ALLIED TREASURE INVESTMENT LTD v. CHAN KA LING AND ANOTHER

CACV 42/2021

[2022] HKCA 459

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 42 OF 2021

(ON APPEAL FROM HCMP 1700/2016)

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JUDGMENT

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Hon Chow JA (giving the Judgment of the Court):

Introduction

1.  This is an appeal against the judgment of Deputy High Court Judge Rachel Lam, SC (“the Judge”) dated 29 December 2020 (“the Judgment”), whereby the Judge adjudged, declared and ordered, inter alia, that –

(1)  the Plaintiff’s claim against the 1^st Defendant be dismissed;

(2)  the “Loan Agreement”, the “Mortgage” and the “Assignment of Rental” all dated 10 November 2015 (more particularly described in §11(2) below) are null and void and of no legal effect, and not enforceable as against the 1^st Defendant;

(3)  the registration of the Mortgage and Assignment of Rental in the Land Registry against the properties known as Flat D on the 7^th Floor (“Flat 7D”) and Car Parking Space No 16 on Ground Floor Level, Belmont Heights, No 3 Marconi Road, Kowloon (together, “the Properties”) be set aside; and

(4)  the Plaintiff do pay the 1^st Defendant’s costs of the action and the costs of her counterclaim, to be taxed if not agreed.

2.  Pursuant to the court’s direction dated 7 March 2022, the present appeal is dealt with by way of written submissions.  For this purpose, the court has received and considered: (i) the Plaintiff’s Skeleton Submissions dated 9 February 2022, (ii) the 1^st Defendant’s Skeleton Argument dated 24 February 2022, and (iii) the Plaintiff’s Skeleton Submissions in Reply received on 14 March 2022.

Basic facts

3.  For the purpose of disposing of the present appeal, the following brief summary of the background facts, taken from the Judgment, should suffice.

4.  The Plaintiff (“the Lender”) is a licensed money lender subject to the Money Lenders Ordinance, Cap 163 (“the MLO”).

5.  The 1^st Defendant (“the Daughter”) acquired the Properties on 23 July 2007, and has been registered as the sole owner of the Properties since that date.

6.  The 2^nd Defendant (“the Father”) is the 1^st Defendant’s father.

7.  By a Power of Attorney dated 13 January 2015 (“the POA”), the Daughter, who was based in Australia, appointed the Father to act as her attorney.  The POA is not a general power of attorney under Section 7 of the Powers of Attorney Ordinance, Cap 31, but is a special power of attorney in respect of the Properties.

8.  In or about May 2015, the Father arranged for a loan from the Lender, utilizing the Properties as security.  On 11 May 2015, the Father executed the following documents, for himself and also, relying on the POA, in his capacity as attorney for the Daughter:

(1)  A loan agreement (“the May Loan Agreement”) for HK$5,100,000 (“the May Loan”) which identified the Daughter and the Father as borrowers, being jointly and severally liable therefor.

(2)  An acknowledgment to confirm receipt of the Form of Summary of Provisions of the MLO.

(3)  A mortgage of the Properties as security for the HK$5,100,000 loan (“the May Mortgage”).

(4)  An assignment of rental to assign all rentals received under the tenancy agreement for Flat 7D to the Lender. 

(5)  A written confirmation letter, in his capacity as attorney for the Daughter, to confirm knowledge and consent about the May Mortgage.

(6)  A written instruction, in his capacity as attorney for the Daughter, instructing the Lender’s Solicitors, Messrs B C Chow & Co (“BC Chow”) to release the balance of the loan to the Father.

9.  The net amount of HK$5,029,250 (after deduction of expenses, legal costs, etc) was paid by the Lender by way of a cheque in the Father’s sole name.  The Father deposited this cheque into his own account.

10.  In about October 2015, the Father made inquiries with the Lender for a further loan of HK$600,000 to be secured by the Properties.  It was agreed that a fresh loan of HK$5,700,000 (“the Loan”) would be extended, and part of the proceeds of the fresh loan would be used to repay the May Loan. 

