Yiu Yan Che By Yiu Wai Yu His Next Friend v. Yiu Cho Yuen

HCA 1363/2024

[2025] HKCFI 3437

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 1363 OF 2024

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REASONS FOR DECISION

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A.   INTRODUCTION

1.In this action, the plaintiff (Mr Yiu Yan Che) (“Father”) seeks to set aside transfers of the shares in 3 companies as well as HK$3.9 million to the defendant (his eldest son) on the grounds that (1) Father was mentally incapacitated at the time of the transfers; and (2) the transfers were effected by Father under the defendant’s undue influence.  As far as the claim of undue influence is concerned, it is pleaded in Father’s Statement of Claim that:

“12. Further, or in the alternative:

(1) By reason of the matters pleaded in Section C hereinabove, as well as the facts of Father’s old age and the Defendant being Father’s eldest son, at all material times, Father reposed trust and confidence on the Defendant.

(2) Father executed the [3 Sale and Purchase Agreements for the sale of certain shares in 3 companies respectively each for HK$1 from Father to the Defendant (‘Impugned Documents’)] under the Defendant’s undue influence, in circumstances where he did not understand and could not have understood the same and/or the effect thereof; and when he did not, and could not have, intend(ed) to effect the purported transfers of relevant shares in each of the Companies and/or to sell at HK$1 such shares to the Defendant preferentially and to the exclusion of Father’s other children. At the material time, each of the Companies held valuable landed properties in Hong Kong:

[…]

(3)  […]

(4) In the premises, the purported transfers pursuant to the Impugned Documents should be set aside at the instance of the Father, which the Father by this action now seeks.

[…]

16. Further, or in the alternative, by reason of the matters pleaded in paragraph 12 above (which is repeated herein), Father executed the [Remittance Application Form to instruct and cause the transfer of HK$3.9 million from Father’s account to the Defendant’s account (‘the Remittance’)] under the Defendant’s undue influence. In the premises, the Remittance should be set aside at the instance of the Father, which the Father by these proceedings now seeks.”

2.Pursuant to the defendant’s summons filed on 19 November 2024 (“the Striking-Out Summons”), a Master struck out paragraphs 12 and 16 of the Statement of Claim on 17 March 2025 (“the Decision”).

3.Father then appealed against the Decision.

4.Having heard parties, this Court allowed Father’s appeal.  The followings are the reasons.

B.   LEGAL PRINCIPLES

B1.    Striking-out application

5.The relevant principles on striking-out are trite and have been summarised by Recorder Manzoni SC in Polyline Development Limited v Ching Lin Chuen & Others [2021] HKCFI 483 as follows:

“10. […]

(1) a strikeout application will only be successful in a plain and obvious case. The claim must be obviously unsustainable, the pleadings unarguably bad and it must be impossible, not just improbable, for the claim to succeed before the court will strike it out.

(2) However, plain is not the same as simple, and obvious is not the same as short. If, on a careful reading of the statement of claim, however complicated, it can be seen that there is no cause of action or the claim will obviously not succeed, then it will be struck out despite the apparent complexity.

(3) There should be no trial upon affidavit and disputed facts should be taken in favour of the party sought to be struck out. Where the legal viability of a cause of action is sensitive to the facts, an order to strikeout should not be made. However, the court should remain vigilant to ensure that its processes are not abused by the prosecution of hopeless claims.

(4) The court should not decide difficult points of law in striking out proceedings.

(5) It is for the party seeking to strikeout the pleading to demonstrate that the case is a plain and obvious one in which the other party’s claim is bound to fail. However, in the context of limitation, once a limitation defence is raised, the onus is on the plaintiff to prove that the cause of action relied upon accrued within the limitation period, even in a strike out application.

11. Insofar as the application is premised upon the proposition that there is no reasonable cause of action, I must proceed on the basis that the facts alleged in the statement of claim will be established. No evidence is admissible in relation to this limb of the applications and I must address the matter simply on the basis of what is pleaded. Where a pleading is defective only in not containing particulars to which the other side is entitled the correct approach is to order particulars rather than strikeout the pleading.

12. Insofar as the pleading is alleged to be scandalous, it will only be struck out if it is degrading, indecent and irrelevant to matters which are material.

13. Insofar as “frivolous or vexatious” is concerned, the object of the rule is to stop cases which ought not to be launched. A proceeding is frivolous when it is not capable of reasoned argument or is without foundation or cannot possibly succeed. A proceeding is vexatious when it is oppressive or lacks bona fides […].

14. Insofar as it is said that the statement of claim may “prejudice, embarrass or delay the fair trial of the action”, the court will generally give a liberal interpretation to these words but they are aimed at identifying pleadings which are unnecessary in a way which will cause undue difficulty at trial or undue difficulty to the other side because it is unable to understand the case that it has to meet […].

15. Insofar as “Abuse of the process of the court” is concerned, this is designed to ensure that the machinery of the courts is used for a bona fide purpose, and is not abused. A claim can be struck out as an abuse of the process of the court where it is groundless, including where the claim is obviously and plainly time-barred.

6.In Sealegend Holdings Ltd v China Taiping Insurance (HK) Co Ltd & Others (HCAJ 95/2012, unreported, 24 October 2014), Au-Yeung J has also reminded that:

“30. Strike out is not justified merely because the story told is highly improbable, and one which it is difficult to believe would be proved. A party’s claim or defence would be struck out only if it is a sham so that to rely on it must be an abuse of the process of the court. Even if one side has a ‘formidable case’, it does not mean that the other has no case. See Hutchvision Asia Ltd v Asia Television Ltd, HCA 6757/1992, 8 September 1993, per Godfrey J (as he then was), p6.

