KWAN SHIU YIN LOUIS as the Executor of the Estate of KWAN MAN CHOCK v. KWAN PO CHUEN PAULA

CACV 50 /2024, [2026] HKCA 182

On appeal from [2024] HKCFI 56

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 50 OF 2024

(ON APPEAL FROM HCA NO 1437 OF 2019)

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REASONS FOR JUDGMENT

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Hon Kwan VP (giving the Reasons for Judgment of the Court):

1.  On 17 January 2025, at the conclusion of the hearing of the plaintiff’s appeal, we allowed his appeal against the judgment of Ng J made on 10 January 2024 dismissing his claim after a three-day trial (“Judgment”)^[1]. We ordered the Judgment be set aside and that there be a retrial of the plaintiff’s claim before another judge, limited to the issue of undue influence. Costs of the appeal were awarded to the plaintiff. As for the costs below, the plaintiff was ordered to pay the defendant half of the costs and the remaining half is to be in the cause of the retrial.

2.  In a nutshell, the subject matter of the claim is the shares in five listed companies in Hong Kong (collectively “Shares”), valued at approximately $33 million in 2019 when they were transferred by Kwan Man Chock (“Deceased”) to one of his nieces, Kwan Po Chuen Paula (“Paula”), in April and May 2019 for no consideration.  The Deceased brought this action against Paula in August 2019 for the return of the Shares.  When he passed away in November 2019, his only son and sole executor, Kwan Shiu Yin Louis (“Louis”), continued this action for the Deceased’s estate^[2].

3.  The Deceased claimed he was induced by Paula and/or her parents (the younger brother of the Deceased, Kwan Man Bun, and his wife Leung Nga Wan (“Madam Leung”)) to transfer the Shares to her as a result of fraudulent or reckless representations.  He also alleged the transfers were procured by undue influence of Paula and/or her parents.

4.  Paula denied the allegations of misrepresentation and undue influence.  She asserted that the Shares were transferred to her as genuine gifts and counterclaimed for a declaration that she is absolutely entitled to them.

5.  The judge found in favour of Paula, holding that the Deceased had intended to and did make a gift of the Shares to her.  He held that the plaintiff has failed to establish his case of undue influence because he found as a fact that none of the misrepresentations were ever made to the Deceased and the Deceased had transferred the Shares to Paula with his informed consent.

6.  On appeal, Mr Robert Pang, SC^[3] confirmed to us on behalf of the plaintiff that he would not challenge the finding of gift (ground 1 of the notice of appeal) and would only challenge the finding on undue influence.  After hearing Mr Pang and Mr Jonathan Chang, SC^[4] for Paula, we decided that the finding on undue influence cannot be upheld as the judge had erred in thinking that the misrepresentations were the only pleaded manner in which the Deceased’s trust and confidence had been abused and rejection of the evidence on misrepresentations meant that the case on undue influence must fail.  He would appear to have overlooked the alternative case pleaded that the Deceased had reposed trust and confidence in Paula and her parents and that the transfers of Shares were not readily explicable and would call for an explanation.  We did not think it appropriate to draw our own inferences as invited by Mr Pang, as findings of relevant primary facts have not been made.  Hence, we ordered the matter be remitted for retrial before another judge limited to the issue of undue influence.

7.  The detailed reasons for our judgment appear below.

Background

8.  We do not propose to give a full narrative of background matters in view of the retrial but merely mention what should be sufficient for an understanding of how and why the judge went wrong.  They are taken from findings in the Judgment and matters not likely to be in dispute as set out in the Deceased’s affirmation in August 2019 (“Deceased’s affirmation”), and the witness statements of Louis and Paula.

9.  The Deceased was 90 years old when he passed away in November 2019.  His wife was diagnosed with dementia and lung cancer and was admitted to an elderly home in 2016/2017.  She passed away in June 2020. Louis was their only son.  He got married in 2005 and has no children.