11.  As a result, the Father executed the following documents, for himself and also, relying on the POA, in his capacity as attorney for the Daughter:

(1)  On 6 November 2015, the Father signed in his capacity as attorney for the Daughter, a “Warning Notice to the Mortgagor”.

(2)  On 10 November 2015:

(a)  The Loan Agreement, which identified the Daughter and the Father as borrowers, being jointly and severally liable therefor.

(b)  The Mortgage.

(c)  The Assignment of Rental to assign all rentals received under the tenancy agreement for Flat 7D to the Lender. 

(d)  A written confirmation letter, in his capacity as attorney for the Daughter, to confirm knowledge and consent about the Mortgage.

(e)  A written instruction, in his capacity as attorney for the Daughter, instructing BC Chow to release the balance of the loan to the Father.

12.  The net proceeds of the Loan (after deduction of the principal amount due under the May Loan Agreement and other charges and expenses), in the amount of HK$525,900, was paid by the Lender by way of a cheque in the Father’s sole name.  The Father deposited this cheque into his own account.

13.  There is no dispute between the parties that throughout the above-mentioned arrangements with the Lender:

(1)  The Father was the one who dealt with the Lender and BC Chow.  The Daughter did not meet or contact the Lender’s representatives until after the loans and mortgages had been arranged and there had been default in repayment.

(2)  The Father utilized the POA in making the above-mentioned arrangements. This had been handed to the Lender’s representatives for consideration in the course of making the arrangements for the loans, and was reviewed by them.

(3)  During the process of arranging the loans and the signing of all relevant documents, neither the Lender’s representatives nor BC Chow contacted or met with the Daughter, the stated reason being their reliance on the terms of the POA.

(4)  The above-mentioned documentation for the May Loan and the Loan was signed by the Father alone, whether for himself or in his capacity as attorney for the Daughter.

(5)  The funds were all deposited into the Father’s account, the cheques having been issued to him in his sole name.

14.  In March 2016, the Father defaulted in repaying interest under the Loan Agreement.

15.  On 5 July 2016, the Lender commenced the present action against the Daughter and the Father by way of Originating Summons.  It was converted into a writ action by the order of Master R Lai dated 20 January 2017.  As set out in the Statement of Claim dated 9 February 2017, the Lender claimed against the Daughter and the Father for, inter alia:

(1)  The outstanding balance and interest under the Loan Agreement, for which both the Daughter and the Father were said to be liable.  The amounts claimed were:

(a)  HK$5,700,000, being the principal originally advanced;

(b)  HK$272,463.01, being interest in arrears as at the date of the Originating Summons;

(c)  further interest on the Loan and unpaid monthly interest; and

(2)  On the basis of the Mortgage, the Lender sought delivery up of vacant possession of the Properties to the Lender.

16.  The Daughter denied liability and raised the following defences:

(1)  On the proper construction of the POA, the Father had no actual authority to execute the Loan Agreement, the Mortgage or the Assignment of Rental on her behalf.

(2)  The Father had no apparent authority to execute the Loan Agreement, the Mortgage or the Assignment of Rental as her attorney as, by reason of the POA, the Lender had notice of the Father’s restricted scope of authority.

(3)  The Father had placed himself in a position of conflict and was in breach of his fiduciary duties owed to her in executing the Loan Agreement, the Mortgage and the Assignment of Rental on her behalf.  The Lender had actual or constructive notice of the said breach of fiduciary duties, which would negate the effectiveness of the Father’s signature on the said documents on her behalf.

17.  As pointed out by the Judge at §28 of the Judgment, all three defences turn on the true construction and effect of the POA, and stand or fall together.

18.  The Daughter also raised a fourth defence, contending that even if, on the true construction of the POA, the Father had actual and/or apparent authority (and in consequence, he would not be in breach of his fiduciary duties, and/or the Lender would not have been put on notice of the said breach), she was nonetheless not liable to the Lender as the Loan Agreement, the Mortgage and the Assignment of Rental were unenforceable against her by reason of the Lender’s breaches of s 18(1) of the MLO, which states as follows:

“No agreement for the repayment of money lent by a money lender or for the payment of interest on money so lent, and no security given to any money lender in respect of any such agreement or loan, shall be enforceable unless -

(a) within 7 days after the making of the agreement, a note or memorandum in writing of the agreement is made in accordance with subsection (2) and signed personally by the borrower, and a copy of such note or memorandum is given to the borrower at the time of signing; and

(b) there is included in or attached to such copy a summary, in such form as may be prescribed, of such provisions of this Part and Part IV as may be prescribed,

and no such agreement or security shall be enforceable if it is proved that the note or memorandum was not signed by the borrower before the money was lent or the security was given.”

