YANG FOO-OI by LEUNG PING CHIU, ROY her next friend v. WAI WAI CHEN AND ANOTHER

HCA 1739/2010

[2019] HKCFI 1312

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 1739 OF 2010

________________________

_______________________

_________________

D E C I S I O N

_________________

1.  There is before the court Yang’s[1] Summons filed on 14 September 2018 (“Capacity Summons”) to confirm the Next Friend’s power and capacity, for the avoidance of doubt[2], for issuing the Summons filed on 1 August 2018 (“Rectification Summons”) seeking rectification of a Deed of Gift and a Declaration both of which were executed by Yang in favour of Angela (collectively “the Gift Documents”).

2.  The background of this case,and the development of it after judgment, can be seen from the Judgment in this action dated 29 November 2016, a Ruling dated 2 August 2018 ([2018] HKCFI 1825) and a Decision dated 9 October 2018 ([2018] HKCFI 2278). 

3.  An application of the present type should not be regarded as part of the adversarial process between the litigants (see the applicable law below).  However, the Defendants are contesting the Capacity Summons vigorously, and the amount of evidence adduced before the court is disproportionate with an application of this nature. 

4.  On behalf of Yang, it is said that the Defendants have adopted a scorch earth strategy of opposing everything regardless of merits.  With respect, I have to say that it is very difficult to see any merit in the opposition to this application. 

5.  In this decision, I shall endeavour to set out the proper parameters for the dispute by an opposing litigant in an application of the present nature.  I shall then identify a few key facts, the understanding and analysis of which would demonstrate the merits of this application.  Finally, I shall deal succinctly with the arguments of the Defendants.

Proper parameters

6.  Under Order 80, rule 2 of the Rules of the High Court, Cap 4A, a person under disability can only take steps in a proceeding through a next friend (as a plaintiff) or a guardian ad litem (as a defendant).

7.  I agree with Mr Yu SC, who appeared[3] for Yang, that generally an application for the appointment of a next friend or guardian ad litem should not be determined by the court on the basis of opposition from the opposing party in the litigation.  The reason is that such opposition would usually be to further the opposing party’s own interests, and not the interest of the person under disability which should be the paramount concern of the court.

8.  The same must also apply to an application by a next friend to confirm his authority in the conduct of the proceedings for which he was appointed.

9.  In Moral Luck Finance Ltd v Law Kin Leung (2015) 18 HKCFAR 343, the plaintiff obtained default judgment for recovery of a loan against the defendant.  Later, the defendant’s wife issued a summons seeking to appoint herself as guardian ad litem for the purpose of seeking to set aside the default judgment.  Her appointment was resisted by the plaintiff who disputed that the defendant was under incapacity.  The appointment was refused in the lower courts on the basis of evidence from a joint report produced by both sides’ experts (see §§2-9).

10.  The appeal was allowed by the CFA.  Ribeiro PJ, whose judgment was unanimously agreed, held that the courts below were in error in allowing the plaintiff, a party whose interest was adverse to the defendant, to resist the appointment (§§9(b) and 10(b)).

11.  Ribeiro PJ explained this at §§42-43 :

“42. It was, in my view, inappropriate to allow the plaintiff, acting in furtherance of its own interests, to seek to deprive Mr Law, a mentally handicapped person, of the protection of a guardian ad litem, especially since the plaintiff’s success meant that its default judgment would not be challenged on the merits.

43. I have already quoted Chadwick LJ’s comment[4] that:

… the question whether a party was required to act through a next friend or guardian ad litem (as the case might be) should, in the ordinary case, be determined by the party himself or by those caring for him; perhaps with the advice of a solicitor but without the need for inquiry by the court.

One might add a fortiori, not determined by the court on the basis of opposition from the other side.”

[emphasis added]

12.  In Folks v Faizey [2006] EWCA Civ 381, the defendant in a personal injuries action tried to resist the appointment of a litigation friend for the plaintiff. There the application for appointment was made after proceedings had commenced, such that a court order was required.

13.  Pill LJ observed at §19 that the rules for appointment of next friend are “not designed to create additional litigation”.  He held at §20 :

“In this case, those advising the respondent, without any plausible reason in terms of protecting the respondent’s own position, have sought to interfere in a procedure with which they were only minimally concerned. Indeed, the appointment of a litigation friend would give protection to them as well as to the appellant and his advisors. I should not wish to describe the opposition as an abuse of the process of the court but in my judgment it is an intermeddling, for no sound reason, which the judge, on the evidence available, ought not to have tolerated.”

[emphasis added]

14.  Keane LJ took the view that an opposing party should not be allowed to file evidence to oppose an appointment of next friend except where he would be “at risk of suffering any prejudice from the appointment of a litigation friend” (§§25-26).  Further, Wilson LJ observed at §31 that it might not be necessary to serve such an application on the other party, depending on the facts of each case.