10.  The Deceased retired since about 1990 at the age of 60.  He used to work as a clerk of the British army in Hong Kong.  Since retirement, he had been investing in shares of listed companies in Hong Kong. The Shares (CK Asset Holding Limited, CK Hutchison Holdings Limited, Henderson Land Development Company Ltd, SUNeVision Holdings Ltd and Far East Consortium International Limited) were the ones that he mainly bought and sold, for their relatively good dividend yield each year.  Other than supporting his daily living expenses, those dividends were the major source of his savings after his retirement.  The annual total dividends issued in respect of the Shares in 2019 came up to $1,364,597.36.  Including the Shares transferred to Paula valued at about $33 million, the total value of listed shares owned by the Deceased at the time of his death was approximately $43.8 million.

11.  In late 2017, the Deceased was diagnosed with liver cancer.  Due to his old age, he could not receive chemotherapy or radiation therapy.  He was told by his doctor that cancer cells had spread and he had been receiving molecularly targeted therapy to control or suppress the growth of cancer cells.

12.  He made a will (“2018 Will”) in May 2018 appointing Louis as the sole executor.  Under the 2018 Will, specific bequests of cash and securities were made to Paula, her parents and her elder brother Gabriel of $250,000 each.  Another $1 million of cash and securities were bequeathed to the Deceased’s younger sister Kwan Siu Ngor, her son and one of her daughters.  The remaining balances of money and securities asset were bequeathed to Louis, who was the residuary legatee and was also bequeathed the Deceased’s residence in Whampoa Garden.

13.  In July 2018, the Deceased was admitted to the same elderly home as his wife and resided there until 15 May 2019, other than the frequent periods when he was hospitalised^[5]. The total fees he paid to the hospital from May 2018 to July 2019, which came out of his savings, amounted to $1,088,465^[6].

14.  Since he was diagnosed with liver cancer in late 2017, Paula and her parents paid close regard to his health condition.  They visited him at the elderly home and in hospital and accompanied him to go out for meals.  Paula recommended doctors and Chinese medicine practitioners to treat him, took him to medical appointments, celebrated his birthday with him (which Louis did not do), made him small gifts to improve his quality of living (an air purifier, a comfortable pair of shoes).  She carried out many chores requested by the Deceased (which Louis failed to handle). She was his registered contact person while he was in hospital.  She took care of him when he was in hospital, helping him to wash his dentures, head and face, the lower parts of his body and his feet.  The Deceased enjoyed talking with her and treated her as his own daughter^[7]. In their casual conversations, he mentioned to her his investments in shares and the shares he usually traded in.

15.  In April/early May 2019, the Deceased’s cancer relapsed and he knew that he would only have several months left.  Since his admission to hospital on 4 May 2019, Paula visited him almost every day.  Louis went on a trip in early May and only flew back on 5 May 2019.  He and the Deceased were not on particularly congenial terms at the time.  He had been changing jobs and was not always available for his father.  The Deceased was not pleased with how infrequently and perfunctorily Louis had visited him and that his son was not present in critical moments when he required urgent medical care.

16.  The Deceased had wanted to return to live in his own residence and did not want to die in the elderly home and for that purpose would need to hire a domestic helper.  When a helper was eventually found by his friend, it was Paula and not Louis who attended to all the steps of hiring a foreign domestic helper in April and May 2019.  On his discharge from hospital on 19 May 2019 and until the domestic helper arrived on 10 June 2019, Paula lived with the Deceased in his residence to take care of him.

17.  In around April 2019, the Deceased requested Paula and Madam Leung to help him prepare a new will and they took down his instructions in a notebook.  According to those instructions, Kwan Man Bun would be appointed the executor, specific bequest of $250,000 would be made to each of these relatives: Kwan Man Bun, Madam Leung, Gabriel, Paula, Kwan Siu Ngor’s son and her two daughters.  Kwan Siu Ngor would be bequeathed $500,000.  Louis would be bequeathed the Deceased’s residence and the shares held jointly by the Deceased and Louis.

