Mr Justice Ribeiro and Mr Justice Fok PJJ: 1. We have had the advantage of reading in draft the judgment of Mr Justice Spigelman NPJ and respectfully agree with his analysis and reasoning and would likewise dismiss the appeal. 2. The starting-point in this appeal is that Ricky Cheng (“Ricky”) owed the usual fiduciary duties of a director as Smart Wave Limited’s (“Smart Wave”) sole director. The central question was whether, in the events that occurred, those duties were limited or cut down so as to enable Ricky to open further restaurants without breaching those fiduciary duties. The argument advanced in favour of such limitation of those duties rests on an agreement of the shareholders having the effect of authorizing or acquiescing in Ricky’s conduct and so preventing enforcement on behalf of Smart Wave of such duties by way of derivative action. 3. For the reasons given by Mr Justice Spigelman NPJ, we are not persuaded that any such agreement has been established. In particular, we do not consider that the 2004 Agreement was of continuing validity after it was discharged by mutual consent in the parties arriving at a settlement agreement reflected in the Hero Elegant Agreement. Even if the 2004 Agreement continued to operate, its content involved an agreement for the establishment of chain restaurants in which its parties would be able to participate as shareholders, rather than an agreement simply allowing Ricky to open further restaurants on his own. Furthermore, the parties to the 2004 Agreement and the Hero Elegant Agreement did not comprise all the shareholders in Smart Wave so that no informal authorization along the lines envisaged in Re Duomatic Ltd,[1] arose. Mr Justice Tang PJ: 4. Itamae sushi is a service mark. Smart Wave Limited, the 2nd defendant, owned and operated the first Itamae sushi restaurant. Ricky was the only director of Smart Wave. This is a derivative action (HCA 304/2011) brought by Jason Poon (“Jason”) on behalf of himself and all the other shareholders in Smart Wave except Ricky, the 1st defendant. The complaint is that Ricky was in breach of fiduciary duties as a director of Smart Wave in that he had opened and operated other Itamae sushi restaurants.[2] The derivative action was heard together before Madam Justice Mimmie Chan with what I will call the Hero Elegant Action[3] (HCA 1269/2008). 5. The events which led to Smart Wave operating the first Itamae sushi restaurant are important for a proper understanding of the complaint. Jason and Ricky told largely the same story. 6. Briefly stated, it was Jason’s case[4] that, he, his sister Daisy Poon (“Daisy”),[5] Ricky and Shigemitsu Katsuaki (“Katsuaki”) were shareholders in a group of companies which were engaged in operating and managing a chain of Japanese style noodle restaurants under the trade name of Ajisen Ramen. They held shares in the Ajisen companies in these proportions: Daisy 48%, Jason 15%, Ricky 23% and Shigemitsu Katsuaki 14% (“the Ajisen shareholders”). The Ajisen shareholders agreed to develop a chain of sushi restaurants using the same model so: “10. … that separate corporate vehicles would be formed to hold the interest of the said chain sushi restaurant business to be established by us. We … would then be allotted shares of and in the said corporate vehicles (‘the 2004 Agreement’).”[6] “11. … Ricky Cheng was tasked to coordinate the establishment and operation of the chain sushi restaurant … [Jason] was tasked to coordinate and supervise the decoration works of the new sushi restaurants.” “23. … Under the 2004 Agreement, [the Ajisen shareholders] agreed that they would each be allotted shares in the corporate vehicles formed to hold the interest of the chain sushi restaurant business. This was never confined to the 1st Itamae Sushi Restaurant, and would equally apply to the subsequent Itamae Sushi Restaurants established as a chain.” 7. The first Itamae restaurant was held in the name of Smart Wave. In due course, Daisy and Jason were allotted 24%[7] and 10% of the shares in Smart Wave respectively, Ricky 23% and Katsuaki[8] 15%, totalling 72%. The remaining 28% were allotted to 5 other shareholders (the minority shareholders).[9] I will deal with the significance of the minority shareholders later. Jason said Ricky’s explanation for the allotment to the minority shareholders was that: “… these people were either suppliers or key staff who would be working in the Itamae Sushi Restaurant and he needed them to ensure a smooth and successful operation for the new business.”[10] 8. Jason also said: “20. … The first Itamae Sushi Restaurant in Tsimshatsui proved to be a huge success. We therefore proceeded to open more Itamae Sushi Restaurants and Ricky Cheng was again tasked to coordinate their establishment.” 9. The second and third were opened in March 2005 and February 2006. Jason was responsible for the supervision of their decoration and he said, as was the practice with the Ajisen restaurants, he only charged a nominal fee for supervising such work. Jason said he asked Ricky from time to time when he would be allotted shares in these two restaurants but Ricky kept saying he was working on it. Later, in May/June 2006, he received a fax from Ricky proposing that in respect of these two Itamae sushi restaurants, Daisy would be allotted 23% and Jason allotted only 7% of the shares in them. When Jason complained to Ricky about the substantial reduction in his shareholdings from 10% to 7%, Ricky again said that he would need to allot some shares to other parties to facilitate the operation of the Itamae sushi business. 10. Cutting a long story short, the dispute over the allotment of shares in the subsequent Itamae restaurants led to the Hero Elegant Agreement. Another background detail which should be mentioned is that around the end of 2005, in order to go public, the Ajisen shareholders were advised to bring the Ajisen companies under one umbrella company,[11] and to facilitate the floatation, it was decided to segregate the management of the Ajisen Ramen business from the Itamae sushi business. At that time, Ricky was the managing director of the Ajisen Ramen companies in Hong Kong[12] group and the sole director of the companies operating Itamae sushi restaurants. The Ajisen shareholders were advised that this might not be acceptable to the listing Committee.[13] So Ricky resigned from Ajisen companies to “focus on the Itamae Sushi business”[14] and Daisy and Jason decided to focus on the Ajisen Raman business.[15] Fine Elite Group Limited (“Fine Elite”) was chosen to be the corporate vehicle to hold Jason and Daisy’s “shares in the Itamae Sushi business.”[16] Fine Elite entered into the Hero Elegant Agreement. Jason added: “36. As I mentioned earlier, Ricky Cheng agreed to allot 23% shares in the other Itamae Sushi Restaurants to Daisy and 8 % shares to me. … 38. … To prevent Ricky Cheng from reneging on this agreement again by failing to allot shares in future Itamae Sushi Restaurant, we decided that Ricky Cheng should be required to vest the interests in all existing (save for Smart Wave) and future Itamae Sushi Restaurants in a holding company and Daisy and I were to be allotted, through Fine Elite, the shares in the holding company…” 11. The Hero Elegant Agreement was dated 16 September 2006. At the time there were a total of 4 Itamae restaurants each held by a separate company, namely, D2 (Smart Wave), D3, D4 and D6. Three others were opened shortly afterwards. D5 was opened in October 2006, D8 November 2006 and D7 December 2006. The detailed provisions of the Hero Elegant Agreement are unimportant. What is important for present purpose is that, by HCA 1269/2008 Fine Elite sought specific performance of the Hero Elegant Agreement against Ricky so that Fine Elite should hold 31% of the shares in a holding company in which shares in all the Itamae companies subsequent to Smart Wave should be held. Ricky’s defence in HCA 1269/2008 was that Fine Elite had repudiated the Hero Elegant Agreement and the repudiation had been accepted by him such that he was discharged from further performance.[17] After trial, Mimmie Chan J held in favour of Ricky and dismissed Fine Elite’s claim based on the Hero Elegant Agreement. There was no appeal. The Hero Elegant Action was heard at the same time as the derivative action which was commenced by Jason in 2011 (HCA 304/2011). It was Jason’s case that the derivative claim represented his fall-back position and was made in case the Hero Elegant Action failed.[18] The learned trial judge dismissed the derivative claim against Ricky in respect of the subsequent Itamae restaurants but ordered Ricky to pay damages to be assessed in respect of the Itacho restaurants. The Court of Appeal reversed the judge in respect of the Itamae restaurant and ordered that in respect of the Itacho restaurants, Jason could elect on behalf of Smart Wave for an enquiry into damages/equitable compensation or an account of profits. 12. The appeal committee granted leave to appeal on the following two questions: (1) Whether the “no conflict rule” applies to a director of a chain business where the agreed modus operandi was to have one company for one agreed operation. Where the company was of a “limited nature” as found by the Trial Judge, with the agreed modus operandi of only operating one restaurant, whether the principle set out in In re Duomatic Ltd. [1969] 2 Ch 365 at 373 and EIC Services Ltd & Anor. v. Phipps & Ors [2003] BCC 931 at para 122 (“the Duomatic principle”) applies as found by the Court of Appeal; (2) In the context of a derivative action, where the only nominal representative has himself agreed to the modus operandi of one restaurant per company, and where he has acted and taken benefit on that basis by signing and suing on the Hero Elegant Agreement, whether he is entitled to rely on a contrary or inconsistent stance at all [Nurcombe v. Nurcombe [1985] WLR 370 at 376G-377D] or without the company calling contrary evidence from other shareholders. 13. In the derivative action, the principal complaint was that Ricky was in breach of fiduciary duties as a director of Smart Wave in establishing the later Itamae sushi restaurants. An additional complaint was that Ricky had started another chain of sushi restaurants under a confusingly similar name, namely, Itacho. I will not deal separately with the Complaint about Itacho. The resolution of this complaint turns also on the scope of Ricky’s fiduciary duties and whether Smart Wave must be taken to have agreed with what the learned judge described as “the limited nature of Smart Wave’s rights in the operation of one Itamae restaurant”.[19] In other words, that Smart Wave was established to operate a single Itamae restaurant as part of a chain of Itamae restaurants which would be owned by the Ajisen shareholders.