Miscellaneous Proceedings2011

MORAL LUCK FINANCE LTD v. LAW KIN LEUNG

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90052-EN-2013-11-07

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DCMP 2062/2011

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MISCELLANEOUS PROCEEDINGS NO 2062 OF 2011

----------------------

BETWEEN
	MORAL LUCK FINANCE LIMITED（德裕財務有限公司）	Plaintiff
and
	LAW KIN LEUNG（羅健良）	Defendant
----------------------

Coram : District Judge R. Yu in Chambers

Date of Hearing : 10 May 2013, 27 May 2013 and 16 September 2013

Date of Ruling : 7 November 2013

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R U L I N G

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The Application

1. This is an application taken out by Bank of Communication Co. Ltd. (“the Bank”) under Order 17 rule 1 of the Rules of District Court. The factual background of this application is set out in the affirmation of Yeung Ming Johnny filed herein on 6 March 2013.

2. The subject matter of this application is the title documents of Flat 17, 29/F., Choi Tin House (Block 3), Hing Tin Estate, No. 8 Lin Tak Road, Kowloon (hereinafter called “the Property” and the title documents thereof “the title documents”). The title documents include the document set out in “JY-2” of the said affirmation of Mr. Yeung, together with the Discharge hereinafter mentioned.

3. At the material time, the Defendant (“Mr. Law”) was the registered owner of the Property and by a Legal Charge dated 27 March 2002 (M/N UB8653611 hereinafter called “the Charge”), the Property was charged by Mr. Law to the Bank as security for a loan of $200,000. Upon execution of the Charge, the title documents were delivered to the Bank.

4. According to the affirmation of Mr. Yeung, the loan has been repaid some time ago. Upon discharge, the Bank should return the title document to Mr. Law. But for reason unknown to the Bank, the Defendant did not take out the formalities in discharging the Charge. The title documents remain with the Bank.

5. The Bank has no interest in the title documents as the loan has been repaid. But 4 parties claim entitlement to the title documents as hereinafter explained. The Bank applies under Order 17 for leave to deposit the title document with this Court for the claimants to show their case. I first refer to some factual background which is necessary for my determination.

Background

6. It is helpful to set out the relationship of these 4 claimants, and how they come to claim interest in the Property and/or the title documents.

7. One of the claimants is the Plaintiff (“Moral Luck”) which is a moneylender and it has lent $30,000 to the Defendant. The loan has not been repaid and Moral Luck started DCCJ 736/2011 to recover the loan and interest. Default Judgment had been obtained and Moral Luck further obtained a charging order absolute against the Property on 29 July 2011(“the Charging Order”).

8. By DCMP 2062/2011, Moral Luck applied to enforce the Charging Order by an order of sale. Order of sale had been granted by Master T. Chan (as she then was) on 20 October 2011 together with an order for possession (“the Order of Sale”). And it is provided in the order that the Plaintiff may sell the Property by private treaty or public auction in the open market after paying the premium to the Housing Authority at a price not less than $1,950,000 or in the secondary market at a price not less than $1,000,000.

9. Pursuant to the Order of Sale and by a provisional agreement dated 19 January 2012, Moral Luck agreed to sell the Property to Madam Wong Wai Ha (“Madam Wong”) for the consideration of $1,950,000.

10. After possession of the Property has been obtained by the Plaintiff through bailiff in January 2012, Madam Cheung Kwai Yin (“Madam Cheung”), the wife of Mr. Law applied to this Court for, firstly, an injunction to restrain sale of the Property, and secondly for an order to appoint her as the guardian ad litem for the Defendant (on the ground that he is a mentally incapacitated person) and to set aside the default judgment Charging Order and Order for Sale. This application came before me in February 2012 and it was partly resolved when the Plaintiff undertook to withhold completion of the sale under the said provisional agreement.

11. The application of Madam Cheung has been dismissed. (I do not repeat my judgment given on 25 October 2012.) And the default judgment, the Charging Order and Order of Sale have not been set aside.

12. On or about 2 January 2013, Madam Cheung applied for leave to appeal against my decision, and for stay of execution. I refused her application. (I do not repeat my written ruling given on 23 April 2013.)

13. And after my rulings, the sale to Madam Wong was completed. In relation to the sale of the Property to Madam Wong, the following facts appear in her affirmations and are not disputed

a. Madam Wong paid $80,000 as initial deposit upon signing of the provisional sale and purchase agreement;
b. On 30 January 2012, Madam Wong paid further deposit of $115,000;
c. On 30 January 2012, Madam Wong paid further deposit of $115,000;
d. On 2 November 2012, Madam Wong signed a third supplemental agreement to postpone the completion date to 4 February 2013 or 7 days after issuance of the Notice of Premium Assessment by Housing Authority;
e. Sale of the Property was completed on 8 February 2013 when balance was paid.

14. I also note that on 31 January 2012, Mr. Law and Madam Cheung issued a new action in the District Court, being DCCJ 303/2012, against Moral Luck and Madam Wong. I note that in the title, Madam Cheung stated that she sued as guardian ad litem. It is not clear if Madam Cheung also brings the action in her personal capacity. No statement of claim has been filed and according to the endorsement of claim, the plaintiffs Mr. Law and Madam Cheung seek, inter alia, a declaration that the provisional agreement between Moral Luck and Madam Wong is null and void. And under prayer 4, they seek a declaration that the 2^nd Plaintiff is entitled to the legal, beneficial and equitable interest in the Property. No particulars of the basis of the claim are given.

15. A copy of the writ has been registered in the Land Registry against the Property on or about 31 January 2012. It is not disputed that this writ has not been served and the validity has expired.

Facts leading to the interpleaders application

16. Around 21 December 2012, solicitor for Moral Luck wrote to the Bank requesting for the title documents on the ground that they have obtained the Order of Sale. The exchange of correspondence has been produced and I do not need to go into the details. It is the Bank’s position that they are reluctant to release the title documents to Moral Luck without the consent of Mr. Law.

17. Around 1 February 2013, Messrs. Kok & Ha acting for Mr. Law wrote to the Bank asking for all the title documents to prepare the Discharge for the Property. The Bank had been informed by Moral Luck that Mr. Law claimed to be a mentally incapacitated person in this action and they were reluctant to send over the title document before the mental capacity of Mr. Law is clarified.

18. And around 4 February 2013, the Bank also received a letter from Messrs. Paul W. Tse acting for Madam Cheung. They alert the Bank that Madam Cheung would appeal against my decision given herein and requested the Bank to withhold releasing the title documents. By letter dated 5 February 2013, the Bank agreed to withhold releasing the title documents.

19. Madam Cheung now claims to have a beneficial interest in the Property which I would come to later herein. This claim is not set out in the letter of Messrs. Paul W. Tse to the Bank and has not been raised in these proceedings before.

20. And around 15 February 2013, the Bank received a further request from Messrs. Kenneth C. C. Man, solicitors for Madam Wong, who claims to be the new purchaser and registered owner of the Property. Madam Wong asked the Bank to release the title documents to her. An assignment dated 4 February 2013 is produced which shows that Moral Luck relies on the Order of Sale to sell and assign the Property to Madam Wong.

The Claim of Madam Wong

21. By a Summons taken out by Madam Wong’s new solicitor, Messrs. Deannie Yew & Associates, and her affirmation filed on 18 April 2013, she applies to be joined in the interpleaders proceedings and claims the title documents from the Bank.

22. It is Madam Wong’s case that she has purchased the Property from Moral Luck as authorized by the Order of Sale. The Defendant’s title to the Property is extinguished. She as the legal owner is entitled to the title documents.

23. Referring to the case of Madam Cheung hereinafter mentioned, Mr. Ng also argues that there is no evidence in writing to show the creation of Madam Cheung’s interest in the Property pursuant to the so called gift. And for her to establish proprietary estoppels, she has not adduced evidence to show that Mr. Law promised to give her an interest in the Property. The essence of proprietary estoppels is the conduct of the legal owner has so conducted himself that the claimant believes he has, or will obtain some right in the land, and he has acted to his detriment on the basis of the induced belief. Madam Cheung only said the father of Mr. Law promised to give her an interest in the Property.

24. Mr. Ng submits that the case is straight forward. He invites me to summarily determine the issue under Order 17 rule 5(2)(b) and direct the title documents be given to Madam Wong.

The Claim of Madam Cheung

25. By a Summons taken out by Messrs. Paul W. Tse, solicitors for Madam Cheung, she claims entitlement to the title documents in her personal capacity. Mr. Wong, counsel for Madam Cheung refers me to the affirmation of Madam Cheung filed on 16 May 2013.

26. Madam Cheung said the Property was purchased by the father of Mr. Law (“Law’s father”) in about 2002. The Property was registered in the name of Mr. Law. She married Mr. Law in 2007. At the time she married Mr. Law, Mr. Law’s father said to her that the Property is a gift to them for their marriage “呢間屋係送比你地結婚架喇”. Madam Cheung said it was the common intention that the Property would be held by Mr. Law and her in equal shares and she is one of the beneficial owners of the Property.

27. Madam Cheung further said, in light of the promise, she had been responsible for various outgoings of the Property (such as rental and management fees and maintenance).

28. In further support, Madam Cheung said in 2008, Mr. Law applied to the Housing Authority to assign the Property to himself and Madam Cheung. This was approved by Housing Authority on or about 22 December 2008. However, the Property was subject to the Charge and could not be assigned to Mr. Law and Madam Cheung.

29. It is her case that notwithstanding the assignment has not been executed, she has a beneficial interest in the Property and hence a right or interest in the title documents. Mr. Wong submits that the title documents should not be released to Madam Wong.

30. Madam Cheung also claims that Madam Wong is not a bona fide purchaser. She initially claims that the sale is a sham arrangement but at the hearing, Mr. Wong agrees that he only seeks to argue that Madam Wong is not a bona fide purchaser without notice of the interest of Madam Cheung in the Property.

31. Mr. Wong submits that in view of the complexity in terms of facts and law, I should not summarily determine the issue. The title documents should be deposited with this Court and the parties claiming entitlement should then state their respective cases and the matter should be referred to trial.

Claim of Moral Luck

32. Moral Luck now agrees that they have no further claim to the title documents as they have sold the Property to Madam Wong pursuant to the Order of Sale. They only claim costs of these proceedings which I would come to later.

Claim of the Defendant

33. And for the Defendant, he is unrepresented. He has filed an affirmation stating that he objects to the release of title documents to Madam Wong with no detailed reason. He further said he would adopt the affirmation of Madam Cheung filed herein in support.

The Bank

34. After the preliminary hearings, the Bank agrees to prepare the Discharge of the Property (“the Discharge”) and has deposited the Discharge together with all the title documents with the Court and/or to deliver the same to the party that this Court found should be entitled.

35. Since the Bank has no interest, this is proper case for the title documents be deposited with the Court for interested parties to claim.