15.  The dicta of Pill LJ in Folks v Faizey were cited with approval in Moral Luck Finance,and the CFA held that the proper course was to allow the appointment of guardian ad litem and then to have the application to set aside the default judgment properly tried (§§44-45).

16.  Mr Strachan SC, who appeared[5] for the Defendants, sought to distinguish Moral Luck Finance from the present case.  I am unable to agree.  Aside from factual difference, I am unable to see any proper ground by reason of which the principles adumbrated in that authority should not be fully applied here. 

17.  The next friend should be a person who has no interest in the cause or matter adverse to that of the person under disability.  Hence the requirement under O 80, r 3(8)(c)(iii) for a certificate to that effect.  This is uncontroversial. 

18.  Mr Strachan relied upon the authority of In re Burgess (1883) 25 Ch D 243 at 245-246.  In particular, the following dicta of Lindley LJ at 246 :

“… I do not know whether [the interests of the person under disability and the interests of the defendant] will conflict or not, but if they do it is obvious [the next friend] cannot look after the interest of the [person under disability] in the way in which an independent person would.”

19.  In re Burgess,a next friend was appointed for an infant in a claim for administration of her father’s estate.  The next friend was a friend of the defendant executors and acted as next friend at their request.  He also engaged the same solicitors as the defendants.  While nothing was alleged against the character, circumstances, or conduct of the next friend, it was held that his connection with the defendants made him an improper person to act as next friend.  The underlying principle was that “there ought not to be either in form or substance the same person both plaintiff and defendant”: per Cotton LJ at 246.

20.  After expressing his agreement with Cotton LJ, Lindley LJ made the above dicta after observing, inter alia, that the next friend was in substance one of the defendants and that he was not in a position to look after the interests of the infant if they should conflict with those of the executors. 

21.  The above dicta of Lindley LJ should be understood in their proper context.  Critically, the next friend was in an irreconcilable position of conflict for being, in substance, a party in the proceedings involving the infant. 

22.  In this case, the appointment of the Next Friend back in April 2016 involved a dispute raised by Vivien over the suitability of the candidate to be appointed (see Decision dated 19 April 2016).  This court was mindful of the family relationship of the protagonists and that, in this case, the appointee should not be someone who might hinder an amicable settlement by reason of the mistrust over him by one side (see §2 of the Decision).

23.  As a general rule, dispute over the suitability of the next friend should be based on cogent evidence, and it must not be treated as an open door for a satellite litigation in which all kinds of arguments, dressed up as going to the suitability of the candidate, are raised.  Based on the highest authority of this jurisdiction, such an approach is not permissible. 

24.  In Ng Hong Ki v Leung Fong Kiu [2012] 1 HKLRD 435, §41, Kwan JA (as she then was), whose judgment was unanimously agreed, held that where there is an application to appoint a next friend or guardian ad litem, it is open to the court to consider whether the appointment is beneficial to that person.  If the claim to be brought is “obviously vexatious” (or a defence “obviously without merit”), the court should refuse the appointment and strike out the claim.

25.  The facts of Ng Hong Ki were unusual.  There was a summary judgment granted by a Master of the District Court against a defendant who was under disability.  The order appointing a guardian ad litem for the defendant was subsequently granted on appeal to a Deputy District Court Judge.  There was an issue before the Court of Appeal whether the proceedings before the appointment of the guardian should be set aside, the CA held that this should not be done without also considering the merits.  In the particular circumstances of that case, as full evidence had been filed on the summary judgment application, it was appropriate for the court to consider if a triable issue had been raised before deciding whether to appoint a guardian to defend the proceedings (§§38-42). 

26.  It is reasonably plain from Ng Hong Ki that the court is not generally required to investigate the merits of the proposed claim or defence.  Rather, its task is to see that the appointment is beneficial to the person under disability. Weeding out an obviously unmeritorious claim (or defence) would serve that purpose. 

27.  However, I agree with Mr Yu that, based on Moral Luck Finance and Folks v Faizey, the determination whether a proposed claim is obviously unmeritorious should not be an exercise involving the respondent to the claim.  The reasons are too obvious to require repeating. 

28.  In summary, apart from any objection based on cogent evidence on the suitability of the person to be appointed, an application for the appointment of a next friend or a guardian ad litem should not, as a general rule, concern the opposing party to the litigation. 

Key facts

29.  The Defendants’ challenge over the locus of Yang based on the contention that she had divested herself of the causes of action in this case in favour of Angela by reason of the Gift Documents (“Locus Summons”) and the cross-applications by Yang: (i) to join Angela in this action (“Joinder Summons”) and (ii) to rectify the Gift Documents to the effect that the causes of action did not form part of the gift to Angela (the Rectification Summons) are scheduled to be heard on 20 November 2019. 

