Many debtors and mortgagors have found themselves in default as a result of the economic downturn. Those forced into a corner are likely to explore all avenues to delay repayment or the surrender of mortgaged properties. These can include disputing a creditor's claim on the ground that the security document - ie the charge or the mortgage - was executed by the debtor as a result of an alleged misrepresentation and/or the undue influence of a close relative, and that the security document ought therefore to be set aside.

Undue Influence and Landed Securities

The guarantee is a contract between the guarantor and the lender. The guarantor is in a vulnerable position because she assumes the liabilities of the principal debtor owing to the lender. Further, the guarantee, usually prepared by the lender's solicitors, may contain onerous terms and conditions in favour of the lender and prejudicial to the interests of the guarantor. The lender does however have a general duty to ensure that the guarantor is fully aware of the nature of transaction that he is entering into.

Since the case of Royal Bank of Scotland v Etridge (No 2) [2002] 2 AC 773 (Etridge), the evidence required to prove undue influence depends on the nature of the alleged influence, the personalities of the parties, their relationship, the extent to which the transaction can readily be accounted for by the ordinary motives of ordinary persons in that relationship, and all the circumstances of the case. The best way of protecting both the lender and the guarantor is to insist that the guarantor should take independent legal advice before execution of the guarantee.

There are a number of vitiating factors which can render the security documents liable to be set aside. One such factor commonly used by the guarantor or mortgagor is undue influence. In Geffen v Goodman Estate (1991) 81 DLR (4th) 211, Wilson J considered undue influence to be 'for protection of the weak, or the momentarily weak, from entering into disadvantageous transactions, however measured'. As a matter of common fairness, the strong should not be allowed to push the weak to the wall.

The cases on undue influence have clearly established that a bank is 'put on inquiry' whenever a wife offers to stand as surety for her husband's debts: see Etridge and also Barclays Bank plc v O'Brien [1994] 1 AC 180 (O'Brien). Etridge provides a three-stage test for the enforcement of a security against a surety under undue influence:

1. Has the surety satisfied the court that the transaction was affected by undue influence?
2. Was the lender put on inquiry?
3. If so, did the lender take reasonable steps to satisfy itself that there was no undue influence?

Once it is established that the bank has been put on inquiry, the burden is on the bank to show that it has taken reasonable steps to satisfy itself that the surety's agreement has been properly obtained.

In the case of Bank of China (Hong Kong) Ltd v Wong King Sing [2002] 1 HKLRD 358; [2002] 1 HKC 83, Recorder G Ma SC (as he then was) observed that the concept of undue influence is ultimately a simple matter of 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 lender may rebut the presumption by showing the reasonable steps having been taken when the lender was put on inquiry. In Li Sau Ying v Bank of China (Hong Kong) Ltd [2005] 1 HKLRD 106, the Court of Final Appeal held that the explanation by a conveyancing clerk of the salient features of a mortgage document was sufficient to constitute reasonable steps. In Bank of China (Hong Kong) Ltd v Well Lok Printing Ltd [2008] 1 HKC 416 (Well Lok), the Court of Appeal reconfirmed the Etridge principles and held that the bank's duty was to take 'reasonable steps to satisfy itself that the wife [the influenced party] has had brought home to her, in a meaningful way, the practical implications of the proposed transaction'.

It is therefore important for the lenders that a surety's agreement has been properly obtained. Adequate time must be allowed for the requisite explanation and advice to be given. In the majority of the cases, this should not be done within a tight time schedule, such as on the actual day when documents are to be signed. For example, in Well Lok, Le Pichon JA held the clerk's explanation to be woefully inadequate in bringing home to the wife the implications of the proposed transaction, and that the wife's consent could not therefore be considered to be 'informed'. In particular, the clerk did not mention that there could be other liabilities, separate to liabilities arising from the mortgage loan, for which the wife would also be liable.

Although the burden of proof is first upon the party seeking to set aside a transaction, ie the mortgagor, this burden may shift as presumptions arise depending on the circumstances.

In a case of alleged undue influence, there is an initial two-way inquiry:

1. Was the relationship between the complainant and the influencer one of those established types of relationship in which, as a matter of law, undue influence is presumed?