Legal Principles

36. On whether to determine an interpleader application summarily, I refer to the judgment of Mr. Justice To given in Nanyang Commercial Bank Limited v. The Personal Representative of Vannee Nativivat, deceased and another HCMP 2027/2011:-

11. On hearing the application, the court has wide discretion, including dismissing the application on grounds that the prerequisites in rule 1 or the formal requirements in rule 3 are not satisfied; making a summary determination of the claim; and giving direction as to the further conduct of the proceedings: rule 5 and Hong Kong Civil Procedure 2012 paragraphs 17/5/2 to 17/5/9. Summary determination is the course most commonly taken in straightforward cases, particularly where expedition is desirable. But if the subject matter is of considerable value and difficult questions of law may arise, summary determination is not appropriate, even if the parties so consent: Fredericks and Pelhams Timber Buidings v Wilkins, Read (Claimant) [1971] 1 WLR 1197; [1971] 3 All ER 545 (CA).
12. A summary determination, being summary in nature, is only appropriate for clear cases to which summary judgment under Order 14 is applicable. The legal principles applicable to summary judgment under that order are also applicable to a summary determination under Order 17. Summary determination is therefore appropriate for cases in which there is no material factual dispute and if there is a legal issue, then no more than a crisp legal question as well decided summarily as otherwise. The court must not embark on a mini trial on affidavits.

37. A similar observation is made by the learned authors of the Hong Kong Civil Procedure 2013 at paragraph 17/5/4. I agree with the able judgment of Mr. Justice To.

Discussion and Ruling

38. To determine if the case can be summarily determined, the key is to identify the issue in dispute.

39. Though there is a long history, most of them are background and not relevant to the determination herein. I agree with Mr. Ng that the only issue before me is the possessory rights to the title documents. The question for my determination is who should be entitled to have the title documents.

40. As to the legal principle on who would be entitled to possessory right to the title documents of a property, Mr. Wong accepts that a purchaser is entitled to the originals of all title documents which relates exclusively to the Property upon completion. He refers to De Monsa Investments Ltd v. Whole Win Management Fund Ltd [2011] 4 HKLRD 478.

41. There is further appeal from the said judgment to the Court of Final Appeal, which is FACV 6/2012. While this judgment has been overturned by the Court of Final Appeal, the Court of Final Appeal reconfirmed that the vendor has a duty to handover the title documents in his possession which relates exclusively to the property in issue. This is a case on the duty of the vendor to prove his title by producing the original title documents. This is not directly on the point as to who should have the title documents but extremely helpful.

42. Applying this principle, when Mr. Law first became the owner of the Property, he indeed obtained the title documents from the vendor and had the possessory right to the title documents. He passed on his possessory right to the Bank when he executed the Charge, possibly as co-lateral security. Without the action, when the Charge is discharged, the title documents should be returned to him.

43. The first issue I would consider is whether the right of Mr. Law to the title documents has been varied, as at today.

44. It must be noted that upon granting of the Order of Sale, Mr. Law is also ordered to do all act necessary to transfer the title of the Property to the new purchaser and to obtain the necessary release of all title documents from the Bank. Hence Mr. Law is obliged to transfer the title documents to the new purchaser. The intention of the order is to give a perfect title to the new purchaser.

45. If Moral Luck sells according to the Order of Sale, the interest in the Property would pass to the new purchaser. And Mr. Law is obliged to pass the title documents to the new purchaser. If the title documents are being kept by his agent, as in this case by the Bank who has no interest in the title documents, he has to procure the transfer of the title document to the new purchaser. Clearly, his possessory right to the title document is governed by the Order for Sale. The Order of Sale has not been set aside and should be complied.

46. Mr. Ng submits that Mr. Law’s entitlement to the title documents is extinguished upon sale of the Property to Madam Wong. I agree that unless it could be established that there is no sale to Madam Wong under the Order of Sale, the Defendant’s claim to the title document must fail.

47. Mr. Law has not raised any arguable case. Understandably, Mr. Law being unrepresented has not raised any argument why the title documents should not be released to Madam Cheung. I take it that he adopts the argument of Madam Cheung.

48. It is the argument of Mr. Wong that Madam Wong is not a bona fide purchaser without notice of the interest of Madam Cheung. I come first to look at the argument and see if a triable issue is raised or is there any reason for the argument be set down for trial.

49. Mr. Wong argues that the burden rest on Madam Wong to prove that she is a bona fide purchaser. It is not disputed that the Property was sold by private treaty and not by auction. But this mode of sale is permitted by the Order of Sale.

50. The undisputed fact is Madam Wong acquired the Property from Moral Luck who sold the Property according to Order of Sale. The assignment has been registered and produced. And there is no dispute that Madam Wong paid the purchase price. I fail to see what other matter she has to show that she is a bona fide purchaser. It would be for Madam Cheung, and/or Mr. Law to show there is any arguable issue that Madam Wong is not a bona fide purchaser.

51. In the written submission, Mr. Wong claims that the sale to Madam Wong is a sham. On submission, Mr. Wong does not relying on the argument that the sale is a sham arrangement anymore.

52. Madam Cheung sets out in her affirmation the following facts and said Madam Wong is a related person to Moral Luck. I asked Mr. Wong if “related person” is a legal concept and he agrees that it is not. And he submits all he wants to prove at trial is that the sale to Madam Wong is suspicious, or not bona fida. He refers to the affirmation of Madam Cheung, that

a. The sole direction of Moral Luck is Mr. Jason Ip.
b. Mr. Jason Ip and one Ip Chi Man are the shareholders and directors of Timemark Investment Limited.
c. Ip Chi Man and Lam Chak Sun are the shareholders and directors of Intell Finance and Mortgage Limited.
d. Intell Finance and Mortgage Limited and Timemark Investment Limited have the same registered office at Flat G, 4/F, Prince Edward Building, which is also the residential address of Mr. Jason Ip.

53. Mr. Wong pointed out that there is some common address between the above three companies. But there is no suggestion that Madam Wong has any interest in these companies.

54. Madam Cheung further says that Mr. Lam Chak Sun and Madam Wong are the directors of Dream Optical City Limited, and Dream Group Limited.

55. The only link between Dream Optical City Limited and Dream Group Limited with Moral Luck is that they are appointed one Wisdom Business Services Limited as company secretary.

56. Madam Cheung claims that by reason therefore, Madam Wong and Moral Luck are related and not a bona fide purchaser.

57. As analysed above, Madam Wong is not a shareholder or director of Moral Luck. The fact that Dream Optical and Dream Group had the same company secretary is not sufficient to suggest that Dream Optical and Dream Group are related company of Moral Luck or raise any reasonable suspicion that suggest Madam Wong is not a bona fide purchaser.

58. Mr. Wong also argues that it is unusual for a purchaser to buy a property without title document, and without inspection. The evidence to establish that Madam Cheung is not a bona fide purchaser is flimsy. Taking all the submission, I am not convinced that there is any reasonable argument or triable issue that Madam Wong is not a bona fide purchaser.

59. Further, Mr. Wong seeks to establish that, even if she is a bona fide purchaser, Madam Wong has knowledge of the equitable interest of his client and therefore she holds the Property subject to the right of Madam Cheung. But what is the claim of Madam Cheung?

60. Madam Cheung claims to be entitled to some beneficial interest in the Property as a gift from Law’s father as mentioned above. Mr. Wong argues that, though the gift is not completed, she had contributed to the outgoings of the Property. Mr. Law and/or his father would be estopped from denying that she should be entitled to some beneficial interest in the Property.

61. Mr. Wong argues that Madam Wong would have constructive notice of the right of Madam Cheung as Madam Wong did not inspect the Property, or the title documents before completion. Mr. Wong refers me to the case of Wong Chim Ying v. Cheng Kam Wing CACV 75/1990. He said Madam Wong has not inspected the Property and she would be imputed with knowledge of the beneficial right of Madam Cheung. For reason following, I do not have to consider at length the case of Wong Chim Ying save that I do not agree the principle of constructive notice is applicable to this case.

62. Mr. Wong further argues that Madam Wong would have actual or implied knowledge of the Writ filed in DCCJ 303/2012. The writ has been registered in the Land Office and Madam Wong or her solicitors should have searched the record before completion. She should be imputed with knowledge of the contents of the writ and the beneficial interest of Madam Cheung. Again, I do not have to consider this argument for reason following. But I should note that the statement of claim has not set out the basis of the claim of Madam Cheung.

63. Mr. Ng submits that Madam Cheung’s claim on proprietary estoppels is misconceived. The essence of proprietary estoppels is that the legal owner has so conducted himself to make the claimant believes that he/she has some rights in the property, and he/she acted to his/her detriment on the basis of the induced belief. I agree.

64. Mr. Ng submits that the promise of gift to Madam Cheung come from Law’s father, according to her own evidence. There is no evidence that Mr. Law promised to give an interest in the Property to Madam Cheung. Even accepting that there is evidence that Mr. Law has applied to the Housing Authority to transfer the Property to the joint name of himself and Madam Cheung. But we have no evidence on the reason for making this application. And it is never the case of Madam Cheung that Mr. Law promised to give her an interest.

65. It is not clear if the father retains any interest in the Property when he promised Madam Cheung an interest in the Property as alleged, as the Property was registered in the name of Mr. Law. It is for Madam Cheung to state clearly if the father retains any right to the Property before she could argue the claim of gift and proprietary estoppel. Since she has not set out the essential element of her claim, she does not begin to have an arguable case of proprietary estoppels to establish her interest in the Property.

66. I agree with the submission of Mr. Ng that there is no reasonably arguable case that Madam Cheung having an interest in the Property as stated in her affirmation. And it follows that the question of notice is of no assistance. Her claim to the title documents is bound to fail.

67. Further and in the alternative, the issue whether Madam Cheung has a beneficial interest in the Property is not an issue that affects my determination on who is entitled to the title documents. Assuming for a moment that Madam Cheung has a right as claimed, would it affect the right of Moral Luck to sell the Property? The answer is “no” for the following reason.

68. Assuming Madam Cheung is entitled to claim an interest in the Property on proprietary estoppels against Mr. Law and the father. But the right of Moral Luck to sell the Property stem from the Charging Order. According to the Rules of District Court, the applicant has to serve notice on all occupiers and it is for the occupier to appear in Court to state their right. No allegation of irregularity on obtaining the Charging Order has been raised. Madam Cheung has not appeared in Court to claim her right or oppose the Charging Order. She cannot now claim her interest against Moral Luck without first applying to set aside the Charging Order. Indeed, she has not taken any action to set aside the Charging Order. And as mentioned above, validity of the writ issued in DCCJ303/2012 has expired.

69. When Madam Wong purchased the Property, she purchased it from Moral Luck who sold pursuant to the Order of Sale. By the order, and pursuant to the common law principle that purchaser is entitled to title documents, she should be provided with the title documents. And as analysed above, Mr. Law is obliged to handover, or assist in the handing over of title documents.

70. Before Madam Cheung could set aside the Charging Order and Order of Sale, and seek a declaration of her right, Madam Wong would still be entitled under the Order of Sale to have possessory right to the title documents. Hence the claim of Madam Cheung would not affect the right of Madam Wong to be the legal owner of the Property and to have the title documents.

71. I need only repeat, I am to determine the possessory right of the title documents. And I see no reason why the Order of Sale should not be complied with.

72. Mr. Ng, counsel for Madam Wong submits that the claim by Madam Cheung for beneficial interest in the Property on the ground of proprietary estoppels is barred by the principle of res judicata. Madam Cheung has elected to pursue the Defendant’s claim for setting aside the Order of Sale as the Defendant’s guardian ad litem. Such application conflict with her claim for proprietary estoppels. Having elected to apply to act as guardian ad litem of Mr. Law, it lies ill in her mouth to have a second bite of the cherry by dressing up herself a claimant for proprietary estoppels.

73. I do not have to go into such argument as the above finding is sufficient to allow Madam Wong to have the title documents. Anyway, this is not the venue to determine any claim by Madam Cheung to any interest in the Property against Mr. Law and/or Law’s father.