[20] 14. As Ricky was a director (indeed, the only) of Smart Wave, I have no doubt that he was not entitled to make a profit or put himself in a position where his interest and duty conflict, unless Smart Wave could be taken to have agreed otherwise. That a director’s fiduciary duties may vary or be limited depending on the circumstances of the particular case is made clear by Lord Upjohn in Phipps v Boardman [1967] 2 AC 46 at 123 where he said: “Rules of equity have to be applied to such a great diversity of circumstances that they can be stated only in the most general terms and applied with particular attention to the exact circumstances of each case. The relevant rule for the decision of this case is the fundamental rule of equity that a person in a fiduciary capacity must not make a profit out of his trust which is part of the wider rule that a trustee must not place himself in a position where his duty and his interest may conflict. I believe the rule is best stated in Bray v Ford by Lord Herschell, who plainly recognised its limitations: ‘It is an inflexible rule of a Court of Equity that a person in a fiduciary position, such as the respondent’s, is not, unless otherwise expressly provided, entitled to make a profit; he is not allowed to put himself in a position where his interest and duty conflict.’” (my emphasis) 15. Mason J said to similar effect in Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41 at 97: “That contractual and fiduciary relationships may co-exist between the same parties has never been doubted. Indeed, the existence of a basic contractual relationship has in many situations provided a foundation for the erection of a fiduciary relationship. In these situations it is the contractual foundation which is all important because it is the contract that regulates the basic rights and liabilities of the parties. The fiduciary relationship, if it is to exist at all, must accommodate itself to the terms of the contract so that it is consistent with, and conforms to, them. The fiduciary relationship cannot be superimposed upon the contract in such a way as to alter the operation which the contract was intended to have according to its true construction.” 16. So the pertinent question is whether Smart Wave could be taken to have agreed that Ricky[21] could operate other Itamae restaurants which are not owned by Smart Wave. In para 6 above, I have set out what I regard as the clearest description of the 2004 Agreement, and in para 8 above, the role which Ricky was to play in the other Itamae restaurants and I will not repeat them. Such evidence, if accepted by the learned trial judge, would provide a firm foundation for the finding that Smart Wave was established pursuant to the 2004 Agreement. If the Ajisen shareholders were the only shareholders in Smart Wave, I have no doubt that Smart Wave could not assert that Ricky was not entitled to establish the other Itamae restaurants. That is so notwithstanding that Smart Wave was not itself a party to the 2004 Agreement. Re Duomatic[22] is accepted authority that: “(1) that where it could be shown that all the shareholders with the right to attend and vote at a general meeting had assented to some matter which a general meeting of the company could carry into effect, the assent was as binding as a resolution in general meeting …” [23] 17. Any fiduciary duties which Ricky might owe to Smart Wave must be consistent with and conform to, the terms of the 2004 Agreement. But there were the minority shareholders and I turn to consider their significance. 18. In para 63 the learned trial judge said: “Hence, as one of the restaurants in the chain, Smart Wave was never intended by its shareholders to have the exclusive right to carry on the sushi restaurant business using the Itamae name or Service Marks. Even on Jason’s and Daisy’s case, the shareholders of Smart Wave knew, intended and agreed that other companies would be set up to operate other sushi restaurants, using the Itamae name and Service Marks. …” 19. The learned judge then concluded that: “Ricky, as a director of Smart Wave, cannot be said to have acted in breach of his duties to Smart Wave by operating other sushi restaurants using the Service Marks.”[24] 20. The Court of Appeal reversed the learned trial judge because they thought she had overlooked the minority shareholders.[25] Cheung JA in a judgment which was agreed to by the other members of the court said: “Mr Paul Shieh SC and Miss Linda Chan SC on behalf of Jason took the short point that the shareholders of the Ajisen Group and Smart Wave are different and there was no evidential basis for the Judge to come to the view that the shareholders of Smart Wave had come to such an understanding or agreement. Further Ricky’s evidence is contrary to any such agreement or understanding by the shareholders of Smart Wave because he had accepted in cross-examination that in 2004, at the time of the alleged agreement, he had not told Jason and Daisy that he could open further Itamae restaurants on his own.”[26] 21. With respect, I cannot agree with the Court of Appeal. At para 62 of her judgment the learned trial judge referred to the shareholders of the Ajisen group when she was considering the 2004 Agreement and its offshoot the Hero Elegant Agreement. In para 63, she referred expressly (twice) to the Smart Wave shareholders. There is no reason to think that the learned judge had confused the Ajisen shareholders with the Smart Wave shareholders. The learned judge was fully aware of Re Duomatic Ltd and said the Re Duomatic principle[27] required the assent of “all shareholders of Smart Wave” and that was why the Hero Elegant Agreementwas not binding on Smart Wave.[28] That the learned judge was plainly aware that the Ajisen and Smart Wave shareholders were not identical is supported by her observation during the cross-examination of Ricky: “Judge: hold on. We need to make this clear, because your previous question you were talking about shareholders of Itamae, and now you were talking different shareholders of Ajisen or what, Mr Cheng?” [29] 22. The Court of Appeal also said that Ricky in his evidence admitted that he had not told Jason or Daisy that he could open further Itamae restaurants on his own. We have been given the relevant transcript. But I agree with Ms Eu SC for Ricky that the question was directed to Ricky’s claim that Jason and Daisy were not entitled to any shares in the other Itamae companies and that Ricky himself was solely entitled. In other words, the emphasis was “on his own”. That this was the point of the question and how it was understood by the learned trial judge is clear from para 5 of her judgment when she said: “On his part, Ricky denies that the Itamae restaurants were an extension of the Ajisen ramen restaurants. He claims that he had planned the operation of the Itamae sushi restaurants as his own chain, and not as a mere franchisee of a Japanese corporation, to bear his own style and his personal stamp. According to Ricky, the trademarks “ITAMAE”, “板前” and the associated logo were his own creation, and he had offered shares in Smart Wave to Daisy and Jason with the intention that Smart Wave was to operate the first Itamae restaurant only. Ricky claims that it was all along his intention to remain the sole owner of the Itamae name and to retain the right to use the “ITAMAE” trade marks for other sushi restaurants in the chain to be owned and operated by him. However, he admits in his testimony in court that he had not informed Ricky and Daisy of this in 2004.”[30] 23. In para 5, I said Jason and Ricky told largely the same story. When Jason’s evidence[31] is compared with para 15 of Ricky’s defence in the derivative action,[32] it is clear that the essential difference between the two versions is that according to Jason, pursuant to the 2004 Agreement, the Ajisen shareholders[33] would be entitled to be allotted shares in the subsequent Itamae sushi restaurants,[34] and Ricky’s case was that he alone was entitled to any share in the later Itamae restaurants. What Jason and Ricky's case had in common was that Smart Wave would be one of a chain of separately owned sushi restaurants. Nor does it appear that Ricky’s claim that he had reached an agreement or understanding with the shareholders of Smart Wave that Smart Wave was only entitled to run one Itamae sushi restaurant in a chain of such restaurants[35] was disputed. There is no indication that Jason put forward a different case. Indeed any such different case would have been inconsistent with his stance in the Hero Elegant Action. In the course of the submissions, I asked Mr Jat SC who together with Ms Linda Chan SC, appeared for Jason in this appeal, whether Ricky was cross-examined on his claim that he had reached an agreement or understanding with the shareholders of Smart Wave that Smart Wave was only entitled to operate one Itamae sushi restaurant in a chain of such restaurants. I was not told that there was such cross-examination. 24. I have had the advantage of reading Mr Justice Spigelman’s judgment in draft. His Lordship is of the view that the first question should be answered against Ricky and his appeal should be dismissed. Ribeiro and Fok PJJ agreed with his Lordship. With respect, I am unable to agree. 25. In paras 110-115, of Mr Justice Spigelman’s judgment, his Lordship discussed the single purpose evidence and concluded at para 115 that Ricky’s and Daisy’s: “… expectation or agreement was expressly interconnected with an expectation and agreement that they would be substantial shareholders in each such vehicle. These two elements were so closely interconnected, that it cannot be concluded that they had agreed to the restriction on Smart Wave on its own. In a case involving the equitable jurisdiction of the Court, the Appellant cannot rely only on that part of the promoters’ agreement that suits his case.” 26. With respect, this is a mischaracterization of Ricky’s conduct. It was not for Ricky to choose what suited him. He entered into a contract and he was bound by it. If he was in breach, as he clearly was, the other parties to the contract could hold him to it. Their remedy was to enforce the contract. This is not a case of discharge by accepted repudiation. Ricky’s breach was resolved by the Hero Elegant Agreement. There is no difference in principle between this settlement and Ricky paying damages for the breach. The fact that the Hero Elegant Agreement miscarried through no fault of Ricky makes no difference. Smart Wave was not a party to the 2004 Agreement, the significance of the 2004 Agreement to Smart Wave is Ricky’s case that to the knowledge and agreement of all the shareholders of Smart Wave it was established pursuant to the 2004 Agreement to be the first in a chain of independently owned Itamae restaurants (limited purpose company). 27. In paras 10 and 11 of Jason’s witness statement he made clear that it was his case that Smart Wave was established pursuant to the 2004 Agreement, and he expressly stated that Daisy was party to the 2004 Agreement. Daisy had not denied that. If Ricky was in breach of the 2004 Agreement, the other parties to the 2004 Agreement could seek enforcement of it. That was their remedy. It seems to be accepted that if Ricky had not been in breach of the agreement. Smart Wave being a limited purpose company would have no claim against Ricky, but because Ricky was in breach of the 2004 Agreement, Smart Wave had a claim for breach of fiduciary duties. It is not clear whether in that case both the other parties to the 2004 Agreement and Smart Wave would have a claim, the former in contract and the latter for breach of fiduciary duties. Nor, whether, upon breach, Smart Wave’s claim would immediately arise and the contractual claim disappears. Or that they co-exist. Presumably, Ricky would not have to pay two sets of damages. If so, does it mean if the contractual claim was brought first, Smart Wave would have no claim. It is not clear whether that would depend on whether the contractual claim is compromised or failed. 