Under the O'Brien principle, a husband and wife relationship is not within this category.

2. If not within the established types of relationship, 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?

For this to be made out, a complainant wife must show that:

• the wife placed trust and confidence in the husband; or
• the husband had acquired an ascendancy or domination over the wife; and
• the transaction is not readily explicable by reason of the relationship of the parties.

In respect of the latter condition, the transaction in question has to be manifestly disadvantageous to the wife in the sense that it cannot be reasonably accounted for on the grounds of friendship, relationship, charity or other ordinary motives on which persons act. For example, a guarantee given by the wife on her interest in the matrimonial home to secure her husband's debts is normally not plainly disadvantageous. If the husband's business is the source of family income, the wife has an interest in doing what she can to support the business. A wife's affection and self-interest may run hand-in hand in inclining her to join with her husband in charging the matrimonial house, usually a jointly-owned asset, to obtain the financial facilities needed by the business. The finance may be needed to start a new business, or expand a promising business, or rescue an ailing business operated by the husband.

If these conditions are met, giving rise to a presumption of undue influence, the burden shifts to the influencer (or a relevant third party, ie the lender) to show that the transaction was entered into with an independent mind and free of undue influence. If this burden is not discharged, the transaction will be set aside without the complainant having to prove any actual undue influence.

In the case of Re Lai Yin Shan, ex p Hong Kong Shanghai Banking Corp Ltd [2002] 3 HKLRD 500, the Court of Appeal held that where a wife became the surety for the debts of a company whose shares were held by her and her husband, where she held a nominal, minority or equal shareholding with him, the bank was put on inquiry even when the wife was a director or secretary of the company:

"The effect of a party, in this case the bank, being put on inquiry is that it should take reasonable steps to satisfy itself that the practical implications of a proposed transaction have been brought home to the relevant person, namely in this case the wife, in a meaningful way. The purpose is that the wife should enter into the transaction with her eyes wide open so far as the basic elements of it are concerned."

Whether a transaction was brought about by undue influence is a question of fact to be determined by a proper and objective examination and assessment of all the circumstances of the case. But once it is established that the bank has been put on inquiry, the burden is on the bank to show that reasonable steps have been taken to satisfy it that the surety's agreement has been properly obtained. According to the Etridge principles, in a surety transaction the bank is required to do the following:

• to insist that the wife attend a private meeting in the absence of the husband with a representative of the creditor (in the case of a mortgage transaction, usually a conveyancing clerk/solicitor in a law firm);
• at such meeting for the representative to warn the wife of the extent of her liability as surety under the contract of suretyship, proceeding only if the surety gives an appropriate response;
• to warn the wife of the risk she is running in entering into the transaction;
• to urge the wife to take independent legal advice with separate legal representation; and
• to insist upon independent assessment of the debtor's financial position.

In assessing these cases, one must look at the transaction and the surety's role in context. In Wing Lung Finance Ltd v Cheng Ho Yin [2009] HKCU 532 (unreported, HCA 1494/2008, 14 April 2009), Chu J identified two important factors to be (i) the seriousness of the practical risk to the giver, and (ii) the benefits gained by the giver in accepting the risk.

Application of the Law in Factual Scenarios

In Bank of China (Hong Kong) Ltd v Wong Yuk Ping Caroline [2003] 1 HKLRD 1, Deputy High Court Judge Poon held that the court will note, as a matter of fact, the opportunities for abuse that flow from the confidence of a wife in her husband and for a husband to take unfair advantage such influence, although in that case the court found that the wife was not a credible witness at trial and did not accept her evidence.

The following checklists set out factors that may be considered during the fact-finding exercise in the face of allegations of undue influence and/or misrepresentation.

 

Common arguments put by debtors, and lenders' defences, can be summarised as follows.

Practical Guidelines for Lenders and Solicitors

Following the enunciation of the Etridge principles, the Law Society of Hong Kong and the Hong Kong Association of Banks issued practice guidelines aimed at bringing home to potential parties the true meaning and effect of documents in respect of landed security transactions. The Law Society guidelines emphasise the need for a solicitor to advise the surety in a separate face-to-face meeting with the borrower absent and the need for independent legal advice. They also stress that the solicitor should provide information on the seriousness of the risk involved, such as the amount of the surety's liability under the transaction, and discuss with the surety her financial means, including her understanding of the value of the security involved and whether there were any other assets out of which repayment could be made if the borrower's business should fail. These guidelines serve to remind solicitors to minimise their own exposure to claims.