74. The Bank has deposited the title documents to this Court under the interpleader proceedings. In summing up, I conclude that the application can be and shall be summarily determined. And with the above analysis, the title documents shall be released to Madam Wong, the new purchaser of the Property in compliance of the Order of Sale. I therefore direct the title documents be released to Madam Wong.

75. And for costs of Madam Wong in this application, I see no reason why cost should not follow the event. Her application is contested by Madam Cheung and Mr. Law. I would therefore grant an order nisi that Madam Cheung and Mr. Law shall jointly and severally bear the costs of Madam Wong in these proceedings, such costs to be taxed if not agreed. I would also certify that this application is fit for counsel.

76. As for the Bank, they should be indemnified for their costs. This case is different from cases when the subject matter is cash, when the usual costs order is for the Bank to retain its costs before payment in. In this situation, I would give an order nisi that the Bank shall recover the cost herein from Mr. Law and Madam Cheung.

77. I am not minded to award any costs to Moral Luck as when the Bank took out these proceedings, they have no further interest in the title documents. They attendance is not required. I make no order in favour of Moral Luck.

78. I believe I covered all issues and I thanks counsels for their able assistance.

( R. Yu )
District Judge

Messrs. Philip T. F. Wong & Co., for the Plaintiff, excused from attendance Defendant, acting in person, present

Mr. J Yeung, of Messrs. Ford, Kwan & Co., for the Bank of Communication Co. Ltd.

Mr. Felix Ng, instructed by Messrs. Dennie Yew & Associates, for Madam Wong Wai Ha

Mr. Tim Wong, instructed by Messrs. Paul W. Tse, for Madam Cheung Kwai Yin

86780-EN-2013-04-23

MORAL LUCK FINANCE LTD v. LAW KIN LEUNG

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DCCJ 736/2011

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 736 OF 2011

----------------------

BETWEEN
	MORAL LUCK FINANCE LIMITED	Plaintiff
	（德裕財務有限公司）
and
	LAW KIN LEUNG（羅健良）	Defendant

----------------------

DCMP 2062/2011

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MISCELLANEOUS PROCEEDINGS NO 2062 OF 2011

----------------------

BETWEEN
	MORAL LUCK FINANCE LIMITED	Plaintiff
	（德裕財務有限公司）
and
	LAW KIN LEUNG（羅健良）	Defendant

----------------------

Coram : Deputy Judge R. Yu in Court

Date of Hearing : 21 February 2013

Date of Ruling : 23 April 2013

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R U L I N G

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1. I shall now proceed to deal with the application by the Plaintiff under Order 62 rule 8 of the Rules of District Court that Mr. Chiu of Messrs. Chiu Szeto & Cheng (“CSC”) shall be personally liable for the costs of the Plaintiff incurred herein. CSC were the solicitors on record for the Defendant, and the solicitors appointed by Director Legal Aid to act for Madam Cheung, the Applicant.

2. Procedurally, the Plaintiff should take out such application after the conclusion of the trial (Order 62 Rule 8A). I do not have to consider if the application is taken out of time. CSC complains that the application is late, and I could only presume that it is a general ground asking this Court not to entertain the application. For reason below, I do not have to cover this point and I take the application as issued in time.

3. I need to cover some relevant background facts before I come to the argument of Mr. Cheung, counsel for the Plaintiff.

4. I would start with the Notices to Act for the Defendant filed by CSC on 28 January 2012 in these actions and the Summonses they filed for the Defendant on the same day asking for various reliefs, including appointment of Madam Cheung as guardian ad litem of the Defendant, setting aside the relevant judgment and order given in these proceedings, an interim order for stay of execution, and an injunction to restrain the Plaintiff from executing the order for sale. At this stage, no party is legally aided.

5. Parties came before me for an urgent interim injunction on 2 February 2012, when counsel Mr. Jacky Lai appeared and claimed in his skeleton that he acted for the Defendant and Madam Cheung.

6. I did not have to rule on the application on that day as the Plaintiff was prepared to give an undertaking not to proceed with the order of sale. As a result, the summonses were adjourned for the Plaintiff to file affirmation in opposition before I hear the full argument.

7. Madam Cheung applied for Legal Aid on or about 22 February 2012. And by a Legal Aid Certificate dated 19 March 2012, Legal Aid was granted to Madam Cheung for Law Kin Leung and Mr. Chiu Kwok Wing of CSC was assigned by Director of Legal Aid to act for the aided person.

8. Pausing here, though the certificate was granted to Madam Cheung “for Law Kin Leung”, the applicant for Legal Aid is Madam Cheung. I believe Madam Cheung is the aided person.

9. Later, the Plaintiff came back asking for leave to medically examine the Defendant. This is resolved and the Defendant is jointly examined by the psychiatrists nominated by the parties. Mr. Cheung informed this Court that the instruction given to the experts was signed by CSC as solicitors for the Defendant.

10. And on 1 August 2012, CSC again took out a summons on behalf of the Defendant asking for leave to instruct a 3^rd psychiatrist to medically examine the Defendant. The summons came before me on 6 August 2012 and counsel Mr. Kam Cheung appeared for Madam Cheung. It is confirmed by Mr. Kam Cheung that it was Madam Cheung who took out the application by the said summonses, and the Legal Aid Certificate was granted in favour of her. I have recorded the matter in my judgment.

11. The application for appointment of Madam Cheung as guardian ad litem for the Defendant was argued before me on 10 August 2012, when Legal Aid has been discharged. And before the hearing, CSC had applied by summons to cease to act as solicitors for Madam Cheung. An order was granted for CSC to cease to act.

12. After the hearing, I ruled against Madam Cheung and a written judgment has been delivered. I ordered Madam Cheung to pay the costs of the Plaintiff. The Plaintiff has applied by summons to vary my costs order to the effect that the Defendant should also be responsible for the costs, which I have given a separate ruling in Chinese today, when the application has been refused and I do not repeat.

13. The Plaintiff also applies for CSC to be responsible for their costs, joint and severely with the Defendant and/or Madam Cheung. The application is based on Order 62 rule 8 which reads –

8. Personal liability of legal representativefor costs-wasted costs order
(O. 62, r. 8)
(1) The Court may make a wasted costs order against a legal representative, only if-
(a) the legal representative, whether personally or through his employee or agent, has caused a party to incur wasted costs as defined in section 53(5) of the Ordinance; and
(b) it is just in all the circumstances to order the legal representative to compensate the party for the whole or part of those costs.
(2) A wasted costs order may-
(a) disallow the costs as between the legal representative and his client; and
(b) direct the legal representative to-
(i) repay to his client costs which the client has been ordered to pay to other parties to the proceedings; or
(ii) indemnify other parties against costs incurred by them.
(3) ……

14. And wasted costs is explained in section 53(5) of the District Court Ordinance and read –

(3) In any civil proceedings before it, the Court may, in accordance with rules of court, by order disallow, or order the legal representative concerned to meet, the whole or any part of any wasted costs.
(4) ……
(5) In subsection (3), “wasted costs” (虛耗訟費) means any costs incurred by a party as a result of-[my emphasis]
(a) an improper or unreasonable act or omission; or
(b) any undue delay or other misconduct or default, on the part of any legal representative, whether personally or through an employee or agent of the legal representative.

15. Reading Order 62 rule 8 with section 53(5), a wasted costs order covers the position when a legal representative commits the wrongful act as set out in section 53(5) causing a party to incur wasted costs and hence should be personally liable to compensation that party, who may be his client, or another party in the action. There has to be a causal link between the improper act and the costs incurred as a result thereof.

16. And, in accordance with rule 8B, I should consider the application by a 2 stage process –

8B. Stage of considering whether to make a wasted costs order
(O. 62, r. 8B)
(1) The Court shall consider whether to make a wasted costs order in 2 stages-
(a) in the first stage, the Court must be satisfied that-
(i) it has before it evidence or other material which, if unanswered, would be likely to lead to a wasted costs order being made; and
(ii) the wasted costs proceedings are justified notwithstanding the likely costs involved; and
(b) in the second stage (even if the Court is satisfied under subparagraph (a)), the Court shall consider, after giving the legal representative an opportunity to give reasons why the Court should not make a wasted costs order, whether it is appropriate to make the order in accordance with rule 8.

17. Parties agrees that for today, I am to rule at the first stage and I only need to consider herein if there is evidence before me that if unanswered, would be likely to lead to a wasted costs order being made. If I rule in favour of the Plaintiff, I would give further direction on the evidence and hearing.

18. There is no affirmation filed in support of the Plaintiff’s application. I believe the above matters are not in dispute. And it must be accepted by all parties that CSC has no instruction to act for the Defendant. The matters relied on by the Plaintiff in support of this application would be that CSC has filed the above summonses, supporting affirmation, and instructions to experts claiming to be solicitors for the Defendant.

19. It is the main argument of Mr. Chiu in his submission that no costs have been wasted. This is an application by Madam Cheung in truth, right from the beginning. And all the legal costs are necessary for determining the application. He admits that his firm is at fault in wrongly stating that they act for the Defendant, but there is no wasted costs and I should not move onto the second stage.

20. Mr. Cheung submits that CSC remains the solicitors for the Defendant on record until the Defendant filed a Notice to Act to Person on 31 October 2012. On the contrary, CSC has not acted for Madam Cheung on record.

21. Mr. Cheung moved on to submit that CSC is in breach of professional conduct when he acted for the Defendant without proper instruction from the Defendant. They acted only on the instruction of Madam Cheung. He relies on the judgment in Chan Chi Ming v. Brilliant Rise Container Deport Ltd. [2008] 1 HKLRD 648 and submits that CSC is in breach of warranty of authority and should be liable for the costs of the Plaintiff.

22. The case is distinguishable as the solicitor has no instruction to act for the 2^nd defendant in that action and costs has been wasted. But here, CSC has instruction from Madam Cheung and the application, as I analyse later, is the application of Madam Cheung.

23. There is no evidence adduced and the Plaintiff is relying entirely on the document filed and some undisputed fact. Apart from the statement on the summons, there is no evidence that the application is taken out by the Defendant. Taking the argument of Mr. Cheung to the highest, CSC has made a mistake in stating on paper as to whom they acted for. If there is a mistake, it is a clerical mistake.

24. The summons is an application for appointment of a guardian ad litem, on the ground that the Defendant could not give instruction to legal advisor, including CSC. It is obvious that the claim to be the solicitors for the Defendant is a mistake and definitely would not conflict with the explanation given to this Court that the summons is indeed taken out by Madam Cheung.

25. And most important, this Court and the Plaintiff had been notified on 6 August 2012 that the application is taken out by Madam Cheung. Assuming for a moment that the summons had been wrongly taken out by the Defendant initially, it must have been taken over by Madam Cheung at that juncture. There was no objection raised by the Plaintiff or its legal advisors. And indeed, application had later been taken out by summons to join Madam Cheung as a party, on the concern that if she was not a party, the Plaintiff could not recover costs against her. I had ruled in my judgment that it is not necessary.

26. Indeed Madam Cheung has obtained Legal Aid in March 2012. The Legal Aid Certificate has been filed and served on the Plaintiff. While accepting that no Notice to Act for Madam Cheung has been filed by CSC, serving of the Legal Aid Certificate gave actual notice to the Court and the Plaintiff that CSC has become her solicitor on record. If the Plaintiff thought that the summons had been wrongly taken out for the Defendant, they should have clarified with CSC there and then. There is no evidence to suggest this is not an application taken out by Madam Cheung.