28. Here, Ricky’s breach predated the Hero Elegant Agreement. And the breach was compromised by the Hero Elegant Agreement. What is the effect of this compromise to Smart Wave’s claim? Suppose the Hero Elegant Agreement was duly performed, how would that affect Smart Wave’s right? Indeed, what if the Hero Elegant Action was settled, how would that leave Smart Wave? It may be pertinent to ask what was Smart Wave’s right vis-a-vis Ricky from the time of the initial breach of the 2004 Agreement to the discharge of the Hero Elegant Agreement? This is not an idle question, the answer should throw light on whether Smart Wave’s right on fiduciary duty could depend on Ricky’s breach of either the 2004 Agreement or the Hero Elegant Agreement. In my opinion, Ricky’s breach of these agreements (e.g. whether by cutting the other parties out of their shares or by giving less than what they were entitled to) can have no relevant impact on Smart Wave’s right against Ricky. The fact that Smart Wave’s shareholder had agreed that it should be a limited purpose company means that Ricky’s fiduciary duties towards Smart Wave must conform to and be consistent with that reality. I do not believe the fact that Smart Wave’s claim is based on breach of statutory duties makes any difference. The relevant question is what were those duties and that depends on whether it was agreed by its shareholders that Smart Wave should be a limited purpose company. 29. Also, in my view, on the facts, the overwhelming probability was that the minority shareholders had been allotted shares on the understanding that Smart Wave was to be one company in a chain of separately owned companies, what the learned trial judge called “the limited nature of Smart Wave’s rights in the operation of one Itamae restaurant”. There was simply no reason not to tell them. Nor any advantage in not doing so. Nor on the facts, was it likely that they would have objected or that if they had, it could not be resolved by not admitting that person(s) as a shareholder. It is common sense that promoters (and the Ajisen shareholders could be regarded as promoters) would inform persons who might be interested the nature of the investment they were promoting. It is just good business sense. Also, one would be asking for trouble otherwise. Nor would any elaborate explanation be needed, it follows from its limited purpose Smart Wave could not object to the establishment of independently owned subsequent restaurants. Nor was the limited nature of Smart Wave something the promoters were likely to have overlooked. That was the raison d’etre of the establishment of Smart Wave. As Jason’s evidence showed Ricky was the prime mover in the enterprise and they were following the Ajisen Ramen restaurant model. And it was Ricky who recruited the minority shareholders. I think it is inconceivable that he would not have made the minority shareholders aware of the limited nature of Smart Wave. The evidence was that the minority shareholders were Ricky’s friends and that it was Ricky who paid for the shares for all the minority shareholders[36] except those which were allotted to Kong.[37] Indeed, they were shareholders because, Jason said as Ricky explained, they were suppliers or key staff and Ricky needed them for the running of the Itamae restaurants. If the plan was for separately owned chain companies to run Itamae restaurants, and the evidence of Jason, Daisy and Ricky left no doubt that it was indeed so and the minority shareholders were admitted or given shares because they were key staff or suppliers, one would naturally expect that there would be different minority shareholders in different restaurants (such as managers). This should also militate against Smart Wave having any right over the later restaurants. Also, Jason relied on the fact that “at least Mak, Teraguchi and Wong”[38] would vote with Ricky such that Ricky controlled more than 50%[39] of the Smart Wave shares to justify a derivative action. It is a fact that none of the minority shareholder gave evidence, but given the narrow disagreement between Ricky’s and Jason’s case, i.e. whether Ricky was solely entitled to run other Itamae restaurants, that does not surprise me. Given the fact that the Itamae chain was a success, one would be surprised that the minority shareholders would have been so passive if they were not aware of the limited nature of Smart Wave. There is also the question of the ownership of the service marks. Smart Wave had not claimed that it owned the service marks[40] and as the judgment on the Hero Elegant Agreement showed, clause 14 of the Hero Elegant Agreement: “is clearly an acknowledgment that Ricky had the right to grant a licence for the use of the Service Marks, a right which only the owner of a trade mark can have.”[41] 30. It does not matter that the learned trial judge made no finding on the actual ownership of the service marks, it is significant that Smart Wave made no claim to ownership because it is supportive of the view that Smart Wave was established to the knowledge of its shareholders to be a single restaurant company in a chain, and Smart Wave was not entitled to open other Itamae restaurants. Lastly, a trial judge has the great advantage of seeing the witnesses and observing the unfolding of the parties’ cases before him. They provide the trial judge with an insight into the case which an appellate court does not share. Here the learned trial judge dealt with the knowledge of the shareholders of Smart Wave briefly but in no uncertain terms. What arguments were raised and to what extent they were pressed may explain the learned trial judge’s brief but firm response. How much evidence is required to tip the balance is a matter of judgment. With respect, there is no reason to think that the learned trial judge’s finding was plainly wrong. 31. For the above reasons, I do not believe that Court of Appeal was entitled to overturn the learned trial judge’s clear conclusion that Ricky had not acted in breach of his duties to Smart Wave by operating other Itamae restaurants. I would allow Ricky’s appeal. 32. I turn now to the second question which would only arise if I was wrong on the first question and that Ricky was in breach of fiduciary duties and it is sought to deny relief because of Jason’s conduct. Like Mr Justice Spigelman, with respect, I am also troubled by the fact that this question is raised for the first time in this court. Leave was granted on the second question, no doubt because it was felt that on the basis of Nurcombe v Nurcombe [1985] WLR 370, Jason might have been refused relief. But for the reasons given by his Lordship, I agree that the court should not entertain the second question. Mr Justice Bokhary NPJ: 33. On the primary facts found at first instance, which findings are justified by the evidence, it is to be concluded that all the individuals concerned always understood that the restaurant operated by the company in this derivative action would be the pioneer in a chain of restaurants, each operated by a different company. So there was no question of the pioneering company operating any further restaurant. And in so far as customers who would otherwise have patronized the pioneering restaurant are diverted to a restaurant further along the chain, such diversion must be taken to be within what the pioneering company had acquiesced in through the human agency by which it functioned. If any shareholder in the pioneering company is aggrieved by reason of not being allotted shares in a company operating a restaurant further along the chain, redress for such grievance is to be sought in an ordinary action based on an allegation of breach of a contractual obligation owed to the aggrieved shareholder, not in a derivative action based on an allegation of a breach of a fiduciary duty owed to the pioneering company. 34. Accordingly, on the basis of the argument advanced under the first of the two questions on which leave to appeal was granted, I would allow the appeal so as to dismiss the derivative action entirely. On the first question, therefore, I agree with Mr Justice Tang PJ, and on the second question, I agree with him and all the other members of the court. 35. Before parting with the case, I wish, first, to thank counsel on both sides for their typically able arguments. Secondly, I wish to acknowledge that I have found the judgments of the learned judges in the courts below helpful on all points - even those on which I have felt unable to share their views. Mr Justice Spigelman NPJ: 36. This appeal arises from a derivative action brought by the 1st Respondent, Poon Ka Man Jason (“Jason” or “the Respondent”), as a shareholder of the 2nd Respondent, Smart Wave Ltd (“Smart Wave”), against the 1st Appellant, Cheng Wai Tao (“Ricky”), with respect to his conduct in relation to the 2nd to 30th Appellants. Jason is a 10% shareholder of Smart Wave. Ricky is the registered owner of 38% of the shares in Smart Wave. 37. Smart Wave operated a sushi restaurant under the name “Itamae”. The 2nd to 9th Appellants each operated a sushi restaurant under the name “Itamae” (the “Itamae restaurants”). The 10th to 30th each operated a sushi restaurant under the name “Itacho” (the “Itacho restaurants”). 38. On 24 May 2013 the Trial Judge, Mimmie Chan J, held that Ricky had breached his fiduciary duties as a director of Smart Wave by operating the Itacho restaurants. Her Ladyship awarded damages to Smart Wave up to 2010, when Smart Wave ceased to operate its sushi restaurant. The Trial Judge dismissed an identical claim with respect to the Itamae restaurants. 39. Jason applied for variation of the judgment of the trial judge so as to allow Smart Wave to elect for an account of profits. On 6 December 2013, the trial judge dismissed the application on discretionary grounds. 40. Jason appealed and Ricky (and all the Appellants) cross appealed. The Court of Appeal rejected the cross appeal, which sought to overturn the First Instance judgment with respect to the Itacho restaurants. The Court of Appeal allowed Jason’s appeal and held that Ricky’s operation of both the Itamae and Itacho restaurants constituted breaches of Ricky’s fiduciary duties to Smart Wave. The Court of Appeal further held that Jason was entitled to elect between an account of profits and damages. The Court dismissed Jason’s appeal with respect to the 2010 temporal limit on damages or an account. Background Facts 41. Ricky, Jason and Daisy, together with a business associate Shigemitsu Katsuaki (“Shigemitsu”) had, since 1996, conducted a successful chain of Japanese noodle restaurants under the trade name “Ajisen Ramen”, under licence from Japan. For present purposes, it is an important feature of this business venture that each of these restaurants was operated by a separate corporate entity, in which the natural persons mentioned were the principal shareholders, of whom Daisy was the largest. Some of the companies had minority shareholders, whose identity varied from one company vehicle to another. 42. It was Jason’s case throughout, a case accepted by the trial judge and the Court of Appeal that, in 2004, the shareholders of the Ajisen Group decided to go into the sushi restaurant business on a similar basis to their existing arrangement. The first restaurant of an intended chain was opened by Smart Wave, using the trade name Itamae, in August 2004. 43. Smart Wave’s shareholders were – Ricky (23%), Shigemitsu (15%), Jason (10%) and his sister Daisy (24%) (who were all Ajisen shareholders), Kong Yiu Wai (10%), Mak Kin Shing (8%), Sato Akira (4%), Teraguchi Tadayoshi (4%) and Wong Yiu To (2%). By 12 March 2007 this had changed to Ricky having (38%), Shigemitsu having transferred his 15% to Ricky. 