception of his Comparable 4 (which was also used by Mr Yuen as Comparable A3), all comparables were at a unit rate substantially higher than the price of the sub-sale. Mr Neoh had explored at length with Mr Lau as to the usefulness of these comparables bearing in mind the principle illustrated by Lai Kit Lau Mutual Aid Committee v Commissioner of Rating and Valuation [1984] HKDCLR 31. Judge Cruden identified the relevant principle as follows at p. 516 of Land Compensation and Valuation Law in Hong Kong, 2nd Edn.,

"...a careful analysis can only provide useful evidence or enable realistic adjustments to be made where the comparables are sufficiently similar to the property being valued. If the comparables are not reasonably similar, then no matter how detailed the subsequent analysis, the result may well be spurious."

250. Since Mr Lau did not actually rely on these comparables to come to his conclusion, I do not propose to burden this lengthy judgment by going into the details of the differences between these comparables and the land. Suffice to say that due to the restriction on the use of the land as outlined at the beginning of this judgment and potential developments pertaining to the comparables and the nature of some of those transactions (being sale and purchase of a part interest in the land rather than the land), I am satisfied that these comparables were so different that it could not provide any useful reference for the valuation of the land.

251. I turn to Mr Yuen. He did not impress me as a good expert witness and his testimony does not inspire confidence in my mind as to his conclusion. Apart from the difficulties I have referred to about his contention as to the irrelevance of the sub-sale as a comparable, his valuation was acutely inconsistent with offers received by the Defendants. His conclusion was that the market value of the land in August 1997 was $85 per square foot. Offers of $92 per square foot had been received by the Defendants from Messrs K C Tsang & Co on 16 November 1993. The offers received in early 1997 were also considerably higher than $85 per square foot, with the highest offer being $96 per square foot from Messrs Leung Kin & Co. Whilst I accept that offers might not be representative of market value because of the price achieved after a bargaining process could be different, common sense tell us that usually offers from purchasers would be lower than the price eventually achieved. Although one would not use these offers as comparables, the fact that there were quite a number of offers from interested purchasers (who had no reason to put forward unrealistic high offers) which were considerably higher than the valuation of Mr Yuen is sufficient to cause one to wonder whether Mr Yuen got it right. This is particularly so when Mr Yuen's valuation is very much below the actual sale price between Earning Youth and the Wui and the sub-sale price.

252. A major difference between Mr Yuen and Mr Lau in their adjustment on the comparables is in respect of the size of the land. Mr Lau said for this kind of property and bearing in mind the potential purchasers being large developers, the larger the land, the higher unit price would be achieved because developers need a large plot of land to make development feasible. Mr Yuen said otherwise. Mr Lau supported his contention by matters set out in Para. 8.2.5 of his Third Supplemental Report. Mr Yuen only gave a discount adjustment ranging from -10% to -25% without any elaboration in his reports. Although Mr Yuen tried to attack Mr Lau's basis in his evidence in chief, I am not persuaded by Mr Yuen's evidence. Mr Neoh had cross-examined Mr Lau at length on this point but Mr Lau remained quite firm on this point. More importantly, as a general proposition, Mr Lau's approach made good sense to me. On this issue, I prefer the evidence of Mr Lau to that of Mr Yuen.

253. As regards the comparables referred to by Mr Yuen, only three were adopted by him as relevant, namely A1 to A3. Mr Yuen made respective size adjustments of -20%, -15% and -10%. Even if one does not go as far as Mr Lau in Para. 3.3 of his Third Supplemental Report, different adjustments in these respects would significantly affect the unit rates. The land size of these comparables are much smaller than the land and the potential purchasers were probably very different. Applying the same principle that Mr Neoh urged this court to adopt by reference to Lai Kit Lau Mutual Aid Committee v Commissioner of Rating and Valuation [1984] HKDCLR 31, I am not convinced that these comparables would be useful for present purposes.

254. Mr Yuen however gave this court useful evidence on discount adjustment regarding vacant possession. He adopted 10% adjustments for A1 and A3. The 5% for A2 was due to the fact that part of that comparable was subject to tenancy. Using 10% as a benchmark, applying it to the sub-sale as a comparable, the value of the land on a sale subject to tenancy would be $401,459,937.30. That was relatively consistent with a deduction of $10 per square foot (assuming the whole piece of land was subject to tenancy). The sub-sale price minus $33,288,552 is $412,778,045.

255. Since it is a question of what would be the sale price had there been proper marketing and due diligence on the part of the Defendants rather than the sale price to a particular purchaser, I would adopt 10% deduction by way of adjustment instead of the $10 per square foot. Hence, my finding is that land could have been sold by the Defendants at $401,459,937.30 in August 1997 had they marketed the land properly and sought professional assistance in the matter.

256. This means that the Wui suffered a loss of,

$401,459,937.30 - $336,000,000 - $6,657,710.40 = $58,802,226.90

The Plaintiff's share of the same is 1.5/32th part thereof. In other words the equitable compensation payable to the Plaintiff is $2,756,354.39. I hold that the Defendants is liable to the Plaintiff for this amount by way of equitable compensation.

257. In coming to that conclusion, I have already taken into account the evidence of Mr Lau that an upward adjustment of 5% should be made for the lack of marketing of the land. Whilst I acknowledge that there could be competition between developers, I think it would be too speculative to justify another 5% adjustment.

Accounts

258. In the light of my findings on the nature of the Donation, and my observations as to the lack of proper account regarding the same, the Defendants must account to the Plaintiff as to what happened to the Donation and its interest ever since the receipt of the same in February 1998. Since this is part of the purchase price, the Plaintiff should be entitled to 1.5/32th part thereof. Upon proper account being taken, the Defendants should pay 1.5/32th part of the Donation and interest to the Plaintiff.

259. As regards the interest derived from the sale proceeds, the Defendants had never accounted to the members despite their promise to render account for the same in their handwritten account statement dated 15 September 1997 and letter dated 29 September 1997. I have dealt with the defence that interest had been paid to the Plaintiff. In my judgment, the Plaintiff is entitled to an account from the Defendants so as to be satisfied that the sum of $15,893,801.80 represented the full amount of principal and interest in respect of the $15,549,195. If there were a shortfall upon account taken, the Defendants should pay the same to the Plaintiff regarding the Plaintiff's share.

260. Two other items were referred to by Mr Fung in his final submissions in the context of account, viz. the commission in the sum of $3,360,000 allegedly paid to Ferdinand Group and legal fees in the sum of $1,000,000 paid to Messrs David Y Y Fung & Co. I note that these were paid by way of deductions made by Messrs David Y Y Fung & Co from the sale proceeds. As solicitors acting for the Wui, Messrs David Y Y Fung & Co owed the Wui a duty to account. Since the Defendants were the managers, they should have pressed for such an account from the solicitors. In this connection, I agree with Mr Fung that the documents produced by the Defendants were inadequate. The duty to account include a duty to produce relevant supporting documents and information (see Underhill & Hayton, Law relating to Trusts and Trustees, 16th Edn., p. 853). Deal Pont & Chalmers, Equity and Trusts in Australia and New Zealand, 2nd Edn. p. 621 had the follow observations,

"Beneficiaries are entitled to inspect documents which verify the trustees'representations concerning the financial position of the trust estate."

261. Whilst the documents might be in the actual possession of the solicitors instead of the Defendants, it must be within the power of the Defendants to procure the same. The Plaintiff's solicitors had made numerous requests for disclosure of relevant documents (particularized in Paragraph 61 of Mr Fung's final submissions) and the Defendants simply did nothing. This was to say the least remarkable bearing in mind that at the early stage of this action, Messrs David Y Y Fung & Co acted for the Defendants and some of the requests by Plaintiff's solicitors were addressed to that firm.

262. I am of the view that the Defendants should procure the relevant documents from Messrs David Y Y Fung & Co and subject to observations by counsel as to the wordings of the order, I would make an order to that effect.

263. Of course, the production of relevant documents is only the initial stage of the accounting process. As Mr Fung observed by reference to Underhill & Hayton, Law relating to Trusts and Trustees, 16th Edn., p. 853-854, the Plaintiff could seek to falsify or surcharge the account if he considers the same to be necessary after seeing the relevant documents. That would have to be decided in the future.

264. In connection with that, I observe that given the underlying assumption for the award of equitable compensation (viz. proper marketing with professional advice as to the sale of the land), there would necessarily be expenses pertaining thereto. Parties have not addressed me on the issues whether the Plaintiff, having obtained the benefit of equitable compensation calculated on this basis, could come back to falsify the account in respect of reasonable expenses on professional fees and what should be the consequences if the expenses incurred were not at a reasonable level. I shall leave these open for future determination if necessary.

Disposal

265. As indicated, I wish to hear parties on the appropriate orders to make in the light of this judgment. I direct the matter be restored for a hearing of half a day to work out the final orders. I shall also hear submissions on costs at that hearing. Parties shall submit their skeleton submission and draft orders at least 5 days before the restored hearing.

266. Last but not least, I wish to thank counsel for their assistance in this case. Although the trial took much longer than originally estimated (the case was set down for a 7 days' trial), that was due to unexpected developments rather than counsel's fault.

(M H Lam)
Judge of the Court of First Instance
High Court

Representation:

Mr Patrick Fung, SC instructed by Baker & McKenzie, for the Plaintiffs

Mr Anthony Neoh, SC (absent on 11 August (p.m.), 5 September, 8 September and 9 September 2003 (a.m.)), leading Mr K M Chong (absent on 5 September 2003 (a.m.)) and Mr Earnest Koo, instructed by Christine M Koo & Ip, for the Defendants

Remarks: Appeal by the 1st and 2nd Defendants to Court of Appeal. Appeal dismissed. Please refer to CACV104/2004

24487-EN-2003-07-22

MAN FONG HANG v. MAN PING NAM AND OTHERS

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HCA007935E/1998

HCA 7935/1998

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 7935 OF 1998

____________

BETWEEN
	MAN FONG HANG (文晃恆) the surviving administrator of the estate of Man Mou Hei (文戊喜) also spelt as Man Mo Hei, Man Mau Hei and Man Mo Hi and also know as Man Hei(文喜)	Plaintiff

	AND

	MAN PING NAM (文炳南), MAN YING LAM (文英林) and MAN LEUNG (文良)	Defendants

____________

Coram: Deputy High Court Judge Lam in Court

Date of Hearing: 22 July 2003

Date of Decision: 22 July 2003

Date of Reasons for Decision: 30 July 2003

_______________________________

REASONS FOR DECISION

_______________________________

1. I have recited the background leading to the two applications before me at the commencement of this trial in my Ruling of 21 July 2003. To recap, the two applications are, (1) the application by Messrs Christine M Koo & Ip ["the Firm"] under O. 67 rule 6 to cease to act for Man Leung and (2) the "application" by Man Leung to have the trial adjourned. Pursuant to my said Ruling, the two matters were heard together on 22 July 2003.

2. I was informed by Mr Neoh SC that the O. 67 summons had been duly served. Although in the special circumstances of the case, bearing in mind the trial had been held up by these applications, I dealt with the application on the basis of the information supplied by Mr Neoh, I think a proper affirmation of service should be filed for the purpose of record and I directed accordingly. Again in view of the special circumstances of this case, I was prepared to grant leave for the service of the summons outside jurisdiction. After hearing submissions (and Man Leung was of course absent, although he was still represented by the Firm at the time of the hearing), I dismissed both applications. The consequence is that the trial continued and the Firm is still solicitors acting for Man Leung pursuant to Order 67 rule 1(1) and as far as this court is concerned, counsel for the Defendants represented all three Defendants. Mr Neoh accepted that there was no conflict amongst the three Defendants apart from the question of adjournment. Once that question had been resolved, there is no reason why counsel could not continue to act for Man Leung. Man Leung certainly had not indicated, as far as I know, that he would not want counsel to act for him if there was no adjournment. I now give my reasons for these decisions.