30.  There is an Agreed List of Issues.  The first issue on that List is whether the Deed of Gift had the effect of assigning Yang’s claims in this action to the Angela. The answer to that question will turn upon the construction of the document, and the court will be asked to consider the evidence of Yang’s intention at the material times.  One of the disagreed issues advanced by Yang set out in the List is whether the Deed of Gift ought to be rectified. 

31.  The application for rectification is simply a further or alternative contention by Yang that if her true intention was not reflected in the Gift Documents, they should be rectified.  I am unable to see any reason why the Next Friend should not be allowed to advance the Rectification Summons in answer to the Defendants’ locus challenge. 

32.  There is a very substantial Judgment in this case in favour of Yang.  Plainly, the Next Friend has a duty to defend the Judgment in light of the evidence concerning the true intention of Yang at the time when the Gift Documents were executed.  Such evidence did not solely come from Angela. 

33.  I agree with Mr Yu that it is impossible to see why the Next Friend can contend for the construction that there was no assignment of right to sue, but somehow cannot represent Yang to contend for rectification to exactly the same effect.

34.  Further, the evidence from Angela had confirmed her position that the claims in this action were not part of the gift from her mother.  Angela’s position is therefore aligned with that of the Next Friend.  I am at a lost to see what true conflict of interest there is in the pursuit of the Rectification Summons by the Next Friend.

Defendants’ arguments

35.  There are 4 arguments advanced by the Defendants, namely, (i) the Rectification Claim falls outside the limited scope of the matters remitted by the CA to this court; (ii) the Rectification Claim falls outside what the Next Friend has been authorised by this court to do on behalf of Yang; (iii) the Rectification Claim has no merit whatsoever; (iv) the Rectification Claim puts the Next Friend in a position in which he has an unavoidable conflict of interest.

36.  In respect of the first argument, para 2 of the Order of the CA remitting these matters to this court stated as follows: “The question of locus of [Yang] to pursue the claims in this action and the application for joinder of [Angela] as a co-plaintiff shall be remitted to the Court of First Instance.” 

37.  I agree with Mr Yu that upon the remittance of these matters, this court has the power to deal with not only the Joinder and Locus Summonses, but also any other matter which arises out of the necessity to determine “the question of locus of Yang to pursue the claims in this action”.  The Rectification Summons was brought as an answer to the challenge over Yang’s locus.

38.  In respect of any technical argument that the Rectification Claim should be brought by fresh proceedings or that it involves a different lis, Mr Yu had provided the court with a number of authorities to the effect that the court has the power to treat a document as having been rectified, without making a formal order for rectification.  Such power may be invoked by any party to litigation, whether claimant or defendant (see Hodge: Rectification, 2^nd edn, [1-86] to [1-92]).  I see no inhibition to the present application by reason of technicalities. 

39.  I should say that, in the unusual circumstances of this case, I do not take the view that the Defendants’ argument concerning the scope of the remittance by the CA should be regarded as illegitimate intermeddling (see para 13 above).  An adversary is entitled to ague the proper boundary of the dispute.  However, I see no legitimate basis for the second and third arguments, which constitute intermeddling on the Defendants’ part. 

40.  In respect of the second argument, given my view that the rectification claim is a further or alternative claim to Yang’s contention on the proper construction of the Gift Documents, and there is no suggestion that the Next Friend lacks capacity to argue the latter, it is not at all clear why it can be said that the existing Order which appointed the Next Friend (dated 19 April 2016) does not cover his capacity to pursue the Rectification Summons. 

41.  In any case, I am unable to see any good reason not to confirm such capacity to put an end to any argument in this regard.

42.  Based on Moral Luck Finance, the Defendants are not entitled to advance the third argument.

43.  In any event, the argument is unmeritorious.  Mr Strachan agreed that the threshold for the argument to succeed is very high – the Defendants need to demonstrate that the Rectification Claim should be struck out. 

44.  The issue of rectification will turn upon the relevant intention of Yang.  I agree with Mr Yu that Yang’s intention behind the Gift Documents can be inferred from the evidence.  For that purpose, there are a number of affirmations filed with the court.  There are also contemporaneous documents to be considered.  In due course, the deponents will be tested on their evidence, taking into account the contemporaneous documents.  I am unable to see how it can be said that the Rectification Summons has no merits whatsoever. 

45.  The fourth argument, based on a conflict of interest between Yang and Angela, is an illusory one.  It has already been pointed out above that the interests of Yang and Angela are aligned on the Rectification Summons. 

46.  The Defendants seek to build an argument premised on Vivien’s allegation that the Gift Documents were executed by Yang under the undue influence of Angela.  There is not one word of evidence from Vivien to support the allegation.  Quite the contrary, the Defendants’ locus challenge here is based upon the validity of the Gift Documents. 