18.  On or about 20 April 2019, the Deceased told Paula and her family that he had changed his mind about altering his 2018 Will, and instead he would give his shares in SUNeVision to Paula as a gift.  On 30 April 2019, the Deceased, Paula and her parents went to the Hong Kong Securities Clearing Company Limited to carry out the necessary procedure for the transfer. The transfer of 2,050,000 shares was executed on 6 May 2019 and share certificates were issued to Paula that day.

19.  When the Deceased was discharged from hospital on 19 May 2019, he looked for the keys to his safety deposit box as he wanted to retrieve some of the share certificates of his shares.  As he could not find the keys, he went to the bank on 20 May 2019 accompanied by Paula and Madam Leung to enquire about the procedure to gain access to his safety deposit box. They all returned to the bank the following day, this time accompanied by the Deceased’s wife and the nurse taking care of her.  A fee was paid for opening the box and new keys were issued to the Deceased.  He retrieved the share certificates of CK Asset (159,000 shares), CK Hutchison (162,000 shares) and Henderson Land (25,002 shares) and later gave them to Paula.  Three transfer forms of those shares were signed on 22 May 2019 by the Deceased in favour of Paula and the transfers were completed the same day.

20.  On 27 May 2019, the Deceased went to the bank accompanied by Paula and her parents.  He retrieved the share certificates of his shares in Far East Consortium.  Madam Leung counted the number of share certificates and filled in the information on the transfer form.  The Deceased signed the form in favour of Paula.  The transfer of 696,608 shares was completed on 31 May 2019.

21.  In mid-June 2019, the Deceased asked Paula to return the Shares he had gifted to her.  She did not comply with his request, save that she asked her parents to issue a cheque of $300,000 to the Deceased which was cashed on 10 June 2019 to pay him part of the dividends she had received from CK Asset and CK Hutchison (in the total sum of $599,979).

22.  On 19 June 2019, Louis went to the home of Paula and her parents to get back the Deceased’s properties kept by them.  The properties returned to Louis were the key to the Deceased’s residence, the new key to his safety deposit box, and $1.8 million given to Paula for purchasing grave plots for the Deceased and his wife.  The Deceased’s watch and jewellery were returned to Louis earlier on 13 June 2019, they were stored in Paula’s home because the Deceased’s residence was renovated in April and May 2019 for him to move back to his home.

23.  On 10 July 2019, the Deceased accompanied by Louis made a report to the police, alleging that he had signed share transfer forms to authorise any person holding them to deal with his shares for him to pay his medical fees and complaining that Paula had failed to return the Shares to him.  He was told by the police that the incident did not involve any criminal element and was advised to pursue the recovery of the shares through the civil route^[8]. On 19 July 2019, he instructed solicitors to pursue a civil claim against Paula.  The writ in this action was issued on 8 August 2019.  On the same day, he applied ex parte and obtained an interlocutory injunction against Paula to restrain her from disposing of the Shares.  The injunction was continued by consent on 15 August 2019 and 6 September 2019 until the further order of the court.  It was extended to restrain disposal of the dividends from the Shares.

24.  On 13 August 2019, the Deceased made a new will (“2019 Will”) appointing Louis as the sole executor.  Louis was bequeathed the Deceased’s residence.  Specific bequests of $250,000 were made to each of Kwan Siu Ngor, her son and her two daughters.  The remaining balances of his money and securities asset were bequeathed to Louis, who was also the residuary legatee.  No provision was made for Paula and her family.  Probate on the 2019 Will was granted to Louis on 13 May 2020.

The plaintiff’s case as pleaded

25.  The statement of claim was filed on 9 September 2019 in the Deceased’s lifetime and was supported by a statement of truth that he signed.  It pleaded a case of fraudulent or reckless misrepresentations made by Paula and/or her father and/or her mother, which induced him to sign the transfer forms for the Shares, and it was not the intention of the Deceased to transfer the Shares to Paula as a gift.  This is in line with the Deceased’s affirmation.