3. In view of the following matters, I consider that the key issue to these two applications is whether this court should accede to Man Leung's request for adjournment. As acknowledged by Mr Neoh, the only conflict between the Defendants was on the question of adjournment. In fact, the case of Man Leung on the merits was the same as the case of the other two Defendants. Apart from the question of adjournment, there was no reason why the Firm could not continue to act for Man Leung in the trial. The only ground relied on by the Firm to ask for an order under O. 67 r. 6 was the conflict between the Defendants stemming from the request for adjournment. Hence, once this question of adjournment had been decided, the conflict no longer subsisted and the underlying basis for the O. 67 r. 6 application likewise disappeared.

4. As I have said, Mr Neoh did not have instructions to apply for an adjournment on behalf of Man Leung. However, I am of the view that instead of brushing aside Man Leung's request on the ground that there is no proper application before me, it would be in the interest of all concerned that the court should deal with it on its merits.

5. From the two letters sent by Man Leung to the court, his request for adjournment was made on the ground that he could not return to Hong Kong to attend trial due to poor health. He produced a letter dated 30 June 2003 and a letter dated 11 July 2003 from a Dr Pankaj Premnath of White Cliffs Medical Centre in Kent to support his request. The doctor said in the first letter that Man Leung had developed sudden onset of shortness of breath and he would be undergoing medical investigations. In the second letter, the doctor repeated the observation as to the symptom of shortness of breath plus symptoms of frequency of micturition. The doctor did not give any diagnosis and only said that investigations were pending. The doctor was of the opinion that Man Leung would be unfit to travel by air. The letters did not say that Man Leung required any hospitalization nor was there any suggestion that any medication had been given to him.

6. In my judgment, such medical evidence provides slender support to Man Leung's request for adjournment. Whilst I can understand the doctor's concern about the well being of his patient, I must say that with the greatest respect to the doctor, this court cannot be expected to accept his conclusion that Man Leung was unfit to come to Hong Kong based on such scanty information. These letters have to be read against the background that Man Leung had been advised by the Firm that concrete evidence as to the health and medical conditions of him is required to substantiate his claim that he was unfit to come to attend trial. On the material before me, I am not satisfied that Man Leung could not come back to Hong Kong for the trial.

7. Further, even assuming for a moment that Man Leung was unfit to travel by air, it is still possible to continue with the trial and if necessary arrange for his evidence to be taken through video-link. It would be quite some time before we come to his evidence and there might be sufficient time to arrange for that in the interim. Moreover, as mentioned, Man Leung's case is the same as the other two Defendants who would also be giving evidence. As far as I can see, Man Leung's testimony did not add anything new to the defence case. Of course, Man Leung was entitled to give his own account of the events to the court and as I said, there are means to achieve that even if he could not fly back to Hong Kong. But I fail to see why an adjournment of the trial was called for simply because he could not come back to Hong Kong.

8. I therefore refused Man Leung's request for adjournment of the trial. Even if he did not attend the trial, his interest would be adequately protected by his lawyers in view of my decision on the Order 67 application.

9. As regards the Order 67 application, Counsel agreed that the principle set out in the commentary of the Hong Kong Civil Procedure 2002 is a correct summary of the position. A solicitor may withdraw for good cause and the court has a discretion whether or not to make the order. Unless there are special circumstances which render it expedient to retain the solicitor on the record, the order will generally be made as a matter of course upon proof that the solicitor has in fact ceased to act for the party. Goff LJ observed in Gamlen Chemical Ltd v Rochem Ltd [1980] 1 WLR 614 at p. 623 that the rule was not dealing with the relationship between the solicitor on the record and his client, but the position as between other parties to the litigation and the client. Vis-à-vis those other litigants, and I would add also the court, the solicitor remained on the record shall be regarded as being still the solicitor for that client if no order is made under Order 67 Rule 6. Mr Fung SC attempted to derive other principles from that judgment concerning how the discretion under Order 67 Rule 6 should be exercised. In my view, the other parts of that judgment were dealing with the question of solicitors' lien and I do not read what their Lordships said in that context as laying down the general approach with regard to how the court should decide an application under Order 67 Rule 6.

10. In the present case, Man Leung did not terminate the retainer of the Firm. Hence, the Firm must show that there was and still is a good cause to discharge itself. As I said, the only cause referred to was the conflict of interest between the Defendants arising from the question of adjournment. In view of my above decision on the request for adjournment, this is no longer a live issue. Whilst the Firm was justified in taking out the Order 67 summons, in view of the latest development, I hold that it is no longer appropriate to grant an order under Order 67 Rule 6. The situation now is akin to a case where a solicitor had been instructed to apply for an adjournment of the trial and the court refused the application. In the absence of any other instructions from his client or other good cause, a solicitor is bound to continue to act for that client at the trial.

11. Due to Man Leung's absence and the very late stage at which the Order 67 application was made, bearing in mind the common stance taken by all the Defendants regarding the substantive merits of the case and their evidence, and having regard to the fact that the Firm would in any event remained on the record to represent the other two defendants and conducted the trial accordingly, I hold that this court should not accede to the application by the Firm. There are indeed special circumstances in this case which renders it expedient that the Firm should be retained on the records as solicitors for Man Leung.

12. In so deciding, I am not imposing the Firm upon Man Leung. He is at liberty at any time to file a Notice to Act in Person or instruct another firm of solicitors to act for him and file a Notice of Change of Solicitors. But until he does so, the Firm would be regarded by this court as acting for him in the trial.

	(M H Lam)
	Deputy High Court Judge

Representation:

Mr Patrick Fung, SC, instructed by Baker & McKenzie, for the Plaintiff

Mr Anthony Neoh, SC, Mr K M Chong & Mr Ernest Koo, instructed by Christine M Koo & Ip, for the Defendants

24469-EN-2003-07-21

MAN FONG HANG v. MAN PING NAM AND OTHERS

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HCA007935D/1998

HCA 7935/1998

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 7935 OF 1998

____________

BETWEEN
	MAN FONG HANG (文晃恆) (the surviving administrator of the estate of Man Mou Hei (文戊喜) also spelt as Man Mo Hei, Man Mau Hei and Man Mo Hi and also known as Man Hei (文喜)	Plaintiff

	AND

	MAN PING NAM (文炳南), MAN YING LAM (文英林), and MAN LEUNG (文良), Managers of MAN SHEK TSUNG (or CHUNG) WUI (文石涌會)	Defendants

____________

Coram: Deputy High Court Judge Lam in Court

Date of Hearing: 21 July 2003

Date of Ruling: 21 July 2003

____________

R U L I N G

____________

1. The trial of this action was scheduled to start today. However, one of the Defendants, Man Leung, is in England and he wrote to this court indicating that he could not fly back to Hong Kong for the purpose of trial on medical grounds. He asked for an adjournment. The matter is complicated by the fact that he was jointly represented together with the other two defendants by Messrs Christine M Koo & Ip ["the Firm"]. I was told by counsel for the Defendants, Mr Neoh SC, that the other two defendants did not want an adjournment. Obviously, there is a conflict amongst the defendants. Mr Neoh also informed the court that he had no instructions to apply for an adjournment on behalf of Man Leung.

2. Although a summons was taken out at a very late stage on 17 July 2003 by the Firm for an order under Order 67 rule 6, no order could have been granted at the hearing on 18 July 2003 for want of service of the application on Man Leung. Hence, up to this stage, the Firm is still solicitors on the record acting for Man Leung.

3. Today, before Mr Fung SC opened his case for the Plaintiff, I brought to parties' attention the letters sent by Man Leung to the court, including its enclosures. There were two letters, one dated 14 July 2003 and the other one dated 18 July 2003. I should mention that the fax copy of the letter of 14 July only came to my attention after the pre-trial review on 15 July 2003, hence I could not have brought that up at that stage. The fax copy of the letter of 18 July 2003 only came to my attention after the case has started this morning.

4. In these circumstance, counsel agreed there are two matters that this court has to deal with,

(a) the cease to act application by the Firm;
(b) the "application" for adjournment by Man Leung.

5. Technically, the second application is not before the court properly since the solicitors on the record acting for Man Leung did not make any application for adjournment on his behalf. However, I do not think it right for this court to ignore these letters from Man Leung in view of the cease to act application.

6. Counsel also agreed that the two matters are related. The outcome of the cease to act application could have an impact on the application for adjournment. Mr Neoh submitted that the court should deal with the cease to act application first. Mr Fung accepted that logically that should be the approach adopted in the present case.

7. Mr Fung applied to be supplied with the papers in connection with the cease to act application and for leave to be heard in that application. His stance was that insofar as the cease to act application would have an impact on the application for adjournment, the Plaintiff should be allowed to make submissions in connection thereto.

8. Mr Neoh accepted that this court does have the power to make such orders (see Fairview Park Property Management Ltd v Sun Wai Chun [1999] 4 HKC 42). However, he submitted that these orders should not be made unless there are special circumstances justifying the same. Normally, an application for an order of cease to act should be regarded as a private matter between a litigant and his solicitors and his adversary should not be involved. In this connection, Mr Neoh's stance is supported by the English Court of Appeal's decision in Re Creehouse Ltd [1983] 1 WLR 77. This is further reinforced by O.67 r.6A in Hong Kong which prohibited inspection of the affidavit in support of such application by the other party without leave of the court.

9. In my judgment, it is necessary for the due administration of justice to recognize that application for cease to act should be made promptly to avoid disruption to trial dates. A late application might entail a risk that a litigant lacks reasonable time to arrange alternative legal representation or to prepare to act in person. In this sort of situation, the court will be faced with a dilemma. The court may feel necessary to explore the option of adjourning the trial to enable the litigant to seek proper legal representation. In that case, the other party to the action could be affected by the outcome of a late application under O.67 r.6. Mr Fung rightly reminded this court that this is not the sort of situation facing the English Court of Appeal in Re Creehouse.

10. In the present case, Man Leung did not terminate his instructions to the Firm. To the contrary, from the correspondence he sent to the court together with its enclosures, it can be seen that he had instructed the Firm to apply for an adjournment on 1 July 2003. Yet no application has been made despite pre-trial reviews being held on 7, 9 and 15 July 2003. In those circumstances, if the Plaintiff has to meet an application for adjournment on the first day of trial, I think Mr Fung can justifiably ask for an explanation as to why no application has been made earlier. The material filed in support of the O.67 r.6 application may supply the answer.

11. Further, Man Leung had written to the court and disclosed in his enclosures his communication with his solicitors on the question of adjournment. To that extent he waived whatever privilege that could arguably be attaching to the solicitor and client correspondence on this subject. As I see it, the only purpose of Man Leung disclosing his letters to his solicitors on the request for adjournment was to show this court that he had made such a request on the first opportunity, hence he was not at fault regarding delay in making the application after 1 July 2003. Once this is put into issue, the privilege attached to the other correspondence, viz. those from the Firm to Man Leung, should be waived impliedly. I do not think the affirmation filed in support of the O.67 application disclosed other confidential material.

12. Even if I were wrong in these analyses, Nazareth VP held in Fairview Park that the affidavit filed under O.67 r.6 were not privileged once they were put before the court. Mr Neoh did not accept that to be a correct statement of the law. I am however bound by that decision.

