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

HCA 1437/2019

[2024] HKCFI 2789

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 1437 OF 2019

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JUDGMENT

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Introduction

1.  There is before this court the Plaintiff’s application (i) by Summons dated 8 February 2024 (“Summons”) for (i) a stay of execution of the Judgment and Order of this court dated 10 January 2024 (“Judgment”) pending the Plaintiff’s appeal; alternatively (ii) the injunction granted by Campbell-Moffat J on 8 August 2019 and varied and continued by Coleman J on 15 August 2019 and 6 September 2019 (“Injunction”) restraining the Defendant from dealing with and disposing of the Shares[1] be further continued pending the Plaintiff’s appeal. There is also before this court the Plaintiff’s application by summons dated 8 July 2024 (“Taxation Summons”) for a stay of the taxation proceedings pending the Plaintiff’s appeal.

2.  By way of background, a Mr Kwan Man Chock (“Deceased”) was the original Plaintiff who passed away in November 2019 at the age of 90, about 3 months after the Writ had been issued. Mr Kwan Shiu Yin Louis (“Louis”) is his only son and the sole executor of the estate of the Deceased under his will. Effectively, Louis was the Plaintiff who ran this case.

3.  The Defendant is the niece of the Deceased.

4.  It is not in dispute that certain listed shares (“Shares”) originally held by the Deceased had been transferred to the Defendant in 2019. It is also not in dispute that the Defendant had paid no consideration for the Shares. Judging from the oral submission of Mr Chang SC, apparently the Defendant is still holding them, or at least some of them, in her name.

5.  The Plaintiff’s claim was principally for the return of the Shares. The 2 grounds put forward by the Plaintiff were that the transfer of the Shares to the Defendant was procured by 2 fraudulent misrepresentations and undue influence.

6.  By the Judgment handed down on 10 January 2024, this court dismissed the Plaintiff’s claim with costs and in consequence discharged the Injunction.

Deliberation

7.  Both parties have cited the decision of Ma J (as he then was) in Star Play Development Ltd v Bess Fashion Management Co Ltd [2007] 5 HKC 84 at [6] –[10] for the principles governing the grant of stay of execution pending appeal. The principles are so well-established that there is no need to repeat them all here save to highlight 3 main points.

8.  First, the starting point is RHC Order 59, rule 13(1) that an appeal shall not operate as a stay of execution or of proceedings. Unless the appellant can justify a stay of execution, one will not be ordered. The practice of the court is that justification can be demonstrated only if good reasons exist.

9.  Second, the existence of merely an arguable appeal cannot by itself amount to sufficient reason to justify a stay. Rather, the existence of an arguable appeal is the minimum requirement before a court would even consider granting a stay. If the court is not convinced that there exist arguable grounds of appeal, no stay will be granted.

10.  Third, the existence of a strong appeal or a strong likelihood that the appeal would succeed will usually by itself enable a stay to be granted because this would constitute a good reason for a stay.

11.  The Plaintiff accepts, as he must, that it is for him to show good reasons justifying a stay.

12.  In the present case, the Plaintiff submits:

a.  His appeal is by itself a good reason justifying a grant of stay of execution because it has a real and strong likelihood of success.

b.  If the court considers his appeal is only arguable, the Plaintiff can show additional good reasons justifying a grant of stay of execution viz (i) his appeal would be rendered nugatory if a stay is not granted and (ii) the prejudice that would be caused to the Defendant would be none, or at most very minimal, if a stay is granted.

13.  In his Notice of Appeal, the Plaintiff has raised 3 grounds. Mr Pang SC submits that all 3 grounds should be considered together. This court agrees. Although dressed up as 3 different grounds, they all boil down to the same point ie this court erred in finding that the Deceased had with informed consent made a gift of the Shares to the Defendant and his consent was not tainted by undue influence.

14.  In this court’s view, none of the grounds, whether considered separately or collectively, are arguable. As submitted by Mr Chang SC, since there is no arguable appeal, that is the end of the matter.

15.  Ground 1 states this court erred in holding that the Deceased had intended to and did make a gift of the Shares to the Defendant for failing to take into account and/or give due consideration to the totality of the evidence including inter alia:

a.  The value of the Shares was about $33 million.

b.  The Shares formed nearly 60% of the Deceased’s total assets.

c.  The Shares formed over 72% of the Deceased’s liquid assets.

d.  The Shares were the Deceased’s main dividend producing assets during his lifetime.

e.  The Deceased gave the Defendant a small bequest of $250,000 under the 2018 Will.

16.  These points and other points under Ground 1 had been raised in the Plaintiff’s submissions at trial and had not been overlooked. At paras 29 and 56 of the Judgment, this court made it clear that it should consider the totality of the evidence in the circumstances of this case, including matters which the Plaintiff submits this court had failed to take into account under Ground 1.

17.  Ground 1 is a direct challenge to this court’s findings of fact at para 55[2]. As Kwan VP said at [33] and [34] of Yu Man Fung Alice v Chiau Sing Chi Stephen [2021] HKCA 1456:

“33. The principles for the appeal court to disturb the findings of fact of the trial judge are well settled. Palpable errors, whether of law or of fact, must be identified, and they must be sufficiently material to undermine the conclusions of the trial judge. In the absence of material errors, an appeal court will interfere with the findings of fact made by a trial judge only if it is satisfied that his decision cannot reasonably be explained or justified. What matters is whether the decision is one that no reasonable judge could have reached. That the judges in the appeal court may have reached a different conclusion is not a ground for intervention.