44. After the opening of the first Itamae restaurant, Ricky proceeded to act on the basis that he was entitled to develop the chain of sushi restaurants in his own right as the sole owner of the chain, subject to him deciding that additional shareholders should be introduced. Three additional Itamae restaurants were opened within two years of the first. Three more were in an advanced stage of development. Ricky, who was the sole director of Smart Wave, was the sole shareholder of each of the separate companies that operated each of these restaurants. That was also the case for all subsequent restaurants with, the Court was informed, one exception where there was a minority shareholder, unrelated to these proceedings. 45. Jason and Daisy regarded the expansion of the sushi chain as a contravention of the agreement that had been made by the shareholders of the Ajisen Group. A legal dispute developed. That dispute coincided with a dispute about the conduct of the Ajisen business and with the need to change the structure and shareholding of the Ajisen Group, in preparation for a public listing of that business. 46. The resolution of the parallel disputes was carried into effect in September 2006 by the parties entering into two written contracts: the “Favour Will Agreement”, with respect to be Ajisen restaurants, and the “Hero Elegant Agreement”, with respect to the Itamae restaurants. The latter is relevant for present purposes. That Agreement did not extend to the Itacho restaurants, which were not then in existence. 47. Whatever the rights Jason and Daisy might have had in the Itamae restaurant business, they agreed, by the entry of their company, Fine Elite Group Ltd (“Fine Elite”), into the Hero Elegant Agreement, to a new structure. Fine Elite accepted a 31% shareholding in Hero Elegant, whereas Ricky held 69%. The three new Itamae restaurants, and future restaurants, would be operated by subsidiaries of Hero Elegant. Smart Wave was not brought under this new arrangement, although it was agreed that that may happen in the future. 48. Ricky had applied for registration of the name “Itamae Sushi” as Service Marks, in his own name, in the PRC. He was obliged, however, under the Hero Elegant Agreement, to grant an exclusive licence of the Service Marks to the Hero restaurants. Fine Elite attempted to register “Itamae” as a Service Mark in Hong Kong, after Jason found out that Ricky had applied for registration in the PRC. Ricky asserted that this constituted a repudiation of the Hero Elegant Agreement and, in December 2006, he accepted the repudiation. 49. Ricky continued to open new Itamae restaurants in separate companies, of which he was sole shareholder. From July 2007 he commenced to open sushi restaurants using the trade name Itacho again in separate corporate vehicles. Jason and Daisy asserted that this conduct was a breach of the Hero Elegant Agreement. On 9 July 2008, Fine Elite commenced proceedings for specific performance of that Agreement, (the “Hero Elegant Action”). On 23 February 2011, Jason commenced the Derivative Action, expressed to be an alternative to the Hero Elegant Action. The First Instance Decision 50. The trial judge heard the two proceedings together. There is no appeal from that part of her judgment of 24 May 2013, concerning the Hero Elegant Action. 51. As indicated above, Daisy and Jason claimed they had entered into an agreement in 2004 with Ricky to develop a chain of sushi restaurants, each of which would be conducted by a separate corporate vehicle and in which Daisy and Jason, as well as Ricky and Shigemitsu, would be shareholders. This appeal proceeded on the basis that the Hero Elegant Agreement constituted a comprehensive resolution of the disputes about the alleged breach of the 2004 Agreement. 52. The Hero Elegant Action was instituted by Fine Elite on the basis that Ricky continued to manage and operate the Itamae restaurants, and subsequently the Itacho restaurants, on his own account. He did not honour the terms of the Hero Elegant Agreement in that he held all the shares in his own name. Fine Elite sought specific performance of the Agreement and damages or, alternatively, an account of profits. In his Defence, Ricky claimed that the Hero Elegant Agreement had been repudiated by Fine Elite and that he had accepted the repudiation. Accordingly, he was discharged from performance. 53. Her Ladyship held that Ricky was entitled to registration of the marks; that Fine Elite had repudiated the Hero Elegant Agreement and that Ricky had accepted the repudiation. Accordingly the Hero Elegant Action failed and the alternative derivative action on behalf of Smart Wave had to be determined. 54. Her Ladyship’s key findings with respect to the Itamae restaurants were: “61. Irrespective of whether Ricky is the owner of the Service Marks, it has never been pleaded that Smart Wave is the owner. On Jason’s or Fine Elite’s case in HCA 1269/2008, the shareholders of the Ajisen Group (Daisy, Jason, Ricky and Shigemitsu) agreed to develop Japanese-style chain restaurants using corporate vehicles in which all of them would be interested as shareholders, and it was pursuant to such agreement that Smart Wave was incorporated in 2004 to manage and operate the Itamae restaurant at Granville Road only. Under the Hero Elegant Agreement, which was signed to resolve the disputes over Daisy’s and Jason’s claims to the Itamae restaurants, Ricky and Fine Elite were to become shareholders of Hero, which with its subsidiaries were to continue and carry on the business of operating chain restaurants using the Service Marks. 62. On the case advanced by Jason and Daisy, the shareholders of the Ajisen Group had agreed ‘to develop chain sushi restaurants in furtherance of the then existing business’ (of the Ajisen Group), and had further agreed that ‘separate corporate vehicles would be formed to hold the interest of the said chain sushi restaurant business to be established’ (emphasis added), following the same shareholding of the Ajisen Group (paragraph 12 of Jason’s witness statement made on 24 October 2011). There is no doubt that, even on the Poons’ case, the intention was for a chain of Itamae restaurants to be established, using different corporate vehicles to hold and to operate different restaurants in the chain, all using the Service Marks. The Hero Elegant Agreement also envisaged this. Clause 14.5 provides for all chain restaurants conducting the business defined in the agreement to be owned and operated by ‘a Group Company’, with Hero being the holding company of all such group companies owning and operating the business of the sushi restaurants. 63. Hence, as one of the restaurants in the chain, Smart Wave was never intended by its shareholders to have the exclusive right to carry on the sushi restaurant business using the Itamae name or Service Marks. Even on Jason’s and Daisy’s case, the shareholders of Smart Wave knew, intended and agreed that other companies would be set up to operate other sushi restaurants, using the Itamae name and Service Marks. I agree with Leading Counsel for Ricky that Smart Wave is not in a position to complain about the use of the Service Marks by other companies, or of the existence and operation of other sushi restaurants in the chain. Ricky, as a director of Smart Wave, cannot be said to have acted in breach of his duties to Smart Wave by operating other sushi restaurants using the Service Marks.” 55. Her Ladyship’s key findings with respect to the Itacho restaurants were: “65. Whereas I accept that the shareholders of Smart Wave knew and hence had consented to the operation of other sushi restaurants in the chain by use of the Service Marks and the name ‘Itamae’, there is no evidence in this case on which I can find that the shareholders of Smart Wave had consented to the operation of sushi restaurants under the ‘ITACHO’ name. As a director of Smart Wave, it is undisputable that Ricky was under a fiduciary duty to act in the best interests of Smart Wave, and prima facie, it is against the interests of Smart Wave for its director Ricky to operate and consent to the operation of a competing sushi restaurant, under the name of ‘ITACHO 板長’ which I consider to be confusingly similar to the name ‘ITAMAE板前’. Due to the similarity between the names ‘ITAMAE 板前’ and ‘ITACHO板長’, I consider that the inevitable inference is that customers of the Itamae restaurants would patronize the Itacho restaurants in the belief that they are connected or related, such that the Itacho restaurants benefit from the goodwill in and reputation of the Itamae name. Leading Counsel for Ricky argued on his behalf that the Itacho restaurants complement, rather than compete with, the Itamae restaurants and the Itamae business, but there is no evidence whatsoever from Ricky to support such claim.” 56. In the subsequent judgment, on the account of profits issue, her Ladyship referred at [12], to “the limited nature of Smart Wave’s rights in the creation of one Itamae restaurant”. The Appellant relied on this formulation in this Court. The Judgment of the Court of Appeal 57. There was no appeal to the Court of Appeal from the First Instance decision on the Hero Elegant Action. 58. With respect to the appeal from the dismissal at First Instance of the case on the Itamae restaurants, Cheung JA noted at para 4.5: “In brief, the Judge held that the shareholders of Smart Wave knew, intended and agreed that Smart Wave would not have the exclusive right to operate another Itamae restaurant. On the contrary, other companies would be set up by Ricky to operate other Itamae restaurants of which the shareholders would not and could not complain.” 59. His Lordship went on to note at para 4.10: “The success of Ricky’s case really hinges on the evidence in support of the Judge’s finding on the agreement by the shareholders of Smart Wave. This is important because while there might be discussion, understanding or agreement amongst the shareholders of the Ajisen Group, the Ajisen Group and Smart Wave have different shareholders.” 60. His Lordship set out an extract from Jason’s witness statement and concluded: “4.11 Reading Jason’s witness statement in its context, he was referring to the shareholders of the Ajisen Group, namely, himself, Daisy, Ricky and Shigemitsu. He did not say there was an identical understanding of the shareholders of Smart Wave. For example, there was no evidence that Mr Sato Akira had anything to do with the Ajisen Group. 4.12 Likewise, Daisy’s witness statement said that Ricky informed her and the other shareholders of the Ajisen Group, as distinct from the shareholders of Smart Wave, when he opened the second Itamae restaurant”. 61. On this issue Cheung JA concluded: “4.18 In my view, in the absence of evidence in support of the Judge’s finding on the understanding or agreement by the shareholders of Smart Wave in respect of the operation of the other Itamae restaurants, Ricky was clearly in breach of his fiduciary duty towards Smart Wave under the well-established principle reaffirmed in Regal (Hastings). He, as the sole director of Smart Wave, was under a fiduciary duty to act in its best interests, and it was against the interests of Smart Wave for him to operate a competing sushi restaurant business where the business opportunity is diverted from Smart Wave to himself. The burden is on Ricky to demonstrate the propriety of the impugned transaction : Bishopsgate Investment Management Ltd [1993] BCC 120 at 139-140 and 143. 