In practice, the Etridge principles place a considerable burden on law firms, including risk management problems. In the case of Wing Hang Bank Ltd v Kwok Lai Sim [2008] HKCU 349 (unreported, HCMP 4362/2003, 28 February 2008), Yam J found against a solicitors' firm in a third party action for its failure to have complied with the guidelines. The solicitors had rushed through a single 30-minute meeting with the guarantors, giving only a gist explanation of the documents. However, the documents contained words with conflicting and confusing meanings, even to lawyers, and Yam J found that the guarantors, who were two sisters of a low educational level, would probably not have understood the true meaning and effects of the documents they signed.

In view of the fact that most of Hong Kong's population is Chinese, it is suggested that a separate, bilingual warning notice should be used on such occasions. A written confirmation and interpretation clause should be drafted in Chinese and presented to a potential influenced party in respect of the need for independent legal advice. Further, lenders and their lawyers often deal with clients from Mainland China who have a different social and legal background. For these clients, a written confirmation drafted in simplified Chinese characters should be interpreted for the parties in Putonghua.

Officers of financial institutions should be briefed as to proper documentation and due diligence compliance in transactions involving landed securities. Material evidence and testimony in support of such proper handling of transactions will help to ensure that lenders' rights to enforce securities are not affected by allegations of undue influence, and lenders would enjoy higher prospects of success in claims for recovery of landed securities.




Zoe Chan So Yuen
Programme Director
HKU SPACE
zoe.chan@hkuspace.hku.hk

土地擔保交易中的不當影響：貸款人當心
陳蘇完談論了丈夫與妻子關係中的不當影響法例的近期發展，並提供了一些貸款人可用以避免損失的實務方法。

由於經濟衰退，令許多債務人和按揭人陷入拖欠還款的境地。處於困境的人士很可能想方設法延遲償還債項或交出按揭物業。這可能包括對債權人的申索提出爭議，理由是指稱擔保文件（即押記或按揭）是債務人由於遭受指稱的失實陳述及／或近親遭受不當影響而簽立，因此，擔保文件應予作廢。

不當影響與土地擔保

擔保是擔保人和貸款人之間的合約。擔保人處於弱勢地位，因為她對主債務人所欠負貸款人的債務承擔責任。並且，擔保文件通常由貸款人的律師擬定，其中可能包含對貸款人有利，但損害擔保人權益的繁苛條款和條件。然而，貸款人確實負有一般性責任，須確保擔保人完全瞭解所訂立交易的性質。自Royal Bank of Scotland v Etridge (No 2) [2002] 2 AC 773 (Etridge)案件後，證明不當影響所須提交的證據，取決於所指影響的性質、各方的個性、各方之間的關係，處於這種關係中之普通人的普通動機可以合理解釋該交易的程度，以及個案之一切相關事實。為同時保障貸款人和擔保人，最佳辦法是堅持要求擔保人在簽立擔保文件前尋求獨立法律意見。

有若干使成為無效的因素，會使得擔保文件有被作廢之虞。擔保人或按揭人經常利用的其中一項此類因素便是不當影響。在Geffen v Goodman Estate (1991) 81 DLR (4th) 211案件中，Wilson法官認為不當影響是「為了保障弱者或該時刻的弱者，使之免於訂立對其不利的交易，無論是如何衡量」。為維護一般的公平性，不應當允許強者恃強淩弱。

有關不當影響的判例已經明確證實，倘若妻子提出為其丈夫的債務作擔保，銀行會「提出查詢」：參見Etridge 及Barclays Bank plc v O'Brien [1994] 1 AC 180 (O'Brien)案件。Etridge 一案就向受不當影響的擔保人強制履行保證提供了一個三階段驗證。