‘But any lawyer with any experience of private practice will be able to remember, only too well, those cases which appeared to be certainties but which, to his surprise, nevertheless failed and, by the same token, those cases which seemed bound to fail but which, to his surprise, nevertheless succeeded. It is for just this reason that the court will not embark, at this stage of an action, on a consideration whether the case of one side or the other is true or false. It will consider only whether the nature of the defence is such that it has to be characterised as an abuse of the process of the court, which is something else altogether.’

31. Where a party seeks to strike out another’s case as unsustainable, he will have to show the other party’s case to be ‘wholly imaginary, a myth or not bona fide’: Overseas Trust Bank Ltd v Coopers & Lybrand & Ors, CACV 109/1989, Fuad VP, 15 December 1989, p15.”

B2.    Appeal from Master’s decision

7.In relation to an appeal brought against Master’s decision, it is well established that such an appeal is dealt with by way of an actual rehearing of the application which led to the order under appeal, and the judge treats the matter as though it came before him for the first time.  The judge will give the weight it deserves to the previous decision of the Master, but he is in no way bound by it.  The judge in chambers is in no way fettered by the previous exercise of the Master’s decision (Hong Kong Civil Procedure 2025, Volume 1, paragraph 58/1/2).

C.   DISCUSSION

C1.    No reasonable cause of action

8.I will first of all deal with the defendant’s argument that Father has failed to demonstrate that he has a reasonable cause of action.  As Mr Bernard Man SC put it, in this regard, the defendant took a very narrow point on Father’s pleadings in the present case. 

9.Before I deal with that point, it would be helpful if I first of all set out the law on undue influence.  For this purpose, assistance may be derived from the case of Bank of China (Hong Kong) Ltd v Wong King Sing & Others [2002] 1 HKLRD 358.  Because of the comprehensiveness of the summary of the law prepared by Recorder Ma SC (as he then was) therein, I hope I may be forgiven for quoting his Lordship’s Judgment at length below:

“34. I should preface the discussion of this defence with the observation that, as with all aspects of the law, one has to apply a large degree of common sense to the matter. The proliferation of cases in this area, particularly in recent times, creates a tendency to have principles mechanically set out as almost formulas to be applied. While this is convenient and provides a logical basis for the application of at times not uncomplicated principles, it is to be borne in mind that the defence of undue influence is ultimately a simple concept. It has all to do with informed consent. Once a court forms the view that consent was freely given with full knowledge of the consequences of entering into the relevant transaction, that is the end of the matter, however improvident the transaction may objectively appear. The rationale for the defence of undue influence is to prevent the victimisation of the complainant. It is there to protect people from being forced, tricked or misled in any way by others into entering into a disadvantageous transaction : see Allcard v. Skinner (1887) 36 Ch.D. 145, at 182-3; National Westminster Bank Plc v. Morgan [1985] AC 686, at 705. As Lord Nicholls of Birkenhead said in Royal Bank of Scotland v. Etridge at 1029 paragraph 8, the unacceptable conduct lies in ‘a relationship between two persons where one has acquired over another a measure of influence, or ascendancy, of which the ascendant person then takes unfair advantage.’

35. The burden is of course on the person seeking to set aside or avoid liability under the relevant transaction. It is not for the other party to prove that the transaction was entered into with full understanding of the nature and consequences of the transaction. This reversal of the burden of proof is commonly referred to as the ‘Romilly heresy’ : see Barclays Bank Plc v. O'Brien [1994] 1 AC 180, at 193A-B.

36. That said, although the legal burden of proof is throughout on the party seeking to set aside, the evidential burden may shift. Here, presumptions may arise depending on the circumstances. I will return to this aspect in due course.

37. It is convenient at this point to identify the different classes of undue influence. Here, the starting point is the classification adopted by the English Court of Appeal in Bank of Credit and Commerce International SA v. Aboody [1990] QB 923, summarised by Lord Browne-Wilkinson in his speech in Barclays Bank Plc v. O'Brien at 189-190 :-

Class 1 : Actual undue influence

In these cases it is necessary for the claimant to prove affirmatively that the wrongdoer exerted undue influence on the complainant to enter into the particular transaction which is impugned.

Class 2 : Presumed undue influence

In these cases the complainant only has to show, in the first instance, that there was a relationship of trust and confidence between the complainant and the wrongdoer of such a nature that it is fair to presume that the wrongdoer abused that relationship in procuring the complainant to enter into the impugned transaction. In Class 2 cases therefore there is no need to produce evidence that actual undue influence was exerted in relation to the particular transaction impugned : once a confidential relationship has been proved, the burden then shifts to the wrongdoer to prove that the complainant entered into the impugned transaction freely, for example by showing that the complainant had independent advice. Such a confidential relationship can be established in two ways, viz.,

Class 2(A)

Certain relationships (for example solicitor and client, medical advisor and patient) as a matter of law raise the presumption that undue influence has been exercised.

Class 2(B)

Even if there is no relationship falling within Class 2(A), if the complainant proves the de facto existence of a relationship under which the complainant generally reposed trust and confidence in the wrongdoer, the existence of such relationship raises the presumption of undue influence. In a Class 2(B) case therefore, in the absence of evidence disproving undue influence, the complainant will succeed in setting aside the impugned transaction merely by proof that the complainant reposed trust and confidence in the wrongdoer without having to prove that the wrongdoer exerted actual undue influence or otherwise abused such trust and confidence in relation to the particular transaction impugned.