26.  In gist, it is alleged that the shares in SUNeVision were transferred to Paula as a result of the “First Representations”, which were to the effect that Gabriel, who was proficient at purple star astrology (紫微斗數), had predicted that Louis and his wife would divorce for they have no children and to avoid the shares inherited by Louis from the Deceased to be distributed to his wife when they divorce, the Deceased should transfer some shares to Paula to hold on trust for him.  As for the shares in the other four companies, the Deceased was induced to sign four transfer forms in blank due to the “Second Representations”, which were to the effect that this would facilitate Paula to sell those shares on his behalf on his instructions when he ran out of cash to pay substantial medical fees. 

27.  Amendments were made to the statement of claim after the Deceased passed away, raising undue influence for the first time.

28.  In the amended statement of claim (“ASOC”) filed on 24 February 2021, it is pleaded that the transfer of the shares in SUNeVision “was procured by the undue influence of the Defendant and/or her father and/or her mother over the Plaintiff” (in §14) and the signing of the four transfer forms in blank “was procured by the undue influence of the Defendant and/or her father and/or her mother over the Plaintiff” (in §17).

29.  The plaintiff was requested to provide further and better particulars of the allegation of undue influence in §§14 and 17 of ASOC and gave these particulars on 9 March 2021 (“FBP”):

30.  Under paragraph 14:

“(a) The Defendant is the Plaintiff’s niece. The Defendant’s father, Kwan Man Bun, is the younger brother of the Plaintiff. The Plaintiff at all material times reposed trust and confidence in each of the member in the Defendant’s Family. By reason of his old age before he passed away and his health condition as pleaded in paragraphs 8-10 of the Amended Statement of Claim, the Plaintiff was in a subservient position in such trust and confidence relationship between himself and the Defendant’s Family.

(b)     By abusing such trust and confidence relationship and making the First Representations, the transfer of 2,050,000 shares of SUNeVision from the Plaintiff to the Defendant was procured by undue influence of the Defendant and/or her father and/or her mother over the Plaintiff at the material times.”

31.  Under paragraph 17:

“(a) The matters as pleaded in Answer (a) to Request 1 above are repeated.

(b) The Plaintiff attended the Defendant’s home alone on that day in or about May 2019 as pleaded in paragraph 16 of the Amended Statement of Claim.  In the abuse of the trust and confidence relationship between the Plaintiff and each of the member of the Defendant’s Family and by making the Second Representations, the signing of the Four Signed Transfer Forms by the Plaintiff was procured by undue influence of the Defendant and/or her mother and/or her father over the Plaintiff at the material times.”

32.  The parts of the FBP underlined above were underlinings made by the judge^[9]. We will return to them for their significance in the judge’s reasoning.

33.  Further pleadings on undue influence were made in the re-amended statement of claim filed on 15 November 2021 (“RASOC”). In §§14, 17 and 29(5), the words “Further or alternatively” were added, to make clear that undue influence was raised in addition or alternatively to the First Representations and Second Representations.  Particulars of undue influence were given in §§25 to 27.  It is averred in §26 that the Deceased reposed trust and confidence in Paula and her parents and particulars were given in (1) to (9)^[10]. In §27 it is pleaded that the transfers of the Shares are not readily explicable and call for an explanation and particulars were given in (1) to (4). In §28, it is averred that the Deceased did not receive independent advice prior to the transfer of the Shares, nor had he given full, free and informed consent.

The defence case as pleaded

34.  The allegations of the First Representations and the Second Representations are denied.

35.  It is averred that the Shares were gifted to Paula by the Deceased.  The reasons were that Paula had treated him well, the Deceased appreciated her for referring him to doctors to treat his cancer, Paula had not married, and the Shares were gifted to provide for her living when she gets old.

36.  It is denied that the transfers were procured by undue influence.  It is further denied that the alleged familial relationship between the Deceased and Paula and her family members were sufficient to give rise to the subservient position of the Deceased, or the trust and confidence relationship between the Deceased and Paula’s family.  It is denied that any trust reposed in Paula and her family was capable of giving rise to any undue influence and/or presumption of undue influence.  And Paula and/or her family members have not abused the alleged trust and confidence relationship.