1. 擔保人是否令法院信納有關交易受不當影響？
2. 貸款人是否提出查詢？
3. 如果是，貸款人是否採取了合理步驟，令自身信納不存在不當影響？

一旦證實銀行已提出查詢，它有責任證明自身已經採取合理步驟，令自身信納 已經適當獲得擔保人的同意。

在Bank of China (Hong Kong) Ltd v Wong King Sing [2002] 1 HKLRD 358; [2002] 1 HKC 83案件中，特委法官G Ma（當時職務）指出，不當影響的概念，最終只是在知情下的同意：

「法院一旦形成這樣的看法：就是在完全瞭解訂立相關交易後果的情況下自由表示同意的，事情便到此為止，無論交易在客觀上看起來是多麼不明智。」

為了反駁推定，貸款人可以證明在貸款人提出查詢時已經採取合理步驟。在Li Sau Ying v Bank of China (Hong Kong) Ltd [2005] 1 HKLRD 106案件中，終審法院裁定，由物業轉易文員解釋按揭文件的顯著特點，便足以構成合理步驟。在Bank of China (Hong Kong) Ltd v Well Lok Printing Ltd [2008] 1 HKC 416 (Well Lok)案件中，上訴法庭再度確認了Etridge 判例的原則，認為銀行的職責是採取「合理步驟令自己信納，妻子[受影響方] 已經通過有意義的方式領會了所提議交易的切實後果」。

因此，對貸款人而言重要之處在於其已經通過適當方式取得擔保人的同意。 必須給予足夠的時間，便於進行必要的解釋及提供相關意見。在大多數情形中， 不應當在緊迫的時限內完成上述工作，例如在實際簽署文件的當天。例如在Well Lok案件中，上訴法庭法官郭美超認為職員的解釋完全不足以讓妻子領會所提議交易的後果，因此，不可認為妻子的同意是「知情」的。尤其是，職員並未提及除了按揭貸款產生的法律責任外，還可能有其他將由妻子承擔的法律責任。

雖然舉證責任首先由謀求交易作廢的一方（即按揭人）承擔，但在相關推定產生時，這項責任可能轉移，視乎情況而定。

在指稱存在不當影響的情形中，存在最初的雙向訊問：

1. 申訴人與影響人之間的關係是否屬於依法推定存在不當影響的確定關係？

根據O'Brien 判例的原則，夫妻關係不屬於這個類別。

2. 如果不屬於確定的關係類別，在該關係中，申訴人是否會通常寄予相當程度的信任與信心，以至於可以推定存在不當影響？

為證實這點，提出申訴的妻子必須證明：

• 妻子對丈夫寄予信任和信心；或
• 丈夫取得了對妻子的支配或控制；及
• 由於雙方的關係，交易難於辯明。

就後一項條件而言，所涉交易必須明顯不利於妻子，因為無法以友誼、關係、慈善或人們據此行事的其他普通動機為由對其加以合理解釋。例如，妻子以其婚姻居所的權益提供擔保以保障丈夫的債務，通常並非明顯不利。如果丈夫的業務是家庭收入來源，妻子盡力支持業務，亦有利於自身的權益。妻子的愛情和自身利益可能共同促使她願意與丈夫一道抵押婚姻居所（通常是共有資產），以取得業務所需的財務融通。有關的資金可能需要用於開展新業務、拓展有前景的業務，或是挽救丈夫營運境況不佳的業務。

如果符合上述條件，從而產生不當影響推定，則影響人（或相關第三方，即貸款人）轉而有責任證明所訂立的交易是獨立而為，並無不當影響。如果無法履行這項責任，該項交易將被撤銷，而申訴人無須證明存在任何實際的不當影響。

在Re Lai Yin Shan, ex p Hong Kong Shanghai Banking Corp Ltd [2002] 3 HKLRD 500案件中，上訴法庭裁定，倘若妻子成為某家公司債務的擔保人，而該公司的股份由妻子及其丈夫持有，又若她持有名義上、少數或與丈夫等額的股權，即使妻子是公司的董事或秘書，銀行亦會提出查詢：

「一方（本案中為該銀行）受到訊問的作用在於，該方應當採取合理步驟令自己信納，相關人士（本案中為妻子）已經通過有意義的方式，領會所提議交易的切實後果。其目的在於，就交易的基本要件而言，妻子應當在訂立交易時具備充分理解。」