4.19 Much was said about Ricky’s exclusive rights to the Itamae service marks. But this must be a separate issue from the one concerning Ricky putting himself in a position of conflict with that of Smart Wave. 62. With respect to the cross-appeal on the Itacho restaurants findings, his Lordship held: “5.2 As to Ricky’s cross-appeal on the Itacho restaurants, Ms Eu rightly did not, and in my view could not in the absence of evidence, rely on the defence of the understanding or agreement of the shareholders towards the opening of the Itacho restaurants. MsEu, however, referred to the difference of the Itamae and Itacho service marks. While the two designs and their differences were raised in the Court below, they are clearly irrelevant to the issue of Ricky’s breach of fiduciary duty towards Smart Wave in opening the Itacho restaurants because Smart Wave’s claim is not based on the cause of action of passing off where it is relevant to consider the similarity of designs and names. The issue here is really whether Ricky had put himself in a position of conflict by the operation of other sushi restaurants. The other Itamae restaurants and the Itacho restaurants could well be operated by any other names without the slightest difference to Ricky’s liability. In my view the Judge had correctly found Ricky liable for his operation of the Itacho restaurants.” 63. The third matter before the Court of Appeal, namely, whether Respondent is entitled to elect an account for profits, is not before this Court. Leave to Appeal 64. On 5 August 2015 the Appeal Committee of the Court of Final Appeal granted leave to appeal from the Court of Appeal’s Judgment on the basis of the following questions of great, general and public importance, namely:- “(1) Whether the ‘no conflict rule’ applies to a director of a chain business where the agreed modus operandi was to have one company for one agreed operation. Where the company was of a ‘limited nature’ as found by the Trial Judge, with the agreed modus operandi of only operating one restaurant, whether the principle set out in In re Duomatic Ltd. [1969] 2 Ch 365 at 373 and EIC Services Ltd & Anor. v. Phipps & Ors [2003] BCC 931 at para 122 (‘the Duomatic principle’) applies as found by the Court of Appeal; (2) In the context of a derivative action, where the only nominal representative has himself agreed to the modus operandi of one restaurant per company, and where he has acted and taken benefit on that basis by signing and suing on the Hero Elegant Agreement, whether he is entitled to rely on a contrary or inconsistent stance at all [Nurcombe v. Nurcombe [1985] WLR 370 at 376G-377D] or without the company calling contrary evidence from other shareholders” The Pleadings 65. As some aspects of the pleadings were relied on in submissions to this Court, it is appropriate to set out relevant sections from both the Hero Elegant Action and the Derivative Action. 66. The “2004 Agreement” was pleaded in the two actions as follows: Derivative Action “6. Poons, Shigemitsu Katsuaki (‘Katsuaki’) and Ricky Cheng were business partners in a group of companies engaging in the business of operating and managing Japanese style noodle restaurants under the trade names of ‘AJISEN RAMEN’ and 味千拉麵’ (‘Ajisen Group’). 7. In around early 2004, the shareholders of Ajisen Group, namely, Jason Poon, Daisy Poon, Katsuaki and Ricky Cheng, agreed:- 7.1 to develop a chain of Japanese-style sushi restaurants business using corporate vehicle or vehicles in which all of them would be interested as shareholders; and 7.2 the new sushi restaurants would be managed and operated by Ricky Cheng (‘2004 Agreement’). 8. Pursuant to the 2004 Agreement- 8.1 Smart Wave was incorporated on 19th April 2004 as the vehicle to operate the first Itamae Sushi restaurant at Ground Floor, No.14 Granville Road, Tsimshatsui, Kowloon, Hong Kong and other Itamae Sushi restaurants to be established;” Hero Elegant Action “4. Jason Poon, Daisy Poon, Shigemitsu Katsuaki and Ricky Cheng used to be business partners in a group of companies engaged in the business of operating and managing Japanese-style noodle restaurants under the trade name of ‘AJISEN RAMEN’ and 味千拉麵’ (‘Ajisen Group’). 5. In around 2004, the shareholders of Ajisen Group agreed to develop Japanese-style chain restaurants in furtherance of the Ajisen Group’s business using corporate vehicles in which all of them would be interested as shareholders (‘the Agreement’). 6. In pursuance of the Agreement, Smart Wave was incorporated on 19th April 2004 to manage and operate the first Itamae restaurant at Ground Floor, No.14 Granville Road, Tsimshatsui, Kowloon, Hong Kong.” 67. The Appellant drew attention to the inconsistency between para 6 of the Hero Elegant Action and the words “and other Itamae sushi restaurants to be established” in para 8.1 of the Derivative Action. 68. Ricky’s Defence to both actions was in virtually identical terms. In the Derivative Action he pleaded: “9. In or around the beginning of 2004 and prior to the existence of Smart Wave, Ricky Cheng decided to establish and operate sushi business, beginning with one sushi restaurant. 10. Prior to the existence of Smart Wave or the first restaurant, Ricky Cheng had already designed the Service Marks bearing the name ‘ITAMAE SUSHI’, both in English and Chinese. The ‘ITAMAE SUSHI’ Service Marks and concept originated from Ricky Cheng and belonged to Ricky Cheng. 11. In about early 2004 Ricky Cheng intended to create a chain of Japanese sushi restaurants and created the Chinese and English names for ‘ITAMAE SUSHI’.” … 15. Ricky Cheng approached Kong Yiu Wai; Mak Kin Shing; Sato Akira; Teraguchi Tadayoshi; Wong Yui To; Jason Poon and Daisy Poon and reached the following Agreement/Understanding:- a. the sushi business would consist of a sushi restaurant to be operated in the name of Smart Wave to be called or known as ‘ITAMAE SUSHI’; b. the sushi restaurant would be managed by Ricky Cheng at the premises at Ground Floor, No.14 Granville Road, Tsimshatsui, Kowloon, Hong Kong; c. the shareholdings of Smart Wave would be allocated and held in the manner and proportions as pleaded in paragraph 8.3 of the Statement of Claim; d. the Service Marks bearing the name of ‘ITAMAE SUSHI’ was originated from, designed by and solely owned by and belonged to Ricky Cheng. In particular Ricky Cheng did not transfer, assign nor gift the Service Marks to Smart Wave nor any other person(s); e. Ricky Cheng would allow Smart Wave to use the Service Marks to operate one ‘ITAMAE SUSHI’ restaurant; f. the parties had only discussed that Smart Wave would be permitted and authorised to operate one sushi restaurant using the Service Marks, namely that at Ground Floor, No.14 Granville Road, Tsimshatsui, Kowloon, Hong Kong, and Ricky Cheng did not permit, authorise nor licence Smart Wave to establish, engage in or operate any other restaurants or sushi restaurants using the Service Marks; g. Ricky Cheng is and remains at liberty to establish, engage in and operate further or other sushi businesses or sushi restaurants, solely or in association with other parties or person and using the Service Marks including the names, arts and logos bearing the Chinese and English names ‘ITAMAE SUSHI’ h.the other parties (including Smart Wave, save as above agreed) would not and would not attempt to set up, deal with, use or purport to lay claim to the Service Marks which originated from, were designed by and solely owned by and belonged to Ricky Cheng, alternatively, this was an implied term by reason of inter alia obviousness, necessity and/or business efficacy. 16. Further, it is averred that in any event, the Service Marks including the names arts and logos bearing the Chinese and English names ‘ITAMAE SUSHI’ all originated from, were designed by and solely owned by and belonged to Ricky Cheng. 17. Further, it is averred that in any event, Ricky Cheng never purported to nor represented that he would nor did he in fact transfer, assign nor gift those Service Marks to Smart Wave nor any other person(s), save for permitting the one sushi restaurants to be operated by Smart Wave. 18. By reason of Ricky Cheng’s ownership of the Service Marks and his permission for Smart Wave to operate one restaurant using the same, the first ‘ITAMAE SUSHI’ Japanese restaurants was established. 19. It is averred that neither the Plaintiff nor Smart Wave in any event have any locus standi or authority to complain or bring action in respect of any of the Service Marks nor the Itacho Service Marks or any part or portion thereof. 20. Ricky Cheng alone all along had and continues to have the right and entitlement to establish, engage in and operate further or other sushi businesses or sushi restaurants, solely or in association with other parties or persons and using the Service Marks including the names, arts and logos bearing the Chinese and English names ‘ITAMAE SUSHI’” Question 1 69. The determination of the first question for which leave to appeal was granted, as set out at para 33 above, turns on both factual and legal issues. The Legal Issues 70. The Respondent contends that this is a case in which breach of a director’s fiduciary duties is clear, in the absence of the informed consent of the beneficiary, relevantly, by the shareholders of Smart Wave, which did not occur. The Appellant’s response is one of confession and avoidance. The issue of breach does not arise because the conduct complained of was beyond the scope of any such duty. 71. In the Derivative Action, the Respondent alleged that Ricky breached his fiduciary duties to Smart Wave by establishing, managing and operating the Itamae and Itacho restaurants. The allegation of breach in each case was pleaded in the following terms: that Ricky “…failed to act in the best interests of Smart Wave and acted solely for his personal benefit and the benefit of his companies.” (see paragraph 19, 28, 35). 72. The duty of a director to act in the best interests of the company is a statement of the positive duty of loyalty which is broader than, but encompasses, the conflict rule. See Bristol and West Building Society v Mothew [1998] Ch 1 at 18 per Millett LJ (as he then was). Perhaps it was the reference in the pleading to acting for his actual personal interests by way of contrast with the company’s interests, in the interests of the company, that led to the assumption in these proceedings, at all levels, that the pleading was a statement of the conflict rule. 73. Notwithstanding the fact that, in business opportunity cases, the conflict rule generally overlaps with the profit rule, in this case the Respondent relied only on the former. That was the rule applied by the trial judge and by the Court of Appeal. It was not suggested in this Court that we should do otherwise. Indeed, the fact that the trial judge limited recovery until the date in 2010, when Smart Wave ceased to operate its restaurant – upheld by the Court of Appeal and from which there is no appeal – is more consistent with a conflict rule finding, than it is with a profit rule finding. 74. The conflict rule is generally stated in the form that a fiduciary may not put himself or herself in a position where his or her interest and duty conflict (see Stuart Bridge et al Snell’s Equity Thirty Third Edition Sweet & Maxwell, Thomson Reuters, London, 2015 para7-018, relying on Bray v Ford [1896] AC 44 at 51 and Aberdeen Railway Co v Blaikie Bros (1854) 1 Macq 461 at 471; 23 LT 315 at 316 at 5. However, it is well established that there must be a “real sensible possibility of conflict” (Boardman v Phipps [1967] 2 AC 46 at 124 per Lord Upjohn). 