The judge’s findings and reasoning

37.  The judge identified two issues for determination: (1) whether the Deceased intended to transfer the beneficial interests in the Shares to Paula as a gift; and (2) even if he had intended to transfer the beneficial interests to her, whether the transfers should be set aside for undue influence.

38.  The main witnesses to testify were Louis and Paula.

39.  On the intention to make a gift of the Shares to Paula, the judge noted this is a question of fact to be decided on the totality of the evidence in the circumstances in this case.  He took the view the Deceased’s bare assertion in his affirmation that he had no such intention must be viewed with circumspection and cannot be taken at face value.  It is self-serving and does not necessarily represent the Deceased’s actual intention at the time in April and May 2019.  He found the plaintiff’s evidence on the First and Second Representations highly unsatisfactory and unreliable, for the reasons set out in his analysis on undue influence^[11].  He found Paula a truthful witness and accepted her testimony.  He regarded her testimony as clear, detailed, straightforward, with a ring of truth and inherently credible.  Her credibility was not shaken in a fairly brief cross-examination by Mr Pang.  He found in Paula’s favour that the Deceased had intended to and did make a gift of the Shares to her and this disposes of the first issue.

40.  On the second issue, the judge stated that the burden of proof is on the plaintiff to establish that the Deceased had been “forced, tricked or misled” by Paula, her mother and/or her father into transferring the Shares to her^[12]. The only pleaded manner in which the Deceased’s trust and confidence had been “abused” and that he had been “tricked” or “misled” into parting with the Shares is by the First and Second Representations^[13].  Without establishing the two representations, there is no leg for the claim in undue influence to stand on^[14]. Having analysed the plaintiff’s pleadings on misrepresentation, the Deceased’s affirmation, the evidence of Louis in his witness statement and oral testimony, the Deceased’s complaint to the police as recorded in the police notebook^[15], the judge arrived at the view that the plaintiff’s evidence is “hardly cogent and compelling in support of his case of undue influence, premised as it is on the First and Second Representations” ^[16].  For the reasons explained in respect of the first issue, the judge found Paula a truthful witness and her testimony on her central case inherently credible and should be accepted^[17].  In conclusion, he found that the plaintiff has failed to establish his case of undue influence.  Rather, he found as a fact that (1) none of the First or Second Representations were ever made to the Deceased; and (2) the Deceased had transferred the Shares to Paula with his informed consent^[18].

The arguments on appeal

41.  As mentioned, Mr Pang did not challenge the finding that the Shares were transferred as a gift to Paula, nor did he challenge the finding of fact that none of the First or Second Representations were made to the Deceased.  His salient contentions may be summarised as follows:

(1) The judge failed to have regard to the fact that the plaintiff’s case on undue influence was not pleaded in a way that it would stand or fall with the case on misrepresentation.  The judge overlooked that undue influence was pleaded as an alternative case to misrepresentation and particulars of this were given in §§25 to 27 of RASOC^[19].

(2) The averments and particulars in §§25 to 27 of RASOC pleaded a case that the Deceased had reposed trust and confidence in Paula and her family and why the transfers of the Shares to her were not readily explicable and call for explanation.  The judge made no findings on these matters, nor did he appear to have considered them.

(3) The judge overlooked that apart from direct proof there was actual exercise of undue influence, undue influence could be proved by relying on an evidential presumption.  See the judgment of the court given by Lord Briggs and Lord Burrows JJSC in the Privy Council decision on appeal from the Court of Appeal of Trinidad and Tobago in Nature Resorts Ltd v First Citizens Bank Ltd [2022] 1 WLR 2788; [2022] UKPC 10 at §§11 to 13:

“11. Ever since Allcard v Skinner (1887) 36 Ch D 145, it has been commonplace to divide undue influence into two categories: actual and presumed. But in Etridge^[20] the House of Lords made clear that undue influence is a single concept. It does not have two different forms. The correct analysis of the two categories is that they refer to different ways of proving undue influence. Presumed undue influence refers to where the person alleging undue influence relies on an evidential presumption. Actual undue influence refers to where the person alleging undue influence relies on direct proof (of A’s conduct, within a relationship with B, which led to B not exercising a free and independent judgment).