27. Mr. Cheung has also relied on the case of Ma So So v. Chin Yuk Lun (2004) 7 HKCFAR 300. I believe the case is relevant that when a solicitor is in serious dereliction of duty on his part, he may be held liable for the costs of the whole action. There the solicitor has been acting mali fide. But the case is distinguishable as here we are dealing with the clerical mistake on the part of CSC, or at most a mistake on practice or law.

28. And what could be the wasted costs incurred? Is there any costs wasted because of the alleged misconduct of CSC?

29. At end of the day, the application for guardian ad litem has been argued at length and all the expert report had been referred to. The summonses and affirmation, and the expert reports are necessary for a fair hearing of the matter.

30. It might be argued that the first hearing on 2 February 2012 is wrongly stated as an application of the Defendant. The legal team of Madam Cheung has indeed made a mistake. But the summonses have not been disposed of on that day, and in fact is part of the final adjudication. Given the subsequent acknowledgement by counsel for Madam Cheung that she is indeed the applicant, the costs would be covered by the costs order against Madam Cheung. And no addition costs is wasted because of the wrong statement of CSC being the solicitor of the Defendant.

31. It may be argued that the costs incurred before March 2012 would not be covered by the Legal Aid Certificate and the Plaintiff has greater difficulty to recover direct from Madam Cheung. But that is not wasted costs. And in any event, if the summons has been taken out correctly under the name of Madam Cheung, this part of the costs would not be covered by the Legal Aid Certificate.

32. The only costs unnecessarily incurred would be the Notice to Act. In compare to the costs of further argument in this case, it is not justified to move on to the 2^nd Stage.

33. From the above, it is not likely that the Court would give a waste costs order against CSC.

34. Accordingly, I refuse the application of the Plaintiff. Mr. Chiu also argues that the Plaintiff is late in making the application. For reason above, I do not have to rule on the ground.

35. This is an unfortunate situation and a good reminder to practitioners that they should be more careful with their drafting. It is always a nightmare to solicitors when he fails to spot the mistake before he signed the document. CSC might be in greater trouble if the Defendant has a complaint against them. And given the special nature of the application, I am not minded to grant any order of costs.

( R. Yu )
Deputy District Judge

Mr. Wallace Cheung, instructed by Messrs. Philip T. F. Wong & Co., for the plaintiff

Mr. Benedict Chiu, of Messrs. Chiu, Szeto & Cheng, on record for the defendant

86779-CH-2013-04-23

德裕財務有限公司對羅健良

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DCMP 2062/2011

香港特別行政區

區域法院

民事雜項案件2011年第2062號

（有關收回被佔用土地事宜）

----------------------

原告人	MORAL LUCK FINANCE LIMITED
	（德裕財務有限公司）
	訴
被告人	LAW KIN LEUNG（羅健良）

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DCCJ 736/2011

香港特別行政區

區域法院

民事訴訟2011年第736號

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原告人	MORAL LUCK FINANCE LIMITED
	（德裕財務有限公司）
	訴
被告人	LAW KIN LEUNG（羅健良）

--------------------

主審法官：余敏奇暫委法官

審訊日期： 2013年2月21日及2013年3月8日

頒下判案書日期： 2013年4月23日

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判決書

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1. 今日的數項申請，源於張桂燕女士在上述兩案中所提出的傳票申請。張女士指被告人，即她的丈夫羅健良是一精神上無行為能力的人，要求法庭委派她成為被告人的辯護監護人，並要求法庭撤銷區域法院在民事訴訟2011年736號案(“DCCJ 736/2011案”)的勝訴判令，及區域法院雜項案件2011年2062號案(“DCMP 2062/2011案”)的命令，包括售樓令。案件經本席審理，並在2012年10月25日頒下書面判詞，駁回張女士的所有申請。

2. 2012年11月2日，被告人向法律援助署署長就DCCJ 736/2011案申請法律援助，根據《法律援助》條例，該案的程序得暫緩進行42天。

3. 2012年11月7日，張女士也向法律援助署署長就兩案申請法律援助，以對本席的判決作出上訴。同樣，根據《法律援助》條例，兩案的程序得暫緩進行42天。

4. 2013年2月15日，法律援助署署長拒絕向被告人及張女士提供法律援助。

5. 在2012年12月20日，原告人在DCMP 2062/2011案發出傳票，要求修改本席於10月25日所頒下的暫時訟費命令。根據本席的暫令，張女士提出的兩項傳票申請，訟費由張女士負責。原告人要求本席將命令修改為被告人及張女士共同及個別負責DCMP 2062/2011案的訟費。

6. 在提出上述修改暫令的申請時，原告人比指定時限遲了一天。而到了2013年1月26日，原告人在DCCJ 736/2011案提出申請，同樣要求本席修改暫令，有關DCCJ 736/2011案的訟費，由被告人及張女士共同或個別負責。而這項申請則遲了超過40天才作出。

7. 2013年2月15日，原告人再發出傳票，申請法庭容許原告人逾時提出上述修改暫令的申請。同時，原告人又進一步申請修改兩案的暫令，除了要求被告人與張女士共同或個別負責訟費外，作為進一步或交替性的申請，要求法庭頒令曾代表張女士的趙、司徒、鄭律師行的趙律師，須個人負責上述兩張傳票所引來的訟費。這項新的申請，是根據《區域法院規則》第62號命令，第8條而作出的。

8. 再者，在2013年1月2日，張女士在無律師代表下，在兩案中發出傳票，向本席申請上訴許可，就本席的上述判決提出上訴。張女士又同時向法庭申請暫緩執行本席的判令。本席首先處理張女士的申請。

9. 根據《區域法院條例》第63 條，張女士要提出上訴，須向法院申請上訴許可。又根據《區域法院條例》第63A 條說明，聆訊有關上訴許可時，法官除非信納有關上訴有合理機會得直，或有其他利於秉行公正的理由，因而該上訴應進行聆訊，否則不得批予上訴許可。責任落在張女士身上，證明她所提出的上訴理由，有合理機會得直，或有其他有利於秉行公正的理由應進行聆訊。

10. 支持她的申請，張女士存檔了一份日期為2013年1月2日的誓詞，但其內容只闡明如出售涉案物業會對被告人及張女士非常不公平，就算成功上訴也沒有用。相信誓詞的內容，是支持張女士提出暫緩執行售樓令的申請，本席下文再處理。

11. 在張女士的傳票，附錄了一份英文書寫的草擬上訴理由書，列出了三個上訴理由，其內容如下：－

‘1. The learned Judge erred in considering whether the Defendant understood the nature of a loan agreement and the opinion of Dr Chung See Yuen under the joint psychiatric report by Dr Chung See Yuen and Dr Ng Fung Shing that “he discussed a lower interest rate which indicates that he understand high and low interest, and understand about borrowing money, and the consequence” and was wrong in failing to apply or consider critically or at all the test “whether the party to legal proceedings is capable of understanding, with the assistance of such proper explanation from legal advisers …. The issue or which his consent or decision is likely to be necessary in the course of the proceedings” for the purpose of the appointment of a guardian ad litem under Order 80 of Rules of District Court, Cap 336.
2. The learned judge erred in relying on his own vision in 2 video tapes taken by Mr Wong Wai Kit of Intell Finance and Mortgage Company and erred in giving opinion of the mental capacity of the defendant that “… the defendant has clear discussions with Mr Wong Wai Kit on the financing and given proposals on instalment payments and both conversations lasted some time”, instead of rely on the expert opinion concerning the said 2 video tapes only, and wrongly find that the opinion of Dr Chung See Yuen should be preferred, not rely on the opinion of Dr Ng Fung Shing. (emphasis added)
3. The learned judge erred in failing to grant leave for the applicant to adduce evidence of a further psychiatrist to medically examine the Defendant notwithstanding that 2 medical certificates shall be given and at least one shall be given by practitioner approved as having special experience in mental disorders as required for the purpose of Mental Health Ordinance, Cap 136.’

12. 雖然，草擬的上訴理由書，列出了三個理由，但這三個理由是否有合理得直機會，仍須張女士向本席解釋。也許張女士沒有律師代表，也沒有受過專業訓練，所以，在陳詞時，只是重覆這三點理由，並强調被告人是一位精神上無行為能力的人士。她沒有解釋她提出的理由為何有合理的得直機會。

13. 張女士又指鍾醫生及吳醫生同一時間檢驗被告人，但得出不同的結論。所以，如果有第三位專家檢驗，則較公平。

14. 代表原告人的張大律師在書面陳詞中，第50至62段詳細列出了三個上訴理由均沒有合理勝數機會的原因，本席同意並採納為判詞的一部份。

15. 再者，就第一個上訴理由，與訟各方均同意，在考慮一與訟者是否精神上無行為能力人士。其測試是他能否在得到適當的法律專業人士解釋下明白法律程序及向律師作出指示。這測試是根據上訴法院2011年民事上訴編號94案，Ng Hong Ki v Leung Fong Kiu的判詞而採用。張女士指本席沒有適當或充份考慮這個測試來決定被告人是否一位精神上無行為能力的人士，但她並沒有分析本席判詞如何沒有根據這個測試準則去衡量被告人的精神狀況。

16. 本席在結論被告人並非一精神上無行為能力的人士，是廣泛地考慮了兩位醫學專家所提出的意見後而作出的。這並非如第一上訴理由中所提，只考慮了兩位專家的聯合報告中的一小段落。

17. 第二項上訴理由，指本席依頼黃先生的錄影片段而作出意見，這是誤解了本席的裁決。有關的錄影片段，在庭上是有播出的。所以，本席也在判詞中有記錄。這閱讀，協助本席去分析兩位專家的意見。這點也只是其中一個因由，致本席結論採納鍾士元醫生的意見。但綜觀本席的判詞，就兩位專家的意見，作出了其他的分析，而作出最後的結論。並非如張女士所指，本席以專家身份而作出結論。張女士也沒有指出，本席所作的其他分析有錯。

18. 就第三項上訴理由，這應該是針對本席於2012年8月6日的裁決而提出的上訴。當天本席處理張女士於2012年8月1日提出的申請，要求法庭批准她安排第三位專家，就被告人的精神狀況作出檢驗。

19. 申請成為被告人的辯護監護人是由張女士提出的，而在2012年2月首次聆訊時，張女士只呈交了吳醫生及另一位臨牀心理專家的報告，以支持她申請。後來，原告人要求由他們的醫療專家檢驗被告人的精神狀況，張女士開始的時候也是反對的。後來，雙方協商而同意由原告人的專家，即鍾士元醫生，連同張女士委聘的吳醫生，一同檢驗被告人。這份聯合醫學報告，也是雙方依賴的專家證據。

20. 明顯地，在正式聆訊前，雙方經審慎考慮所應呈堂的專家證據。8月6日，張女士由大律師代表而作申請。本席亦立刻作出口述裁決。雖然這一件事，在本席10月25日的判詞中有所記錄，也只是重覆本席在8月6日的裁決要點。張女士沒有就8月6日的裁決提出上訴。