19.  In relation to this ground of defence, the Daughter relied on the fact that:

(1)  The Lender failed to ask her to personally sign the note or memorandum of the Loan Agreement; and

(2)  The Lender failed to provide a copy of the note or memorandum to her at the time of signing.

The Daughter further contended that the Court should not exercise its discretion under s 18(3) of the MLO to allow enforcement of the above instruments against her.

20.  By way of counterclaim, the Daughter sought declaratory relief that the Loan Agreement, the Mortgage and the Assignment of Rental were not valid or binding, or alternatively not enforceable as against her.

21.  The Father also denied liabilities to the Lender, relying on the defence of non est factum, and an argument that he did not know and was not aware that he was asked to mortgage the Properties in order to obtain the Loan.

The judgment

22.  The trial of the action came before the Judge in October 2020.  In the Judgment, the Judge upheld the four grounds of defence raised by the Daughter, and rejected the defences raised by the Father.

23.  In respect of the first three grounds of defence raised by the Daughter, the Judge accepted the Daughter’s submissions that:

(1)  on the true construction of the POA, the Father, as attorney, had no power to (a) obtain any loans which were not solely for the benefit of the Daughter, or (b) use the Properties as security for any loans which were not solely for the benefit of the Daughter;

(2)  given that the Loan was in both the Father’s and the Daughter’s names as co-borrowers, it was not for the sole benefit of the Daughter; and

(3)  hence, the Loan and Mortgage arrangements exceeded the scope of the POA and were thus void or unenforceable as against her.[1]

24.  At §35 of the Judgment, the Judge set out various principles for the construction of a power of attorney, which have not been disputed by Mr Siu (for the Lender):

“(1) The Lender and the Daughter agreed that the POA is to be construed strictly.

(2) Where an act purporting to be done under the POA is challenged as being in excess of authority conferred by the power, it is necessary to prove that on a fair construction of the whole instrument the authority in question is to be found within the four corners of the instrument, either in express terms or by necessary implication.

(3) The operative part of a deed is controlled by the recitals where there is ambiguity.

(4) Where authority is given to do particular acts, followed by general words, the general words are restricted to what is necessary for the proper performance of the particular acts.

(5) General words do not confer general powers, but are limited to the purpose for which the authority is given, and are construed as enlarging the special powers only when necessary for that purpose.

(6) A deed must be construed so as to include all incidental powers necessary for the effective execution of the power it confers.

(7) The Lender and the Daughter also agreed that extrinsic evidence is not admissible for the purposes of construing the meaning and effect of the POA.”

25.  The Judge found in favour of the Daughter on the issue of construction, holding that, upon the true construction of the POA:

“(1) The POA including in particular Clause 6 thereof, properly understood, did not entitle the Father to make the arrangements for and execute the Loan Agreement, the Mortgage and the Assignment of Rental as the Daughter’s attorney in the manner that he did – in particular, in seeking to obtain the benefit of the Loan for himself as co-borrower.

(2) The Lender, having had the chance to review the POA (whether by its director Ms Candy Cheung and/or by its lawyers BC Chow), being well aware that the Father was a co-borrower to the Loan, ought to have been aware that the Father was acting outside his actual and/or apparent authority, and/or was in breach of his fiduciary duties, when he executed the Loan, the Mortgage and the Assignment of Rental on behalf of the Daughter.

(3) The key point in this regard is that the Father was a co-borrower on the Loan when he in fact had no entitlement to benefit from use of the Properties as the security; this is what rendered the arrangements outside the scope of the POA and Clause 6 in particular.” (see §56 of the Judgment)

26.  Her reasons for coming to this construction of the POA are set out at §57 of the Judgment, as follows:

“In coming to such a conclusion, I have taken into account the following points:

(1)  I accept the distinction drawn between the entitlement to the mortgage consideration and monies on the one hand, and the mode by which such funds were to be paid (paragraph 43 above). 