12. As Etridge also made clear, there are two requirements for establishing the (rebuttable) presumption of undue influence. First, there must be a relationship of influence. This may be established on the facts. But in respect of some relationships there is what is commonly referred to as an irrebuttable legal presumption (but is more appropriately referred to as a legal rule) that the relationship is one of influence (but note not undue influence). Examples of such relationships are doctor and patient (Mitchell v Homfray (1881) 8 QBD 587), spiritual adviser and follower (Allcard v Skinner), parent and young child (Lancashire Loans Ltd v Black [1934] 1 KB 380) and, of direct relevance to the facts of this case, solicitor and client (Wright v Carter [1903] 1 Ch 27). The second requirement is that the transaction must not be readily explicable on ordinary motives. The House of Lords preferred this test, which uses the words of Lindley LJ in Allcard v Skinner, to a test of whether the transaction was manifestly disadvantageous which had been put forward by Lord Scarman in National Westminster Bank plc v Morgan [1985] AC 686, 703-707. The underlying idea behind the test is that the nature and/or contents of the transaction must make one conclude, in the context of the relationship of influence, that, absent evidence to the contrary, undue influence has been exercised. A contract between A and B which is substantively very unfair to A stands on one side of the line: a Christmas present by A to B stands on the other side of the line.

13. If those two requirements are satisfied, so that there is a presumption of undue influence, the burden of proof shifts and it is for the party seeking to uphold the transaction to rebut the presumption by showing that A was not acting under undue influence (i.e. that A exercised free and independent judgment) when entering into the transaction. Although neither necessary nor conclusive, the main method of rebuttal is to show that A obtained the fully informed and competent independent advice of a qualified person, most obviously a lawyer: see Inche Noriah v Shaik Allie Bin Omar [1929] AC 127 and Etridge.”^[21]

(4) The plaintiff’s case turns on whether an evidential rebuttable presumption is made out, by establishing first, there was a relationship of influence between the Deceased and Paula and her family; and secondly, the transfers of Shares were not readily explicable by ordinary motives. If those two elements are satisfied by the plaintiff, there is a presumption which Paula would need to rebut by proving that in making the transfers of Shares, the Deceased was exercising free and independent judgment^[22].

(5) The scale of the gift was so large that it calls for an explanation. The total value of the Shares was about $33 million in 2019, this was nearly 60% of the total assets of the Deceased and over 72% of his liquid assets. The transfers were made within a very short timeframe of one month.

(6) Absent a satisfactory explanation, the court should infer that the transfers could only have been procured by undue influence.

42.  Mr Chang sought to support the Judgment with these arguments:

(1) On the pleading point, he repeated his submissions to the judge^[23] that the First and Second Representations underpin the plaintiff’s case on undue influence and referred to the FBP quoted above.  The fact that undue influence was pleaded as an alternative to the case based on misrepresentation does not change the plaintiff’s case that Paula exerted undue influence on the Deceased by making the First and Second Representations.  There is therefore no escape from the conclusion that if the plaintiff fails to prove the First and Second Representations, the entire claim of undue influence has no leg to stand on.

(2) Without the First and Second Representations, the plaintiff has no other factual basis to support the plea that the Deceased had transferred the Shares to Paula without his informed consent, or that his consent was not “freely given with full knowledge of the consequences of entering into the relevant transaction.”^[24]

(3) In finding that the Deceased had transferred the Shares to Paula with his “informed consent”^[25], the judge had considered the totality of the evidence:

(a) He held that the assertion in the Deceased’s affirmation that he never intended to transfer the Shares to Paula must be viewed with circumspection^[26].