21. 如果針對本席於8月6日的裁決，即拒絕引入第三位專家證據，這項上訴許可，經已超過提出上訴的時限，而張女士也沒有解釋到今天才提出上訴的理由。

22. 所以第三項的上訴理由，並非針對本判決的上訴理由。而且，張女士也沒有提出任何論點，指本席拒絕收錄第三位專家證據的做法，犯了法律上的錯誤。

23. 綜合以上各點，本席裁定張女士所提出的三點上訴理由並沒有合理的勝數機會，也沒其他為秉行公義應審訊的理由。所以本席駁回張女士的申請。

24. 張女士的第二項申請是暫緩執行本席的判令。本席的判令，是駁回張女士的申請，暫緩執行是沒有意義的。由她的支持誓章所見，相信她是申請暫緩執行售樓令。由於本席已駁回張女士的上訴許可申請，所以，張女士沒有理據支持她提出申請暫緩執行售樓令。

25. 而且，根據張大律師的的陳詞，有關的物業經已轉售。根據本席的記錄，當張女士開始提出本申請的時候，曾透過代表大律師，向法庭申請臨時禁制令，阻止原告人出售涉案物業。在聽取雙方陳詞時，代表原告人的大律師指原告人已簽署一份臨時買賣合約。但原告人同意向法庭作出保證，在張女士的申請完結前不會正式出售該物業。而這個保證，也一直伸延至本席判決為止。但在本席作出判決後，被告人並沒有再作出申請，所以，沒有命令阻止原告人執行售樓令。

26. 法例早已言明，上訴並非暫緩執行令。而目前，原告人已將物業出售，無論如何，這並非一恰當的案件，將售樓令暫緩執行。所以本席亦駁回張女士的申請。

27. 本席也頒下暫令，張女士須支付原告人她申請上訴許可和暫緩令的訟費，如就訟費雙方不能達成協議，則由聆案官評定。

28. 現本席處理原告人要求修改訟費暫令的問題。

29. 有關修改暫令的問題，也可分為兩部份。針對被告人的申請，是第一項申請。而針對代表律師行的申請，並不牽涉被告人和張女士，本席另行頒下書面裁決。

30. 不爭的事實，DCCJ 736/2011 案，原告人遲了一天才提出修改暫令的申請，而DCMP 2062/2011案，原告人是遲了超過40天才提作出申請。原告人須說服本席應行駛酌情權，伸延原告人提出修改暫令的時限。

31. 原告人存檔了Lei Sou Hang 的誓章；他是原告人代表律師行的一名文員。在2012年12月19日，他按上司Yeung Chin Wing的指示，就DCCJ 736/2011案，將一份申請修改本席上述暫令的傳票，帶到區域法院的登記處存檔。但排期主任向他指出，該傳票的發出時間太早，指他應在第二天再到區域法院存檔。結果，他在第二天再到區域法院登記處存檔，並排期2013年2月21日審理。

32. 關於DCCJ 736/2011案的傳票，Yeung Chin Wing存檔誓章，解釋因為張女士在兩件案件均申請法律援助，所以他計算法律援助的暫緩期滿日期是在2013年1月25日。

33. 張大律師承認，在計算時間上，特別是DCCJ 736/2011案，他的指示律師犯了法律觀點上的錯誤。但張大律師指DCMP 2062/2011案的錯誤，只是一日，法庭應行駛酌情權。又如果法庭行駛酌情權，被告人是否須負責張女士提出的傳票的訟費，基本上是同一件事，也不會對被告人構成不利。所以，張大律師邀請本席同時行駛酌情權，容許原告人在兩案逾期申請修改訟費暫令。

34. 法庭要行駛酌情權，應考慮是否有好的理由，及對被告人是否構成不可挽回的不利情況。在今次的兩個案件中，DCMP 2062/2011案，原告人的代表律師在2012年12月19日，嘗試發出有關的傳票。登記處的職員如果錯誤地拒絕律師存檔一份傳票，負責的律師應盡速向當值的聆案官或法官提出申請。而對被告人所產生的不利，只是一日之差。考慮今次的特殊情況，本席相信是一適切的情況，法庭應考慮行駛酌情權。但是否行駛酌情權，應同時考慮原告人是否有得直機會。

35. 至於DCCJ 736/2011案，張大律師也同意，他的指示律師在計算時間上，出現錯誤。如果律師犯錯，在這種情況下，原告人有渠道可以向他的律師索償，並不會構成不公。所以，這並不是一個好的理由，促使法庭行駛酌情權。（本席同時參考區域法院潘兆童法官（當時職銜）在DCPI 2272/2008於2010年8月12日頒下之判詞。）就算本席同意在DCMP 2062/2011案行使酌情權，也不等同必須同時在DCCJ 736/2011案行使酌情權。

36. 再者，在這兩案中，本席對原告人申請由被告人負責張女士的申請所引起的訟費，對其理據有所保留。

37. 在本席的判詞中也有記錄，代表張女士的大律師在2012年8月6日的聆訊中，已清楚說明，趙、司徒、鄭律師行只代表張女士，相信原告人也清楚。所以，根據法庭的記錄，已更正為張女士提出這次的申請。張大律師所持的理據是被告人於本申請中，一直坐在法庭內。被告人並沒有提出反對或阻止張女士的申請，所以，他的行為，構成採納了張女士的申請而成為他的申請。

38. 張大律師依賴Bowstead and Reynold on Agency一書的內容，指一人可採納其代理人的行為。他引述以下的段落：－

“What constitutes Ratification
(1) Ratification may be expressed or by conduct
(3) Ratification will be implied whenever the conduct of the person in whose name or on whose behalf the act or transaction is done or entered into its such as to among to clear evidence that he adopts or recognizes such act or transaction; and may be implied from the mere acquiescence or inactivity of the principle.
(4) The adoption of part of a transaction operates as a ratification of the whole.”

39. 就這些法律原則，張女士沒有提出意見。本席也同意這些法律原則是正確的考慮方向。但重點是答辯人有否採納了張女士的申請成為他的申請。沒有正面的證據指被告人採納了張女士的行為成她的行為。

40. 張大律師所依賴的重點，是在一些情況下，一個人不採取行動，就相等於接納了他的代理人或聲稱為他代理人的行徑或採取的行動。

41. 但本案的最大分別，是張女士要求法庭批准她成為被告人的辯護監護人。這一個身份比一般代理人有所不同。她提出這申請，也不需要得到被告人的同意。因為如果法庭滿意被告人是行為上無行為能力的人，法庭有責任保護被告人及他的財產。而委任辯護監護人，是法庭行駛保護行為上無能力人士的一個責任。本席參考Scott v. Scott [1913] AC 417的判詞。雖然，這案是關於聆訊應否公開，但其中就法庭照顧行為上無能力人士的角色及權力，Viscount Haldane LC有精確的解說：

“The case of wards of court and lunatics stands on a different footing. There the judge who is administering their affairs in the exercise of what has been called a paternal jurisdiction delegated to him from the Crown through the Lord Chancellor is not sitting merely to decide a contested question. His position as an administrator as well as judge may require the application of another and overriding principle to regulate his procedure in the interest of those whose affairs are in his charge.
….While the board principle is that the courts of this country must, as between parties, administer justice in public, this principle is subject to apparent exceptions, such as those I have referred. But the exceptions are themselves the outcome of a yet more fundamental principle that the chief object of courts of justice must be to secure that justice is done. In the two cases of wards of court and of lunatics the court is really sitting primarily to guard the interests of the ward or the lunatic. Its jurisdiction is in this respect parental and administrative, and the disposal of controverted questions is an incident only in the jurisdiction. It may often be necessary, in order to attain its primary object, that the court should exclude the public.[my emphasis]

42. 所以，當張女士依80號命令提出申請時，她是要求法庭行使對被告人的監護司法權。法庭無需考慮她是否得到被告人的同意，去進行這項申請。法庭反而要考慮，是在獨立的醫學意見下，決定被告人是否可以處理自己的法律問題。然後在決定被告人是無精神行為能力的人後，法庭再決定誰是適合的人，去作為他的辯護監護人。

43. 有鑑於以上的分析，這項申請，基本不是張女士代表被告人提出，與被告人是否同意，也拉不上關係，所以張大律師所提出的論說，並不適用。

44. 當然，原告人也沒有提出任何論點或證據，指被告人與張女士串謀，以法律程序拖延售樓。綜合以上的分析，本席並不認為原告人的申請有足夠的得直理據。所以，駁回原告人的申請。

45. 而就本部份申請，本席頒下暫令，訟費歸張女士及被告人，如不能達成協議，則由聆案官評定。

（余敏奇）
區域法院暫委法官

原告人由黃德富律師行轉聘Wallace Cheung大律師代表應訊

被告人親自應訊

申請人（張桂燕女士）親自應訊

84047-EN-2012-08-25

MORAL LUCK FINANCE LTD v. LAW KIN LEUNG

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DCCJ 736/2011

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 736 OF 2011

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BETWEEN
	MORAL LUCK FINANCE LIMITED （德裕財務有限公司）	Plaintiff
	and
	LAW KIN LEUNG（羅健良）	Defendant

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DCMP 2062/2011

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MISCELLANEOUS PROCEEDINGS NO 2062 OF 2011

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BETWEEN
	MORAL LUCK FINANCE LIMITED	Plaintiff
	（德裕財務有限公司）
and
	LAW KIN LEUNG（羅健良）	Defendant
----------------------
	(TWO ACTIONS HEARING TOGETHER)

Coram : Deputy Judge R. Yu in Court

Date of Hearing : 10 August 2012

Date of Ruling : 25 August 2012

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R U L I N G

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1. There are two summonses before me, one issued in each of these actions. Before I go to the details of these summonses, in general, one Madam Cheung Kwai Yin (“Madam Cheung”), the wife of the Defendant in both actions contends that the Defendant is a mentally incapacitated person as defined under Order 80 of the Rules of District Court. She now seeks, among other matters to be appointed as the guardian ad litem of the Defendant in both actions. Mentally incapacitated person is defined in Order 80 as –

"mentally incapacitated person" (精神上無行為能力的人) means a mentally disordered person or a mentally handicapped person (within the meaning of the Mental Health Ordinance (Cap 136)) who, by reason of mental disorder or mental handicap, as the case may be, is incapable of managing and administering his property and affairs;

2. And in this case, the evidence adduced for the Defendant suggests that he has an IQ of 62 and is a mentally handicapped person rather than a mentally disordered person. A mentally handicapped person is defined in Mental Health Ordinance as –

"mental handicap" (弱智) means sub-average general intellectual functioning with deficiencies in adaptive behaviour, and "mentally handicapped" shall be construed accordingly;

3. The issue before me is whether the Defendant is incapable of managing and administering his property and affairs, and to give instruction to legal advisors. In order to better understand the applications, I need to set out some background history. I will start with the civil action issued by the Plaintiff against the Defendant in DCCJ 736 of 2011. The Plaintiff is a licensed money lender. According to their pleaded case, they have lent a sum of money to the Defendant of $30,000. The Defendant failed to repay according to the terms of the loan agreement. The said civil action has been taken out by the Plaintiff to recover the balance of the debt and all interest accrued. No acknowledgement of service has been filed. The Plaintiff applied for default judgment under Order 83A of the Rules of District Court and judgment was granted in favour of the Plaintiff on 14 April 2011. As the Defendant has not paid the judgment, the Plaintiff has on 6 July 2011 obtained a charging order absolute against the property of the Defendant situated at Flat 17, 29^th Floor Choi Tin House, Block 3, Hing Tin Estate, No 8 Lin Tak Road Kowloon (“the said property”).

4. Notwithstanding the judgment and the subsequent charging order being imposed, the Defendant has failed to settle the judgment debt. The Plaintiff issued an originating summons in the District Court in DCMP 2062 of 2011 for, inter alia, order of possession of the said property and an order of sale of the said property. The Defendant has again failed to file any acknowledgement of service or affirmation of opposition. Judgment was granted on 18 October 2011 for the Plaintiff to recover possession of the said property, and to have it sold at the reserved price of $1,000,000 at the secondary market. Other consequential directions have been given.