(2)  The words ‘in my name solely or in the name of the Attorney solely’ follow the particular act ‘to receive the consideration and the same or any of them payable to me’, and must be construed and restricted accordingly by reference to the phrase ending with ‘…payable to me’.

(3)  The purpose for which the authority is given ‘to receive the consideration and the same or any of them’ is made clear by the phrase ‘payable to me’, and there was no intent to benefit the Father in the operation of this power or act.

(4)  Whilst the present case is distinguishable from the Wealth Lee situation (as above), it does not follow that Clause 6 in the present case must necessarily be construed in a manner which enables the donor of the POA to have entitlement to the mortgage funds.  The wording of the clause is wider than that in Wealth Lee, but one must still endeavour to understand and construe the phrase ‘to receive the consideration and the same or any of them payable to me’ in the context of the present case.

(5)  I do not consider it necessary to take any particular stance on the other parts of the POA containing the plural pronouns. There is no ambiguity on the face of Clauses 6 and 7 themselves, and these are the clauses which govern the arrangements in this case.

(6)  The Lender’s point in paragraph 39 above that the option for payment to the Daughter or the Father was equal, and that there was no default position in favour of the Daughter does not, in my view, support its proposed construction. The situation might be different if, say, the phrase did not specify that the consideration should be paid to the Daughter (eg ‘to receive the consideration and the same or any of them payable to me in my name solely or in the name of the Attorney solely’), but that is not what the clause said.  The clause quite clearly indicated that the proceeds were to be payable to the Daughter, and thus for her benefit.

(7)  Any reliance sought to be placed by the Lender on various prior transactions entered into by the Father as attorney on behalf of the Daughter is neither here nor there.  The Glory Sky mortgages took place under a different power of attorney altogether, and the May loan arrangements took place under the subject POA.  This latter point brings the analysis back to the effect and scope of the POA, which does not entitle the Father to benefit for himself from the Properties.”

27.  In respect of the fourth ground of defence raised by the Daughter, the Judge found that the requirements of s 18(1) of the MLO were not met.[2] On the basis of the facts and circumstances of the case found by the Judge, she further declined to exercise the discretion under s 18(3) in favour of the Lender.[3]

28.  For the purpose of this judgment, it is not necessary to consider the Father’s defences, save to point out that they were rejected by the Judge.

The present appeal

29.  By a Notice of Appeal dated 26 January 2021, the Lender appealed the Judgment to this court.  Eight grounds of appeal are raised in the Notice of Appeal:

(1)  Ground 1 attacks the Judge’s construction of the POA.

(2)  Ground 2 contends that the Judge erred in holding that the Lender ought to have been aware that the Father was acting outside his actual and/or apparent authority, and/or was in breach of his fiduciary duties, when he executed the Loan Agreement, the Mortgage and the Assignment of Rental on behalf of the Daughter, and the Father was seeking the benefit of the Loan for himself as co-borrower.

(3)  Grounds 3 to 7 concern the breach of the requirements of s 18(1), and the Judge’s exercise of discretion under s 18(3) of the MLO.

(4)  Ground 8 complains about the costs order made by the Judge.  It is contended that the Judge erred in refusing to order that the costs of the action between the Lender and the Daughter should be borne by the Father alone.

Ground 1: construction of the Power of attorney

30.  Under Ground 1 of the Notice of Appeal, the Lender contends that the Judge, after reading the POA as a whole and after taking into account that the POA was an instrument prepared by the Daughter’s own solicitors and thus should be weighed and construed against her, ought to have found, inter alia, that:

(i)  the POA did authorise the Father as the lawful attorney of the Daughter to mortgage the Properties in the manner that he did; and

(ii)  the POA did authorise the Father as the lawful attorney of the Daughter to receive the consideration payable to the Daughter in the name of the Father solely.

