Allegation of breach of trustees’ breach of duty: need to prove loss

In Man Ping Nam v Man Fong Hang ([2006] 4 HKLRD 484, CFA) the managers of a wui agreed to sell land to EY (a shell company) but without vacant possession and subject to severe restrictions on the permissible use. Shortly thereafter EY agreed to sub-sell to another company SLD at a considerably higher price but on terms that provided for a significant reduction in price if vacant possession could not be given and if it proved impossible to relax the restrictions on use. The transactions were later completed.

One of the members of the wui alleged a breach of trust in agreeing to sell at a substantial undervalue. The only evidence of this (given the unique nature of the land and the fact that it would be of interest only to a very limited set of buyers and middlemen prepared to take the risk of being able to sell on to them) was that the headline price in the sub-sale was higher than the price to be paid under the agreement with EY.

The Court of Final Appeal rejected this as evidence of a sale at an undervalue; the terms of the two transactions were radically different and there was no satisfactory way of comparing the two (or at least the plaintiff had not proved that this was possible). Hence, even if the managers’ conduct had been open to criticism, there was no evidence that any loss had been incurred by the wui.

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