Elderly father’s gifts to his children set aside on the grounds of undue influence

In Chan Yuk Pui v Chan Yui Chi ([2016] HKEC 1891) the plaintiff (‘P’) was an elderly man who owned four properties as joint tenant with one of his sons. The complaints of the defendants  (P’s other children) led him to sever the joint tenancies. They promised him that they would look after him and that he would live with them until his death (‘the promise’).

Relying on the promise, P executed deeds of gift of his half share in each of the properties so that they were divided among the defendants. Having an assurance that he would be looked after in his old age was P’s dominant concern. When the defendants failed to live up to the promise that they had made, P sought to have the deeds of gift set aside on the grounds that they had been procured by undue influence.

P did not allege that he had been misled or coerced or that he had failed to understand the nature of the deeds of gift. Au Yeung J pointed out (at [4]) that he could still show actual undue influence where:

(a) the defendants had failed to point out to P that the transaction was not to his advantage and to ensure that he took proper independent advice; and

(b) there was unconscionability.

Unconscionability is a serious allegation and is not to be found lightly ([5]).

There were express findings that P did not repose trust and confidence in the defendants and that he understood what he had signed.

The transaction was obviously disadvantageous to P since he lost all of his sources of income as a result and had only his savings to rely on. The defendants had not pointed this out to P. Although P had legal advice this was not independent; the lawyer who gave the advice did not consider the implications of the transaction from P’s perspective but saw P and the defendants as being a single client with identical interests ([115]).

The defendants had behaved unconscionably. They had acted in concert to get P to transfer his interest in the properties to them. In doing so, they preferred their own interests over those of P and had disregarded the adverse consequences that the gift would have for them.([104]).

‘[I]t was clear that the Defendants were the dominant party, had the capacity to influence the plaintiff and did exert that influence. That exercise was undue as they preferred their own interests over that of the Plaintiff … The Defendants did not allow the Plaintiff to exercise free and informal judgment … The Plaintiff’s mind was a mere channel through which the will of the Defendants operated.’ ([138])

Michael Lower

 

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