KO SIU YUNG v. CHEUNG HAY LEE HAILEY

HCMP 2362/2017

[2018] HKCFI 1797

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 2362 OF 2017

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REASONS  FOR  DECISION

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The issue

1.  The only issue in these proceedings is costs.  I heard counsel on 24 July 2018, and ruled that the defendant must pay the plaintiff’s costs, to be summarily assessed, on an indemnity basis.  These are my reasons for that decision.

What happened

2.  The plaintiff, (Mdm Ko) is the defendant, (Mdm Cheung’s) mother.  Mdm Ko was born in 1936, in Zhongshan, and came to Hong Kong in 1949.  She is now aged 82. In 1955, Mdm Ko married Cheung Yiu Wing.  They had three children, two sons and one daughter, Mdm Cheung.  Mr Cheung died in 1987.

3.  In 2001, Mdm Ko married her second husband, Poon Chue Tim.  He died on 10 February 2013, leaving his whole estate to Mdm Ko.  That estate included three flats in Tsuen Wan, one in Tsuen Wan Centre, one in Discovery Park and the third at Serenade Cove.  Mdm Ko lived in the flat at Serenade Cove and sold the Tsuen Wan Centre property for about HK$3.3 million, and the Discovery Park property for about HK$5.36 million.

4.  Mdm Cheung assisted her mother after the death of Mr Poon, in particular with the grant of probate and his estate.  Mdm Ko placed trust in her daughter and relied on her for financial arrangements, particularly banking documents that were in English.

The legislation

5.  The Enduring Powers of Attorney Ordinance (Cap 501) (“EPAO”)[1], enables a power of attorney to be granted that, unlike an ordinary power of attorney, will survive the mental incapacity of a donor.  An Enduring Power of Attorney, (EPA), which is given by a person who suffers from no mental incapacity, must be witnessed by a solicitor who must certify that the donor appeared to be mentally capable (section 5(2)(d)), and by a medical practitioner who must certify that the donor was mentally capable (section 5(2)(e)).

6.  An EPA may be revoked by the donor when the donor is mentally capable, or after having become mentally incapable after the grant and registration of the EPA, if the donor recovers mental capability.  However an additional requirement for the revocation of an EPA is that the Court must confirm the revocation of the power if it is satisfied, inter alia, that the donor was mentally capable of revoking a power of attorney when he did so: see section 14(2).

The steps taken

7.  On 24 February 2017, at Mdm Cheung’s persuasion, and in thepresence of a registered medical practitioner and a solicitor, Mdm Ko signedan Enduring Power of Attorney (“EPA”) in favour of Mdm Cheung.  On its face, the EPA confirms that the provisions of section 5 were complied with.

8.  Mdm Cheung then used the EPA to withdraw and transfer funds from Mdm Ko’s joint bank accounts with herself, to repay “debts” owed to herself, by transferring HK$1.2 million, by three tranches, into her own bank account, and taking control of Mdm Ko’s safety deposit box.

9.  On the facts, Mr Clough was entitled to say that generally, Mdm Cheung acted contrary to Mdm Ko’s interests.  Mdm Cheung does not now dispute that the “debts” she sought to recover were statute barred.

10.  In August 2017, Mdm Ko became suspicious of steps that were being taken in respect of her joint bank account with Mdm Cheung, and steps that were being taken in respect of a proposed sale of the Serenade Cove property.

11.  On 4 September 2017, Mdm Ko duly completed a Deed of Revocation (“DoR”) of the EPA.  On 23 October 2017, pursuant to section 14 EPAO, Mdm Ko commenced these proceedings seeking an orderconfirming the DoR.  The orders sought by the Originating Summons were:

(a)  an order that the Deed of Revocation be confirmed;

(b)  an order that the registration of the EPA be removed;

(c)  an order directing (Mdm Cheung) to produce all records and accounts kept under the EPOA;

(d)  all other necessary and/or proper consequential relief;

(e)  further and/or other relief the court deems just and fit; and

(f)  costs.

12.  Mdm Cheung must have known, long before the matter came before me, that it was abundantly clear that under paragraphs (d) and (e), Mdm Ko would seek the return of the sum of HK$1.2 million and control of safety deposit boxes, control of which had passed to Mdm Cheung.

13.  On 12 January 2018, the matter came before Deputy High Court Judge To for directions.  The judge ordered that each party should, within 14 days, nominate a psychiatric expert to conduct a joint psychiatric examination of Mdm Ko and to give their opinion on the reliability of the psychiatrist’s certificate as to Mdm Ko’s mental capacity at the time she executed the DoR.