13. As with the exercise of other discretion, how I should exercise my discretion on these requests by Mr Fung must be a balancing exercise. I agree that there must be special circumstances to justify an order for disclosure and leave being given to the other party to participate in the hearing of an application under O.67 r.6. On the facts of the present case, given the circumstances under which Man Leung made his "application" for adjournment and the material he relied upon, and the belated stage at which the Firm made the application under O.67 r.6, and having regard to the potential prejudice that might cause to Man Leung and the potential impact of this application on the trial dates, I am of the view that it is a special case where the Plaintiff should be allowed to have access to the affirmation filed in support of the O.67 application. However, just in case I have missed anything in the affirmation which disclosed confidential material over and above those relating to the question of adjournment, that could be dealt with by way of appropriate editing. I shall hear Mr Neoh further to see whether there should be any editing.

14. Further, given the impacts that the O.67 application might have on the application for adjournment, I shall grant leave to the Plaintiff to address the court in that application. In the light of this, despite counsel's submissions on the sequence of hearing, I am of the view that the two applications should be heard together.

	(M H Lam)
	Deputy High Court Judge

Representation:

Mr Patrick Fung, SC, instructed by Messrs Baker & McKenzie, for the Plaintiff

Mr Anthony Neoh, SC, Mr K M Chong and Mr Ernest Koo, instructed by Messrs Christine M Koo & Ip, for the Defendants

24466-EN-2003-07-15

MAN FONG HANG v. MAN PING NAM AND OTHERS

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HCA007935C/1998

HCA 7935/1998

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 7935 OF 1999

____________

BETWEEN
	MAN FONG HANG （文晃恆） (the surviving administrator of the estate of Man Mou Hei (文戊喜) also spelt as Man Mo Hei, Man Mau Hei and Man Mo Hi and also known as Man Hei (文喜))	Plaintiff

	AND

	MAN PING NAM (文炳南), MAN YING LAM (文英林), and MAN LEUNG (文良), Managers of MAN SHEK TSUNG (or CHUNG) WUI (文石涌會)	Defendants

____________

Coram: Deputy High Court Judge Lam in Chambers

Date of Hearing: 9, 15 July 2003

Date of Decision: 15 July 2003

Date of Reasons for Decision: 21 July 2003

________________________________

REASONS FOR DECISION

________________________________

1. This is an application for leave to put in late evidence for a trial due to commence on 21 July 2003. The summons was issued by the Defendants on 10 July 2003. The application was made against these circumstances. Leave to set down was granted by the Master on 18 September 2002 and the trial dates were fixed well in advance. Notice of trial was given to the parties on 22 November 2002. Prior to the setting down, there had been a history of dilatoriness in the filing of witness statements on the part of the Defendants. On 8 February 2002, there was an order for exchange of additional witness statements within 28 days. Plaintiff filed their witness statements within the time limit. The Defendant failed to do so despite repeated reminders. On 11 April 2002, the Plaintiff took out an application for an unless order. In response, the Defendants took out an application for extension of time. On 19 April 2002, Master Lung granted an extension of time on 19 April 2002 with a warning that unless order would be made on the next default. The Defendants then filed their additional statements on 24 April 2002.

2. The first checklist hearing before the Listing Master took place on 17 July 2002. In the checklist filed on 12 July 2002, the then solicitors for the Defendants indicated to the court, inter alia, that hearsay notices had not yet been served. They further indicated that proofs of evidence had been obtained from all their witnesses and there would be 3 factual witnesses and 1 expert witness. An estimate length of trial of 7 days were given to the court. Another outstanding matter related to expert report which is not relevant for present purposes. The Listing Master adjourned the checklist hearing and gave directions for hearsay notice and expert report. On 16 August 2002, the Defendants filed a hearsay notice and the Plaintiff filed counter notice. The Defendants did nothing about the counter notice.

3. The checklist hearing was restored before the Listing Master on 18 September 2002. The Defendants did not comply with the expert directions previously given and an unless order was made by the master. Parties informed the court that the other orders had been complied with and subject to the filing of expert report, the case was ready for trial. The Defendants did not indicate to the court that they would be adducing evidence regarding the documents in respect of which counter notice has been served. Leave to set down was granted by the Master on that basis on 18 September 2002.

4. The pre-trial review was on 20 June 2003. At that hearing, Mr Fung SC, counsel for the Plaintiff, brought up the subject about the lack of response to the counter notice. He indicated to the court that the Plaintiff had obtained some statutory declarations from some of the makers of the documents referred to in the hearsay notice. Mr Chong, counsel appearing for the Defendants at that hearing, indicated that the Defendants intended to call the makers to give evidence at the trial. This court expressed doubt whether those makers could be allowed to give evidence without any witness statements. In the light of the uncertainty as to the number of witnesses and its impact on the estimate length of trial, a second pre-trial review was ordered.

5. The second pre-trial review took place on 7 July 2003 which was a Monday. Shortly before lunch on 5 July 2003, the Saturday before that hearing, solicitors for the Defendants served a bundle of additional witness statements and documents on the solicitors for the Plaintiff. It consists of 6 additional witness statements, a supplemental list of documents containing 18 items and a hearsay notice. The whole bundle is made up of 145 pages. The timing of the service of this bundle and the volume of its contents rendered it impossible for Mr Fung to have reasonably sufficient time to take proper instructions from his client to deal with these new material. This court was also deprived of any opportunity to properly prepare for the second pre-trial review. This is regrettable since it should have been clear to the parties that the purpose of the second pre-trial review is to apprise the court of the position as to the proposed new evidence from the defence and if necessary, deal with the Plaintiff's objections thereto. These are important for an accurate assessment of the estimate length of trial and one of the purposes of a pre-trial review is to ascertain whether the case can likely be completed within the original time slot allocated for the case and if not, to explore various possible options. It is in everybody's interest that these should be dealt with as soon as possible bearing in mind the imminence of the trial days. It therefore behoves a party making a late application that might have an impact on the length of trial and the trial dates to proceed promptly and diligently. Lawyers representing such a party should not be surprised if the court expects them to try their best in this regard. Smooth and efficient case management depends very much on the co-operation and good sense of the lawyers. Proper preparation by those representing the parties as well as the court are also very important since usually only a short hearing (usually only 15 minutes to half an hour) is allotted for pre-trial review.

6. Due to the late service of the new material, the pre-trial review on 7 July 2003 could not achieve any useful purpose. A third pre-trial review was fixed and it took place in the afternoon of 9 July 2003. I was informed at that hearing that counter notice has been served by the Plaintiff regarding the latest hearsay notice issued by the Defendants. Mr Fung indicated the Plaintiff had oppositions to leave being granted to the Defendants to rely on the additional material subject to some exceptions. Mr Chong briefly explained to the court the relevance of the additional witness statements and attempt was also made to account for the late filing of the same. Mr Fung did not have sufficient time at that hearing to complete his submissions.

7. When it was apparent that the matter could not be concluded in that afternoon, a fourth pre-trial review was fixed. Further, I also directed the Defendants to issue a summons setting out the relief they sought from the court regarding the new material together with the affirmation in support of the application. The summons and affirmation were duly filed on 10 July 2003. I note that the summons did not seek any relief concerning the items in the new hearsay notice except item 449. I therefore take it that the Defendants did not intend to rely on those other items in that hearsay notice at the trial.

8. The fourth pre-trial review was heard on 15 July 2003. On this occasion, the Defendants were represented by Mr A Neoh SC instead of Mr Chong. I heard parties' submissions on the summons and at the end of the hearing, I granted leave to file four out of six additional witness statements (viz. items (1)(i) to (iv) in the summons of 10 July 2003) and I refused leave to file the remaining additional statements. I also determined that five Chinese notes could be produced at the trial by the Defendants without calling their makers because two of them were dead and the other three of them were out of the jurisdiction. Although I did not make any specific order (since Mr Fung could not give me any specific details about the evidence the Plaintiff would file in response), I indicated to Mr Fung that the court would be sympathetic to any applications by the Plaintiff to file additional evidence in response to the new material admitted pursuant to my aforesaid decisions. I now give reasons for these decisions.

9. I shall first deal with the additional witness statements. They could broadly be divided into three categories,

(a) evidence as to the making of 1997 Chinese notes in respect of which counter-notice has been served by the Plaintiff;
(b) evidence pertinent to how a 1994 document came into existence and its perceived effects, referred to as the Circular Letter in the Re-re-re-amended Statement of Claim;
(c) evidence pertinent to an offer of 14 July 1997 from Messrs Andy Lo & Co.

10. The Plaintiff has no objection in respect of the evidence falling within category (a) but objected to those coming within categories (b) and (c). Basically, I allowed the Defendants to adduce additional evidence under categories (a) and (b) but not (c).

11. In my judgment, the proper approach that I should adopt in considering the application is the one laid down by the English Court of Appeal in Mortgage Corporation v Sandoes [1997] PNLR 263. In that case, Millett LJ (as he then was) reviewed the relevant English authorities and after consultation with the Master of the Rolls and the Vice Chancellor gave a ten point guidance as to the approach which litigants could expect the court to adopt to the failure to adhere to time limits contained in the rules of directions of the court at p.284C-285A. They were recited by Godfrey JA in LessySARL v Pacific Star Development [1997] HKLRD 1248 at p.1252. An earlier important statement of principles can be found in the judgment of Sir Thomas Bingham MR (as he then was) in Costellow v Somerset County Council [1993] 1 WLR 226 at p.263, cited with approval by Millett LJ in Mortgage Corporation as well as by Nazareth VP in Po Kwong Marble v Wah Yee Decoration [1997] HKLRD 1341 at p.1347 to 1348 and by Keith JA in Hong Kong Housing Society v Tang Kar Hung, CACV 153 of 1999, 9 November 1999.

12. As Sir Thomas Bingham MR reminded us, the resolution of these sorts of problems cannot be governed by a single rule and a rigid and mechanistic approach is inappropriate. Ultimately, it is a balancing exercise and the court has to consider all relevant factors on the facts and circumstances of the particular case before it. No single factor can be regarded as decisive or conclusive. At the risk of repeating the obvious, perhaps I could be forgiven for repeating a dicta of Simon Brown LJ in Willis v Royal Doulton (UK) Ltd, 4 November 1996, also cited by Millett LJ in Mortgage Corporation,

"At the end of the day it must be for the court, upon the individual facts of the case and having regard to all the circumstances, to weigh the competing considerations and decide where the justice of the case lies. Crucially it will ask how serious was the breach, how explicable, and how far it has affected the proceedings or disrupted the administration of justice generally."

13. The actual decision in Mortgage Corporation also served to remind us that the lack of acceptable reason for the delay, though of some importance, might not be fatal, see also Hong Kong Housing Society v Tang Kar Hung, CACV 153 of 1999, 9 November 1999. Mr Fung relied on the judgment of Lord Woolf MR (as he then was) in Beachley Properties Ltd v Edgar, 21 June 1996. I agreed that the change of lawyers cannot by itself constitute a good excuse with regard to the delay in the filing of witness statements. Nor could a litigant expect the court to exercise discretion in his favour just because the evidence is very important to his case. Neither is the non-defaulting party obliged to demonstrate serious prejudice before he could successfully resist an application by the defaulting party for extension of time. However, as pointed out by Millett LJ in Mortgage Corporation at p.276D to 277C, it is incorrect to read the judgment of Lord Woolf as saying that unless there are good reasons for the failure to comply with the time table laid down by rules or directions, the court will not exercise its discretion to extend time. It is important that all relevant circumstances were considered.

14. As also observed by Millett LJ in Mortgage Corporation at p.273C, in the context of a late application for extension of time which might affect the trial dates, logically the first question to ask is whether the trial date should be vacated. Of course, one must bear in mind that the court should strive to keep the trial date if possible and every effort should be made to ensure that there would be a fair trial on the fixed date (see p.278 G to 279A).