5. In early January 2012, the Plaintiff proceeded to obtain possession of the said property. On or about 27 January 2012, Messrs Chiu Szeto & Cheng issued a summons in DCCJ 736 of 2011. According to the record, Messrs Chiu Szeto & Cheng took out the summons as “solicitors for the Defendant”. The summons applied for the appointment of Madam Cheung as the guardian ad litem of the Defendant, and for the judgment given on 14 April 2012 be set aside, and that the said charging order be discharged.

6. Another summons was taken out in DCMP 2062 of 2011 by Messrs Chiu Szeto & Cheng, again acting as solicitors for the Defendant. The summons applied for the appointment of Madam Cheung as the guardian ad litem of the Defendant and the execution of the said order for sale be stayed.

7. Both summonses first come before me for an urgent hearing on 2 February 2012. By then, the Plaintiff has obtained vacant possession of the said property and entered into a provisional sales and purchase agreement to sell the said property. Counsel then appearing for “the Defendant” applied for an interlocutory injunction to restrain the Plaintiff from disposing of the interest in the said property. At the first hearing, and by consent, the Plaintiff undertook not to proceed with the sales and the summonses were adjourned for argument. Leave was also granted to the Plaintiff to put in affirmation in opposition.

8. As claimed in the affirmations of Madam Cheung, the Defendant is a mentally handicapped person and cannot handle litigation matter. She also claims that the Defendant does not understand the loan transaction. In support, Madam Cheung exhibits a psychiatric expert’s report by Dr Ng Fung Shing dated 4 May 2009 and a further report by a clinical psychologist Dr Ng Kee On dated 25 April 2009.

9. It is the opinion of Dr Ng Fung Shing that the Defendant has a full scale IQ score of 62 which indicates he is a mild grade mentally handicapped person. He has been a slow learner since birth and has studied in special school before. Because of his impaired intelligence, he has poor ability in comprehension. He cannot do even simply calculation. He fails to tell the nature of a contract even in broad terms. Dr Ng is of the opinion that the Defendant failed to understand the exact nature of a loan agreement and lack the mental capacity to enter into any contract in the form of loan agreements. The psychologist Dr Ng Kee On also commented that the Defendant is suffering from a significant intellectual dysfunction, functioning in the mildly handicapped spectrum of intellectual ability. The Defendant is likely to encounter difficulty in his daily activity including the handling of simple financial transaction.

10. I was given to understand that the two reports had been adduced in another District Court Action, DCCJ 5291/2007, involving another money lender. Leave had been granted for Madam Cheung to be the guardian ad litem for the Defendant and the case was subsequently settled. I shall come back to this case later.

11. It is the case of the Plaintiff that the Defendant is not a mentally incapacitated person as provided under Order 80 rule 1. At the first hearing, I was also given to understand that there were video tape conversation between the Defendant with officer/agent of the Plaintiff and the Plaintiff would rely on these to show that the Defendant could understand the loan arrangement. They also ask for leave to medically examine the Defendant by a psychiatrist expert to be nominated by the Plaintiff. This was not agreed to by the Defendant at that stage.

12. The parties having failed to reach any agreement on medical examination of the Defendant by nominated psychiatrist, the Plaintiff came back with an application. But the issue has been resolved before me amicably as the parties agreed for the Defendant to be examined by two psychiatrists, one to be nominated by each party. A joint psychiatric report prepared by Dr Chung See Yuen (nominated by the Plaintiff) and the said Dr Ng Fung Shing (nominated by Madam Cheung) has been produced. I shall come back to this joint report in greater details later.

13. In essence, both doctors agreed that the Defendant has a full scale intelligence score of 62 and the Defendant has been functioning in the mild grade mentally retarded range. Dr Ng maintains his opinion that the Defendant is incapable of instructing lawyers in relation to the present proceedings because of his mental incapacity. Dr Chung opines that the Defendant is not incapable of managing and administering his property and affairs. Dr Chung believes the Defendant would understand the nature of the loan agreement and he is capable of instructing lawyers now in relation to the present proceedings.

14. Some times after the 1^st or 2^nd appearance before me, Madam Cheung obtained Legal Aid to pursuit the case. On 6 August 2012, Counsel appearing for Madam Cheung applied for an adjournment and leave to arrange for a third psychiatrist to medically examine the Defendant. I am then told that Messrs Chiu Szeto & Cheng had made a mistake in taking out the summons for the Defendant as all along they only have instruction from Madam Cheung. Counsel then confirms that these two summonses are indeed taken out by Madam Cheung. It now becomes clear that the summonses should be divided into two separate parts. If I rule in favour of Madam Cheung that the Defendant is a mentally incapacitated person and that Madam Cheung should be appointed as the guardian ad litem, then I should proceed to consider the rest of the application on setting aside judgment and charging order, which Madam Cheung took out in anticipation that she would be so appointed. If I rule against Madam Cheung, there is no application by the Defendant before me and accordingly both summonses should be dismissed.

15. On the application for adjournment and leave to have the Defendant to be examined by a third psychiatric medical expert, the Plaintiff objected and submitted that Madam Cheung was fishing for evidence. There was no draft report prepared for my consideration if further psychiatric evidence was required. Counsel for Madam Cheung failed to persuade me that this is an appropriate case for adducing additional evidence and for adjournment.

16. And when the matters come back to me for the substantive hearing on 10 August 2012, Legal Aid has been discharged and Madam Cheung act in person. Messrs Chiu Szeto & Cheng has also applied under Order 67 rule 6 to cease to be the solicitor for Madam Cheung, which I thought is not strictly necessary. Under the Legal Aid Ordinance the solicitors ceased acting once the certificate is discharged. Mr Chiu submitted that he wants to put on record that they only act for Madam Cheung in these proceedings. This may be a matter I might have to revisit in future on the question of cost.

17. This is a case which turns on a difficult area of law and interpretation of medical evidence. Madam Cheung could offer little assistance. Fortunately, she had had legal representation in a number of appearances before me and I bear in mind the submission and written submission made by her counsel in dealing with this application. I would first consider the nature of this application.

18. For both summonses the solicitors made reference to Order 80 rule 6. When a plaintiff brings an action against a defendant who is a mentally disabled person, the plaintiff must make an application to the court to appoint a guardian ad litem. Failing such appointment, the plaintiff cannot proceed with the case. It is trite law that if the plaintiff proceeds and obtains default judgment, it is an irregularity and judgment is due to be set aside.

19. The burden rest on the Madam Cheung to first satisfy this Court that the Defendant is a mentally handicapped person under the Mental Health Ordinance. There has to be evidence of “sub-average general intellectual functioning with deficiencies in adaptive behavior”. And Madam Cheung has to further prove that the Defendant cannot administer his own property and affair before he come within the definition of “mentally incapacitated person” under Order 80.

20. And if the Defendant is a mentally incapacitated person, he would not be in the position to bring proceedings to have the judgment set aside on the ground obvious own disability. It must be right for someone he trusts to apply to the Court for the appointment as guardian ad litem. If the appointment is granted, the appointment must be related back to the time when the application was first taken out and be then deemed to be the application of the Defendant to set aside the judgment. As rightly observed by Mr Cheung, counsel for the Plaintiff, the prime issue before me is whether there is sufficient evidence to support the claim by the Defendant through his wife Madam Cheung that he is a mentally incapacitated person.

21. In the joint expert report that I would come to shortly, the experts are specifically referred to the judgment of the Court Appeal given in Ng Hong Ki v Leung Fong Kiu [2012] on the test of mental incapacity. According to Ng Hong Ki:

“For the purpose of the appointment of a guardian ad litem under Order 80, the test of mental incapacity is “issue-specify” and the test it has to be applied “whether the party to legal proceedings is capable of understanding, with the assistance of such proper explanation from legal advisers………. The issue on which his consent or decision is likely to be necessary in the course of the proceedings.” The focus of the enquiry was on the litigation under consideration rather than the whole of the person’s property and affairs. Complete incapacity is not required to be established ………… This features were identified in a person that would lead the court to conclude that he was a person under disability for the purpose of Order 80 …………… he had no insight at all into his own mental state. He was not capable of instructing a solicitor properly. He certainly was capable of exercising any reasonable judgment on a possible settlement”. [my emphasis]

22. I believe there is no disagreement between the parties that this is the appropriate test to be adopted by this Court to determine if a person is mentally incapacitated and cannot handle his affairs. When instruction was given to the experts, Madam Cheung was on Legal Aid. I would adopt the test in this ruling.

23. On the evidence required to be satisfied that a person is a mentally incapacitated person, usually medical expert evidence would be adduced. Mr Cheung referred to the Court of Appeal decision given in Ho Po Chu v Tung Chee Wah & others CACV 206 of 2005. I bear in mind that Ho Po Chu is an appeal against a debarring order which prevented the plaintiff Madam Ho from having direct access to the Court. It is stated in the judgment that where a debarring order was sought, “given the effect on the person’s direct access to the court and the stigma involved,…the court should require medical evidence of the same quality [as an inquiry under the Mental Health Ordinance] (even if not with the same formality) before it would make a debarring order.” And for the purpose of an inquiry under the Ordinance as per section 2(2), 7(5) and 7(6), 2 medical certificates with at least one from a medical practitioner approved as having special experience in mentally disorder is required. Ho Po Chu also ruled that, when action was started by the next friend, or defended by the guardian ad litem, of a person said to be suffering mental incapacity and the act was obviously for person’s benefit, the court would not initially require formal medical evidence, although it would be prudent for the next friend or guardian ad litem to have the medical evidence available in case of challenge.

24. It is submission of Mr Cheung that the purpose of Madam Cheung’s summonses is to set aside the default judgment and various consequential orders on the ground of the defendant’s mental disability and to prevent the sale of the said property. The practical consequence is a serious one. He submitted that the evidence required for the present case should be akin to an application for a debarring order under Order 80 rule 2(1) when the court would expect clear medical evidence to prove the mental incapacity. The medical evidence required should be of a comparable quality to the requirement for the purposes of a Part II inquiry under the Mental Health Ordinance, namely two medical certificates with at least one from a medical practitioner approved as having special experience in mental disorder.

25. As said, I do not have the assistance from Madam Cheung on this point of legal issue. However, counsel appearing for Madam Cheung on the application for the third psychiatrist submitted that there ought to be two medical certificates in support of the claim that the Defendant is a mentally incapacitated person. In that, he agreed with Mr Cheung’s submission.

26. I also refer to the judgment of Yuen JA in Ho Po Chu at paragraph 37 to 39 of the judgment. Yuen JA accepted that the person subjected to a debarring order would have his access to court restricted to a certain extent only, namely, pending the appointment of next friend and solicitors are instructed, but that is not a power that the court should exercise lightly. Reference was made to section 10 of the Mental Health Ordinance on a Part II enquiry for the appointment of a committee to manage the property of a mentally incapacitated person who cannot manage his property and affairs. Two medical certificates including at least one from a practitioner approved by the Hospital Authority as having special experience in the diagnosis treatment and mentally disorder or having special experience in the assessment of mental handicap is required. Yuen JA goes on to say that the debarring order is less draconian than a section 10 decision. But the court should require medical evidence of the same quality before it would make a debarring order.

