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Cheung Kwai Yin v Moral Luck Finance Ltd

Judgment Cited authorities 8 Cited in Precedent Map Related
Vincent
Judgment Date24 June 2015
Year2015
Citation(2015) 18 HKCFAR 343
Judgement NumberFACV6/2015
Subject MatterFinal Appeal (Civil)
CourtCourt of Final Appeal (Hong Kong)
FACV5/2015 CHEUNG KWAI YIN v. MORAL LUCK FINANCE LTD

FACV Nos. 5 & 6 of 2015

FACV No. 5 of 2015

IN THE COURT OF FINAL APPEAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

FINAL APPEAL NO. 5 OF 2015 (CIVIL)

(ON APPEAL FROM CACV NO.127 OF 2013)

_______________

BETWEEN

MORAL LUCK FINANCE LIMITED Plaintiff
(德裕財務有限公司) (Respondent)
and
LAW KIN LEUNG (羅健良) Defendant
and
CHEUNG KWAI YIN Applicant
(Appellant)

_______________

FACV No. 6 of 2015

IN THE COURT OF FINAL APPEAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

FINAL APPEAL NO. 6 OF 2015 (CIVIL)

(ON APPEAL FROM CACV NO.128 OF 2013)

_______________

BETWEEN

MORAL LUCK FINANCE LIMITED Plaintiff
(德裕財務有限公司) (Respondent)
and
LAW KIN LEUNG (羅健良) Defendant
and
CHEUNG KWAI YIN Applicant
(Appellant)

_______________

Before : Mr Justice Ribeiro PJ, Mr Justice Tang PJ, Mr Justice Fok PJ, Mr Justice Stock NPJ and Sir Anthony Mason NPJ
Date of hearing: 12 June 2015
Date of Judgment: 24 June 2015

_______________

J U D G M E N T

_______________

Mr Justice Ribeiro PJ:

1. In these appeals, the proper approach to appointing a guardian ad litem in respect of a mentally incapacitated person falls to be considered.

A. The background

2. The plaintiff is a licensed money lender. It lent the defendant (“Mr Law”) $30,000 (with interest at 47.4% per annum). When he defaulted in making repayments, it brought proceedings in the District Court,[1] obtaining judgment against him, a charging order on his flat and an order for vacant possession and sale,[2] all in default of acknowledgment of service by Mr Law. After the plaintiff had obtained vacant possession and entered into a provisional agreement for the sale of the flat, Madam Cheung, Mr Law’s wife, approached the Court contending that Mr Law was a mentally incapacitated person. With the help of solicitors, she issued a summons seeking orders that she be appointed his guardian ad litem and that the judgment and consequential orders be set aside, claiming that Mr Law did not understand the loan transaction. Medical reports by a psychiatrist and a clinical psychologist were filed in support. Pending resolution of the dispute, the plaintiff agreed not to proceed with the provisional sale.

B. The decisions in the Courts below

3. Deputy District Judge R Yu[3] summarised the effect of the medical evidence filed by Madam Cheung as follows:

“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.”[4]

4. Subsequently, his Honour directed that Mr Law be examined by two psychiatrists, one (Dr Chung See Yuen) appointed by the plaintiff and the other (Dr Ng Fung Shing) by Madam Cheung, and that they produce a joint report. The effect of the joint report was summarised by the Judge as follows:

“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.”[5]

5. If Mr Law was indeed a mentally incapacitated person, Order 80 r 2(1) of the Rules of the District Court[6] would have precluded him from acknowledging service or defending the proceedings except by his guardian ad litem. However, in line with the plaintiff’s resistance to her appointment, the Judge refused to appoint Madam Cheung as guardian ad litem. In reaching that decision, he had regard to the joint psychiatric report and also viewed two videos showing communications between Mr Law and someone described as a referral agent who would assist him in getting loans. He rejected the view expressed in the report of Dr Ng in favour of that of Dr Chung and held that it had not been established that Mr Law was incapable of managing and administering his property and affairs or giving instructions to his legal advisors.[7]

6. Since Madam Cheung was denied locus as Mr Law’s guardian ad litem, the Judge dismissed her application to set aside the default judgment and consequential orders.[8]

7. On 23 April 2013,[9] the Judge refused the plaintiff’s application to vary the costs order made and Madam Cheung’s application for leave to appeal, elaborating on the basis upon which he had refused to appoint her Mr Law’s guardian ad litem, to which I shall return.