15. In the present case, both parties are anxious to keep the scheduled trial dates. Bearing in mind the respective age of some involved in this action and the fact that this action was commenced in 1998, I think it would not be right to vacate the trial dates in order to accommodate the Defendants' wish to place before the court additional material. In view of the history as to the conduct of the litigation as recited in the earlier part of this judgment, it is obvious that the Defendants had been given more than fair opportunity to put in their evidence. I do not think they could complain were the court to tell them now that no further indulgence could be granted to them if such indulgence will inevitably lead to the vacation of trial dates.

16. Since the trial would start before me on 21 July 2003, I will not say more than necessary. Within the short time available, I am of view that the trial would not be fair to the Plaintiff if the Defendants were allowed to adduce and rely on the evidence under category (c) stated above. If admitted, the new evidence would obviously open a new dimension to the case which had not been raised before: it is alleged that the Andy Lo offer was not a genuine offer but rather an attempt by Man Bun to extract money from Wong Shui Ming. Within the short time available, the Plaintiff could not be expected to investigate into these serious allegations satisfactorily. There is evidence that Wong Shui Ming could not be readily located. In this connection, I do not regard the calling of Cheung Chun Kar as a sufficient measure to alleviate the prejudice to the Plaintiff. The Plaintiff should be allowed sufficient time to carry out his own investigation in a manner as he deems fit. Otherwise, he would have a justifiable sense of grievance if the court shall place any reliance on the evidence of Man Bun. In my judgment, if I allow the Defendants to rely on the evidence of Man Bun about the Andy Lo offer, the Plaintiff would suffer prejudice that cannot be compensated by costs.

17. I am of course aware of the Defendants' explanation as to why the proposed evidence from Man Bun could not be obtained earlier as set out in the Affirmation of Wong Chor Wan. But the fact remained that prior to setting down, the Defendants must have accepted that they would not conduct further investigation to locate the maker of the alleged offer. It was on that basis the case was set down and on that basis the Plaintiff made preparation for trial. To allow the Defendants to open a new dimension in the circumstances of this case and impose the same on the Plaintiff at such short notice must require very good and cogent justification.

18. In this regard, I am not satisfied that the Defendants have been as diligent as they should have been in respect of the evidence of Man Bun. I should mention immediately that Mr Neoh, as I understand, was only brought into this case after the hearing on 9 July 2003. However, the current solicitors had received instructions from the Defendants as early as December 2002. I do not regard the delay in transfer of papers as sufficient excuse as far as the Defendants (as opposed to the lawyers) are concerned. Even without a full set of papers, the Defendants should have been able to tell their lawyers the significance of the Andy Lo offer. Although the firm of Messrs Andy Lo & Co. had ceased to exist, there is nothing before me to suggest that Andy Lo himself could not be located and attempts should have been made by the Defendants or their then lawyers to locate him before the case was set down. There is simply no evidence before me to explain why this was not done.

19. In the affirmation of Wong Chor Wan, reference was made to the absence of Man Leung from Hong Kong since mid May 2003. That is not a good excuse in the circumstances of the present case. At least one other defendant was in Hong Kong, viz. Man Ping Nam and there is no suggestion that the solicitors had any difficulties in getting instructions from him. Further, even if specific instructions had to be taken from Man Leung, I see no reason why these could not be done promptly through IDD phone calls or other modern communication aids. As mentioned, given the imminence of the trial dates, the Defendants owed a duty to the court and the other party to proceed promptly and diligently.

20. Neither were the Defendants as forthcoming as they should have been in terms of disclosure about the evidence of Man Bun. According to the affirmation of Wong Chor Wan, Mr Chong contacted Cheung Chun Kar and through him learnt about Man Bun's involvement regarding the Andy Lo offer. Man Ping Nam was advised to contact Man Bun. Mr Wong did not say in his affirmation precisely when these took place. Obviously, the events took place at least some days prior to 18 June 2003. As a result of the contact with Man Bun, a joint conference with counsel and Man Bun was arranged on 18 June 2003. Instructions were taken for the preparation of witness statement. Yet nothing was mentioned by Mr Chong about the possibility of calling further evidence relating to the Andy Lo offer at the first pre-trial review on 20 June 2003. It may be that the Defendants had tactical reasons for not disclosing full details of this latest development at that stage. However, bearing in mind the imminence of the trial and the potential of the evidence of Man Bun disrupting the trial dates, this court expects those representing the Defendants to act promptly and give timely disclosure of information which might have significant impact on the trial to the other side as well as the court. They should have appreciated that time was of the essence and it was imperative that every effort should be made by them to enable the Plaintiff to have as much time as possible between disclosure and commencement of trial to deal with such new evidence in order to reduce the prejudice to the Plaintiff. As it happened, the statement of Man Bun was not disclosed to the Plaintiff until shortly before lunch on 5 July 2003.

21. Although Man Bun also referred to matters falling within categories (a) and (b), I do not find his evidence to be of much assistance to the defence case. Similar evidence is going to be given by other witnesses proposed to be called by the Defendants. Regarding category (b), Man Bun did not sign the Circular Letter and a lot of what he said about that topic appears to be what he learnt from people who had signed the same, and as such constituted hearsay evidence. No hearsay notice had been issued for these evidence. As far as (a) is concerned, as presently advised, I do not see much significance as to exactly why Man Bun had signed the Chinese Note. Since similar evidence had been given by other witnesses, I do not see much purpose in having a further witness on this topic. I am however willing to keep an open mind in this regard and if the Defendants could persuade me at a later stage that the evidence of Man Bun is important in this regard, I shall reconsider the same under O. 38 r. 2A(10).

22. Having regard to all the circumstances of this case, I therefore refused to grant leave to the Defendants to file the witness statement of Man Bun.

23. The position regarding the additional evidence under category (b) is different. In the witness statements already filed with the court, the defence witnesses already referred to matters pertaining to the Circular Letter. The Plaintiff was all along aware of the challenge by the defence to the Circular Letter. Mr Neoh quite rightly pointed out that the additional witnesses would be giving corroborative evidence on the issues already raised. I do not see any reasons why the Plaintiff could not sufficiently deal with these additional witnesses at the trial. As I indicated, I would take a sympathetic stance to any application by the Plaintiff to file additional evidence in response. Since the Plaintiff is relying on this Circular Letter to allege breach of fiduciary duty on the part of the Defendants, after balancing all relevant circumstances in the present case, notwithstanding the criticism one may have about the conduct of the case on the part of the Defendants (some of which I have highlighted above), I am of the view that leave should be granted to the Defendant to rely on items (i) to (iv) in Paragraph 1 of the Summons of 10 July 2003.

24. As to item (vi), I was told that the witness would not be available to attend the trial. In the circumstances, it would be futile for me to grant leave to file his witness statement. I therefore refused leave regarding this item.

25. As to the hearsay documents, the old rules apply because the action was commenced before the new rules came into force. Mr Fung's opposition was that there is no evidence as to the efforts made by the Defendants to secure the attendance of the overseas witnesses. That was not necessary, see Piermay Shipping v Chester [1978] 1 WLR 411 and Rasool v West Midlands Passenger Transport Executive [1974] 3 All ER 638. In the absence of evidence challenging the evidence of Mr Wong that the two witnesses are dead and three of them are outside jurisdiction, I cannot exclude their evidence. The hearsay notice regarding the Chinese Note signed by Man Yung Sau was issued out of time. But I see no prejudice to the Plaintiff which cannot be compensated by costs if I grant leave for this particular item to be admitted as evidence. I therefore made an order in terms of Paragraphs 2 and 3 of the summons of 10 July 2003.

	(M H Lam)
	Deputy High Court Judge

Representation:

Mr Patrick Fung, SC, instructed by Messrs Baker & McKenzie, for the Plaintiff

Mr K M Chong and Mr Ernest Koo (on 9.7.2003), Mr Anthony Neoh, SC

Mr Ernest Koo (on 15.7.2003), instructed by Messrs Christine M Koo & Ip, for the Defendants

19349-EN-2002-09-26

MAN FONG HANG v. MAN PING NAM AND OTHERS

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HCA007935B/1998

HCA 7935/1998

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 7935 OF 1998

____________

BETWEEN
	MAN FONG HANG（文晃恆） (the surviving administrator of the estate of Man Mou Hei（文戊喜）also spelt as Man Mo Hei, Man Mau Hei and Man Mo Hi and also known as Man Hei（文喜）)	Plaintiff

	AND

	MAN PING NAM（文炳南） MAN YING LAM（文英林） MAN LEUNG（文良）, Managers of MAN SHEK TSUNG (or CHUNG) WUI （文石涌會）	Defendants

____________

Coram: Deputy High Court Judge A Cheung in Chambers

Date of Hearing: 10 September 2002

Date of Judgment: 26 September 2002

_______________

J U D G M E N T

_______________

1. This is an appeal against an order made by a master on 4 June 2002 in which he gave leave to the Plaintiff to file a supplemental expert report, and leave to the Defendants to file no more than two supplemental expert reports in reply, and ordered that "the costs of and incidental to the Plaintiff's application be costs in the cause with certificate for counsel". The appeal relates only to the order as to costs.

2. In this action, the Plaintiff, in his capacity as the surviving administrator of the estate of a deceased member of a Wui in the New Territories, sues the managers of the Wui for having sold a piece of land belonging to the Wui allegedly at an undervalue. It is alleged that the land was sold in August 1997 for HK$336 million by the managers, yet the same piece of land was resold by way of a confirmor sale in December, the same year, for over HK$446 million, i.e. $110 million more than the price fetched by the Defendant-managers.

3. The Defendants deny all allegations of wrongdoing and deny that the land was sold at an undervalue.

4. Given the nature of the claim, expert valuation evidence is naturally very important to both sides.

5. Pursuant to an earlier court direction, the parties filed and exchanged their expert reports on 18 January 2000.

6. On 22 December 2001, the Defendants' solicitors wrote to those representing the Plaintiff, making a number of serious allegations against the Plaintiff's expert valuer and his report and against the Plaintiff's case generally. All this was denied by the Plaintiff's solicitors, who also took the opportunity to inform the Defendants' side of the Plaintiff's intention to file a supplemental expert valuation report to comment on the valuation reports of the Defendants' experts. This suggestion did not attract the Defendants' solicitors at all.

7. Eventually, the Plaintiff took out a summons dated 30 January 2002 asking for, amongst other things, an order that the parties do exchange and file a supplemental expert report within 21 days. A supporting affidavit was filed in which the Plaintiff explained generally the need to file a supplemental expert report to comment on the Defendants' expert reports as well as to answer the serious allegations made against the Plaintiff's case and his expert in the Defendants' solicitors' letter. But no supplemental expert report or draft supplemental expert report was exhibited to the supporting affidavit or was otherwise supplied to the Defendants' side.

8. The application was strenuously opposed by the Defendants who through their solicitors wrote on 31 January 2002 that they would resist the summons "to the fullest extent of the law" and that senior counsel would be instructed to resist the application.

9. Furthermore, an affidavit was filed on behalf of the Defendants to oppose the application. Amongst other things, the affidavit pointed out that the Plaintiff had not disclosed any supplemental expert report or draft expert report and had not shown any real ground for asking for leave to file such a report.

10. On 21 March 2002, a second supporting affidavit was filed on behalf of the Plaintiff exhibiting a draft supplemental expert report. The draft report comprised three parts. The first two parts contained observations and comments on the Defendants' expert reports. The third part of the report comprised a reply to the various criticisms levelled at the Plaintiff's expert report by the Defendants' solicitors in their letter.