38. In the case of actual undue influence (Class 1), the complainant (on whom the burden of proof on this issue rests) has to demonstrate the following, namely that :-

(a) the person who allegedly influenced (I will refer to him as "the influencer") had the capacity to influence the complainant;

(b) influence was in fact exerted;

(c) the exercise of influence by the influencer was undue; and

(d) the exercise of undue influence resulted in the transaction complained about (although it need not be the only reason as long as it was a significant reason : Chitty on Contracts Vol.1 (28th edition) at paragraphs 7-50).

See : Bank of Credit and Commerce International SA v. Aboody at 967.

39. In cases of actual undue influence, it is not necessary in order for the transaction to be set aside to demonstrate that it was manifestly disadvantageous to the complainant : see the House of Lords decision in CIBC Mortgages Plc v. Pitt [1994] 1 AC 200, at 208-9. As Lord Browne-Wilkinson remarked, actual undue influence is a species of fraud; ‘A man guilty of fraud is no more entitled to argue that the transaction was beneficial to the person defrauded than is a man who has procured a transaction by misrepresentation. The effect of the wrongdoer’s conduct is to prevent the wronged party from bringing a free will and properly informed mind to bear on the proposed transaction which accordingly must be set aside in equity as a matter of justice’ : CIBC Mortgages Plc v. Pitt at 209C-D.

40. In cases of presumed undue influence (Class 2), there is first a two-step inquiry :-

(a) Was the relationship between the complainant and the influencer one of those established types of relationship that as a matter of law, undue influence is presumed? This is commonly known as the Class 2(A) category.

(b) If not within Class 2(A), was the relationship nevertheless one in which the complainant generally reposed such a degree of trust and confidence that the presumption of undue influence can be presumed? This is the Class 2(B) category.

41. Once it can be shown by the complainant that he falls within either Class 2(A) or Class 2(B), a presumption arises in his favour that the relevant transaction has been entered into as a result of undue influence. The effect of this presumption is that once it arises, whether Class 2(A) or 2(B), the burden then shifts to the influencer (or, as will be dealt with below, by the relevant third party such as the Bank in the present case) to show that the transaction was entered into with an independent mind and free of any undue influence : see Bank of Credit and Commerce International SA v. Aboody at 953; Barclays Bank Plc v. O'Brien at 189. If he fails to discharge the burden, the transaction will be set aside without the complainant having to prove any actual undue influence. It is important to bear in mind that the effect of the presumptions is to place an evidential burden on the influencer (or the third party as we shall see) to prove that the transaction was freely entered into by the complainant with full knowledge.

42. In other words, the effect of these presumptions arising in Class 2(A) and Class 2(B) situations is not absolute but can be rebutted by evidence to the contrary. One of the criticisms made by the House of Lords in Royal Bank of Scotland v. Etridge of the extract from Lord Browne-Wilkinson's speech in Barclays Bank plc v. O'Brien dealing with Class 2(B) cases was that it seemed to ignore the evidential and rebuttable character of a Class 2 presumption : Royal Bank of Scotland v. Etridge at 1076 paragraphs 157-158, 1077 paragraph 161 per Lord Scott of Foscote.

43. I should perhaps add in the context of this discussion that in Royal Bank of Scotland v. Etridge at 1031 paragraph 18, Lord Nicholls of Birkenhead said in relation to Class 2(A) situations, "In these cases, the law presumes, irrebuttably, that one party had influence over the other" (my emphasis). As I understand this passage, Lord Nicholls was not saying that in Class 2(A) cases, there was an irrebuttable inference of undue influence. Rather, he was merely saying there was an irrebuttable inference of the existence of a relationship of influence, that is, a relationship in which it will be presumed that the complainant reposed trust and confidence in the influencer.

44. There are important differences in the treatment of Classes 2(A) and 2(B) cases.

45. In Class 2(A) cases, all that the complainant needs prove is the existence of one of those established categories of relationship before the presumption arises. He need not even prove that he actually reposed trust and confidence in that person : Royal Bank of Scotland v. Etridge at 1031 paragraph 18.

46. However, it is not every confidential relationship that gives rise to the presumption : In re. Coomber [1911] 1 Ch 723, at 726-7. The established categories include (and this is not meant to be exhaustive) solicitor and client, religious superior and inferior, doctor and patient, parent and child, guardian and ward, trustee and beneficiary : see In re. Coomber at 726-7; Bank of Credit and Commerce International SA v. Aboody at 953; Chitty on Contracts Vol.1 at paragraphs 7-053 to 7-056; Royal Bank of Scotland v. Etridge at 1031 paragraph 18, 1075 paragraph 157. It is noteworthy that the relationship of husband and wife does not come within this category : Barclays Bank Plc v. O'Brien at 190, reaffirmed in Royal Bank of Scotland v. Etridge at 1032 paragraph 19, 1075 paragraph 157. Nor that of banker and customer : National Westminster Bank Plc v. Morgan [1985] AC 686; Royal Bank of Scotland v. Etridge at 1075 paragraph 157.

47. In Class 2(B) cases, the complainant needs to do more before the presumption arises. Here, the complainant has first to show that :-

(a) he placed trust and confidence in the influencer or that the influencer had acquired an ascendancy or domination over him; and

(b) the transaction cannot be readily explicable by the relationship of the parties.

See Royal Bank of Scotland v. Etridge at 1030 paragraph 14, 1032 paragraph 21.

48. The requirement referred to in sub-paragraph (b) above is not found in the speech of Lord Browne-Wilkinson in Barclays Bank plc v. O'Brien in the passage I have quoted above. That passage has given rise in terms of the way it has dealt with Class 2(B) situations to controversy and difficulties of application in practice. With respect, I adopt as the correct approach the formulation of Lord Nicholls of Birkenhead in Royal Bank of Scotland v. Etridge, as supported by the observations of Lord Scott of Foscote in the same case : Royal Bank of Scotland v. Etridge at 1076-77 paragraphs 159-161.