27. In this particular case, the finding that the Defendant is a mentally incapacitated person is a bar to the Plaintiff from pursuing this action against the Defendant until the appointment of guardian ad litem and appointment of solicitors. I agree with Mr Cheung that the medical evidence that should be adduced before such a finding should be made should be of the same quality as for a debarring order.

28. Alternatively, if I adopt the flexible approach, it is duty bound upon this court to find on the medical evidence and all available evidence before me to rule if the Defendant is not capable at this moment to instruct his solicitor.

29. Before I move on to consider the medical evidence, I would also quote the judgment of Lam J (as he then was) given in Ho Po Chu. Lam J said in the situation where the court is faced the situation when a litigant is not represented by a next friend and there is suggestion that he or she is suffered from mental incapacity, the following options are open:-

(a) strike out the claims if it is obviously vexatious;
(b) if mental incapacity is clearly established by way of medical evidence and there is no dispute by litigant as to his mental incapacity, and if the action is not vexatious, the court may stay the action pending either appointment of next friend under Order 80 or an inquiry and appointment of committee under Part II;
(c) if mental incapacity is disputed, the litigant must be given a fair chance to defend his or her case on that issue. The matter as to capacity can still be solved within the context of Order 80 (see Atkins’s Court Forms Vol 26, 1996 issue, paragraph 20 and 23.) Alternatively, the court may stay the action pending the holding of a Part II inquiry;
(d) if the evidence as to mental incapacity is inadequate, the court may allow the action to be proceeded on the basis that the challenge based on disability is unsubstantiated.

30. With these guidance in mind, I now turn to consider first the medical evidence. Though there is a joint expert report, I believe I should also consider the first report of Dr. Ng. Dr Ng first came to examine the Defendant upon instruction of Messrs Chiu Szeto & Cheng on 22 April 2009.

31. According to the personal history, the Defendant has suffered from suspected hypoxic (lack of oxygen) injury to the brain during delivery. He has delayed development as compared with his brothers. He was a slow learner and he studied in Yau Tong Morning Hill School which is a special school for children with mild grade mental handicap. After graduation in 1986, he has worked briefly as cleaning worker in a private company. However, he has never sustained the open employment for long because of poor ability in comprehension, as well as failure to read written instructions. In the past few years, the Defendant helped in the cleaning company which is owned by his father. He participated in some casual work but he still needs to work under supervision. He is married at the age of 36 and his wife aged 32 come from Mainland China. They have a one year old daughter. The Defendant has no significant past physical illness except for the said suspected hypoxic brain damage during delivery.

32. According to Dr Ng’s 2009 report, the Defendant is new to mental health service. And in the list of documents sent to Dr Ng and Dr Chung in 2012 for the joint examination, there is no record of medical/psychiatric treatment received by the Defendant in Hospital Authority or private hospital/clinics.

33. According to his wife, she discovered that the Defendant could not read when they first acquainted. He could not read the short text messages that she sent him. The Defendant is unable to do even simple calculation. He also has poor ability in money management. As an example, Madam Cheung gave him a $500 note to pay for a telephone bill of $280. He was unaware of the need to have a change of $220. He just casually said that $500 was good enough to settle the bill.

34. Dr Ng carried out mental state examination. In conclusion, Dr Ng found that the defendant has a full scale IQ score of 62 which indicates he is a mild grade mentally handicapped person. He has been a slow learner since birth and he has studied in special school before. He indicates his impaired intelligence has been presence since birth and it is not acquired recently. And because of his impaired intelligence, he has poor ability in comprehension. He cannot do even simple calculation. He was unable to tell in broad term what is a contract or interest of a loan. Dr Ng opined that because of his impaired intelligence, the Defendant failed to understand the exact nature of the loan agreement and its consequence.

35. Dr Ng examined the Defendant again with Dr Chung on 14 June 2012. For record, I should note that specific instruction has been given to the two experts to comment on 5 different areas. First, they are to assess the IQ of the Defendant and I believe there is no disagreement between the experts that his score is 62. Secondly, the experts are required to comment whether the Defendant is incapable of managing and administering his property and affairs. Thirdly, they are to assess whether the Defendant is capable of instructing lawyers now in relation to the present proceedings because of his alleged mental incapacity with specific reference to the test set out in the said judgment of the Court Appeal given in Ng Hong Ki.

36. The experts were also asked to opine whether there would have been changes in the Defendant’s medical condition during 2008 to 2012. And lastly, the experts were to comment on whether the Defendant would have understanding of the nature of the loan agreement that he had entered into in 2008 and whether the Defendant’s alleged mental incapacity would be apparent to the plaintiff (or its agents) in dealing with the defendant in relation to such loan transactions in 2008.

37. According to the joint report by Dr Ng and Dr. Chung, the Defendant told the experts that he had studied in a special school for mentally handicapped. He cannot tell clearly the number of years he has studied nor the year he graduated. He could not recall what subjects he had studied.

38. He said he worked mainly in his father’s cleaning company after leaving school. His working hours were from 7 am to 5 pm. He did not know how to go to the work place initially. He had to ask people and after one to three times, he would go to the work place by bus. The experts have also made enquiry with his borrowing from finance company.

39. On current condition, the Defendant is still working at his father’s company. His salary is more than $7,000 a month. He receives a cheque for his salary. He has a bank account. He deposits the cheque into the bank account. He withdraws the money the next day. He gives $7,000 to his wife. He used his ATM card at times as he had been taught by a bank staff to use the card. He withdraws $100 $200 or $300 on each occasion, he sometimes press the button wrongly and the card was taken by the machine.

40. At the mental state examination by the experts, the Defendant readily said one had to pay interest when one borrowed money. However he cannot tell clearly the meaning of interest or the difference between simple interest and compound interest. When asked the meaning of a contract he said he was not clear. When asked about the nature of a court, he answered that when someone committed a crime like fighting or killing, one needed to attend the court. He was requested to perform the colored progressive matrices (one of the tests for intellectual function). He failed to complete the test as he was unable to read the Chinese written instruction.

41. Mini mental state examination was administered and he scored 13 out of a total 30. He was unable to do simple calculation (example 100 - 7 = ? and 20 - 3 = ?). He was unable to read and perform simple Chinese instruction “拍手”. He was asked to perform simple arithmetic. He said he did not know when he was asked to do 8 + 15. He said 1 + 1 = 5. When he was asked to do it again, he said 1 + 1 = 3 and then 4. He was asked about the change when he paid $10 for an item costing $2. He said he did not know the change. He did not look at the change and would not care about it.

42. In conclusion Dr Ng said the Defendant scored a full scale IQ of 62. This places him in the category of mild mental retardation. Dr Ng is

of the opinion Mr Law is a mentally incapacitated person as he is a mentally handicapped person within the meaning of the Mental Health Ordinance. He further said that the Defendant failed to understand and tell even in broad terms, the legal process. Dr Ng opined that the Defendant is not able to instruct lawyer because of his mental incapacity.

43. Dr Ng also opined that the mild mental retardation is a permanent disability and there would not have been any change in the condition during 2008 to 2012. Dr Ng also opined that the Defendant would not have the understanding of the nature of the loan agreement that he had entered into in 2008, given that he was unable to do simple calculation and failed to tell even in simple terms the meaning of a contract or the concept of interest.

44. Dr Ng also said that the Defendant could maintain a short and unsophisticated conversation just like ordinary people. However, if the conversation continue longer, for example over 5 minutes, it is not difficult to notice that his answers are often very simple and repetitive. With his inability to read and write Chinese, Dr Ng believed he would raise the suspicion of the people who were dealing with him in relation to loan transaction about his possible mental incapacity.

45. Dr Chung agreed that the IQ of the Defendant is 62 and he has been functioning in the mild grade mentally retarded range since young. But he opines that mentally retarded patient may or may not be a mentally incapacitated person. Dr Chung has doubt on the genuineness of the performance of the Defendant in the examination.

46. Dr Chung quoted from “Diagnostic and Statistical Manual of Mental Disorder” 4^th edition -

“As a group, people with mild grade mentally retardation typically develop social and communications skill during the pre-school years (ages 0-5 years), have minimal impairment in sensor motor areas, and often are not distinguishable for children without mental retardation. By their late teens, they can acquire academic skill up to approximately the 6^th grade level. During the adult years, they usually achieve social a vocational skill adequate for minimum self support but may need supervision, guardians and assistance, especially when under unusual social or economic stress. With appropriate support, individuals with mild grade mentally retardation can usually live successfully in the community, either independently or supervising setting.”

47. Dr Chung observed that the Defendant has worked for 10 years or more as a cleaner. He became acquainted with his wife when they met within a coach. He had courtship with her and married. He now has a 4 years old daughter. It indicates that he is functioning very satisfactorily in the community. His level of functioning is comparable with a person with mild grade mentally retardation, and according to the said passage, during the adult years, they usually achieved social and vocational skill adequate for minimum self support but may need supervision, guardians and assistance, especially when under unusual social or economic stress. Dr Chung believes the Defendant is mentally fit to perform all activities of daily living. Any impairment by the mild grade mental retardation is mild and is compatible with most usual functioning.

48. Dr Chung also noted that a person with mild grade mental

retardation can acquire academic skill up to approximately primary 5 or 6. It is unlikely that a mild grade mental retarded person could not do 1 + 1 or 10 – 7. Inability to perform such simple arithmetic is not commensurate with the defendant’s level of functioning: he has a job, has a bank account, and is able to withdraw money with an ATM card, has a wife and daughter and he can live fairly independently in the community.

49. Mini mental state examination has been carried out and the defendant scored 13 out of 30. It suggested that he is suffering from moderate dementia. Dr Chung opines that patient with mild dementia tends to score 20 to 24. It is likely that the Defendant has portrayed a worse picture of his mental functioning in the present examination.

50. Dr Chung also observed the Defendant says he did not know or cannot remember something when he knows said that interviewers are testing his ability. As an example, when the interviewers are testing his mental function, the Defendant cannot tell the day, the season. He gives history which would indicate mental functioning when he does not know the interviewers are testing his ability. For example he says he has a bank account, he knows how to deposit his money into his bank account, he can use an ATM card to withdraw money, he knows his salary, and he goes to work alone. The discrepancy in the performance suggests that his mental ability should be better than he has presented.

51. The Defendant said in the interview that he cannot remember

on many occasions. Dr Chung opines that intellectual impairment is found in people with mental retardation, but significant memory impairment is not a feature of mild grade mentally retarded person.

52. Dr Chung also made reference to video recording which I shall come to later on the conversation between the Defendant with a staff of the Plaintiff’s agent.

53. The Defendant told the experts that he does not know the amount of money he has borrowed, the monthly installments and interest rate. However, according to the video, the Defendant is able to tell one Mr Wong about the amount he borrowed and the approximate monthly installments. He even asked Mr Wong for a decrease in interest rate which indicates he should know the difference between high and low interest rate. The recorded interview indicates that he has a satisfactory understanding about borrowing money. He knows that he has to repay the loan and interest is incurred. He also asked Mr Wong in the recorded interview not to let people take possession of his flat. That suggests the Defendant knows the consequence of failure to repay the loan. He said he would repay the loan in exchange for not surrendering the possession of the flat.

54. Further, with assistance of the video, Dr Chung also concluded that the Defendant would give the impression to a lay person that he has received low education and is not a bright person. He does not have abnormal faces and does not appear to be a mentally abnormal person in the recorded interview.