交易是否由不當影響而引致是一個事實問題，應當經過對所有案情適當、客觀的研究和評估後方可確定。但是，一旦證實銀行提出查詢，銀行便有責任證明已經採取合理步驟，令其信納已經通過適當步驟取得擔保人的同意

根據Etridge一案的原則，在擔保人交易中，銀行必須做下列事情：

• 堅持要求妻子於丈夫不在場的情況下出席與債權人代表（在按揭交易中，通常是律師行的物業轉易文員／律師）一起的私人會晤；
• 在此類會晤中，讓該代表提醒妻子注意擔保合約所規定的擔保人法律責任範圍，只有在擔保人給予適當回應的情況下才繼續；
• 提醒妻子注意在訂立交易時所承擔的風險；
• 敦促妻子尋求獨立法律意見，具備獨立的法律代表；及
• 堅持獨立評估債務人的財務狀況。

在評估該等案件時，人們必須關注交易及相關情境中擔保人的角色。在Wing Lung Finance Ltd v Cheng Ho Yin [2009] HKCU 532案件（未經報導，HCA 1494/2008，2009年4月14日）中，高等法院法官朱芬齡識別兩項重要因素為：(i) 現實風險給擔保人構成的嚴重程度；(ii) 給予擔保人在接受風險方面的得益。

在事實情境中適用法律

在Bank of China (Hong Kong) Ltd v Wong Yuk Ping Caroline [2003] 1 HKLRD 1案件中，高等法院暫委法官潘兆初認為，法院事實上會關注到妻子對丈夫的信任有可能遭到濫用，以及丈夫有可能不公平地利用這種影響，雖然在該案件中，法院在審訊過程中裁定妻子並非可信的證人，因此不接納她的證供。

下面的核查清單列明當面臨不當影響及／或失實陳述指控時，在事實查證行動中可以考慮的因素。

 

債務人提出的常見論點以及貸款人的抗辯可歸納如下。

貸款人和律師的實務指引

Etridge判例的原則獲闡明後，香港律師會和香港銀行公會發佈了實務指引，旨在令潛在當事人領會土地擔保交易相關文件的真正含義及效力。律師會的指引強調律師必須在借款人不在場的單獨當面會晤中向擔保人提供意見，並強調獨立法律意見的必要性。律師會還強調指出，律師應當就所涉及的風險的嚴重程度提供資料（例如在該交易下的擔保人須承擔的金額），並與擔保人討論其財務能力，包括她對所涉及的擔保數值的瞭解，以及是否存在任何其他資產，一旦借款人業務倒閉時，以這些資產來償還債務。這些指引有助於提醒律師盡量減少自身遭受申索的風險。

在實務中，Etridge判例原則令律師行承擔了相當重大的責任，包括風險管理問題。在Wing Hang Bank Ltd v Kwok Lai Sim [2008] HKCU 349案件（未經報道，HCMP 4362/2003，2008年2月28日）中，任懿君法官在第三方訴訟中作出對某律師行不利的裁決，理由是該律師行未能遵守上述指引。涉案律師僅匆忙與擔保人會晤了30分鐘，並僅概要地解釋了文件。然而，文件中包含即使在律師看來亦充滿矛盾、令人費解的措辭。任懿君法官亦裁斷，擔保人（兩名教育程度較低的姐妹）很可能並不理解自己簽署的文件的真正含義和效力。

鑒於香港大多數人口為華人，因此在此類情形中應另行使用雙語警示。 就獲取獨立法律意見的需要而言，應當以中文擬定確認與闡釋條款，並將其提交潛在受影響的一方。此外，貸款人及其律師經常為社會及法律背景不同的中國內地當事人處理業務，對於這些當事人，應當擬定簡體中文的確認書，並用普通話來為他們闡釋。

應當向金融機構的高級職員簡要介紹如何在涉及土地擔保的交易中進行適當的文檔記錄，並遵守盡職查證規定。佐證如此適當地處理交易的關鍵證據和證供，將有助於確保貸款人執行擔保的權利不會受到不當影響指稱的影響，令貸款人在土地擔保追討的申索中享有更高的勝訴機會。

陳蘇完
課程主任
HKU SPACE
zoe.chan@hkuspace.hku.hk