49. As to the first of these requirements, the complainant must prove the existence of a relationship under which he generally reposed trust and confidence in the influencer or that the influencer had acquired an ascendancy or domination over him. In Goldsworthy v. Brickell [1987] Ch 378, at 401, Nourse LJ said, ‘In all of these relationships, whether of the first kind [Class 2(A)] or the second [Class 2(B)], the principle is the same. It is that the degree of trust and confidence is such that the party in whom it is reposed, either because he is or has become an adviser of the other or because he has been entrusted with the management of his affairs or everyday needs or for some other reason is in a position to influence him in into effecting the transaction of which complaint is later made.’ Obviously, whether such a relationship exists in any given case is dependent on the facts, but, as Nourse LJ remarked also at 410, it is not every relationship of trust and confidence to which the presumption applies.

50. In Brusewitz v. Brown (1922) 42 NZLR 1106, at 1109-1110, Salmond J (in a passage cited with approval by Millett LJ in Credit Lyonnais v. Burch [1997] 1 All ER 144 at 153g-j) said :-

‘The mere fact that a transaction is based on an inadequate consideration or is otherwise improvident, unreasonable, or unjust is not in itself any ground on which this Court can set it aside as invalid. Nor is such a circumstance in itself even a sufficient ground for a presumption that the transaction was the result of fraud, misrepresentation, mistake, or undue influence, so as to place the burden of supporting the transaction upon the person who profits by it. The law in general leaves every man at liberty to make such bargains as he pleases, and to dispose of his own property as he chooses. However improvident, unreasonable, or unjust such bargains or dispositions may be, they are binding on every party to them unless he can prove affirmatively the existence of one of the recognized invalidating circumstances, such as fraud or undue influence.

This general principle, however, is subject to an important exception. Where there is not merely an absence or inadequacy of consideration for the transfer of property, but there also exists between the grantor and the grantee some special relation of confidence, control, domination, influence, or other form of superiority, such as to render reasonable a presumption that the transaction was procured by the grantee through some unconscientious use of his power over the grantor, the law will make that presumption, and will place on the grantee the burden of supporting the transaction by which he so benefits, and of rebutting the presumption of its invalidity. In such cases it is necessary for the grantee to prove that the suspected transaction has not its source in any improper influence over the mind or will of the grantee, or in any fraud, misrepresentation, mistake, or concealment of material facts which ought to have been disclosed by the grantee to the grantor in view of the relation between them. Unless the grantee can prove this the transaction will be set aside at the suit of the grantor or his representatives.

The commonest and most important instances of this presumption are those cases in which the relation between the parties is some recognized legal relationship of confidence, such as that existing between solicitor and client and between trustee and beneficiary. The rule, however, is not limited to any exclusive and defined list of recognized legal relations. It is quite general in its application. The question in every case is : Did the parties contract at arm's length and on terms of equality, or, on the contrary, did there exist between them such a relation of superiority on the one side and inferiority on the other (whatever the source of nature of that superiority or inferiority may be), and therefore such an opportunity and temptation for the unconscientious abuse of the power and influence so possessed by the superior party, as to justify the legal presumption that such an abuse actually took place and that the transaction was procured thereby?’

51. After Barclays Banks plc v. O’Brien, there was a tendency in practice to treat the words of Lord Browne-Wilkinson in the passage I have quoted above, as words in a statute. The words ‘trust and confidence’ were given much prominence and led to much controversy. Yet, as Lord Nicholls of Birkenhead observed in Royal Bank of Scotland v. Etridge, the principle is not confined to cases of abuse of trust or confidence. There may for example be cases where a risk exists of vulnerable person being exploited. As Lord Nicholls said at p.1030 at paragraph 11, ‘Several expressions have been used in an endeavour to encapsulate the essence : trust and confidence, reliance, dependence or vulnerability on the one hand and ascendancy, domination or control on the other. None of these descriptions is perfect. None is all embracing. Each has its proper place’.

52. Clearly though, the relationship between the complainant and the influencer, though not decisive, is obviously relevant. In particular, the relationship of husband and wife, though insufficient by itself to bring the case within Class 2(A), will nevertheless be relevant in Class 2(B) situations since a wife may well be able to demonstrate that in reality she left decisions on financial matters to her husband enabling her therefore to establish that she reposed trust and confidence in her husband in relation to their financial affairs : Barclays Bank Plc v. O'Brien at 190-1. There are of course other relationships that might attract critical attention, such as that of employer and junior employee : Credit Lyonnais Bank Nederland NV v. Burch [1997] 1 All ER 144.