75. The Appellant’s principal submission was that Smart Wave was a single purpose company i.e. a single restaurant company. Accordingly the scope of the fiduciary duty of Ricky, as the sole director of Smart Wave, did not extend to Ricky’s conduct in establishing and operating other sushi restaurants. By reason of the limited scope, there was no position of conflict. 76. The Respondent submitted that the Appellant was subject to the fiduciary duties of a director. Accordingly, it was for him to establish that the scope of those duties was restricted in the manner for which he contended. See Bishopsgate Investment v Maxwell (No. 2) [1994] All ER 261 at 265 per Hoffmann LJ, as he then was. He had not done so. 77. The boundary of fiduciary duty is variously expressed in the authorities “the company has no concern” or “no interest” in the impugned conduct (Bell v Lever Brothers Ltd [1932] AC 161 at p 194); “the fiduciary has no duties to perform in respect thereof” Boardman v Phipps [1967] 2 AC 46 at 130; “wholly without the scope of the firm’s business” Aas v Benham [1891] 2 Ch 244 at 256 per Lindley LJ; the company was “not in the business” Canberra Residential Developments Pty Limited v Brendas [2010] FCAFC 125, (2010) 80 ACSR 270 at [38]. 78. In a frequently cited passage in Birtchnell v Equity Trustees Executors and Agency Co Ltd (1929) 42 CLR 384 at 408, Dixon J said: “The subject matter over which the fiduciary obligations extend is determined by the character of the venture or undertaking for which the partnership exists.” 79. As Lord Wilberforce pointed out in New Zealand Netherlands Society “Oranje” Inc v Kuys [1973] 1 WLR 1126 at 1130, the principle stated by Dixon J is not limited to partnership, but is of general application. 80. To the same effect are the observations of Sir Anthony Mason in Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41 at 102, relying inter alia on Kuys: “[T]he scope of the fiduciary duty must be moulded according to the nature of the relationship and the facts of the case” 81. The Appellant adopted the terminology of Mason J in Hospital Products supra at 97, to submit that the contractual context, indeed the “contractual foundation”, of the fiduciary duty in this case was the “limited nature” of Smart Wave (Appellants’ Written Case at [48], [49] and [52]) namely the sole purpose or single restaurant restriction. The Court was referred to a line of authorities in which the scope of fiduciary duties was found to arise from a contractual relationship. 82. These authorities are of little assistance in this case. The fact that a director has fiduciary duties is a well established category, with well established incidents, arising from the nature of the office. The fiduciary relationship between a director and the company does not have a “foundation” in contract. 83. The Respondent relied on the reasoning of the English Court of Appeal in Re Allied Business and Financial Consultants Ltd: O’Donnell v Shanahan [2009] EWCA Civ 751; [2009] 2 BCLC 666 at [55]–[72] for the proposition that, in a business opportunity case, it was no answer that the opportunity fell outside the company’s business. [Respondent’s Written Case para 39(7)]. That Court expressly applied its analysis to both the profit rule and the conflict rule at [55], [67], [73]. 84. The decision distinguished the case of directors from that of partnership. It did not apply the reasoning in Aas v Benham supra on the basis that, unlike partners “director’s fiduciary duties are not circumscribed by the terms of a contract”,at [68] and [69]. Accordingly there was no room for a “scope of business inquiry” in the case of directors at [70]. 85. In my opinion, the reasoning in O’Donnell v Shanahan may go too far. In particular the attempt to distinguish Aas v Benhamis not compelling. Indeed it would be surprising if a different rule applied to directors and partners – the latter being an equally well established category of fiduciary relationship. 86. I do not understand Lindley LJ in Aas v Benham to have determined the scope of business in that case on the basis of the contract of partnership. He determined it on the basis of the facts of the case, namely what the two companies actually did. 87. In my opinion, a “scope of business test” may be applicable to a company director. The facts and circumstances of a particular case may be such as to modify the subject matter to which the fiduciary duties of a director apply. However, such modification must be binding in the corporate context. Such modification does not need to be formal – as in a provision in the constitutive documents or a shareholders’ resolution – as long as it is, in substance, equivalent to a formal modification (e.g. In ReDuomatic Ltd[1962] 2 Ch 365). 88. The submissions in this court proceeded on the basis that the answer to the scope of duty issue was to be determined on fiduciary principles. Relevantly, the beneficiaries, in this case all the shareholders, had to be unanimous and to give a fully informed consent. 89. It is necessary to commence, in the case of an established category, with the usual scope and incidents of a well recognised fiduciary relationship. In this case, that means that the Appellant has the onus of establishing that the single purpose restraint was, or should be regarded as, binding on Smart Wave, on whose behalf the Derivative Action is brought. 90. The Appellant's case was that the agreement amongst the promoters to establish the business on the same model as the Ajisen business, together with the concurrence of the minority shareholders in Smart Wave, was effective to constitute a restriction on the activities of Smart Wave. That was a determination, and therefore a limitation, of the scope of the duty owed by the sole director, Ricky. 91. In my opinion, it is self evident that, unless the scope of duty was limited in the way for which the Appellant contends, Ricky was in breach of the conflict rule. Although the trial judge expressed this conclusion in term of “competition” by the Itacho restaurants with the single restaurant conducted by Smart Wave (at para 65), the scope of the rule is not limited to competition. As the Court of Appeal stated, in addition to competition there is the possibility that a business opportunity was diverted from Smart Wave (at para 4.18). Furthermore, Smart Wave, as the first restaurant in what was to become a chain of restaurants, had an interest in the establishment and operation of the chain as it developed. The strength of the brand, and its popularity, would redound to its advantage. Mashonaland 92. The Appellant placed particular reliance on the reasoning in Bell v Lever Brothers Ltd [1932] AC 161, especially at 194-195, including the references by Lord Blanesburgh to the decision of Chitty J in London and Mashonaland Exploration Co Ltd v New Mashonaland [1891] WN 165. The statement of principle by his Lordship, in the passage relied on, that a director has no fiduciary duty in a matter in which “the company has no concern”, is an orthodox reflection of the scope of duty principle, discussed above. 93. However, the Appellant also relied on what Lord Blanesburgh called an “essential qualification” to the effect that it must appear that the fiduciary “has made use either of the property of the company or of some confidential information which has come to him as a director of the company”. The Appellant submitted there is no such finding here (Appellants’ Written Case at [56]). Further, the Appellant also relied on the proposition that there is no rule against being a director of competing companies (Appellants’ Written Case at [67]). 94. The formulation of an “essential qualification” by Lord Blanesburgh was a reference to the reasoning in Mashonaland. His Lordship’s reliance was, in my opinion, based on a misunderstanding of the earlier case. 95. Mashonaland is usually cited for the proposition that there is no rigid rule that a director cannot be involved in the business of a company in competition with the company of which he is a director. That proposition is either trite or is also based on a misconception of the case. 96. As Lord Blanesburgh made clear, he relied solely on the short report of Mashonaland in the Weekly Notes. All subsequent references to that case have been similarly confined. However, there is a fuller report of the case in The Times of 10 August 1891 at page 3. That report puts the reasoning of Chitty J in a different light. 97. The Earl of Mayo was appointed to both Boards for the purpose of his name appearing as a director in each prospectus. He never attended a Board Meeting or acted in the capacity of a director in any way. In that era, it was unnecessary and, no doubt, undignified, for Chitty J to point out that the Earl never would. He was there only to enhance the reputability of the investment, by allowing his name to be used on both prospectuses. 98. The duty of diligence expected from contemporary directors – even a Lord – makes Mashonaland an anachronistic authority on which reliance cannot now be placed. Note the observations of Hoffmann LJ, as he then was, in Bishopsgate Investment Management Ltd (in liq) v Maxwell (No. 2) [1994] All ER 261 at 264 on how “older authorities” on directors duties have been superceded by the interaction of statutory provision and the natural development of the common law. See also Gower and Davies, Principles of Modern Company Law Ninth Edition Sweet & Maxwell, Thomson Reuters, London, 2012 at [16-167]. 99. The Times report contains reference to two authorities on which Chitty J relied, neither of which are mentioned in the Weekly Notes report. It is clear that when Chitty J described the application as “unprecedented” – an observation only found in The Times –he was referring to the circumstances in which an injunction would lie. He relied on the judgment of Lindley LJ in Whitwood Chemical Co vHardman[1891] 2 Ch 416, where the Court refused an injunction to prevent an executive from working for a rival, there being no evidence he had actually done so. In the absence of a negative stipulation in the contract, no injunction was granted. 100. As Chitty J noted, there was no suggestion in that case that the executive was about to disclose confidential information, when an injunction could have been given. He added that, in the case before him, Lord Mayo had acquired no confidential information. The Times report makes it quite clear that Chitty J was not purporting to set out a comprehensive statement of breaches by a director who become involved with a competitor company. 101. Before concluding that “The company had the most appropriate remedy in its own hands”, namely removing the director, Chitty J had said: “if a director acted contrary to his duty the company could call upon him to resign, or could remove him. If his conduct was of a grosser kind, such as betraying secrets, they could get an injunction. In other cases of that class a remedy by damages seemed more appropriate. The extraordinary remedy by injunction – although as to this he must be considered as speaking with caution - would be rarely appropriate.” The word “such as”, before “betraying secrets”, makes it clear that the reference to confidential information was merely illustrative. 