31.  This ground raises an issue of construction of the POA, in particular, whether it permits the Father to mortgage the Properties as security for a loan which is not for the sole benefit of the Daughter.  The POA, so far as material, provides as follows:

(1)  Recital (1) states that the Daughter is the registered owner and beneficially entitled to the premises set out in Schedule thereto, ie the Properties.

(2)  Recital (2) states that the Daughter nominates constitutes and appoints the Father to be her true and lawful attorney for her and in their names or the name of the Father to do execute and perform all or any of the acts deeds and things referred to in the substantive provisions of the POA in respect of “[our] interest right title benefit and entitlement of and in the said premises”.[4]

(3)  Clauses 1 to 21 of the POA set out a list of the things which the Father is authorised to execute and perform in respect of the Properties, including managing, letting/leasing, demanding for rents, recovering possession, repairing, insuring, selling the Properties, etc.[5]

(4)  Of particular relevance for the purpose of the present discussion is Clause 6 of the POA concerning the power to mortgage the Properties to raise funds.  Clause 6 states as follows -

“From time to time if and when the Attorney shall think fit to mortgage, charge, pledge or otherwise dispose of the Property or any part thereof for such consideration and upon such terms and conditions as the Attorney shall in his absolute discretion think fit, to receive the consideration and the same or any of them payable to me in my name solely or in the name of the Attorney solely or other monies for the same and to give good receipts and proper discharges therefor, which receipts shall exonerate the person(s) and/or corporation(s) paying such monies from seeing to the application thereof or being responsible for the loss, non-application or mis-application thereof.” [emphasis added]

32.  In order to decide whether the POA permits the Father to mortgage the Properties to raise funds which are not for the sole benefit of the Daughter, it is necessary to have regard to the purpose and context of the POA as well as its wording, in particular Clause 6 thereof.

33.  The purpose of the POA can be ascertained from, inter alia, its recitals and the general nature of a power of attorney.  Recital (2) of the POA makes it clear that it is to constitute the Father as the Daughter’s attorney to execute and perform various acts, deeds and things in respect of her interest right title benefit and entitlement of and in the Properties.  Although Recital (2) refers to the Daughter and Father’s (“our”) interest … etc of and in the Properties, bearing in mind that the Daughter is the sole registered and beneficial owner of the Properties, a fact stated in Recital (1), it seems to us to be clear that the reference to “our” interest, etc is a mistake and should instead be to the Daughter’s interest in the Properties.

34.  Generally speaking, an attorney is in the position of an agent of the principal (ie the donor of the power of attorney), and can only exercise the powers conferred on him by the power of attorney for the benefit of the principal.  As such, the attorney owes fiduciary duties to, and is required to act in the best interests of, the principal.  While it is certainly possible for a power of attorney to authorise an attorney to act for his own benefit, that is not a conclusion which should be lightly reached in the absence of clear wording to that effect.  The general position is stated in Overseas Trust Bank Ltd v Tang Chi-ching [1994] 2 HKLR 73, at 77 per Kempster JA:

“It would be surprising if the terms of an agent's appointment were to be found susceptible of the construction that he was permitted to act otherwise than in the interests of his principal. As Russell J observed in Reckitt v Barnett, Pembroke and Slater, Ltd [1929] 2 KB 244 at p 268 in the course of a judgment subsequently approved in the House of Lords ((1929] AC 176):

‘It is said that the plaintiff's statement to the bank that he wishes the power of attorney to cover the drawing of cheques upon them by Mr Woodhouse ‘without restriction’, operates to enlarge the powers conferred by the power of attorney, and to such a sweeping extent that Lord Terrington became authorized to do what he liked with the plaintiff’s moneys, even to the extent of applying them in payment of his own personal debt. It would need words unambiguous and irresistible to enable me to attribute such a meaning and intention to a power of attorney. The primary object of a power of attorney is to enable the attorney to act in the management of his principal’s affairs. An attorney cannot, in the absence of a clear power so to do, make presents to himself or to others of his principal's property’.”

35.  As for the context, Clause 6 of the POA is within, or appears amongst, a list of the powers which the Father is authorised to exercise on behalf of the Daughter in relation to the Properties.  The exercise of such powers should be tied to the purpose of the POA as mentioned above, ie to act for the benefit of the Daughter and in her best interests.