11. The application was eventually heard by the learned Master on 4 June 2002. Shortly before the hearing, the Defendants' counsel indicated in his skeleton argument that the Defendants had no objection to the Plaintiff getting leave to file his supplemental expert report; but that was a matter for the Court to decide; and in the event that the Plaintiff was successful in persuading the Court to grant leave, the Defendants would ask for leave to file supplemental expert reports in reply. Submissions were therefore heard by the Master on that basis.

12. After hearing the submissions, the Master gave leave to the Plaintiff to file his supplemental expert report. He gave brief reasons as follows:

"This is an adjourned hearing of the plaintiff's application to adduce a draft supplemental valuation report on essentially two matters. First, they were made to comment on the comparables presented in two valuation reports of the defendant, dated respectively 6 November 99 and 28 December 99. Second, they were made to answer criticisms from the defendant's solicitors dated 22 December 2001, contending that there were absurd allegations made by the plaintiff's valuation expert, Mr Lau Chun-kong.
I've been taken through the contents of the draft supplemental report and the defendant's solicitor's letter dated 22 December 2001. I am satisfied that the plaintiff should be given a fair opportunity to respond to those matters. I'm aware that there has been some delay in adducing comment on the comparables, but in the interests of justice and for good case management, I believe those comments from the plaintiff should form part of the evidence at trial and therefore I will allow the following order.
That the plaintiff do have leave to file a supplemental expert report, exhibited as AP23 of the ninth affidavit of Anthony Pun dated 21 March 2002. I'm also minded to give leave to the defendant to file a report in answer..."

13. Then the Master proceeded to hear counsel on the question of costs. Both counsel respectively asked for the costs of the application in their clients' favour. Without detailing all the submissions that were made before the Master, the main point of Mr Fung, SC who appeared for the Plaintiff before the Master as well as before this Court, was that costs should follow the event, and as the Plaintiff was successful with his application for leave, he should get the costs of the whole application. On the other hand, Mr Pun, also appearing for the Defendants at the Court below as well as in this appeal, mainly argued that the Plaintiff had delayed for 2 years after the first exchange of expert reports in January 2000 to make the present application. This would have the effect of increasing the costs of the Defendants' experts in preparing their supplemental expert reports in reply; moreover, as a matter of case management, the delay itself provided a ground for resisting the application and in any event for asking the Court in the exercise of its discretion to deprive the Plaintiff wholly or partly of his costs of the application. Mr Pun also argued that since the Plaintiff was asking for leave from the Court, he had to come to Court in any event. Another point, amongst others, taken by Mr Pun was that the application asked for an exchange of expert reports whereas the Defendants' position was that there should be a sequential disclosure of expert reports.

14. After hearing submissions, the Master ordered that the costs of the application be in the cause. He said as follows:

"I think after hearing parties, I don't think a more justified order can be made other than costs in the cause. I shall not say anything more apart from that is the exercise of my discretion. Obviously, both sides have a number of points, but if the case is managed properly, if the judiciary is required to manage this sort of case properly, then of course there are a number of things that could have been said, but I'm only dealing with the application as stated in paragraph 4 of the plaintiff's [Summons] and of course the evolution of the chronological events requires a slightly different order.
I don't think I can accept the point that you must [need] the attendance in court just because you need leave from the court to file an expert report under rule 36 of order 38. It may well be that in some cases the court is not happy, then they will require attendance, but on this particular case I'm not satisfied in fact court attendance is really necessary if, indeed the defendant is not opposing to the filing of the supplemental expert report by the plaintiff, and the only thing it wants is to file a supplemental report in response.
The point taken that the order has been asked for, has not been given, is perhaps a rather insignificant point given the evolution of the events in these proceedings. So, I will make the following order. That the costs of the plaintiff's application be in the cause with a certificate for counsel. Anything else? To clarify, perhaps I say costs of the plaintiff's application, I should add costs of and incidental to."

15. The Plaintiff is not satisfied with the cost order. He appeals to this Court asking me to substitute the cost order by an order that the costs of and incidental to the Plaintiff's application be to the Plaintiff (together with a certificate for counsel which is not in dispute).

16. The circumstances under which a judge sitting in chambers on appeal may disturb an order as to costs made by a master are limited. He or she may only do so if the master's order was unreasonable; if the order made erred in law; if the master failed to take into account proper matters; or if he or she took into account matters that should not have been taken into account. See Hoddle v CCF Construction Limited [1992] 2 All ER 550; Lessy SARL v Pacific Star Development Ltd [1996] 2 HKC 326; China Venturetechno International Company Limited v New Century Chain Development Company Limited Civil Appeal No. 20 of 1996 (3 July 1996); Hon Kwok Lun Wilson v Shin Pok Lai Alvin HCA 10334/1998 Suffiad J (8 March 1999); Honnin Development Ltd v Ho Ming HCA 16376/1999 Poon DJ (14 December 2000); Hong Kong Civil Procedure 2002 (Vol 1) para 62/2/11.

17. In my judgment, the Court is entitled to exercise afresh the discretion on costs in the present case. First, in this type of contested applications, there are two sets of costs to be considered, i.e. the costs of and occasioned by the application for leave itself (including, for all practical purposes, the costs of the three-minute call-over hearing), and the costs of the (substantive) hearing before the master. The same distinction has been drawn by Yam J in Lessy SARL (supra) concerning an application for leave to amend. In that case, the learned Judge said (at p. 327B - G) as follows:

"It is accepted by both sides that in the usual order in an application to amend, when the application was resisted, there should be two sets of costs, namely:
(a) costs of and occasioned by the amendment shall be to the other side, and in this case the plaintiffs, in any event; but
(b) costs of the hearing before the tribunal shall be to the party who is successful in the argument, and in this case the defendants, who were successful in obtaining leave to amend.
...
The rationale behind in differentiating these two sets of costs is not to encourage the other side who has decided to resist an application to amend to have a try-on. Otherwise the resisting party would be under an impression that, win or lose, they will get their costs anyway. The resisting party should be deterred to adopt such an attitude. In deciding to resist the amendment, they should know that in the event they have lost the argument, they would be ordered to pay the cost of the argument and that is the costs of the hearing whilst the first set of costs (ie the costs of and occasioned by the amendment), would be to them in any event."

18. Although Lessy SARL was concerned with a different type of applications, it seems to me that as a matter of principle, the same rationale must apply. Moreover, both types of applications involve a party seeking the court's indulgence to take a certain step. Of course, in the case of an application to amend pleading, the first set of costs, namely, the costs of and occasioned by the amendment should, as a matter of usual order, be given to the other side in any event, in the absence of exceptional circumstances, as pointed out in Lessy SARL. This is due to nothing more than the very nature of the application itself.

19. In the case of an application for leave to adduce further expert evidence, the position may not be that straightforward, and the nature of the application is slightly different. As very general guidance, I would say that if the application for leave to adduce further or supplemental expert evidence was occasioned by the applying party's omission to include something that ought to have been included in his earlier expert report, then the costs of and occasioned by the application (i.e. the first set of costs) should normally be paid by him to his opposite party in any event. The position is no different from an application to amend pleading.

20. On the other hand, if the application for leave to adduce further or supplemental expert evidence was occasioned by some other reasons, like the need to comment on one's opponent's expert report or to deal with matters arising after the earlier report was disclosed, then there could be good justification for ordering that the costs of and occasioned by the application be costs in the cause. This is because in this latter situation, the application is more in the nature of a direction application, i.e. an application for a direction to facilitate the further prosecution of the claim or conduct of the defence, and/or the proper conduct of the eventual trial. There is not much "right" or "wrong" in the application itself, and the underlying "merits" of the application are really determined by the general merits of a party's case. Therefore, it would be generally fair in those circumstances to order the costs to be in the cause.

21. In short, so far as the costs of and occasioned by an application for leave to adduce further or supplemental expert evidence is concerned, one must look at the reasons prompting the application in the first place and then decide on the most appropriate order as to costs. Of course in this process, if there are other matters that are relevant, the court can and should take them into account. So for instance, if, borrowing the facts in the present case, the supplemental report sought to be filed was prepared to comment on the opposite party's expert report, yet the application was taken out very late so that it would likely increase the costs of the opposite party's expert in preparing a report in reply to the supplemental expert report because the opposite party's expert had to read the relevant papers all over again, then that could constitute a relevant factor to be taken into account in the exercise of the court's discretion, in relation to the proper order regarding the costs of and occasioned by the application for leave to file the supplemental report. Likewise, for example, the pre-summons conduct or correspondence of the parties or their solicitors may be taken into account, to see if the matter could have been dealt with by consent without needing to take out a summons at all, or, at the other end, if the applying party's conduct itself unnecessarily attracted resistance to his application.

22. As I say, all this is merely intended to be no more than general and non-exhaustive guidance regarding the first set of costs.

23. However, as regards the second set of costs, i.e. the costs of the substantive hearing, assuming as I do that the application is resisted, the similarities between an application to amend and an application for leave to adduce further or supplemental expert evidence are marked. In my judgment, the same rationale applies. A party on the receiving end of such an application must decide before the hearing whether to resist the application. Any attempt to have a "try on" must be discouraged. For as Yam J observed in Lessy SARL, otherwise a resisting party would be under an impression that win or lose he would get the costs anyway. The resisting party should be deterred from adopting such an attitude, which not only escalates costs unnecessarily but also consumes valuable court time and resources. In deciding to resist the application, a party must fully consider the risk of his losing the argument and being ordered to pay the costs of the argument, regardless of the incidence of the first set of costs (i.e. the costs of and occasioned by the application for leave to adduce further or supplemental expert evidence).

24. However, as demonstrated by the facts in Lessry SARL itself, if there was a reasonable ground for resisting the application, then even if the application was eventually successful, the court could still award the second set of costs, i.e. the costs of the hearing, to the resisting party although he was unsuccessful in opposing the application. Needless to say, even in relation to this second set of costs, there is nothing to stop the court from taking into account and indeed the court should take into account any and all other relevant factors in the exercise of its discretion.

25. In my judgment, the learned Master in the present case apparently failed to realise that there were involved or, in any event, differentiate, the two sets of costs (see below). He should not, however, be blamed because that was not the way arguments were presented before him and indeed both counsel asked for the whole costs of the application (including the hearing itself) to be in favour of their respective clients. Lessy SARL was not cited to him.

26. Be that as it may, since the learned Master did not consider the two sets of costs separately, this Court is entitled to exercise the discretion afresh in relation to the two sets of costs.

27. In my judgment, it is impossible to rescue the situation by arguing that the Master must have taken a global view of the matter in reaching his decision on costs. I accept that it was indeed open to the Master to take a global view of the matter eventually, but I would emphasize the word "eventually". As I tried to analyse above, as a matter of principle, two sets of costs were involved. Before one could adopt a global approach, one should, in my judgment, first consider the two sets of costs separately and come to a certain preliminary view in relation to the two sets of costs respectively; after that had been done, one could then proceed to consider the situation globally and see whether an overall view of the matter could be taken, and if "yes", what should be the most appropriate order as to costs. Some sort of a mental balancing exercise or setting-off exercise would have to be preformed and the respective estimated quanta of the two sets of costs would have to be borne in mind before one could attempt such a global approach; and if the whole exercise should prove too difficult to perform, then perhaps the only conclusion one could draw would be that it was impossible or impracticable to make a global order as to costs. In that case, one should make separate orders as to costs in respect of the two sets of costs respectively. That was clearly not done here. Indeed the Master never said he was adopting such a global approach (in the above sense) at all.

28. In any event, the second reason why I conclude that the discretion should be exercised afresh, which is quite independent from the differentiation of costs into two sets, is this. The Master gave three reasons for his decision, namely, the chronology of events (i.e. "the evolution of the chronological events") which apparently required "a slightly different order", the rejection of the Defendants' argument that there was a need to attend court for the Plaintiff to obtain leave, and finally his rejection of the Defendants' further argument that there should not be a mutual exchange of expert reports but rather a sequential disclosure of reports.