102. I set these passages out at some length because the case has been treated as a binding authority, in view of its approval by the House of Lords, based on an inadequate report. This has been so despite frequent criticism (see e.g. In Plus Group Ltd v Pyke [2002] EWCA Civ 370; [2002] 2 BCLC 201 at [72], [75], [79], [81]–[89]; British Midland Tool Ltd v Midland International Tooling Ltd [2003] EWHC 466 Ch, [2003] 2 BCLC 523 at [81]-[85]; Foster Bryant Surveying Ltd v Bryant[2007] EWCA Civ 200; [2007] 2 BCLC 239 at [70]; Eastland Technology Australia Pty Ltd v Whisson [2005] WASCA 144; (2005) 223 ALR 123 at [69]; Links Golf Tasmania Pty Ltd v Sattler [2012] FCA 634, (2012) 292 ALR 382 at [545]–[547], [555]–[556], [559]–[563]. 103. Perhaps the most thorough critical analysis of Mashonaland and its adoption in Bell v Lever Bros, is by the Scottish Court of Session, first by the Outer House in Commonwealth Oil and Gas Company Ltd v Baxter [2007] CSOH 198 at [175]–[176] and then by the Inner House in Commonwealth Oil and Gas Company v Baxter [2009] CSIH 75; [2010] SC 156 at [4]-[5], [75]-[78]. 104. In the light of this considerable body of criticism, Mashonaland and its adoption in Bell v Lever Bros, should be regarded as standing for no wider a proposition than the trite statement that the law will not interfere in the absence of evidence of a real possibility of breach of fiduciary duty, including of the conflict rule. 105. As Upjohn LJ said, the conflict rule: “…must be applied with common sense … and applied realistically to a state of affairs which discloses a real conflict of duty and interest and not to some theoretical or rhetorical conflict.” [Boulting v Association of Cinematograph Television and Allied Technicians [1963] 2 QB 606 at 637-638] 106. The Appellant’s reliance on the comments in Mashonaland about breach of confidence (Appellants’ Written Case [56]), should be rejected. The Appellant’s reliance on the proposition that there is no rigid rule against being a director of competitive companies (Appellants’ Written Case [67]) does not advance its case. The Factual Issues 107. The parties made conflicting submissions on two, inter-related, factual issues. First, did the shareholders of Smart Wave agree that the company would have no interest in any other sushi restaurants? Secondly, was the intention that Smart Wave would only operate one restaurant, inextricably interrelated with an understanding that the original Ajisen shareholders (until the departure of Shigemitsu) would become shareholders in each company established to operate a sushi restaurant? It is convenient to refer to these investors as “the promoters”, to distinguish them from the smaller shareholders in Smart Wave. 108. The Appellant contends that the answer to the first issue is “Yes”. On the whole of the evidence, the Court should infer such an agreement. The Respondent contends that the answer is “No”, particularly in the absence of any positive evidence to that effect from Ricky himself, let alone from the minority shareholders. 109. The Appellant contends, with respect to the second factual issue, that the Court of Appeal erred in failing to separate the single purpose restaurant understanding from the promoters’ arrangement for future shareholdings. The Respondent contends that the two matters cannot be separated. The Single Purpose Evidence 110. As noted above, the modus operandi of the Ajisen Group was that each restaurant was conducted by a separate corporate vehicle. This was agreed by the promoters to be the model for the chain of sushi restaurants. Jason said in his witness statement: “Eventually, the shareholders of the Hong Kong Ajisen Ramen Group, including Mr Shigemitsu, Daisy, Ricky Cheng and I, all agreed to develop chain sushi restaurants in furtherance of the then existing business. We further agreed that separate corporate vehicles would be formed to hold the interest of the said chain restaurant business to be established by us. We as shareholders of Hong Kong Ajisen Ramen Group would then be allotted shares of and in the said corporate vehicles (‘the 2004 Agreement’).” 111. He also said: “Among us, Ricky Cheng was tasked to coordinate the establishment and operation of the chain sushi restaurant and to look for a suitable venue for the restaurant, negotiating the lease with the prospective landlord and applying for the necessary licenses for the opening of the new sushi restaurant. … It has always been the understanding of the shareholders of the Hong Kong Ajisen Ramen Group including Mr Shigemitsu, Daisy, Ricky Cheng and I, that the said 1st Itamae Sushi Restaurant was established in pursuance of the 2004 Agreement.” 112. Furthermore, he said: “… Under the 2004 Agreement, the shareholders of the Hong Kong Ajisen Ramen Group agreed that they would each be allotted shares in the corporate vehicles formed to hold the interest of the chain sushi restaurant business. This was never confined to the 1st Itamae Sushi Restaurant, and would equally apply to the subsequent Itamae Sushi Restaurants established as a chain. Further, as mentioned above, under the 2004 Agreement the shareholdings in the said corporate vehicles should follow those of the Hong Kong Ajisen Ramen Group as set out in paragraph 5 above.” 113. In the materials provided to this Court, Daisy does not state, in terms, that the separate corporate vehicle modus operandi was agreed. She did however give evidence of discussions with Ricky about share allocations in the first two companies established after Smart Wave. Similarly, Jason gave evidence that he discussed with Ricky the allocation of shares in those companies to him. On their own evidence, it is clear that both Ricky and Daisy expected that each sushi restaurant would be operated within a separate corporate vehicle, but that they would be shareholders in each such vehicle. 114. Of course, Smart Wave itself reflects both aspects of the agreement. However, unless at least the majority of shareholders of Smart Wave - as the promoters are - can be said to be bound by the agreement, there is no proper basis on which Smart Wave itself can be found to be so bound. 115. Daisy and Jason expected, indeed agreed, with Ricky that Smart Wave would be the first of a number of corporate vehicles, each operating one restaurant. However, that expectation or agreement was expressly interconnected with an expectation and agreement that they would be substantial shareholders in each such vehicle. These two elements were so closely interconnected, that it cannot be concluded that they had agreed to the restriction on Smart Wave on its own. In a case involving the equitable jurisdiction of the Court, the Appellant cannot rely only on that part of the promoters’ agreement that suits his case. The Minority Shareholders Evidence 116. I turn to consider the Appellant’s contention that the minority shareholders agreed to, or at least acquiesced in, the sole purpose restriction. 117. Evidence about the background of the minority shareholders was set out in Jason’s witness statement: “As far as I know, the parties who were not the shareholders of the Hong Kong Ajisen Ramen Group either worked under Ricky Cheng or were his business partners or suppliers. For example, Mak Kin Shing and Wong Yui To were at the time operation managers of the Hong Kong Ajisen Ramen Group and were assigned to also manage the first Itamae Sushi Restaurant when it was opened. They later followed Ricky Cheng to the Itamae Sushi Group after Ricky Cheng’s departure from the Hong Kong Ajisen Ramen Group in August 2006. Kong Yiu Wai used to be the kitchenware supplier of the Hong Kong Ajisen Ramen Group. He was a good friend of Ricky Cheng and was also his business partner in a Chinese restaurant named ‘御品軒’ (now closed). Sato Akira was a friend of Ricky Cheng who was his business partner in a Japanese-style restaurant named ‘Sesson雪村爐端燒’. Teraguchi Tadayoshi was a supplier for the Itamae Sushi business.” 118. Jason also said at para 76 of his witness statement that “most of the current shareholders of Smart Wave are either nominees or business associates of Ricky Cheng”. Ricky generally confirmed this in his evidence at trial (see Part B Tab 11). 119. Para 15(g) of the Appellant’s Defence (in the derivative action) asserted that Ricky had informed all the shareholders in Smart Wave that he, Ricky, “is and remains at liberty to establish, engage in and operate further or other sushi business or sushi restaurants, solely or in association with other parties or person.” (see also Defence in the Hero Elegant Action, at para 9e). This proposition is repeated at para 20. Both are set out at para 68 above. In cross examination, however, he accepted that he did not tell any of the shareholders that. (Part B Tabs 13 and 18). 120. Para 15(f) of the Defence (in the derivative action) asserted, in the context of the chapeau referring to the “Agreement/Understanding” of the Smart Wave shareholders. “[T]he parties had only discussed that Smart Wave would be permitted and authorised to operate one sushi restaurant using the Service Marks … and Ricky Cheng did not permit, authorise nor license Smart Wave to establish, engage in or operate any other restaurants or sushi restaurants using the Service Marks.” 121. On the materials before this Court, there is no evidence in support of any such “discussion” amongst the shareholders of Smart Wave. Nevertheless, the trial judge held at [62], set out at para 54 above, that “the shareholders of Smart Wave knew, intended and agreed that other companies would be set up to operate other sushi restaurants, using the Itamae name and Service Marks.” 122. Other than a reference, in the previous paragraph, to the fact that the shareholders of the Ajisen Group had an intention to operate in that way, the trial judge referred to no evidence in support of that conclusion. The Court of Appeal correctly pointed out that the Ajisen shareholders and the Smart Wave shareholders were not the same. On the materials and submissions in this Court, there is no direct evidence of any such acquiescence, let alone agreement, by the minority shareholders in Smart Wave. 123. Counsel for the Appellant asked us to infer such from the whole of the evidence. She drew attention to the close relationship, both business and personal, between Ricky and those shareholders. She also relied on the absence of any complaint by them about the opening of competing restaurants, of which they must have been aware. She also relied on their failure to join the derivative action. 124. In my opinion, the fact that these shareholders had such a close relationship with Ricky, is a basis for drawing the opposite conclusion. First, the Appellant did not call them in support of the alleged “agreement” or “understanding”. That is a foundation for the usual inference that nothing they could say would support his case. Secondly, the more probable inference is that they were reluctant to jeopardise that relationship by complaining, let alone joining in hostile legal proceedings. As to the absence of complaint, none of them, after the departure of Shigemitsu, had been Ajisen shareholders. Accordingly, they did not have the incentive of a promise of a shareholding in future corporate vehicles. As to the legal proceedings, they could sit back and take the benefit of the proceedings, without risk of any kind. 125. For the above reasons, there is no evidence on which it can be concluded that the minority shareholders had acquiesced in or agreed to any such restriction. They may not have had any basis for an expectation that Smart Wave would operate other restaurants. However, that is not the same as acquiescing or agreeing to such a restriction. The failure to call them, indeed the failure of Ricky to give direct evidence of their alleged concurrence, leads to the conclusion that no inference of their concurrence is open. The Service Marks 126. The Appellant’s submissions made frequent reference to the fact that Ricky owned the Service Marks and had only licensed Smart Wave to operate a single restaurant. It appeared that counsel was relying on that fact as a distinct basis for the single restaurant restriction, irrespective of any agreement of the shareholders. 