53. As to the second matter to be proved (i.e. the transaction cannot be readily explicable by the relationship of the parties), the point here is that transactions are commonly entered into by people on the ground of friendship, relationship or charity or for other motives on which many people ordinarily act. It would be wrong for the law to set aside everyday transactions when, say, a gift was clearly intended, such as birthday presents or gifts : see Royal Bank of Scotland v. Etridge at 1033 paragraph 24. The presumption under Class 2(B) is intended to apply when the complainant ‘makes a gift so large, or enters into a transaction so improvident, as not to be reasonably accounted for on the ground of friendship, relationship, charity or other ordinary motives on which ordinary men act’ : see Goldsworthy v. Brickell at 401F-H; Allcard v. Skinner (1885) Ch.D. 145, at 185; Royal Bank of Scotland v. Etridge at 1032 paragraph 22, 1034 paragraph 29, 1088 paragraph 220. And yet, it has to be recognised that sometimes it is the very relationship whether of friendship, kinship or otherwise, that would give rise to the complainant reposing the requisite degree of trust and confidence in the influencer in the first place. The line therefore between what is reasonable (and therefore) acceptable and what is not may therefore at times be hard to gauge. One of the keys is to look at the nature of the transaction itself : Royal Bank of Scotland v. Etridge at 1074 paragraph 156. A Christmas gift is not the same as an unlimited guarantee. This by itself however does not provide the complete answer. Another important guide lies in my view in always looking at the respective characters of the complainant and of the influencer when assessing the impact of their relationship, particularly that of the complainant : c.f. In re. the Estate of Brocklehurst [1978] Ch 14, at 39E-40B. If the complainant is for example a well educated or strong-willed person capable of independent thought, a court may more likely be of the view that he was able to make an informed and free choice for himself in deciding whether or not to enter into the relevant transaction for the benefit of his friend or relative even though he would not personally benefit from the transaction. On the other hand, a naive and dependent person, easily influenced by a stronger or more dominant personality, would be regarded in a completely different light when he has entered into a disadvantageous transaction. In his case, he could well be regarded as having reposed such trust and confidence in the influencer that it becomes questionable whether his decision to enter into the transaction was voluntary. In most cases, it may be sufficient for the court to ask whether the decision was likely to have been freely and voluntarily made by the complainant or whether his mind was effectively made up for him by the influencer. A good illustration of this point is Inche Noriah v. Shaik Allie Bin Omar [1929] AC 127 where the relevant transaction was set aside as between an aunt who was old and illiterate, and her nephew who had the management of her affairs.

54. This latter aspect is what is meant by the requirement commonly referred to as the need to show manifest disadvantage. It is not, as is sometimes thought, restricted to purely commercial considerations. The Court is required to take a broader view. See : Royal Bank of Scotland v. Etridge at 1032-1034 paragraphs 21-31 per Lord Nicholls of Birkenhead, 1088 paragraph 220 per Lord Scott of Foscote.

55. Once the presumption of undue influence arises (whether Class 2(A) or Class 2(B)), the onus then shifts to the influencer to demonstrate that the relevant transaction was not one in which undue influence could have existed. As was helpfully pointed out by Lord Nicholls of Birkenhead in Royal Bank of Scotland v. Etridge at 1030 paragraph 13, ‘The evidence required to discharge the burden of proof depends on the nature of the alleged undue influence, the personality of the parties, their relationship, the extent to which the transaction cannot readily be accounted for by the ordinary motives of ordinary persons in that relationship, and all the circumstances of the case’. One of the relevant circumstances would be whether the complainant received advice from a third party as to the consequences of entering into the relevant transaction : Royal Bank of Scotland v. Etridge at 1032 paragraph 20.

56. In practice, the existence of presumptions should not in my view obscure the function of the Court to take into account the whole of the evidence in arriving at its decision. As I have already remarked, the Court is not required to follow the principles derived from authorities as though they were set formulas. Common sense is required and this means in particular a recognition that the weight of presumptions will vary from case to case. The type and weight of evidence needed to rebut a presumption would depend on the strength of the presumption itself : see Royal Bank of Scotland v. Etridge at 1074 paragraph 153 per Lord Scott of Foscote. For example, the weight of evidence needed to discharge the burden on the influencer in a case like Inche Noriah v. Shaik Allie Bin Omar would have been a very heavy one. The evidence of the complainant will often be of critical importance : c.f. Royal Bank of Scotland v. Etridge at 1056 paragraphs 106-7. The presumptions operate mainly as forensic tools and will be helpful to parties to direct them as to the requisite evidence needed to be adduced.”

(emphasis added)

10.Pausing here, I should point out that what Recorder Ma SC stated in paragraphs 34 and 56 of the aforesaid Judgment are important.  As I have highlighted, the law has to be applied with “a large degree of common sense”, and the principles should not be applied mechanically as if they are formulas.

11.The Judgment in Bank of China (Hong Kong) Ltd v Wong King Sing & Others (supra) was handed down very shortly after the House of Lords gave its Judgment in Royal Bank of Scotland plc v Etridge (No.2) [2002] 2 AC 773, in which Lord Scott doubted the utility of the use of presumption in relation to Class 2B cases[1].  His Lordship then sat as a Non-Permanent Judge in our Court of Final Appeal in Li Sau Ying v Bank of China (Hong Kong) Ltd (2004) 7 HKCFAR 579 and explained further as follows:

“28. […] Lord Browne-Wilkinson in Barclays Bank plc v O’Brien [1994] 1 AC 180 adopted Slade LJ’s categorisation of Class 2A and Class 2B cases and said that:

‘… In a Class 2(B) case therefore, in the absence of evidence disproving undue influence, the complainant will succeed in setting aside the impugned transaction merely by proof that the complainant reposed trust and confidence in the wrongdoer without having to prove that the wrongdoer exerted actual undue influence or otherwise abused such trust and confidence in relation to the particular transaction impugned.’ (p.189)

29. Lord Browne-Wilkinson’s approach in O’Brien was broadly endorsed and built upon by the House of Lords in Royal Bank of Scotland plc v Etridge (No. 2) [2002] 2 AC 773 but the use of the expression ‘presumed undue influence’ and, in particular, its use in connection with Class 2B cases was deprecated. Lord Nicholls of Birkenhead at paras 16 and 17 made clear that the expression connoted 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’. Lord Hobhouse of Woodborough said, at para. 98 that the Class 2A and Class 2B categorisation derived from the Aboody case had been “the source of much of the confusion which has ensued” and, at para. 105, that ‘the language of presumption is likely to confuse rather than assist’ He said that:

‘… If at the end of the trial the wife succeeds on the issue of undue influence, it will be because that is the right conclusion of fact on the state of the evidence at the end of the trial, not because of some artificial legal presumption that there must have been undue influence.’ (para. 106)

Lord Hobhouse concluded that:

‘… the so-called Class 2(B) presumption should not be adopted. It is not a useful forensic tool.’ (para. 107)

And I expressed similar views at para. 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 …’

30. The strong message from Etridge therefore is that, particularly in Class 2B cases, 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. […]

[…]

34. I do not wish to leave this issue without expressing the hope that in future cases, where undue influence has to be proved but where the relationship between the parties is not a relationship that falls within Slade LJ’s Class 2A category, 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, 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.  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.”