55. Dr Chung agreed that mild mental retardation is a permanent disability and his mental functioning has been seen since early adult hood. He would be able to acquire more knowledge and skill as a result of life experience from time. He believed his mental capacity has not shown any change from 2008 to 2012.

56. It is the opinion of Dr Chung that the Defendant is not incapable, by reason of mental incapacity, as defined in the Mental Health Ordinance, of managing and administering his property and affair. Dr Chung believed the Defendant would have understanding of the nature of the loan agreement that he had entered into in 2008. The Defendant’s alleged mentally incapacity would not be apparent to the plaintiff or its agent.

57. I have viewed the 2 video produced. They are taken by Mr. Wong Wai Kit of Intell Finance and Mortgage Company. According to his affirmation filed herein on 16 February 2012, his company is a referral agent for banks and finance companies. They have referred the Defendant to borrow a loan of $15,000 from the Plaintiff on 14 July 2008, and subsequently for another loan on 12 August 2008 for $30,000. The Defendant paid back the Plaintiff for the 1^st loan and interest thereon at $660. That also explains why on borrowing, the Defendant immediately paid back $15,660 to the Plaintiff. So in effect, the Defendant has borrowed $30,000 from the Plaintiff by 2 loans.

58. In March 2011, the Defendant called Mr. Wong and met him in the afternoon of 9 March 2011. The conversation was video taped and produced in the Affirmation. The Plaintiff has produced a transcript of the video tape.

59. In the meeting, the Defendant told Mr. Wong that he was being sued by the Plaintiff for his default in payment of the 2^nd Loan. The Defendant explained that he had lost his wallet and documents including his identity card a fortnight ago. The Defendant asked Mr. Wong to convey to the Plaintiff that he did not want litigation, and would continue with the installments. The Defendant proposed to pay $1500 a month, and to repay the loan by installment.

60. This conversation last for about 25 minutes. And they also have talk or discussion on other matter. The Defendant has informed Mr. Wong about his loan from State China Finance Limited (及時雨財務有限公司). He can relate to Mr. Wong that there was litigation with State China and subsequently the proceedings were settled and he did not need to repay the loan.

61. On 10 December 2011, the Defendant visited Mr. Wong again and the meeting is again video taped. He told Mr. Wong that the Plaintiff is taking action to obtain possession of his flat. He asked Mr. Wong to request the Plaintiff not to do so. He explained that he had not paid the installments since May 2011 because he had to help his friend’s relative with funeral expenses.

62. There is no dispute on the truthfulness of these video records.

63. As set out above, the Applicant has to prove the claims that the Defendant is a mentally incapacitated person by the medical evidence.

64. Given that I have the joint medical report from Dr. Ng and Dr. Chung, I pay little weight to the earlier report of Dr. Ng which has been referred to by the expert in the join report. The report is prepared 3 years ago. And more importantly, the video tapes are not available to Dr Ng then. The report only assists me with the medical history and personal history of the Defendant. I would consider the psychologist’s report by Dr. Ng Kee On separately.

65. From the joint report of the 2 doctors, Dr. Chung is of the view that the Defendant is not mentally incapacitated. He has clearly analysed the reaction of the Defendant during examination and concludes that the Defendant has exaggerated on his memory power and mathematic power. Dr. Ng has not commented on these matters.

66. Dr. Chung has commented on the adaptive behavior of the Defendant. While it does not go as far as to suggest the Defendant is not a mentally handicapped person under the Mental Health Ordinance, it is clear that it has a bearing on his conclusion that the Defendant is not a mentally incapacitated person. Dr Ng has made no reference to this important issue.

67. Dr Ng has not commented on the surveillance video in the report. But Dr Ng said in his opinion that the Defendant can only have short and uncomplicated conversation with others. But his observation cannot sit on well with the vision in these 2 video tapes, when the Defendant has clear discussion with Mr. Wong on re-financing and giving proposals on installment payment, and both conversation last some time.

As commented by Dr. Chung, he discuss a lower interest rate which indicates that he understand high and low interest, and understand about borrowing money, and the consequence.

68. On the balance, I found that the opinion of Dr. Chung should be preferred. He gives a more detailed analysis, and has carried out appropriate test during examination to support his conclusion. I do not rely on the opinion of Dr. Ng.

69. As for the report of Dr. Ng Kee On, the clinical psychologist, he is not a medical doctor. According to his resume, he is an adjunct Associate Professor of the Department of Psychiatry in the Chinese University of Hong Kong, holding a doctor degree of clinical psychology. He opines that the Defendant has an IQ score of 62 which is adopted by both experts. He comments that the Defendant may have difficulty in his daily activity. There is no detail on how he comes to this conclusion. The duty is on this Court to determine if the opinion is reliable and the only way I could do so is for the expert to provide the reasoning for any conclusion, especial a significant conclusion on the mental capacity of the Defendant. I do not accept his conclusion that the Defendant has difficulty in his daily activity.

70. I should also refer to the 2^nd Affirmation of Chau Sai Hong filed herein on 24 April 2012. The Plaintiff has located a name card in the said property that the Defendant is a manager of Law’s Cleaning Service Ltd. They also find an updated employment contract which states that the Defendant is a foreman. And Mr. Chau confirms that the Defendant filled up the loan application form in front of him.

71. Madam Cheung denies that the application is filled up by the Defendant. And one Chung Wai Ming, a director of Law’s Cleaning Services Ltd give an affirmation filed herein on 22 May 2012. He denies that the Defendant is a manager of the companies, and there is no such position in the company. They never issue the name card to the Defendant. The Defendant only worked as a cleaning worker. He said the Defendant could not do mathematic. As an example, he said the Defendant insisted that his wage should be $300 per day and they told him that he would be paid at that rate. But they on paid him at the rate of $100 per day and the Defendant did not complain about the discrepancy in wages.

72. One Lam Mei Ling filed an affirmation dated 18 May 2012 in support of the Defendant’s application. She said that she was the manager of one Long Yue Shanghai Food in Kwun Tong. The Defendant worked as a part time casual worker around 2 years ago. He has no fixed working hours. Ms. Lam agrees that the Defendant looked normal when she first met him. But after a conversation, she notice that he has lower intelligence quotient due to his incoherent speech.

73. Ms. Lam said the Defendant does not read or write Chinese words. He could not take orders from customers. He could not remember table numbers and could not work as a waiter. He can only perform simple basic manual tasks.

74. I remind myself that the test whether a person is mentally incapacitated and cannot handle his affairs is “whether the party to legal

proceedings is capable of understanding, with the assistance of such proper explanation from legal advisers………. The issue on which his consent or decision is likely to be necessary in the course of the proceedings.” There is only one medical expert, Dr. Ng who supports the assertion of Madam Cheung, which I do not rely on for reason above. And I do not find the evidence of Dr. Ng Kee On helpful. Strictly in compliance with the rule in Ho Po Chu, there is insufficient evidence to support Madam Cheung’s assertion.

75. Even if I am to use a flexible approach, there is not sufficient evidence before me to show that the Defendant is a mentally incapacitated person, as I find earlier that the opinion of Dr. Ng is not reliable. I am left with the evidence from Madam Cheung and the co-workers of the Defendant in favour of the claim that the Defendant is mentally incapacitated. What Mr. Chung said is that he is cheating the Defendant of his salary. I have great reservation with his evidence. And for Ms. Lam, it is clear that the Defendant has been working as a part time for 2 years. He may not be able to be a waiter. But there is not suggestion that he cannot, and indeed he has been working as a casual worker. It tally with the opinion of Dr. Chung that patient with mild retardation could achieve social or vocation skill adequate for self support. They may show that the Defendant is handicapped in some extent, but I am not convinced by their evidence that the Defendant cannot manage his property and affairs, or that he cannot give instructions to legal advisors.

76. Madam Cheung has been given more than a fair chance to prove her case. I do not consider it necessary to adjourn the application pending Part II enquiry. And there is not such application.

77. Though Madam Cheung has been appointed as guardian ad litem in DCCJ 5291/2007, my discretion is not fettered. That is a different case. And more importantly, I now have more evidence before me, including the joint experts report, and the surveillance tapes which are not available to HH Judge Wong.

78. Mr. Cheung has kindly taken care of whether the judgment has been entered for too much. He prepared a reference table in paragraph 60 of his closing submission, which I adopt. Strictly, I do not have to go to the merit. I am satisfied that there is no evidence to show that this is an illegal contract, or judgment entered for too much.

79. In conclusion, I see no reason to allow the application by Madam Cheung to act as guardian ad litem of the Defendant and her application should be dismissed as she cannot prove that the Defendant is a mentally incapacitated person as defined under Order 80. Since there is no application by the Defendant to set aside the judgment, such application in the summonses as taken out by Madam Cheung in both actions for the Defendant in anticipation that she would be appointed must be dismissed.

80. Finally, I come to consider the issue on costs. I see no reason why the Plaintiff should not be entitled to their cost of this application, including a related application for further expert evidence which I dismissed on 6 August 2012. The difficult part is who should pay their costs.

81. As set out above, Madam Cheung is the applicant. As such, I see no reason why she should not bear the costs. Mr. Cheung refers me to Order 62 rule 6A and invited this Court to join Madam Cheung as a party for costs purpose. I do not think rule 6A applies, for Madam Cheung as an applicant must be a party to the proceedings. I only need to refer to section 2 of the District Court Ordinance, and “party” is defined as “includes every person served with notice of or attending any proceedings, although not named in the record.”

82. I also note that Madam Cheung is Legal Aided until shortly before the hearing. And I give an order nisi on costs as follows –

a. The applicant Madam Cheung do pay the costs of the Plaintiff in the Summonses taken out these 2 actions with certificate for counsel (including any reserved costs) and to be taxed if not agreed;
b. The applicant’s own costs be taxed according to Legal Aid Regulations;
c. This order on costs be an order nisi to become absolute within 14 days;
d. Plaintiff do serve a copy of my judgment on the Director of Legal Aid within 3 working days who may address this Court on the issue of costs if necessary.

83. I am not minded to order costs to be borne by the Defendant. I do not think there is evidence to suggest that he knows or approves of the application. But I am open to further submission and hence order, as an order nisi (to become absolute within 14 days), that there be no order of costs against the Defendant.

( R. Yu )
Deputy District Judge

Mr. Wallace Cheung instructed by Philip T. F. Wong & Co., for the plaintiff

Mr. Chiu Kwok Hong of Chiu, Szeto & Cheng, on record for the defendant

Applicant, Ms. Cheung Kwai Yin, In Person

	a.	Madam Wong paid $80,000 as initial deposit upon signing of the provisional sale and purchase agreement;
	b.	On 30 January 2012, Madam Wong paid further deposit of $115,000;
	c.	On 30 January 2012, Madam Wong paid further deposit of $115,000;
	d.	On 2 November 2012, Madam Wong signed a third supplemental agreement to postpone the completion date to 4 February 2013 or 7 days after issuance of the Notice of Premium Assessment by Housing Authority;
	e.	Sale of the Property was completed on 8 February 2013 when balance was paid.

	a.	The sole direction of Moral Luck is Mr. Jason Ip.
	b.	Mr. Jason Ip and one Ip Chi Man are the shareholders and directors of Timemark Investment Limited.
	c.	Ip Chi Man and Lam Chak Sun are the shareholders and directors of Intell Finance and Mortgage Limited.
	d.	Intell Finance and Mortgage Limited and Timemark Investment Limited have the same registered office at Flat G, 4/F, Prince Edward Building, which is also the residential address of Mr. Jason Ip.