127. In these proceedings, there was no issue as to whether Ricky was using his position as a director of Smart Wave, or the skill and knowledge acquired in that capacity, in the course of establishing and operating the Itamae and Itacho sushi restaurants. The only such matter raised in the evidence and submissions was the proposition that Smart Wave could have no interest in those restaurants by reason of Ricky’s ownership of the Service Marks. 128. In the derivative action, the Court is not concerned with any contractual obligation which Ricky may have had to license the Service Marks. The issue before us, in this respect, is whether he was entitled to establish and operate the other restaurants at all, even though Smart Wave, absent any contractual license, could not itself have done so. 129. It is well established that a fiduciary is liable to account, even if the beneficiary was not otherwise able to take advantage of the opportunity. The foundational authority for this proposition is Keech v Sandford (1726) Sel Cas Ch 61, 25 ER 223. The most frequently cited application of the principle to directors is Regal (Hastings) Ltd v Gulliver[1967] 2 AC 134 especially at 143, 144, 145, 149, 153 and 154. 130. On the basis of this line of authority, the Appellant’s submission should be rejected. No doubt in any account for profits, the value of any license can be part of an assessment of just allowances. Question 2 131. I have set out at the second question at para 64 above. The Appellant submits that, if it should fail on Question 1, the Court should, in the exercise of its discretion, refuse relief. He relies in particular on the decision of the English Court of Appeal in Nurcombe v Nurcombe [1985] 1 WLR 370, where Lawton LJ said at 377: “…[T]he court is entitled to look at the conduct of a plaintiff in a minority shareholder’s action in order to satisfy itself that he is a proper person to bring the action on behalf of the company and that the company itself will benefit. A particular plaintiff may not be a proper person because his conduct is tainted in some way which under the rules of equity may bar relief. He may not have come with’ clean hands or he may have been guilty of delay”. 132. The Respondent contends that the reference to “clean hands” in this quotation contravenes the rejection, by the Appeal Committee of two grounds of appeal involving the terminology of clean hands. However, the sole focus of the actual submissions of the Appellant was on the question of inconsistency. There is no reliance on clean hands. The fact that there is such a reference in an authority relied on, is in no way inconsistent with the decision to reject leave in certain respects. 133. The Respondent also contends that various references to the Respondents receiving a “benefit” from the allegedly disentitling conduct is also inconsistent with the rejection of those two grounds of appeal. However, the terminology of ‘benefit’ appears in Question 2. 134. The Respondent makes a compelling case that the Appellant is not entitled to raise this discretionary matter for the first time in this Court. Discretionary refusal of relief must be fact based. As the Respondent contends, no such discretionary ground for refusing relief was pleaded and, accordingly, evidence was not directed to it. Furthermore, neither the trial judge nor the Court of Appeal made, or indeed were asked to make, any relevant findings of fact or law. 135. What we are left with is an abstract question, whether, without the broader context usually relevant to the grant of equitable relief, inconsistent conduct or, the failure of an alleged obligation to call “contrary evidence”, is sufficient to deny the equitable relief which the Respondent seeks on behalf of Smart Wave. In my opinion these matters should not be permitted to be agitated for the first time in this Court. 136. At the trial, the parties did not address themselves to this unpleaded case. We do not have the benefit of any findings of fact. This Court should not entertain an argument that relief should be denied on equitable grounds without taking the full range of relevant considerations into account, particularly in a case where both sides may be said to have acted in an inappropriate manner. This is not to say that the conduct of Jason and Ricky must be balanced. However, Ricky’s conduct is relevant to the denial of equitable relief to the company in the derivative action brought by Jason. 137. As the Privy Council said in Sang Lee Investment Co Ltd v Wing Kwai Investment Co Ltd [1983] HKLR 197 at 209: “…[T]heir Lordships do not accept that in a case of this sort, where there are alleged improprieties on each side, the proper approach of the court in exercising its discretion is to compare the misconduct on the one side with the misconduct on the other side. The court should first decide whether there has been any relevant want of faith, honesty or righteous dealing on the part of the person seeking relief, and the court should then decide whether, as a matter of discretion and in all the circumstances, which may include any relevant misconduct on the part of the person resisting equitable relief, it is right to grant or refuse specific performance. There is no balancing exercise which falls to be performed.” 138. It is not appropriate to speculate on the range of evidence that the Respondent may have wished to adduce if this issue had been pleaded, or even raised, at first instance. Three examples will suffice. 139. In his submission to this Court, the Appellant places emphasis on the alleged failure of the Respondent to call the minority shareholders (Appellants’ Written Case at [26], [27], [28], [91], [92] and especially [93].) This argument is picked up in the last clause of Question 2. It is by no means clear that the Respondent had any onus to call the minority shareholders on this discretionary issue. However, wherever the onus lies, the fact that this issue was not raised at first instance meant that neither side adduced evidence from those shareholders relevant to this issue. 140. The second example arises from the fact the principal act of inconsistency alleged by the Appellant is the entry into the Hero Elegant Agreement. This, of course, applies only to the Itamae restaurants, not to the Itacho restaurants. There is no appeal from her Ladyship’s finding at [66] that the proposition that the Hero Elegant Agreement somehow extended to the Itacho restaurants was never pleaded. No evidence, it appears, was adduced about Ricky’s conduct with respect to the Itacho restaurants, which could provide the context for the conduct of the Respondent said to disentitle him from relief in that respect. 141. Thirdly, it is apparent that the Hero Elegant Agreement did not stand alone. The parties also compromised Ricky’s claims with respect to the Ajisen restaurants in the Favor Will Agreement. Any appraisal of the Respondent’s conduct in entering the Hero Elegant Agreement, and any related conduct by Ricky, must be assessed in the full context. However, there was no inquiry into the Ajisen dispute leading to the Favor Will Agreement. 142. Finally, it is pertinent to point out that, Ricky also entered into the Hero Elegant Agreement. On the findings above, he was in breach of his fiduciary duty to Smart Wave. He is in an identical position as Jason in this respect. Although this is not a balancing exercise, this fact would be entitled to weight when assessing the conduct of Jason, for purposes of exercising the discretion to deny the company relief. 143. This Court should not entertain Question 2. The Appeal should be dismissed without the exercise of the discretion to refuse relief which the Appellant seeks. Mr Justice Ribeiro PJ: 144. By a majority, Mr Justice Tang PJ and Mr Justice Bokhary NPJ dissenting, the appeal is dismissed and an order for costs nisi is made in favour of the respondent with liberty to the parties, if so advised, to lodge submissions as to costs in writing within 14 days from the handing down of this judgment. (Kemal Bokhary)				Non-Permanent Judge (James Spigelman)				Non-Permanent Judge Ms Audrey Eu SC, Mr. Jeremy S.K. Chan and Mr Anson Wong Yu Yat, instructed by Tang, Lai & Leung, for the 1st defendant (1st appellant) and 3rd to 31st defendants (2nd to 30th appellants) Mr Jat Sew-tong SC, Ms Linda Chan SC, instructed by T. H. Koo & Associates, for the plaintiff (1st respondent) The 2nd defendant (2nd respondent) was not represented and did not appear [1] [1969] 2 Ch 365. [2] Another complaint relates to Ricky operating a chain of sushi restaurant called Itacho. See para 13 below. [3] See para 10 below. [4] Taken from his witness statement. [5] There is no material difference between Daisy and Jason’s evidence. [6] Para 10 of Jason’s witness statement. Unless otherwise stated, all paragraph references are to his statement. [7] It was raised to 24% from an initial proposed 23% after Daisy complained, so that Daisy should be the largest shareholder. Para 18. [8] Katsuaki’s shares have been transferred to Ricky. [9] They were Kong Yiu Wai (“Kong”) 10%, Mak Kin Shing (“Mak”) 8%, Sato Akira (“Sato”) 4%, Teraguchi Tadayoshi (“Teraguchi”) 4%, Wong Yui To (“Wong”) 2%. [10] Para 18, two of the minority shareholders became the managers of the first Itamae restaurant. [11] Para 26. [12] It is unimportant detail but there were Ajisen Ramen restaurants in the mainland which were part of the listed company. [13] Para 27. [14] Para 29. [15] Para 30. [16] Para 31. [17] See for example, para 15 Defence. [18] Section D3, Statement of Claim. [19] Decision, 6 December 2013, at para 12. [20] And other minor shareholders who could facilitate the operation of these Itamae restaurants. [21] Indeed the other Ajisen shareholders too. [22] [1969] 2 Ch 365. [23] The headnotes at 366. [24] Para 63 CFI judgment. I should add that Smart Wave never claimed that it had the exclusive right to the use of the service marks. [25] Paras 4.16 and 4.21, CA Judgment. [26] Para 4.6, CA Judgment. [27] Which can be. [28] Para 67. [29] This was used in the context where Smart Wave was referred to as the “first Itamae”. [30] See also para 25 of the CFI judgment. [31] See, for example, para 6 above. [32] Where he claimed that he had reached an agreement or understanding with all the shareholders of Smart Wave naming them individually). See para 68 below, where Mr Justice Spigelman reproduced the entire paragraph. [33] He and Daisy seemed to have accepted that there would be some minority shareholders when they accepted the percentage of shares allotted to them in Smart Wave. Similar percentage is reflected in the Hero Elegant Agreement. [34] Strictly speaking in the corporate vehicles holding those restaurants. [35] See para 15(f). [36] Mak and Wong became the managers of the first Itamae restaurant and it seems clear that managers or staff of other Itamae restaurants might be given shares in other Itamae restaurants. [37] 10%. [38] Collectively holding 14% of the Smart Waves’ shares. [39] Together with Ricky’s 23% and Katsuaki’s 15% transferred to Ricky. [40] Para 61, CFI Judgment. [41] Para 31, CFI Judgment.