12.Mr Ho and Mr Wong submitted that, by virtue of the Court of Final Appeal’s Judgment in Li Sau Ying, “Hong Kong has moved away from the traditional ‘Class 2B’ presumption analysis, which remains entrenched under English law”[2]. With respect, I do not accept that this is a correct statement.  In my view, the legal position in this area of the law in Hong Kong and in England and Wales is the same after Royal Bank of Scotland plc v Etridge and Li Sau Ying, for it can be seen that Lord Scott had applied Etridge in the Court of Final Appeal case.  In short, as far as the Class 2B cases are concerned, the reference to “presumption” should be avoided so as not to cause confusion.  At the end of the day, it is a matter of considering whether the evidence adduced is sufficient to justify a finding of undue influence.  The situation is similar to the operation of the principle of res ipsa loquitur in negligence cases – a concept which Lord Scott referred to at [161] in his Judgment in Etridge. In Li Sau Ying, Lord Scott also quoted Lord Nicholls’ similar view on the same matter as expressed in Etridge.

13.Mr Ho and Mr Wong drew my attention to [34] of Lord Scott’s Judgment in Li Sau Ying as quoted above, and boldly submitted that his Lordship has in fact departed from his own Judgment in Etridge (including the other Law Lords’ Judgments as quoted in [29] of Li Sau Ying).  With greatest respect, I disagree.  If his Lordship had had a change of mind in the period of 3 years since Etridge as alleged, I do not believe his Lordship would not have made it absolutely clear in Li Sau Ying, not to mention referring the Judgment in Etridge as having given a strong message: Li Sau Ying, at [30].

14.Furthermore, such a submission does not sit well with the Court of Appeal’s Judgment in Bank of China (Hong Kong) Ltd v China Hong Kong Textile Co Ltd & Others [2011] 4 HKLRD 457, in which Lam J (as Lam PJ then was) had quoted Etridge extensively, without saying that the principles explained therein are inapplicable in Hong Kong.

15.The fact that there is no longer a presumption under the previous Class 2B situation in England and Wales can also be seen from Chitty on Contracts (35^th edition (2023)), Vol.1, in which the learned authors wrote at paragraph 11-121 that:

“Relationship shown on facts An inference of undue influence may also arise if it is shown on the facts, rather than presumed as a matter of law, that the parties were in a relationship of influence, and that the parties have entered a transaction that is ‘not otherwise readily explicable’. While the cases in this section have been treated this as a separate category of presumed undue influence (formerly known as 2B), this is no longer correct in the light of the opinions expressed by the House of Lords in the Etridge case. They must now be viewed simply as instances of the kind of evidence that, in the absence of direct proof of undue influence, and in the absence of evidence of a presumption of a relationship of influence, when combined with a transaction ‘not readily explicable by the relationship of the parties’, may be sufficient to raise an inference that the transaction was procured by undue influence and, unless the other party displaces this influence, should be set aside.”

16.Coming back to the present case, it is indisputable that, in the case where the relationship of the relevant parties concerned is not categorised as a Class 2A case, the Court should focus on the question of whether the evidence justifies the inference that, on a balance of probabilities, the impugned transaction was procured by undue influence, that is, an abuse by the alleged dominant party of the trust and confidence reposed in him by the alleged subservient party.

17.What counsel differ is whether there is any need to plead and prove some underlying impropriety on the part of the alleged dominant party.

18.Mr Ho and Mr Wong for the defendant relied on authorities such as Kwan Shiu Yin Louis v Kwan Po Chuen Paula [2024] HKCFI 56 (at [57] & [58]), Fubon Bank (Hong Kong) Limited v Union Sharp Hong Kong Investment Limited & Others [2022] HKCFI 1509 (at [49(4)]), Re Leung Lai Hing Cindy (HCB 6777/2015, unreported, 3 April 2017, at [26]), Hua Xia Bank Co Ltd Hong Kong Branch v Gahood Holding Co Ltd & Others [2025] HKCFI 1925 (at [64]) and Bank of China (Hong Kong) Ltd v China Hong Kong Textile Co Ltd & Others (supra), and submitted that Father is obliged to plead his case in respect of his allegation that the defendant has engaged in abuse or underlying impropriety with the effect of forcing, tricking or misleading Father into transferring his valuable assets to the defendant, and that in the absence of such plea, Father has no reasonable cause of action on undue influence. 

19.With respect, I disagree with the defendant’s submissions. 

20.First of all, I have serious doubt as to the value of looking into the facts of other cases when those other cases concern the merits of the facts as presented.

