In the recent judgment, Deutsche Bank Aktiengesellschaft also known as Deutsche Bank AG acting through its Singapore Branch v Land Holding Company Investment Ltd and Another [2025] HKCFI 5308, the Court dismissed the wife’s defence of undue influence and allowed the Bank’s claims to enforce a Second Mortgage over a property owned by the wife’s corporate vehicle (Second Mortgage) for credit facilities offered to a holding company under the joint directorship of the husband and wife. Deacons represented the successful Plaintiff, Deutsche Bank AG.
In the judgment, the Court analysed the laws of undue influence when a wife stands as surety for her husband, and confirmed the following key legal principles:
1) There is no automatic presumption of undue influence in “husband and wife surety” situations;
2) The ultimate question is for the court to look at all relevant facts and circumstances to discern whether there has been actual undue influence;
3) Difficult discussions and heated exchanges between husband and wife are not sufficient to constitute undue influence. “Something more” has to be proved, before the court can infer that a husband had exerted undue influence over a wife; and
4) Once the Court rules against the finding of actual undue influence, it is not necessary to consider the question of presumed undue influence.
A. Factual Background
The Husband is an executive chairperson of a Listed Company (Listco). The Wife was previously the vice-chairperson, non-executive director, as well as member of the audit committee, of the Listco. After resignation from those positions in 2023, the Wife remained as a director of “various subsidiaries” of the Listco. At all material times, both the Husband and Wife were also directors and indirect shareholders of a holding company of the Listco (Holding Company). The Bank granted credit facilities to the Holding Company, secured by a guarantee from the Husband and also later a Second Mortgage over a property owned by the Wife’s corporate vehicle (Land Holding Company).
Following a default in payment, the Bank commenced the current legal actions against the Husband under the Guarantee and against the Holding Company and Land Holding Company under the Second Mortgage.
The Wife relied on the defence of undue influence, claiming to have signed the Second Mortgage Documents under the undue influence of the Husband. The Husband later filed an affirmation in support of the Wife’s claim of undue influence, admitting that he did try to exert pressure on the Wife at the time of the Wife’s signing of the Second Mortgage.
B. Legal Principles
The Court revisited the legal principles concerning undue influence. First, the Court cautioned against the use of presumptions in husband-and-wife surety cases. Given that husband and wife typically repose mutual trust and confidence in each other, it is not sufficient to establish any automatic presumption of undue influence merely because the case involves such relationship, as held in Royal Bank of Scotland v Etridge (No. 2) [2002] 2 AC 773. The court must look at all relevant facts and circumstances to discern whether there has been actual undue influence.
Second, undue influence connotes some form of impropriety and should not be lightly inferred. The Court commented that difficult discussions and heated exchanges between husband and wife are not sufficient to constitute undue influence, as they are a fact of daily life. Something more – positive misrepresentation, excessive pressure, emotional blackmail or bullying – has to be proved before the Court can infer that a husband had exerted undue influence over a wife and thereby constrained the exercise of the wife’s free will, as in the leading caseEtridge (No. 2).
C. Assessment of evidence
The Court found that both the Husband and Wife were not credible witnesses, because of, amongst others, the following:
1) The claims of the Husband and Wife were not supported by any contemporaneous evidence; but instead, contradicted by the documentary evidence adduced by the Bank;
2) There were contradictions in the oral evidence of the Husband and Wife with the witness statements and/or affirmations filed with the Court;
3) The Husband admitted that he was lying to the Bank when he told the Bank in telephone conversations that the Wife had consulted her own lawyers.
The Court even went on to find the Husband to have a propensity to say whatever may be expedient for his position, and “he may well have been lying about lying”, because it would help his wife’s case and (indirectly) his own.
For lack of credible evidence, the Court came to the conclusion that no actual influence was exerted on the Wife, and therefore there could be no question of finding presumed undue influence.
D. Concluding remarks
This case serves as a reminder that there is no automatic presumption of undue influence in a “husband and wife surety” scenario. The Court must look at all relevant facts and circumstances to decide whether the husband’s behaviour has some form of impropriety that goes beyond the bounds of what may be expected of a reasonable husband in the circumstances. This case also demonstrates the importance of contemporaneous evidence when parties later proffer contradictory evidence in the legal proceedings.
For further information, please contact:
Paul Kwan, Partner, Deacons
paul.kwan@deacons.com