29. The second and third reasons are clearly in favour of the Plaintiff and cannot be utilised against the Plaintiff for any adverse order as to costs or "a slightly different order" from the usual one (whatever it might be). The first reason is ambiguous. At the hearing, both counsel informed me that according to what they guessed, the Master was trying to say that as a starting point, costs should follow the event and therefore the Plaintiff should get the costs of the application, but the "evolution of the chronological events" i.e. the delay of the Plaintiff in making the application "required a slightly different order", namely, an order less favourable to the Plaintiff. (Incidentally, this demonstrates my first point that the Master did not realize that there were two sets of costs involved here and therefore there were two starting points instead of one.)

30. In deciding to give leave to adduce the supplemental expert report, the Master recognised that there were two reasons for applying for leave, namely, to answer the serious allegations made against the Plaintiff's expert in the Defendants' solicitors' letter, and to comment on the Defendants' expert reports. The delay point could only be applicable to the second reason for applying for leave but not the first. Moreover in terms of prejudice, the consequence of delay was the possibility that the Defendants' experts might charge a higher fee for compiling their reports, if any, in reply to the Plaintiff's supplemental expert report, because they might need to read the papers all over again after the lapse of more than 2 years. Mr Pun said at the hearing that this is a "commonsense" point and needs no factual evidence to back it up. I accept this argument but in the absence of factual evidence, one could only make a very rough estimate of how much extra expert fees would likely be caused by the delay in making the application.

31. Assuming counsel were correct with their understanding of the Master's first reason, the Master's starting point was that the Plaintiff should get the costs of the application; but because of the delay, he was given a less favourable order. It was less favourable in that if he should eventually lose the action, he would not only be unable to recover his own costs of the application, he would have to pay the Defendants their costs of the application. The order may be analysed thus: If the Plaintiff should lose the action, he would, in the normal course of events, have to pay the Defendants their costs of the action, and that would have included the costs of their expert reports in reply comprising, amongst others, any extra fees that would have been charged by the experts in having to read the papers all over again because of the 2-year delay (i.e. the Defendants' main subject of complaint before the Master). In other words, the Defendants would have been fully "compensated" for whatever extra expert fees that would have been occasioned by the Plaintiff's delay in making the present application. That being the case, from a "compensatory" point of view, there would be no justification whatsoever left for depriving the Plaintiff of his costs of the present application, and still less, for making him liable to pay the Defendants their costs of resisting the present application, in the event of the Plaintiff eventually losing the action, which is the effect of the Master's "slightly different order".

32. From a "punishment" or "case management" point of view, bearing in mind the likely costs of counsel and solicitors in attending before the Master at the hearing below, to make an order which would have the effect of depriving the Plaintiff of the taxed costs of the whole application including the costs of counsel and solicitors in attending the hearing before the Master, as well as obliging the Plaintiff to pay the Defendants their taxed costs of the whole application (including the costs of their counsel and solicitors at the substantive hearing), in the event of the Plaintiff being unsuccessful at the trial, in order to mark the Court's disapproval of the Plaintiff's delay in making the application or stamp the Court's authority regarding proper case management on the present litigation would, it seems to me, be quite disproportionate to the delay in question and its likely prejudice to the proper progression of the action to trial. Further, if the Plaintiff's delay was a relevant and sufficient justification for the "punishment" on the Plaintiff for the sake of good case management, then likewise one should take into account the unreasonable resistance put up by the Defendants to the application after they had had sight of the supplemental expert report of the Plaintiff, also for the sake of good case management.

33. So for this reason as well, I am of the view that the learned Master fell into error, the three reasons he gave could not justify the order he made, and the cost order made was unreasonable. In those circumstances, this Court is entitled to exercise the discretion afresh.

34. As regards the first set of costs, based on the two reasons identified by the learned Master in giving leave to file the supplemental expert report, against which there is no appeal, I am of the view that prima facie the application was occasioned by the course of litigation itself rather than any omission on the part of the Plaintiff in relation to his first expert report. In those circumstances, the costs of and occasioned by the application should be in the cause. But there is one relevant matter which I should specifically consider, namely, the delay, and in particular, the likely monetary prejudice that may be caused to the Defendants by reason of the delay of over 2 years.

35. Mr Fung argued that after the writ was first issued, the proceedings had a chequered history and the parties' attention was focused elsewhere in the past.

36. I will not repeat the history of the action or proceedings thus far here. Nor will I repeat the importance of expert valuation evidence in the present case. I should say that I have borne all this, as well as the pre-summons correspondence and the fact that the draft report did not surface until 21 March 2002, in mind. In the exercise of my discretion, I order that the costs of and occasioned by the application for leave (including the costs of the call-over hearing) be the Defendants' costs in the cause, to be taxed if not agreed. This is meant to be a sort of a half-way house between costs in the cause and costs to the Defendants in any event.

37. Turning to the second set of costs, namely, the costs of the substantive hearing itself, the chronology shows that the draft supplemental expert report was disclosed on 21 March 2002 and the hearing before the learned Master did not take place until 4 June 2002. In my judgment, there was more than ample time available to the Defendants to make up their mind as to whether they should resist the application for leave to file that supplemental expert report, and if the answer was in the negative, what consequential direction they would like to obtain from the Court, such as the exchange of supplemental expert reports (as suggested by the Plaintiff) or the filing of supplemental expert reports in reply (as the Defendants eventually opted for). I agree entirely with the Master that there was absolutely no need for the Defendants to attend the Master in order to see whether the Plaintiff could successfully persuade the Master to grant him leave.

38. Likewise, there was ample justification for the Plaintiff's expert to seek to reply to the serious allegations made by the Defendants' solicitors against him in his supplemental report, and the Defendants would not be justified to resist the application on that ground (which was, as a matter of fact, not relied on by Mr Pun at the hearing before the Master). I also agree totally with the Master when he said that the difference between a mutual exchange of expert reports and a sequential disclosure of expert reports was insignificant. I certainly do not think that this difference justified the Defendants' resisting the application at the hearing. A telephone call or a short letter from the Defendants' solicitors to the Plaintiff's solicitors setting out the Defendants' solicitors' preference for a sequential disclosure of expert reports would, in my judgment, be more than sufficient to cater for the Defendants' concern. It did not provide any justification for resisting the application at the adjourned hearing on 4 June 2002.

39. Mr Pun argued at the hearing of this appeal that the delay justified the Defendants' resisting the application before the Master. I must say I am puzzled by this submission. As I said, shortly before the hearing before the Master, Mr Pun put in a skeleton argument in which he indicated that his side did not oppose the application for leave and left it entirely in the hands of the Court. The delay point was not put forward as a ground for resisting the application. It was only relied on as a ground for asking for costs after the application was granted. Furthermore and more importantly, in my judgment, the delay, even if it had been relied on, was not a good reason for resisting the application. As the Master rightly observed during the course of submission, it was really a "cost point".

40. For all these reasons, I can find no sustainable reasons for the Defendants' continued resistance to the application for leave after the disclosure of the draft supplemental expert report. In other words, the Defendants had unreasonably resisted the application until the very last moment before the same was heard by the Master. The costs of the substantive hearing should follow the event and be awarded to the Plaintiff. So I make a further order that the costs of the hearing before the Master on 4 June 2002 be paid by the Defendants to the Plaintiff to be taxed if not agreed. I have deliberately omitted the words "in any event" because I do not see any reason why recovery of those costs should be delayed, particularly when, given the chequered history of the proceedings, I am not sure when the matter will come on for trial. As I said, there is no dispute relating to the grant of a certificate for counsel. I therefore order that there be a certificate for counsel in respect of the hearing before the Master.

41. As regards the costs of this appeal, costs should follow the event. I make an order that the Defendants pay to the Plaintiff his costs of this appeal to be taxed if not agreed; again the costs should be paid forthwith for the same reasons.

42. Lastly, I would like to thank counsel for their helpful assistance.

	(Andrew Cheung)
	Deputy Judge of the Court of First Instance
	High Court

Representation:

Mr Patrick Fung, SC, instructed by Messrs Baker & McKenzie, for the Plaintiff

Mr Hectar Pun, instructed by Messrs David Y Y Fung & Co., for the Defendants

33494-EN-2000-03-17

MAN FOR TAI AND OTHERS v. MAN PING NAM AND OTHERS

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HCA007935A/1998

HCA 7935/1998

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 7935 OF 1998

____________

BETWEEN
	MAN FOR TAI (文伙泰)	1st Plaintiff
	MAN FONG HANG (文晃恆)suing on his own or alternatively as surviving administrator of the estate of Man Mou Hei (文戊喜) also spelt as Man Mo Hie, Man Mau Hei and Man Mo Hi and also known as Man Hei (文喜)	2nd Plaintiff
	MAN TIM SUNG (文添送)	3rd Plaintiff

	AND

	MAN PING NAM (文炳南), MAN YING LAM (文英林) and MAN LEUNG (文良), Managers of MAN SHEK TSUNG (or CHUNG) WUI (文石涌會)	Defendants

____________

AND

HCMP 2163/1998

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 2163 OF 1998

____________

IN THE MATTER of MAN MOU HEI TONG (文戊喜堂)

and

IN THE MATTER of a cheque no. 373872 drawn on Hang Seng Bank Limited in favour of Man Mou Hei Tong (文戊喜堂)

and

IN THE MATTER of Order 85, Rule 2 and Order 22, Rule 8 of the Rules of the High Court

____________

BETWEEN
	MAN LEUNG (文良)	1st Plaintiff
	MAN YING LAM (文英林)	2nd Plaintiff
	MAN PING NAM (文炳南)	3rd Plaintiff

	AND

	MAN FOR TAI (文伙泰)	1st Defendant
	MAN FONG HANG (文晃恆)	2nd Defendant
	MAN TIM SUNG (文添送)	3rd Defendant
	MAN WONG TIM TAI (文黃添娣)	4th Defendant

____________

(Heard together)

Coram: Hon Yuen J in Chambers

Date of Hearing: 17 March 2000

Date of Decision: 17 March 2000

_____________

D E C I S I O N

_____________

1. There are three summonses before me this morning. The one which has taken the most time is an application by Mr Fung's clients for a variation of the costs order nisi which I made in my Judgment handed down on 21 October 1999.

2. That costs order nisi was made after hearing some argument from both counsel, and the reasons for that order have been set out or highlighted at pages 15-17 of the Judgment. Nothing in Mr Fung's submissions this morning are new. They had all been made the subject of previous submissions to me, and even on more mature consideration of the issues which I have been asked to do today, I find that after consideration of the matters which are summarised briefly in my judgment and in the exercise of my discretion, I would decline to vary the order nisi as to costs.

3. As for the other summonses this morning, Mr Chan has indicated there is no objection to the application for leave to cease to be parties and for amendment of the Statement of Claim in the action. As far as the interest matter is concerned, Mr Fung has asked that the matter be adjourned and Mr Chan has no objection to that.