21.Moreover, in the present case, as can be seen from Father’s pleadings as quoted at the beginning of this Reasons, he has pleaded:

(1)  By reason of the deterioration of Father’s mental state, his old age, and the fact that the defendant is Father’s eldest son, Father reposed trust and confidence on the defendant;

(2)  Father did not understand and could not have understood the documents which effected the transfers of his valuable assets to the defendant;

(3)  Father’s valuable assets had been transferred to the defendant to the exclusion of Father’s 4 other children;

(4)  The shares in 3 companies which hold valuable landed properties had been transferred to the defendant at HK$1;

(5)  $3.9 million had been transferred from Father’s account to the defendant’s account.  Father was told on the occasion that the remittance was for the purpose of making payment(s) of stamp duty in respect of certain share transfers.

22.Adopting the approach as explained in Li Sau Ying, the question is whether the Court should, having considered all the evidence to be adduced, come to the conclusion that a finding of undue influence is justified on the balance of probabilities.  In my view, this is a matter for the trial. 

23.The fact that Father cannot pinpoint to any particular act on the part of the defendant which influenced Father into effecting the transfers does not mean that Father’s claim of undue influence is bound to fail.  Indeed, if Father is able to plead that the defendant had done an act so as to “force, trick or mislead” Father, then, as accepted by the defendant’s counsel, this would probably become a “Class 1” undue influence case, but it is not, as made clear by Father.  Further, as explained by Lord Nicholls in Etridge, proof that the complainant placed trust and confidence in the donee, coupled with a transaction which calls for explanation, would normally be sufficient to raise a prima facie case of undue influence: Etridge, at [14] (see [26] below).  That being the case, the Statement of Claim herein can hardly be said to be inadequate.

24.Further, the insistence of the defendant that the plaintiff must prove that the defendant had “forced, tricked or misled” Father demonstrates the defendant’s attempt to apply the legal principles on undue influence mechanically, which Recorder Ma SC had expressly warned against.  It is also worthwhile to refer to what Lord Nicholls said in [10] of Etridge as follow:

“The law [of undue influence] has long recognised the need to prevent abuse of influence in these “relationship” cases despite the absence of evidence of overt acts of persuasive conduct […]”

25.Putting the defendant’s case to the highest, the inability on the part of the plaintiff to plead “forced, tricked or misled” may only mean (but this should not be taken as my view) that the plaintiff’s case on undue influence is weak.  However, the Court should not be concerned with the strength of the case in a striking-out application made on the basis of “no reasonable cause of action”.

26.Furthermore, attention should be drawn to what Lord Nicholls stated in Etridge:

“13. Whether a transaction was brought about by the exercise of undue influence is a question of fact. Here, as elsewhere, the general principle is that he who asserts a wrong has been committed must prove it. The burden of proving an allegation of undue influence rests upon the person who claims to have been wronged. This is the general rule. The evidence required to discharge the burden of proof depends on the nature of the alleged undue influence, the personality of the parties, their relationship, the extent to which the transaction cannot readily be accounted for by the ordinary motives of ordinary persons in that relationship, and all the circumstances of the case.

14. Proof that the complainant placed trust and confidence in the other party in relation to the management of the complainant’s financial affairs, coupled with a transaction which calls for explanation, will normally be sufficient, failing satisfactory evidence to the contrary, to discharge the burden of proof.  On proof of these two matters the stage is set for the court to infer that, in the absence of a satisfactory explanation, the transaction can only have been procured by undue influence.  In other words, proof of these two facts is prima facie evidence that the defendant abused the influence he acquired in the parties’ relationship.  He preferred his own interests.  He did not behave fairly to the other.  So the evidential burden then shifts to him.  It is for him to produce evidence to counter the inference which otherwise should be drawn.”

27.In my view, the law in relation to the proof of undue influence before and after Etridge and Li Sau Ying have not changed, in the sense that the legal burden remains on the complainant throughout and he is obliged to prove his case.  Once he has proved prima facie case of undue influence[3], the court would examine the defendant’s evidence to see if the complainant would at the end of the day succeed in proving his case on the balance of probabilities.  The difference is that, as advised, we should no longer describe this evidence-weighing process by the use of “presumption”.  As Lord Hobhouse put it at [106] of Etridge:

“[…] the general burden of proving some form of wrongdoing remains with the wife, but the evidence which she has adduced may suffice to raise an inference of wrongdoing which the opposite party may find itself having to adduce evidence to rebut. If at the end of the trial the wife succeeds on the issue of undue influence, it will be because that is the right conclusion of fact on the state of the evidence at the end of the trial, not because of some artificial legal presumption that there must have been undue influence.”

28.For reasons of the aforesaid, I rejected the defendant’s application to strike-out paragraphs 12 and 16 of the Statement of Claim on the ground of “no reasonable cause of action”.

C2.    Other plain and obvious grounds

29.Despite the defendant’s arguments set out in his skeleton submissions that, even if Father has pleaded a reasonable cause of action, such a claim against the defendant is bound to fail if one has regard to the evidence put forward by Father, Mr Ho informed this court that the defendant would not rely on those arguments anymore.  In other words, the defendant had abandoned the grounds under Order 18 rule 19(1)(b), (c) or (d) of the Rules of the High Court (“the RHC”) (“the Other Grounds”).

30.That being the case, I need not deal with his arguments further herein.

D.  DISPOSITION

31.I therefore made the following orders:

(1)  The learned Master’s orders dated 17 March 2025 and 27 March 2025[4] be set aside.

(2)  The Striking-Out Summons be dismissed.

E.   COSTS

32.There was no dispute that costs should follow the event.  Therefore, the defendant should bear the plaintiff’s costs of the Striking-Out Summons, the appeal and the hearing below, with certificate for two counsel.

33.However, the plaintiff argued that his costs should be assessed on indemnity basis because:

(1)  The point of law taken by the defendant is apparently hopeless;

(2)  It is an abuse of the process of the court for the defendant to rely on the Other Grounds.