8. The Court of Appeal (which subsequently granted leave) upheld the Judge’s decision. [10] Cheung JA,[11] reviewed certain authorities and supported the Judge’s approach which involved considering whether Mr Law was capable of understanding the issues on which his consent or decision were likely to be necessary in the course of the proceedings, in the light of the medical and other evidence placed before the Court.[12] His Lordship rejected the argument that the Judge had adopted an inappropriately high standard more apposite for other types of inquiry into mental capacity.[13]

9. Leave to appeal to this Court was granted by the Appeal Committee on the basis that questions of the requisite importance arise on the appeal concerning:

(a) the correct approach in law to deciding whether a person should be allowed to act as guardian ad litem with a view to protecting the interests of a person sued as defendant, who is alleged to be a mentally incapacitated person; and

(b) the appropriateness of permitting the plaintiff in such cases to oppose such intervention by the proposed guardian ad litem.

C. Errors in the judgments below

10. In my view, with respect, the Courts below:

(a) adopted the wrong approach to, and the incorrect test of, mental incapacity in refusing to allow Madam Cheung to act as Mr Law’s guardian ad litem; and

(b) erroneously allowed the plaintiff, whose interests are obviously adverse to those of Mr Law, to resist her appointment to defend the proceedings it had brought, so that the default judgment was upheld without the plaintiff’s claim ever being tested on its merits.

D. The correct approach to the appointment of a guardian ad litem

11. The appointment of Madam Cheung as guardian ad litem for Mr Law ought to have been simple.

12. RDC Order 80 provides for how a “person under disability” participates in legal proceedings. As we have seen, it precludes a person under disability from defending proceedings save by a guardian ad litem.[14] It defines a “person under disability” as “a person who is a minor or a mentally incapacitated person”.[15]

13. Order 80 r 1 then defines “mentally incapacitated person” to mean:

“... 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 ...”

14. By section 2 of the Mental Health Ordinance (“MHO”), “mentally handicapped person” is defined as “a person who is or appears to be mentally handicapped”, and “mental handicap” is defined to mean:

“... sub-average general intellectual functioning with deficiencies in adaptive behaviour, and ‘mentally handicapped’ shall be construed accordingly;”

15. MHO section 2 goes on to define “sub-average general intellectual functioning” to mean:

“... an IQ of 70 or below according to the Wechsler Intelligence Scales for Children or an equivalent scale in a standardized intelligence test”.

16. It was common ground that D had an IQ of 62.[16] So Mr Law plainly fell within the statutory definition of “mentally handicapped person” [17] and thus within the definition of “mentally incapacitated person” in Order 80 r 1.

17. Madam Cheung (who was unrepresented before the Judge) took the step of issuing a summons seeking an Order that she be appointed Mr Law’s guardian ad litem. However, such an Order was not needed. In their judgments, the Courts below do not mention Order 80 r 3(2) which provides:

“Except as provided by paragraph (4) or (5) or by rule 6,[18] an order appointing a person next friend or guardian ad litem of a person under disability is not necessary.”

18. By the combined effect of Order 80 r 3(6)(c)[19] and Order 80 r 3(8),[20] a person under disability is entitled to appear by his guardian ad litem if specified documents have been filed in court. Most importantly, there must be a certificate made by the solicitor representing the person under disability stating that the solicitor knows or believes that the person in question is a mentally incapacitated person, giving the grounds of his knowledge or belief; and stating that the...

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