(b) He took the view that Paula gave “clear and detailed testimony” on the gift of the Shares by the Deceased, that her evidence is “inherently credible” and “clearly has a ring of truth”, and found her a truthful witness and accepted her testimony^[27].

(c) He found it accords with common human experience that the Deceased, who was of very advanced age and in critical health condition with only months left in life, would be particularly appreciative of the care and attention provided by a close relative he liked and would wish to reward her with some of what would soon become his estate for which he, or his frail wife, had no use^[28].

(d) He took the view it is not for the court to put a monetary value on the care and attention provided to the Deceased by Paula or to decide how appreciative the Deceased was towards Paula in monetary terms.  That was a wholly subjective matter for the Deceased to decide.  The court does not find it inherently improbable for the Deceased to have made a gift of the Shares to Paula in such circumstances^[29].

(e) There is evidence that the Deceased and Louis were not on particularly congenial terms in the Deceased’s last days, and this provided a foundation for the Deceased to make a gift of the Shares to Paula rather than leaving almost his entire estate to Louis^[30].

(f) The Deceased had not completely cut Louis out from his estate despite dissatisfaction with him.  According to the 2019 Will, Louis would still receive substantial assets in excess of $50 million^[31].

(g) He found that the Deceased intended to and did make a gift of the Shares to Paula^[32].

(h) He found the plaintiff’s evidence “hardly cogent and compelling in support of his case of undue influence, premised as it is on the First and Second Representations” ^[33]. On the other hand, he found Paula a truthful witness and her testimony on “her central case” that the Shares were gifted to her inherently credible and should be accepted^[34].

(4) The judge’s above conclusion is a finding of facts based on his evaluation of evidence and involves an assessment of a number of factors to be weighed against each other.  As in appeals against judges’ exercise of discretion, the appeal court will not interfere so long as it is within the range of outcomes upon which different judges can legitimately differ^[35]. 

(5) The judge had made clear in the Judgment he had considered the totality of the evidence^[36], including the matters said to be overlooked by him.

(6) “Concentration on a so-called presumption of undue influence is likely to detract from the real issue, namely, whether the evidence justifies a conclusion that the impugned transaction was procured by undue influence”, “that is to say, by an abuse by the allegedly dominant party of the trust and confidence reposed in him by the allegedly subservient party”. (Li Sau Ying v Bank of China (Hong Kong) Ltd (2004) 7 HKCFAR 579 at §§30 and 34, per Lord Scott of Foscote NPJ)  The judge had applied the correct test in Bank of China (Hong Kong) Ltd v Wong King Sing and in Li Sau Ying^[37].  He had taken into account the whole of the evidence in arriving at the conclusion whether there is a case of undue influence.

(7) The judge placed the burden on the plaintiff to establish that the Deceased had been “forced, tricked or misled”^[38] by Paula and/or her parents into transferring the Shares to her^[39] because that was the way in which the plaintiff had advanced his case, namely, that Paula and/or her parents had “abused” the Deceased’s trust and confidence and “tricked” or “misled” the Deceased into parting with the Shares by making the First and Second Representations^[40].

Analysis

43.  The judge made three errors here, which led to his wrong conclusion that the Deceased had transferred the Shares to Paula with informed consent.

44.  The first error relates to the judge’s understanding of how the plaintiff’s case on undue influence was pleaded.  He would appear to have been led astray by focusing on the FBP and taking the view that the only pleaded manner in which the Deceased’s trust and confidence had been “abused” and that he had been “tricked” or “misled” into parting with the Shares is by the First and Second Representations, so that without establishing the representations, the case on undue influence has no leg to stand on.  He had apparently overlooked the amendments subsequent to the FBP in the RASOC, which pleaded an alternative case to misrepresentation, with particulars in support of a relationship of trust and confidence and reasons why the transfers of the Shares to Paula would call for explanation.  We do not agree with Mr Chang that this alternative case (if accepted) does not alter the conclusion that the case on undue influence must fail if the First and Second Representations are not established.  Quite clearly, the alternative case provides other factual basis to support a rebuttable evidential presumption of undue influence such that if unrebutted, the court could infer that the transfers had been procured by undue influence.