34.In relation to the 1^st argument, while I have rejected the defendant’s submissions on the pleading requirement in respect of a claim for undue influence, I do not consider that the application made under Order 18 rule 19(1)(a) of the RHC is so hopeless that indemnity costs is appropriate.  Put it in another way, I cannot see any special or unusual feature in the application which would justify the award of indemnity costs.

35.The 2^nd argument is quite different.

36.To put the matter in context, it is necessary to set out Order 18 rule 19 of the RHC first.  This rule provides that:

“(1) The Court may, either of its own motion or on application, at any stage of the proceedings order to be struck out or amended any pleading or the indorsement of any writ in the action, or anything in any pleading or in the indorsement, on the ground that –

(a) it discloses no reasonable cause of action or defence, as the case may be; or

(b) it is scandalous, frivolous or vexatious; or

(c) it may prejudice, embarrass or delay the fair trial of the action; or

(d) it is otherwise an abuse of the process of the court;

and may order the action to be stayed or dismissed or judgment to be entered accordingly, as the case may be.

(2) No evidence shall be admissible on an application under paragraph (1)(a).

(3)        […]”

37.It has been explained in Commentary 18/19/3 (page 563) of Hong Kong Civil Procedure 2025 (Vol.1) that:

“Order 18 rule 19(2) excludes evidence (whether by the applicant or the respondent) on an application under O.18 r.19(1)(a). The court is obliged to look at the indorsement on the writ or the pleading without extrinsic evidence and decide whether on the assumption that the facts as pleaded are true, the indorsement or pleading discloses a cause of action or defence in law […]

38.The rationale is clear. 

39.Nonetheless, it is not uncommon that applicants of striking-out applications who are in substance only relying on the “no reasonable cause of action” ground would file evidence in support of the application concerned.  In order to circumvent the restriction imposed by Order 18 rule 19(2), those applicants would also include the Other Grounds in the striking-out summons.  Some of those affirmations may be so useless to the extent that they simply set out what have been pleaded by the other side in full and then conclude that there is no reasonable cause of action/defence disclosed. 

40.This apparently is totally inappropriate.  Not only is such “evidence” unnecessary for the purpose of the application, it would also lead to legal costs which could have been saved by both sides.

41.It is because of such a phenomenon that Masters presiding over call-over hearings would read the application papers carefully. In the event it is satisfied that any unnecessary affirmations have been filed in support of the striking-out applications, Masters would not give leave for the parties to file further affirmations for the purpose of the striking-out applications.  Masters may also expunge the affirmation already filed and order the applicant to bear the costs of the affirmation.

42.Practitioners should therefore consider very carefully which ground under Order 18 rule 19(1) of the RHC that they should rely on.  If in substance they are only relying on the “no reasonable cause of action” ground, they should not file any evidence in support, and still less to do so by alleging that the Other Grounds will be relied on.  As aforesaid, that may bring adverse costs consequence.  In appropriate cases, legal advisors may even be ordered to bear the wasted cost personally (even if the affidavit concerned is sworn by the party), given the problematic affidavit is normally made upon the advice of the legal advisor, upon which the party would rely heavily, if not totally.

43.On the other hand, legal advisors for the respondent to a striking-out application should also consider the supporting affidavit filed by the other side carefully, before asking the Court for leave to file and serve affidavit in opposition.  If it is apparent that the supporting affidavit filed by the other side is not conducive to the resolution of the striking-out summons (for example, if it only contains legal arguments, or if the application is in substance based on “no reasonable cause of action”), the respondent should not seek leave to file affidavit in opposition.  What the respondent should do is to draw the Court’s attention to such features at the call-over hearing, so that the matter may be properly handled by the Court.  It is quite wrong for the respondent to think that an affidavit in opposition should be filed anyway, for fear that his position may be prejudiced if the applicant’s allegations are left unanswered.

44.As far as the present case is concerned, I have been told[5] that at the call-over hearing held on 13 December 2024, Registrar Kwang did raise query with the defendant’s counsel (not Mr Ho nor Mr Wong) as to whether this application concerned anything other than argument on law, and whether affirmation was necessary for the purpose of this application. The learned Registrar had even asked the defendant to consider whether it was appropriate to rely on the Other Grounds.  However, the defendant’s counsel insisted that the application should be proceeded on all the grounds under Order 18 rule 19(1).  As a result, the learned Registrar gave directions for the filing of evidence from both sides.

45.I must say I can see why the learned Registrar felt fit to raise the issue which he did at the call-over hearing, for if the plaintiff could survive the defendant’s application made under the “no reasonable cause of action” ground, the claim on undue influence should simply be left for trial, and there is no way that the Court may come to a conclusion on the facts at the interlocutory hearing.

46.Indeed, it turns out that the concerns raised by the learned Registrar is totally justified.  As Mr Ho fairly accepted at the hearing before this Court, if the defendant’s argument on the law of undue influence is not accepted by this Court, his argument on the Other Grounds would also fall away.  That is the reason why the defendant abandoned his argument on the Other Grounds at the hearing, which apparently was the right thing to do. 

47.In such circumstances, it is plainly unreasonable to a high degree for the defendant to insist at the call-over hearing that he would rely on the Other Grounds and that evidence should be filed for the purpose of this striking-out application, especially when the necessity for filing evidence has been expressly brought up by the court thereat.  It is an abuse of the process of the court.

48.I therefore ordered that the plaintiff’s costs on defending the defendant’s application made on the other Grounds be assessed on indemnity basis, and the rest of his costs shall be assessed on party and party basis.

49.At the hearing, directions had been given for the plaintiff’s costs to be summarily assessed in lieu of taxation.   Summary assessment will be conducted on paper in due course.