47.  Whilst this court is alive to the Defendants’ wish to argue both the validity and invalidity of the Gift Documents as and when it may suit them (see the Ruling dated 2 August 2018 ([2018] HKCFI 1825), Decision dated 8 October 2018 ([2018] HKCFI 2277) and the Judgment of the CA dated 14 January 2019 ([2019] HKCA 49)), I am unable to see how the conflict argument can get off the ground based on nothing but a potential argument of Vivien which may be made at an unknown time in the future.  It should be noted that Yang’s position is that the Defendants will be barred from approbation and reprobation on the validity of the Gift Documents.

48.  I do not believe that this intractable position of the Defendants can be legitimately deployed as an obstacle to the present application.  It would be allowing the Defendants to pull themselves up by their own bootstraps. 

49.  Further, as Mr Yu had pointed out, the intractable position applies to the locus challenge (in respect of which there is no challenge over the Next Friend’s capacity) and the Rectification Summons does not change the situation.

50.  Furthermore, it should not be overlooked that the Next Friend’s existing mandate is to conduct these proceedings on behalf of Yang.  It is clearly right for him to defend the Judgment.  I do not see how the Next Friend or anyone in his place can conduct these proceedings on the basis of a non-existing dispute.  If it ever materializes, such dispute will have to be brought in different proceedings by Vivien. 

51.  For completeness, I should deal with the serious allegation that the Next Friend is acting under the influence of Angela.  Such allegation is based on little more than views generated via the prism of an adversary.  I need only refer to a few examples. 

52.  Firstly, it is said that the Next Friend “took instructions” from Angela.  It is a regrettable insinuation.  The fact of the matter is that the Next Friend has no personal knowledge of the dispute between Yang and the Defendants.  Angela was a witness of this case, and apparently the closest person to Yang.  It is only to be expected that any next friend representing Yang would seek to obtain information from Angela.

53.  Secondly, it is said that the Next Friend’s fees were paid by Angela.  In his evidence, the Next Friend acknowledged that whilst he had been responsible for paying Yang’s legal expenses, the settlement of the same, including his own fees, was arranged by Angela. 

54.  Yang has been in a state of incapacity for a number of years.  It cannot be disputed that Yang is a very wealthy person and would have no difficulty in discharging the fees of the Next Friend.  It appears that Angela was appointed as her mother’s attorney pursuant to 2 Enduring Powers of Attorney executed on 21 April 2014. It is more likely than not that Angela had been paying the expenses of her mother since her incapacity (whether from her own funds or those of her mother).  The settlement of the Next Friend’s fees by Angela is likely to be a matter dictated by practicalities and cannot, per se, constitute any inappropriate influence by the latter over the former. 

55.  Importantly, the Next Friend’s evidence confirmed that he had obtained independent legal advice in respect of each step of the proceedings, and that he had exercised his independent judgment as to what is in the best interest of Yang. 

56.  This court has seen no evidence or reason to believe that the Next Friend has taken any step which is contrary to Yang’s interest, nor do I see any real risk that such a step may be taken in the future.

57.  Thirdly, considerable emphasis had been laid by the Defendants on the fact that the Next Friend had proposed a professional investor (JenCap), said to be connected to Angela, to advise on the investment of the very substantial payment into court made by the Defendants. 

58.  The evidence of the Defendants is that one of the members of the JenCap’s investment team was a classmate of Angela’s son and she had previously helped this person to obtain scholarships for his studies.  I do not believe it can fairly be said that such connection means that JenCap was associated with Angela or somehow it could be used by her to further her own agenda. 

59.  The Next Friend had set out in his evidence the details concerning the attempt to agree with the Defendants on the appointment of an investor (see paras 21 to 29 of his 5^th Affidavit).  JenCap was introduced to the Next Friend by Angela.  He did not know of any connection between that company and Angela at the time when he proposed it for the Defendants’ consideration.  JenCap was one of a number of investors considered by the Next Friend.  He explained that it was put forward for the Defendants’ agreement after considering, eg, the fees to be charged.  Eventually, nothing had materialised due to the lack of cooperation of the Defendants.

60.  There can be no question of JenCap being appointed without the Defendants’ vetting and agreement.  I am unable to see that by putting forward a professional investor introduced by Angela the Next Friend had compromised his ability or responsibility to look after the best interest of Yang.

61.  For these reasons, I make an order confirming that the Next Friend has the power and capacity to issue the Rectification Summons.  I make an order nisi that the costs of and occasioned by the Capacity Summons be paid by the Defendants, to be taxed if not agreed with a certificate for 2 counsel.

62.  I am grateful to counsel for their assistance.