	(MARIA YUEN)
	Judge of the Court of First Instance High Court

Representation:

Mr Patrick Fung, SC, instructed by Baker & McKenzie, for 1st-3rd Plaintiffs in A7935/1998 and for 1st-4th Defendants in MP2163/1998

Mr Warren Chan, SC, instructed by David Y Y Fung, for Defendants in A7935/1998 and for 1st-3rd Plaintiffs in MP2163/1998

20949-EN-1999-10-21

MAN FOR TAI AND OTHERS v. MAN PING NAM AND OTHERS

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HCA007935/1998

HCA 7935/98

IN THE HIGH COURT OF THE HONG KONG

SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 7935 OF 1998

____________________

BETWEEN
	MAN FOR TAI (文伙泰)	1st Plaintiff
	MAN FONG HANG(文晃恆) suing on his own or alternatively as surviving administrator of the estate of Man Mou Hei (文戊喜) also spelt as Man Mo Hie, Man Mau Hei and Man Mo Hi and also known as Man Hei (文喜)	2nd Plaintiff
	MAN TIM SUNG (文添送)	3rd Plaintiff
	~~MAN WONG TIM TAI (文黃添娣~~)	~~4th Plaintiff~~

	AND

	MAN PING NAM (文炳南), MAN YING LAM (文英林) and MAN LEUNG (文良), Managers of MAN SHEK TSUNG (or CHUNG) WUI (文石涌會)	Defendants

AND

HCMP 2163/98

IN THE HIGH COURT OF THE HONG KONG

SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 2163 OF 1998

____________________

IN THE MATTER of MAN MOU HEI TONG (文戊喜堂)

and

IN THE MATTER of a cheque no. 373872 drawn on Hang Seng Bank Limited in favour of Man Mou Hei Tong (文戊喜堂)

and

IN THE MATTER of Order 85, Rule 2 and Order 22, Rule 8 of the Rules of the High Court

BETWEEN
	MAN LEUNG (文良)	1st Plaintiff
	MAN YING LAM (文英林)	2nd Plaintiff
	MAN PING NAM (文炳南)	3rd Plaintiff

	AND

	MAN FOR TAI (文伙泰)	1st Defendant
	MAN FONG HANG (文晃恆)	2nd Defendant
	MAN TIM SUNG (文添送)	3rd Defendant
	MAN WONG TIM TAI (文黃添娣)	4th Defendant

___________________

Coram: Madam Justice Yuen in Chambers

Dates of Hearing: 13 - 14 October 1999

Date of Handing down Judgment: 21 October 1999

---------------------

J U D G M E N T

----------------------

Applications in the Action

1. This is an application in A7935/98 ("the Action") by :-

- William Man For Tai 文伙泰 (also known as Man Shui Tai 文水泰) - Man Fong Hang 文晃恆 and
- Man Tim Sung 文添送 (also known as Man Sung Chi 文送池) (collectively referred to as "the surviving Man brothers") for a representation order under Order 15 rule 13 of the Rules of the High Court that Man Fong Hang represent the interests of all persons who have or may have an interest under Chinese law and custom in :-

(a) the estate of Man Mou Hei 文戊喜
(the father of the surviving Man brothers),
(b) the estate of Man Yat Kwai 文日葵 (the elder brother of the surviving Man brothers),
(c) Man Mou Hei Tso 文戊喜袓 and
(d) Man Mou Hei Tong 文戊喜堂.

2. There is also an application in the Action for summary judgment for the sum of HK$15,549,195, being part of the proceeds of sale of property belonging to an entity known as the Man Shek Chung Wui 文石涌會 ("the Wui").

3. The Defendants in the Action are the managers of the Wui ("the Managers"). The Managers' case is that the amount in question should be paid to "Man Mou Hei Tong", but they do not accept that the surviving Man brothers are members of "Man Mou Hei Tong". The Managers deny that the estate of Man Mou Hei, the estate of Man Yat Kwai, or "Man Mou Hei Tso" is entitled to the proceeds.

The Originating Summons

4. Two days before the writ was issued, the Managers issued an Originating Summons, with the surviving Man brothers and the widow of Man Yat Kwai as the defendants.

5. At the call-over hearing of this Originating Summons, the Managers gave an undertaking to this Court to make payment of the amount in question (together with accrued interest) into Court. This has been done. The effect of payment in is that under s.62 of the Trustees Ordinance cap. 29,

"(1) trustees ... having in their hands or under their control money ... belonging to a trust may pay the sum into court, and the same shall, subject to rules of court, be dealt with according to the orders of the court.
(2) The receipt or certificate of the proper official shall be a sufficient discharge to trustee for the money ... so paid into court."

Procedure

6. At the call-over hearing of the Originating Summons, I had also given directions that the Originating Summons should be heard together with the action. Although not listed, the Originating Summons has been heard together with the summons in the Action without objection from any of the parties. I should also record that more evidence has been adduced by the parties since the call-over.

7. Since the Originating Summons concerned a trust, it was appropriate for the matters to heard in chambers.

Facts

8. I shall now examine the facts (as disclosed in the evidence) in chronological order. In examining the facts, I have borne in mind that under the Originating Summons procedure, the burden is not thrown on the defendants as in a summary judgment application under the Writ procedure. In considering the matters before me, I have not approached the issues on the basis that the Managers bear the burden.

9. In my judgment, even adopting the approach that it is for the surviving Man brothers to bear the burden of proving their case, it is clear from the evidence that the estate of Man Mou Hei is entitled to the said proceeds of sale.

Man Mou Hei

10. The documentary evidence shows that in 1945, Man Mou Hei acquired 1 shek 石 of property which was part of the Wui for HK$1,200. This is evidenced by a deed in Chinese that had been produced by one of the sons of Man Yat Kwai, who had found the document amongst his father's papers.

11. In 1962, Man Mou Hei acquired a further 1/2 shek of property which was part of the Wui for $550. This is also evidenced by another deed in Chinese, also found in similar circumstances.

12. The 11/2 shek referred to in the 2 Chinese deeds correspond to the portion that was attributed to Man Yat Kwai, Man Mou Hei Tong and Man Mou Hei Tso in documents of the Wui since 1972. There was no documentary evidence of the membership of the Wui before 1972 (Man Mou Hei died in 1966).

13. As for the Managers' case on Man Mou Hei's membership of the Wui, it should be noted that Man Ping Nam, one of the Managers, has been a manager of the Wui since 1949. He did not leave Hong Kong until 1952. During that period, as a trustee, he would have had knowledge of the membership of the Wui, and if Man Mou Hei was not a member, one would expect Man Ping Nam to say so directly. He has not done so.

Man Yat Kwai

14. The Rental Distribution Book of the Wui 租務部starting in 1972 does not include Man Mou Hei's name, but records Man Yat Kwai's name against 11/2 shek.

15. However there is no evidence of how Man Yat Kwai acquired this 1 1/2 shek. Certainly there is no documentary evidence that Man Yat Kwai bought it from anyone, in contradistinction to Man Mou Hei's acquisition, as evidenced by the 2 Chinese deeds.

16. Further, there is no evidence that Man Mou Hei had transferred his interest to Man Yat Kwai alone amongst his 4 sons.

17. More importantly, Man Yat Kwai's name was recorded in the Wui's documents for only 1 year. The next year, the 1 1/2 shek's owner was recorded as "Man Mou Hei Tong", and Man Yat Kwai's name was never again listed as an owner.

18. Man Yat Kwai knew of this change in the records of owners. He was one of the managers of the Wui from 1949 up to the time of his death in 1992, and according to Man Ping Nam, he controlled the affairs of the Wui to a large extent. He also signed receipt for the rents distributed by the Wui on the Rental Distribution Book where the owner was recorded as "Man Mou Hei Tong".

19. Clearly therefore, either Man Yat Kwai had initiated the change in the records in 1973, or at the very least he must have known of it. Either way, there is clear evidence of his acknowledgement that he personally had no claim to the 1 1/2 shek, a position that the administrator of his estate accepts.

"Man Mou Hei Tong"

20. The words "Man Mou Hei Tong" first appeared in the Rental Distribution Book of the Wui in 1973. There is no documentary evidence as to how it got there - there is no evidence of any applications for transfer of the 1 1/2 shek into this name, nor is there evidence that the Managers had been informed of the establishment of such a tong in the proper Chinese customary law sense of the word, as an ancient Chinese device or form of landholding.

21. Indeed, it is clear from the evidence that no "Man Mou Hei Tong" has ever been registered with the Tso Tong Registry, and no-one has ever been registered as its manager.

22. From 1973 to 1976 inclusive, "Man Mou Hei Tong" was recorded as owner of the 1 1/2 shek. As referred to above, the receipts for the rents distributed by the Wui were signed by Man Yat Kwai, but in no instance had Man Yat Kwai purported to do so as "manager" of such a tong.

"Man Mou Hei Tso"

23. In 1977, the words "Man Mou Hei Tso" appeared as owner of the 1 1/2 shek in the Rental Distribution Book. There is no documentary evidence as to how it got there, and none of the Managers can throw any light on this either.

24. Similarly with "Man Mou Hei Tong", no such tso has ever been registered with the Tso Tong Registry, and no-one has ever been registered as its manager.

25. Man Yat Kwai signed the receipts for the rents distributed, but again in no instance did he purport to do so as "manager" of any such tso.

26. "Man Mou Hei Tso" appeared in the Rental Distribution Book as owner of the 1 1/2 shek from 1977 to 1982 inclusive.

27. In 1981, an Owners Booklet 業主部 was printed and distributed by the Wui to the owners of the Wui. One such booklet for 1 1/2 shek was addressed to “Man Mou Hei Tso".

28. In 1983, however, “Man Mou Hei Tong" was recorded in the Rental Distribution Book again as the owner of the 1 1/2 shek. Again there were no applications for transfer. Further, although Man Ping Nam was in Hong Kong in 1983, he has not shed any light on the circumstances surrounding this change from “Man Mou Hei Tso" to "Man Mou Hei Tong".

29. "Man Mou Hei Tong" has remained in the Wui's documents as the recorded owner of the 1 1/2 shek, save for one instance in March 1992 when the Managers submitted an application to the District Office for the sale of the Wui's property. The application contains a reference to a "Members List" which was attached. This took the form of a "Power of Attorney" which was signed by some members and not by others. In this "Members' List", "Man Mou Hei Tso" not "Man Mou Hei Tong" was recorded as an owner.

Findings

30. It is in my judgment clear from the evidence before this Court that the estate of Man Mou Hei is the owner of the 1 1/2 shek. One starts with the primary evidence of ownership, i.e. the 2 Chinese deeds which evidenced Man Mou Hei's purchase of the 1 1/2 shek.

31. In this connection, I have noted that the 1 1/2 shek do not appear in the schedule to the Letters of Administration of Man Mou Hei's estate. Man Fong Hang has sought to explain this in his Affirmation by saying that it was thought that he "need not deal with it" because it was thought that the interest would be dealt with "by reference to customs and practice" of the village. (In any event I note that the Letters of Administration were only granted in 1988, when Man Mou Hei had died in 1966, so it cannot be said that the administrators had been energetic in complying with administration procedures.)

32. I find that Man Yat Kwai did not own the 1 1/2 shek. There is no evidence that he had bought the 1 1/2 shek from his father, nor any other evidence of any transfer from his father in the father's lifetime. In any event, it is clear from Man Yat Kwai's conduct in the nearly 20 years from 1973 (when the name of the owner in the Wui's Rental Distribution Book was changed from "Man Yat Kwai" to "Man Mou Hei Tong") to 1992 (when Man Yat Kwai died) that he has disavowed any personal claim to the 1 1/2 shek.

33. As for "Man Mou Hei Tong" and "Man Mou Hei Tso", it would appear from :-

(a) the way that "Man Mou Hei Tong" was recorded in the Wui's documents as owner from 1973 to 1976, then changed to "Man Mou Hei Tso" from 1977 to 1982, then back to "Man Mou Hei Tong" from 1983 to date, and yet recorded as "Man Mou Hei Tso" in the 1992 List submitted to the District Office;

(b) the fact that the same person, Man Yat Kwai signed receipts on behalf of both "Man Mou Hei Tong" and "Man Mou Hei Tso";
(c) neither "Man Mou Hei Tong" nor "Man Mou Hei Tso" has ever been registered in the Tso Tong Registry; and

(d) the lack of any transfer documents between "Man Mou Hei Tong" and "Man Mou Hei Tso"

that "Man Mou Hei Tong" and "Man Mou Hei Tso" were used interchangeably. There is no other acceptable explanation for the manner in which "Man Mou Hei Tong" and "Man Mou Hei Tso" appeared from time to time in the Rental Distribution Books.