14.  Dr Tsai Tsang Wing, Derek and Prof Felice Lieh Mak were dulyappointed and, on 12 April 2018, examined Mdm Ko.  Their joint report was produced on 31 May 2018.  Both doctors were completely ad idem that Mdm Ko was mentally capable to revoke the EPA on 4 September 2017.  The reasons they gave to determine that capability were precisely the same.  There was accordingly, from 31 May 2018, not the slightest doubt at all that Mdm Ko would succeed in obtaining the orders she sought.

Discussion

15.  Although the section 5 formalities were completed in this case, it is significant that, although Mdm Cheung herself filed an affirmation explaining her circumstances in response to the application, including setting out extensive particulars as to why she considered her mother’s mental condition was declining, she did not file any affirmation from either the solicitor or the medical practitioner who gave the appropriate certificates on the signing of the EPA.  If, as Mdm Cheung’s position was as from her affirmation, that the signing of the EPA was perfectly appropriate, and the DoR ought not to be confirmed by the Court, it is remarkable that those affirmations were not filed. 

16.  In the light of Mdm Ko’s evidence that she was misled by Mdm Cheung into signing the EPA and other documents at the same time, the absence of those affirmations cannot be explained by a desire to save costs.  Mdm Ko’s evidence to that effect rendered affirmations from the witnesses to the EPA vital.

17.  Although the evidence has not been fully tested in a trial, the overwhelming inference arises that, as Mdm Ko asserts, Mdm Cheung deliberately misled Mdm Ko as to the nature of the documents she was signing when the EPA was signed on 4 September 2017.

18.  Furthermore, it is clear that Mdm Cheung had taken no proper medical advice in respect of her mother prior to the signing of the EPA.  The only medical advice she refers to is a visit she made to her mother’s general practitioner on 16 August 2017, six months after the EPA was signed.  A note given by that doctor recommends that Mdm Ko should see a psychiatrist for further treatment in relation to loss of memory.

19.  In the light of the complete agreement between the psychiatrists, the matter was brought before me by Mr Clough with the intention that therebe an order that the case proceed to hearing without oral testimony.  Havingregard to the state of the evidence, that was a sensible application made with a view to saving costs.

20.  The evidence before me shows that as long ago as 5 June 2018, Mdm Ko’s solicitors sought to resolve matters in the light of the state of the evidence that had been revealed in the report from the psychiatric experts.  In the light of that report, plainly, any opposition to the orders sought by Mdm Ko’s Originating Summons were bound to fail. 

21.  Between that date and 19 July 2018, despite repeated requests by Mdm Ko’s solicitors, only two responses were received by them from Mdm Cheung’s solicitors.  The first was a complaint, on 29 June 2018, that a response should be demanded within three days.  The second, on 13 July 2018, said that instructions were being sought.

22.  It was not until 19 July 2018, that Mdm Cheung’s solicitors said that, without any admission as to liability, Mdm Cheung had no objection to the orders being made in terms of paragraphs 1 to 3 of the Originating Summons.  An issue was raised as to the identity and amount of any property or moneys that was required to be returned by Mdm Cheung.  As I have indicated, there could not have been any doubt about that.

23.  When the matter came before me on 24 July 2018, Mdm Cheung conceded the orders sought under the Originating Summons, including an order that she should produce all records and accounts kept under the EPA within 42 days and that she return the sum of HK$1.2 million forthwith.  The order contained an undertaking by Mdm Cheung to attend HSBC no later than 4 pm on 7 August 2018, to assist in the retrieval of the contents of the safety deposit box, and to facilitate the change of tenants of the safety deposit boxes back to Mdm Ko.

24.  On the plain face of the papers all these orders had become inevitable as soon as the Originating Summons was issued.