36.  As for the wording of Clause 6, we consider that a distinction is drawn between (i) entitlement to the consideration, which is to be “payable to me”, ie the Daughter, and (ii) the manner of effecting such payment, ie, “in my name solely or in the name of the Attorney solely”.  In other words, the intention and effect of Clause 6 is to authorise the Father to mortgage, charge or pledge the Properties for consideration payable to the Daughter (not anyone else), but such consideration may be paid to the Daughter (ie in her name) solely or the Father (ie in the name of the Attorney) solely.  As observed by the Judge, Clause 6 only authorises the Father to “receive” consideration “payable to” the Daughter.  There is nothing in Clause 6 to suggest that it also authorizes the Father to mortgage, charge or pledge the Properties for any consideration payable to him, or for his benefit (solely or otherwise).

37.  In our view, the Judge has come to the correct construction of the POA that it does not permit the Father to mortgage the Properties for the Loan which is not for the sole benefit of the Daughter. 

38.  Mr Siu argues otherwise.  He prays in aid Clauses 7, 19, 21 and the last paragraph of the POA as conferring the necessary authority on the Father to enter into the Loan arrangement.

(1)  Clauses 7, 19 and 21 are some of the specific powers conferred on the Father under the POA, namely -

“To execute sign seal and as my act and deed deliver enter into acknowledge perfect and do all such mortgages, legal charges, charges and all other instruments deeds and documents as shall be required or may be deemed proper for or in relation to all or any of the purpose or matters aforesaid.” (Clause 7)

For all or any of the purposes of these presents to execute sign seal and as our act and deed deliver enter into give acknowledge perfect and do all such … contracts transfers assignments mortgages charges pledges assurances deeds agreements covenants memorials notices receipts documents or instruments in writing whatsoever whether under seal or not and for such purpose aforesaid or any of them to draw sign accept all cheques and orders for payment or money payable by or to us.” (Clause 19)

To concur in doing any of the acts deeds and things hereinbefore mentioned in conjunction with any other person or persons (including the Attorney) interested in the said premises.” (Clause 21)

(2)  The last paragraph of the POA states that -

“AND GENERALLY to act in relation to the said premises as fully and effectually in all respects as we ourselves could do and we hereby undertake to allow ratify and confirm everything which the Attorney shall lawfully do or cause to be done in respect of the said premises by virtue of these presents including whatsoever shall be done between the revocation of these presents by any means and the time of such revocation becoming known to the Attorney”.

In our view, these provisions of the POA do not assist the Lender, because the powers referred to therein do not stand on their own but are all “incidental” to the powers contained in other provisions of the POA, including in particular Clause 6 thereof.  In other words, before these incidental powers may be exercised, it must first be shown that the Father is authorised to enter into the Loan and Mortgage on behalf of the Daughter.

39.  In respect of Clause 21 of the POA, Mr Siu also argues that it authorises the Father to concur in doing anything (including those under Clause 6) with persons (expressly including the Father) “interested in the said premises”, and the phrase “interested in the said premises” should not be restrictively construed to include only proprietary, beneficial or legal interests in the Properties, especially when Recital (2) to the POA acknowledged that the Father had “interests” over the Properties.  In support of his proposition that the phrase “interested in the said premises” should not be restrictively construed to include only proprietary, beneficial or legal interests in the Properties, Mr Siu relies on Tsui Yun Bun Barry v Law Wan Tung [2019] HKCFI 2955.  That case concerns the construction of the phrase “any person interested in any property” / “any other person interested in the subject-matter of the charge” in s 20B(4) of the High Court Ordinance (Cap 4) and Order 50, r 7(1) of the Rules of the High Court (Cap 4A), both being concerned with the court’s jurisdiction to discharge or vary a charging order upon the application of an interested party, and is irrelevant to the present discussion.  Mr Siu argues that the Father has some “non-proprietary interest” in the Properties, in that he has the power “to demand for rent, to sell, to recover possession, to claim and receive money from the Government, to commence legal proceedings, to do any act that the Daughter is bound to do (Clause 20), and etc” under the POA.  In our view, even if the Father may, for the purpose of Clause 21, be regarded as being “interested” in the Properties, we do not see how this argument can assist the Lender on the issue of whether, upon the true construction of the POA, it permits the Father to obtain a loan which is not solely for the benefit of the Daughter, or mortgage the Properties as security for such loan.   Further, as mentioned above, we consider that Recital (2) was mistaken when it referred to the Daughter and Father’s (“our”) interest right title benefit and entitlement of and in the Properties.  On the facts of the present case, it is clear that the Father has no such interest, etc.