45.  The second error relates to the law.  The judge approached the law as guided by the statements of Lord Scott in Li Sau Ying quoted above.  He therefore steered away from evidential presumptions of undue influence and focused on whether the evidence before the court would justify a conclusion that the impugned transaction was procured by undue influence.  We are keenly aware that in §34 of Li Sau Ying Lord Scott expressed the hope that “in future cases, where undue influence is not a relationship that falls within Slade LJ’s Class 2A category^[41], the parties will concentrate on whether the evidence justifies the inference that, on a balance of probabilities, the impugned transaction was procured by undue influence”.  He also expressed the view that: “References in such cases to, and attempts to invoke the assistance of, an alleged evidential presumption of undue influence are, in my opinion, likely to be, as they have been in this case, a source of confusion and an impediment to the evaluation of the available evidence.”

46.  What Lord Scott deprecated was the approach of the lower courts in focusing on whether the case would fall within the Class 2B category^[42] and then applying the presumption mechanically without regard to all the evidence.  The use of the expression “presumed undue influence” and in particular its use in connection with Class 2B cases was deprecated because this expression connotes no more than a shift in the evidential burden of proof, “the equitable counterpart of common law cases where the principle of res ipsa loquitur is invoked”^{[43] [44]}.  Lord Scott then quoted what he had said in Etridge at §161:

“For my part, I doubt the utility of the Class 2B classification … The presumption in Class 2B cases, … is doing no more than recognising that evidence of the relationship between the dominant and subservient parties, coupled with whatever other evidence is for the time being available, may be sufficient to justify a finding of undue influence on the balance of probabilities …”

47.  We do not read Lord Scott’s statements quoted by Mr Chang as an absolute prohibition against relying on an evidential rebuttable presumption where it is appropriate to do so, particularly in a situation in which the subservient party would not be^[45], or would no longer be (as in this case), able to testify, unlike the situation in Li Sau Ying.  As Lord Nicholls observed in Etridge at §7: “The circumstances in which one person acquires influence over another, and the manner in which that influence may be exercised, vary too widely to permit of any more specific criterion”.  Undue influence may be exerted even in the absence of overt forms of improper pressure or coercion, one well-known example is Allcard v Skinner.  It may not be possible to adduce direct evidence on the exercise of actual undue influence in all situations. 

48.  So long as it is borne in mind that undue influence does not have two different forms or categories, there is nothing objectionable in principle why undue influence could not be proved directly (by adducing evidence of the dominant party’s conduct, within a relationship of influence with the subservient party, which led to the latter not exercising a free and independent judgment) or by adducing evidence on matters which would give rise to an evidential rebuttable presumption.  What is important is that this presumption, which is merely a forensic tool, should not be permitted to obscure the overall position, which was what Lord Scott has enjoined in Li Sau Ying.

49.  The judge made an error of law in disregarding the evidential rebuttable presumption invoked by the plaintiff as an alternative case in proving undue influence.

50.  The third error relates to the consideration of the evidence.  It is plain on a fair reading of the Judgment that the judge had not considered whether there was a relationship of influence (which is denied in the defence), nor did he consider whether the transfers of the Shares to Paula would not be readily explicable on ordinary motives and call for explanation.  It is correct that he did mention it accords with common human experience for the Deceased to make a gift of the Shares to Paula in the particular circumstances, and that it is not for the court to put a monetary value on how Paula should be rewarded as that was a wholly subjective matter for the Deceased to decide.  These assessments were made in the context of whether the Deceased had intended to make a gift to Paula.  Whether there was an understandable reason for making a gift does not go to the different question whether the Deceased’s decision to make a gift of that size (which he resiled from within a month or two) was the product of undue influence, or whether his decision was the result of “full, free and informed thought about it”^[46] so that he was “exercising free and independent judgment”^[47]. 

51.  We therefore allowed the plaintiff’s appeal and remitted the case for retrial before another judge limited to the issue of undue influence.