The principles

25.  The principles in respect of when an order for indemnity costs may be made have been stated by the Court of Appeal in Choy Yee Chun v Bond Star Development Ltd [1997] HKLRD 1327.  Those principles are summarised in Hong Kong Civil Procedure 2018, Vol 1 at §62/App/12 in the following terms:

“ A taxation of the successful party’s costs on an indemnity basis could properly be ordered where the proceedings were scandalous or vexatious, or had been initiated or prosecuted maliciously, or for an ulterior motive, or in an oppressive manner. Any proceedings instituted or prosecuted in such circumstances as to constitute an affront to the court could properly be the subject of a direction for the taxation of the successful party’s costs on an indemnity basis. However, the circumstances in which an indemnity award might properly be made were not restricted to circumstances such as those described. The discretion was not to be fettered or circumscribed beyond the requirement that taxation of an indemnity basis must be ‘appropriate’. The principle for the award of an order of costs on an indemnity basis applied equally to those who not only instituted proceedings but who defended them. If a plaintiff had been forced to institute proceedings by a defendant whose conduct had been not only hostile in the normal litigious sense, but oppressive and with baseulterior motive, and if the pursuit of a defence constituted conductwhich was part of an oppressive game plan, then invocation of thepower to award costs on an indemnity basis might well be justified.”

26.  Mr Clough correctly submits that had Mdm Cheung succeededin maintaining the EPA, by the court refusing to confirm the DoR, she would have been entitled to costs on a trustee basis.  In those circumstances, he said, upon Mdm Cheung’s complete failure to oppose any of the orders sought, Mdm Ko should equally be entitled to indemnity costs.

27.  Mr Clough relies also upon Harold v Smith (1860) 157 ER 1229, 5 H & N 381, where Bramwell B said:

“ Costs as between party and party are given by the law as an indemnity to the person entitled to them: they are not imposed as a punishment on the party who pays them, nor given as a bonus to the party who receives them. Therefore, if the extent of the damnification can be found out, the extent to which costs ought to be allowed is also ascertained.”

28.  To the extent that Mr Wong, for Mdm Cheung, submitted that the costs were designed to compensate the successful party in litigation he is correct.  But to the extent that his submission went on to say that costs were not intended to punish an unsuccessful litigant he is wrong.  The invocation of the power to award costs on an indemnity basis may be determined by the manner in which a party has conducted themselves, leading up to the litigation, and through the litigation: see Choy Yee Chun, cited above.

29.  Notwithstanding the assertions made by Mdm Cheung as to her belief as to her mother’s mental state, it is abundantly plain that she set about misleading her mother into signing the EPA, with a view to wrongly taking from her mother sums of money, justified only by a spurious claim for debts that were in fact unable to be proven and in any event statute barred.  In any circumstances that is conduct which the Court is entitled to take into account in an award of costs arising from those events.

30.  It is equally plain that Mdm Cheung’s conduct of the litigation has been such as to deliberately frustrate its progress and avoid the ultimate inevitability if at all possible.  The correspondence demonstrates continued delay on the part of Mdm Cheung in responding to perfectly reasonable requests from Mdm Ko’s solicitors.  That is particularly so following the production of the joint psychiatric report.

31.  Mdm Ko has been completely unnecessarily put to the expense of having to bring these proceedings to obtain the approval of the Court to the revocation of an EPA which should never have been signed in the first place.  Having regard to the manner in which Mdm Cheung has conducted this essential litigation, made essential only by her manipulation of Mdm Cheung into signing the EPA, Mdm Ko must be entitled to be compensated for her expense of the highest level.

32.  Until 19 July 2018, Mdm Cheung’s position appeared to be, without any suggestion to the contrary, that she would resist the proceedings and would be asserting that none of the orders sought ought to be made.  Mr Clough was entitled to remind me that in any event, there was no possible basis to resist an order for an accounting as that was a duty imposed upon Mdm Cheung by her position as a trustee of her mother under the EPA. 

33.  The continuation of the resistance to the proceedings by Mdm Cheung until 19 July 2018, was simply unjustified.

Disposal

34.  For these reasons I ordered that the costs of the proceedings should be paid by Mdm Cheung on an indemnity basis, to be summarily assessed. I directed that Mdm Ko’s solicitors should submit a schedule of the costs for summary assessment to me by 5 pm on Thursday 26 July, with Mdm Cheung’s solicitors to respond with their comments no later than 5 pm on Tuesday 31 July.

Certificate for two counsel

35.  The existence of two official languages in Hong Kong, with a very significant population that is monolingual in Chinese, and an extensive bar which comprises bilingual and monolingual counsel, creates an issue peculiar to Hong Kong. 

36.  There will be often occasions when the appropriate counsel to instruct is monolingual in English.  Where the lay client’s mother tongue is Chinese it is, in my view, entirely appropriate to instruct, in addition to counsel monolingual in English, a bilingual junior who will be able to assist, in Chinese, in the explanation of documents and advice to the client.

37.  For that reason, I was satisfied that, in the circumstances of this case there should be a certificate for two counsel.