40.  Mr Siu next argues that joining the Father as a co-borrower “was not a gift to himself but a liability”, and the attorney (the Father) “incurred personal liability to his detriment”[6].  Such argument cannot assist the Lender in relation to the issue of construction of the POA.  That the Father, being a co-borrower of the Loan, should incur personal liability for its repayment, is entirely unexceptional.  However, the fact that such liability is incurred provides no answer, or clue, to the question of whether the Father is authorised to use the Properties as security for a loan which is not solely for the benefit of Daughter.

41.  On the basis that the POA does not authorise the Father to obtain any loan which is not solely for the benefit of the Daughter, or use the Properties as security for any loan which is not solely for the benefit of the Daughter, it is clear that the Father has no authority to enter into the Loan, Mortgage and Assignment of Rental as attorney for or on behalf of the Daughter, since the Loan is, on its face, for the benefit of the Father and Daughter jointly, and not for the benefit of the Daughter solely.

42.  Having reached the above conclusions, it becomes unnecessary for us to consider Grounds 2 to 7 of the Notice of Appeal.

Ground 8: judge’s exercise of discretion on costs

43.  Under Ground 8, Mr Siu argues that a Sanderson Costs Order should be made in the present case, relying on the judgment in Fung Chun Man v Hospital Authority [2012] 1 HKC 531.  In that case, Bharwaney J stated at §5 of his judgment that the principles that govern the making of Sanderson or a Bullock order (ie an order that the plaintiff pays the costs of the successful defendant and recovers them from the unsuccessful defendant) are well settled.  The court must, in each case, determine whether or not it was reasonable for the plaintiff to proceed against the successful defendant.  If it was, the unsuccessful defendant may be ordered to pay the successful defendant’s costs, either directly, via a Sanderson order, or indirectly, via a Bullock order.

44.  In the present case, the Judge’s reasons for not making a Sanderson Costs Order are set out at §101(6) of the Judgment:

“In relation to the costs of the Daughter to be borne by the Lender, I am presently not inclined to make a Sanderson Costs Order as invited by the Lender. In so doing, I have taken into account the principles set out in Fung Chun Man v Hospital Authority & Anor [2012] 1 HKC 531 at §§5-7. Given the findings I have made above regarding the equities of the case and the state of affairs as to the Lender’s approach in dealing with the loans, I do not consider it appropriate to make a Sanderson Costs Order. There are plenty of cases, including a number cited by counsel on both sides in this case, where money lenders have elected to only pursue or proceed against one or other of the borrowers or sureties involved in loan arrangements. It was not a given that the Lender had to proceed against both in this case. Nor does this fall into the ‘classic scenario’ described in Fung Man Chun where the unsuccessful defendant blames the successful one and causes the plaintiff to join or proceed against both.”

45.  The Judge was plainly aware that she had a discretion to make a Sanderson Costs Order, but declined to exercise such discretion based on her view of the facts and circumstances of the case. It has not been shown that the Judge erred in principle, or that any of the well-established grounds for this court to interfere with the exercise of the broad discretion as to costs by the Judge is present.  It is not good enough for the Lender to simply assert that the Judge erred in refusing to make a Sanderson Costs Order.[7] Ground 8 of the Notice of Appeal has no substance.

Disposition

46.  The Plaintiff’s appeal against the Judgment is rejected, and the Notice of Appeal is dismissed.  We also make an order nisi that the Plaintiff shall pay the 1^st Defendant’s costs of the appeal, to be taxed if not agreed.  The order as to costs shall become absolute upon the expiration of 14 days from the date of this judgment unless the Plaintiff shall apply to vary the same prior to the expiration of the 14-day period.