34. The principles for appellate intervention apply also to inferences of fact drawn from primary facts (unless the finding is based purely on inferences or otherwise has nothing to do with the witnesses’ demeanour or the trial judge’s having received the evidence at first hand), and findings of mixed fact and law, or an issue on which the judge had to come to a judgmental conclusion after taking a number of factors into account. The correct approach in reviewing such a conclusion is to treat the judge’s decision with utmost respect, and refrain from interference unless satisfied that it proceeded upon some erroneous principle or was plainly wrong. It is similar to an appeal against an exercise of discretion.”

18.  This court’s examination of the evidence before finding the Deceased had intended to and did make a gift of the Shares to the Defendant can be found at paras 29 to 55 of the Judgment. They speak for themselves. It is worth specifically mentioning that this court found at para 40 of the Judgment that the Defendant was a credible and truthful witness and accepted her testimony.

19.  It is difficult to see from the Notice of Appeal or the Plaintiff’s skeleton what palpable and material errors have been identified. Nor can this court see why it is said this court’s finding of fact that the Deceased had intended to and did make a gift of the Shares to the Defendant cannot reasonably be explained or justified. In fact, in section B2 of the Plaintiff’s skeleton entitled “Real Prospect of success in the Appeal”, Counsel for the Plaintiff only focused on Ground 2 to which this court will turn.

20.  Ground 2 states this court “failed to properly and adequately apply the correct test of presumed undue influence and was wrong in putting the burden of proof on the Plaintiff to establish that the Deceased had been “forced, tricked or misled” by the Defendant, her mother and/or her father into entering into the transactions relating to the Shares.” (emphasis added)

21.  Ground 3 states had this court “applied the correct test, he would have found that given:

a.  The trust and confidence reposed by the Deceased to the Defendant;

b.  The transfer of the Shares is such that is not readily explicable by the relationship between the parties and therefore calling for an explanation; and

c.  The lack of independent advice to the Deceased;

[this court] would have found that the totality of the circumstances justifies a conclusion that the transfer of the Shares was procured by undue influence.”

22.  These 2 grounds are inter-related and can be dealt with together.

23.  The first point to note is that, at para 56 of the Judgment, this court recorded what Mr Pang SC had submitted in his oral Opening that “this case is not about presumption of undue influence. Rather, this court should look at the totality of the evidence which may (or may not) point to whether there was undue influence as a result of the abuse of trust and confidence reposed in the Defendant by the Deceased.” (emphasis added) So even Mr Pang SC advisedly was not relying on “presumed undue influence” at the trial, although his name appears on the Notice of Appeal.

24.  Second, this court has not applied the wrong test on undue influence. The relevant discussion on the law of undue influence can be found at paras 57 and 58 of the Judgment. Again, they speak for themselves. It is curious that in the Notice of Appeal, the Plaintiff relies on Bank of China (Hong Kong) Ltd v Wong King Sing & Others [2002] 1 HKLRD 358 and Li Sau Ying v Bank of China (Hong Kong) Ltd (2004) 7 HKCFAR 579, the same two authorities referred to at para 57 of the Judgment.[3]

25.  At para 8 of the Plaintiff’s skeleton, it is submitted that “the correct approach is for the court to see whether the evidence considered as a whole justifies an inference that on a balance of probabilities the transactions of the Shares were procured by undue influence. The Plaintiff contends that Ng J had not properly done so and erred in reaching a conclusion that the Shares were a gift from the Deceased to the Defendant.”

26.  Contrary to that submission, one can see from paras 59 onwards, this court had examined the evidence in light of the pleadings and came to the conclusion at para 80 that the Plaintiff had failed to establish his case of undue influence. Para 80 contains 2 findings of fact viz (i) none of the First or Second Representations were ever made to the Deceased; and (ii) the Deceased had transferred the Shares to the Defendant with his informed consent.

27.  Third, the Defendant is correct in submitting that the Plaintiff is simply attempting to dress up Grounds 2 and 3 as involving a point of law when in fact the Plaintiff is challenging this court’s findings of fact at para 80.

28.  As a challenge to this court’s findings of fact, again, it is difficult to see from the Notice of Appeal or the Plaintiff’s skeleton what palpable and material errors have been identified. Nor can this court see why it is said this court’s 2 findings of fact cannot reasonably be explained or justified.

29.  Since the Plaintiff cannot show good reasons for a stay pending appeal, there are no good reasons to continue the Injunction pending appeal. As Mr Chang SC submits, the continuation of the Injunction does cause prejudice to the Defendant. Given the recent volatility of the stock market, if the Defendant is restrained from dealing with the Shares, which are all listed shares, pending appeal, even if the appeal is only 3 months away, she will lose the ability to sell them in light of the prevailing market condition, whether the market goes upwards or downwards.

Disposition and costs nisi

30.  The Summons and the Taxation Summons are hereby dismissed with costs, to be taxed if not agreed and paid forthwith, certificate for two counsel.