34. It would follow from that that "Man Mou Hei Tong" was not a "non-lineage" tong (such as a business tong) as postulated by the Managers' expert Mr Anthony Dicks. I accept that there could be "non-lineage" tongs. But the fact that "Man Mou Hei Tong" was used inter-changeably with "Man Mou Hei Tso" in this case shows that if there had been a "Man Mou Hei Tong", it would have been a lineage tong, because a tso is a form of landholding that is open only to descendants of a common ancestor.

35. In my judgment, however, the owner of the 1 1/2 shek was neither "Man Mou Hei Tong" or "Man Mou Hei Tso", because there were no such entities in the proper Chinese customary law sense of the terms. Neither has ever been registered in the Tso Tong Registry. The evidence of the surviving Man brothers is that no such tong or tso was ever established. Their evidence is that the addition of the words "tong" or "tso" was simply to signify that the 1 1/2 shek belonged to their late father, used as in "the estate of Man Mou Hei".

36. I have taken into account the fact that in earlier correspondence between the parties' solicitors, in particular a letter dated 21 April 1998 from Au Kong & Tang and a letter dated 13 May 1998 from Baker & McKenzie, that the surviving Man brothers and the widow of Man Yat Kwai claimed to be "all the beneficiaries of the Man Mou Hei Tong". Further, there is an allegation that Man For Tai claimed to be the registered manager of the Man Mou Hei Tong at a meeting with the Managers' solicitors on 8 May 1998. Man Fong Hang has sought to explain these claims in his evidence.

37. It may be that those previous claims were due to a different interpretation of the term "tong", or it may be that that position was taken inappropriately for reasons of expediency.

38. But be that as it may, the evidence is that "Man Mou Hei Tong" or "Man Mou Hei Tso" has never been registered, and yet Man Mou Hei and Man Yat Kwai had registered other tongs of which they were managers.

39. Man Mou Hei had registered his business Hop Yick Lung as a tong as early as 1954, so if he had wished to set up a "Man Mou Hei Tong" in the proper Chinese customary law sense of the word, no doubt he would have done so before his death in 1966.

40. Man Yat Kwai was of course the manager of the Wui itself, as well as the manager of Hop Yick Lung after Man Mou Hei. Again, if he had wished to set up a "Man Mou Hei Tong" or a "Man Mou Hei Tso" under Chinese customary law, he would have done so between 1973 and 1992.

41. The fact that they had registered other tongs, and not a "Man Mou Hei Tong" or "Man Mou Hei Tso", strongly supports the conclusion that no such tong or tso ever existed.

42. Further, it would have been most unlikely that Man Mou Hei or Man Yat Kwai would have set up a tong or a tso without the knowledge of the surviving Man brothers, being closely related, when the surviving Man brothers had been involved even in a "business" tong, Hop Yick Lung.

43. Moreover, it is to be noted that if the "Man Mou Hei Tong" was a tong in the proper Chinese customary law sense of the word, one would have expected the Managers of the Wui to have dealt with its manager(s). However, the evidence is that the Managers of the Wui were prepared to deal with a number of different persons as "owners", viz. Man For Tai, Man Tim Sung, Man Fung Wing 文風榮 and Man Fung Shek 文風石, when none of them had any personal share in the Wui and none had been appointed manager of "Man Mou Hei Tong" or "Man Mou Hei Tso".

44. The common factor amongst all these persons was, of course, that they are all successors to the estate of Man Mou Hei. And the view that it was the estate of Man Mou Hei which is entitled to the proceeds of sale is consistent with the manner in which the letter regarding sale of the Wui's property was addressed, not to "the managers of Man Mou Hei Tong", but to "the sons and grandsons (or descendants) of Man Mou Hei Tong" 文戊喜堂子孫.

45. In all the circumstances, I find that the owner of the 1 1/2 shek was (in his lifetime) Man Mou Hei, and (upon his death) his estate.

46. It is therefore not necessary for me to make a representation order, as Man Fong Hang is the surviving administrator of the estate of Man Mou Hei.

Orders

47. In respect of the Action, I would therefore dismiss the application for an order under O.15 r.13 but I would give final judgment to the 2nd Plaintiff as administrator of the estate of Man Mou Hei in the sum of $15,549,195 together with interest thereon. The sum is to be paid by way of an order for payment out referred to below.

48. As far as the rate of interest is concerned, counsel for the Managers has informed the Court that the sum had been placed in a savings account prior to payment into Court. Counsel for the 2nd Plaintiff wishes to consider this aspect further, and I would give liberty to both parties to apply in relation to the rate of interest.

49. In respect of the Originating Summons, the questions posed have been postulated on the basis that "Man Mou Hei Tong" was a form of landholding under Chinese customary law. In the light of my findings that there was no such tong, the answers to the questions are:-

(1) No;
(2) No;
(3) No; and
(4) Not applicable.

50. I would order payment out of the sum in Court to the 2nd Defendant in the Originating Summons, Man Fong Hang, as administrator of the estate of Man Mou Hei.

51. Finally as for costs, counsel for the Managers has asked that their costs be paid out of the trust funds pursuant to Order.62 rule.6(2) Rules of the High Court. Counsel for the surviving Man brothers has objected to this form of order. He submits that the Managers have been deliberately obstructive, because the surviving Man brothers have questioned the value at which the Managers have sold the land. A claim for damages for breach of fiduciary duty remains a live issue on the pleadings in the Action.

52. In my view, the Managers were entitled to put the surviving Man brothers to proof of their claims to entitlement to the sum in question, given the various capacities in which they were claiming entitlement.

53. I note in particular the assertion by the surviving Man brothers and the widow of Man Yat Kwai that they were the "only" members and the "beneficiaries" of "the Man Mou Hei Tong", which can reasonably be interpreted as an assertion of the existence of such a tong in the proper Chinese customary law sense of the word.

54. Further, the reference in the Affirmations filed by the surviving Man brothers to "Man Mou Hei Tong" or "Man Mou Hei Tso" being an "alias" of Man Mou Hei is confusing. The common understanding of an "alias" is that it is another name assumed by a person. But there was no evidence that Man Mou Hei ever assumed the name of "Man Mou Hei Tong" or "Man Mou Hei Tso".

55. Moreover, the pleadings referred to "designations" of beneficial ownerships of land interest by Man Mou Hei, and by Man Yat Kwai. This aspect was abandoned, but only at the hearing before me. Prior to the abandonment of that case, those pleadings of "designation" served only to confuse.

56. It may or may not be that the Managers are hostile to the surviving Man brothers by reason of the latter's stance on the value of the property. That is a matter for another day. But any trustee (especially one with a sum of more than $15m in his hands) faced with confusing positions, such as I have referred to above, would wish to be covered by a Court order before making payment, and it would only be proper for a trustee to assist the Court in its deliberations on the matter.

57. Accordingly, taking those matters into account and in the exercise of my discretion on costs, I would make an order nisi that the costs of the surviving Man brothers and of the Managers in both the Originating Summons and the Action be paid out of the trust funds. However I would note that if costs are not agreed, the Managers' costs should be taxed on the basis that only those costs should be allowed which would have been expended by a trustee doing no more than putting claimant beneficiaries to proof, and not adopting any other position.

	(MARIA YUEN)
	Judge of the Court of First Instance High Court

Representation:

Mr Patrick Fung SC instructed by Baker & McKenzie for Plaintiffs in A7935/98 and Defendants in MP2163/98

Mr Warren Chan SC and Mr Benjamin Chain instructed by David YY Fung & Co for Defendants in A7935/98 and Plaintiffs in MP2163/98

"	(a)	The balance of the Purchase price in the sum of HK$64,208,886.60 shall be paid by the Purchaser to the Vendor upon,

		(i)	the Purchaser obtaining written permission or approval from the relevant Government authority to modify or change the existing user of the Property to other user so that the value of the Property shall at least be equivalent to the value of land of equivalent size permitted for the use of open storage of containers; and

		(ii)	the Vendor delivering or procuring to deliver vacant possession of the Property to the Purchaser after receipt of written demand from the Purchaser requiring the Vendor to do so.

	(b)	Notwithstanding anything contained in Clause 4(a) above, if the [Vendor] fails to deliver or procure to deliver vacant possession of the Property or any part thereof to the Purchaser, so long as the said written permission or approval from the relevant Government authority as mentioned in Clauses 4(a)(i) has been obtained by the Purchaser, the Purchaser shall upon expiration of 18 months from the date of receipt of the said written demand by the Vendor pay the said balance of Purchase Price to the Vendor deducting therefrom as liquidated damages a sum calculated Dollars Ten (HK$10.00) per square foot on the area of such portion of the Property vacant possession of which the Vendor fails to deliver or procure to deliver."

(a)	a sum of $3,360,000 (again by a cheque of Yam & Co.) was paid over to the solicitors acting for the Wui and utilized for payment of commission allegedly due to one Ferdinand Group Limited under a commission agreement dated 4 August 1997;

(b)	a sum of $3,606,875 (again by a cheque of Yam & Co.) was paid over to the solicitors acting for one member of the Wui, Man Shing Lee 文勝利 in respect of that member's shares for stakeholding pending litigation with regard to such shares;

(c)	the deposits in the total sum of $14,000,000 paid by Earning Youth to the managers on 4 August 1997 for the sale of their own interests in the Wui were used to set off against liabilities of Earning Youth to the Wui on completion.

(a)	the Defendants were only required to fetch the best available price in the market and not a price indicated by a valuation;

(b)	the Defendants had a discretion under Section 13 of the Trustees Ordinance to choose the mode of sale, provided that the requirement in (a) is met;

(c)	in any event, provided that the Defendants acted honestly and reasonably in the sale, they ought to be relieved under Section 60 of the Trustees Ordinance.

(a)	whether the Defendants had gone through a process of price discovery since 1992;

(b)	whether the Defendants had retained George Yip of Messrs Robert Wang & Co to advise the Wui on the sale procedures and the extent to which the Defendants acted in accordance with such advice;

(c)	whether the Defendants had agreed to the proposal set out in the 1994 Circular and what was the reason for the Defendants' failure to act in accordance with the same subsequently;

(d)	whether the Defendants had obtained the approval from the members of the Wui to sell the land at a price above $96 per square foot at the meeting of 16 March 1997.

(a)	the managers were advised that if they were to sell by private sale, they should hold another meeting to have a clear mandate from the members for sale by private treaty and the resolution should set out the relevant guidelines to ensure the sale was conducted fairly and openly;

(b)	the managers were aware of objection from MFT as to sale by private treaty and counter-proposal was formulated in the form of 1994 Circular;

(c)	the managers had access to legal advice regarding the proper steps to be taken in respect of the sale.

(a)	ability to afford to buy the land and other lands forming part of a development scheme;

(b)	ownership or reasonable prospect of acquiring ownership of other pieces of land (whether contiguous or not to the land) forming the total development scheme;

(c)	ability to devise and implement a development scheme which will comprise the land and other lands, which together will form a package which is likely to be acceptable to the Town Planning Board and the Lands Department.

(a)	costs of and occasioned by the amendment shall be to the other side, and in this case the plaintiffs, in any event; but

(b)	costs of the hearing before the tribunal shall be to the party who is successful in the argument, and in this case the defendants, who were successful in obtaining leave to amend.