Lam Chi Ming v. Leung Hop Fook and Others

HCA 1590/2011

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1590 OF 2011

BETWEEN

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D E C I S I O N

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I.  INTRODUCTION

1.The plaintiff (“Lam”) is the son of Leung Kan who died on/about 2 July 2006.  In her will dated 3 March 1993, Leung Kan appointed Lam as her sole executor.  The 2^nd defendant (“Yuen”) is the wife of 1^st defendant (“Leung”).  Lam is Leung’s nephew.

2.In HCMP 1972/2007 and HCA 96/2008 (which proceedings were consolidated by court order dated 21 October 2008, “Consolidated Action”), Lam claimed against Leung and Yuen for certain interests in Lot No 642 in Ma Wan (“Lot 642”) and the messages erections and buildings thereon now known as No 101 Ma Wan Main Street Village, South Ma Wan, New Territories, Hong Kong (“Building”).  Lot 642 and the Building comprised (a) the ground floor of the Building, (b) the first floor (“First Floor”), and (c) the second floor (including the balcony appertaining thereto and the roof above thereof of the Building) (“Property”), each being ⅓ part or share of and in Lot 642 and the Building. Sealed copies of the originating processes in HCMP 1972/2007 and HCA 96/2008 were registered at the Land Registry against Lot 642 and the Building (including the Property) on 11 October 2007 and 17 January 2008 respectively.

3.According to the Defence filed by Leung and Yuen in HCA96/2008 on 30 June 2008,

(a) Leung is the lawful and natural son of Leung Hing Cho. He became/is the only beneficiary of the estate of Leung Hing Cho. By succession, Leung was solely entitled to Lot No 120 in Ma Wan (“Lot 120”).

(b) In 1993, the Sun Hung Kai group of companies (“SHK”) started to acquire land in Ma Wan from various owners. Leung being an indigenous resident in Ma Wan was entitled to and did participate in the exchange of land scheme proposed by SHK whereby Lot 120 would be exchanged for a new three-storey village type house (with an area of 700 sq ft per floor) to be erected on another site in Ma Wan (which eventually turned out to be Lot 642).

(c) By a Deed of Gift dated 29 August 2001, Leung assigned Lot 120 to Yuen.

(d) Pursuant to an Agreement dated 8 June 2006 whereby Leung agreed to sell Lot 642 to Yuen, Yuen assigned Lot 120 back to Leung in order to facilitate the grant of Lot 642 to Leung.

(e) By a Deed of Assignment dated 8 June 2006, Yuen assigned Lot 120 to Yuen.

(f) On 16 August 2007, a New Grant of Lot 642 was issued in favour of Leung.

(g) On 17 October 2007, pursuant to the Agreement dated 8 June 2006 in (d) above, Leung assigned Lot 642 to Yuen.[1]

4.According to the land search records, by a Deed of Relinquishment and Assignment dated 21 October 2008, the Property was assigned to Leung.  By a further Assignment dated 22 April 2009, the Property was assigned to Yuen in her sole name for a consideration of $500,000.00.

5.It transpired that Yuen entered into a Chinese agreement dated 3 January 2011 with the 3^rd defendant (“Tam”) for the sale of the First Floor and the Property to Tam on the terms stated therein (“Tam Agreement”) as follows:

(a) as there were disputes regarding the First Floor and the Property, they could not be sold to Tam and the deposit could not be received;

(b) Yuen undertook that once the litigation were won and title to the First Floor and the Property were obtained, the First Floor would be sold to Tam for $1,950,000.00 and the Property would be sold to him at the price of $2,300,000.00;

(c) within three months of completion of the litigation and obtaining title by a court judgment, Tam shall pay a deposit equivalent to 10% of the purchase price, and both parties shall sign a “must sell and must buy” agreement with completion of the transaction to take place within the following three months;

(d) if Yuen failed in the litigation, the Tam Agreement shall become void and both parties shall have no claim against each other.

The Tam Agreement suggested that the sale of the First Floor and the Property by Yuen to Tam would be subject to two conditions precedent, ie that Yuen would succeed in the litigation and she would obtain title to and ownership of the First Floor and the Property.

6.As a result of mediation held on 18 January 2011 whilst the Consolidated Action was pending (“Mediation”), Lam as “甲方” and Leung and Yuen as “乙方” entered into and signed a settlement agreement of the same date (“Mediated Agreement”).  Clause 3 of the Mediated Agreement provided as follows:

「3. 經調解後，立約雙方同意以下條款和解[the Consolidated Action]:-

(1) 乙方同意轉讓 [the Property] 的業權給予申方。

(2) 乙方須於2011年3月31日或之前 (“轉讓日”) 將 [the Property] 以不交吉形式轉讓予甲方或甲方之提名人。[The Property] 之租約租金為HK$7,000一個月，在轉讓日後由甲方向租客收取。乙方須於同時提交予甲方或甲方提名人一份已蓋厘印並由[Yuen]與現在租客簽訂之租約正本，並付予甲方港幣七仟元正為一個月之租金按金，租約完結日為不遲於2012年12月31日。

(3) 甲方同意及確認 [the Property] 的樓契狀況乃不完整，但甲方仍然願意接受該狀況，不得向乙方追究。

(4) 乙方承諾有關 [the Property] 於轉讓日前的所有費用，包括裝修費由乙方負責，但 [the Property] 轉讓給甲方所引致的印花稅由甲方負責。而物業轉讓的律師費由雙方各自負責。

(5) 甲方須於轉讓日或之前將港幣十萬元正支付給乙方，作為 [Leung] 的生活費。

(6) 雙方須指示各自律師作出有關終止 [the Consolidated Action] 的法庭文件手續。

(7) [The Consolidated Action] 上律師費及堂費，雙方各自各負責。」

7.On 10 February 2011, Tam’s solicitors lodged the Tam Agreement with the Land Registry for registration against the First Floor and the Property, but for reasons unknown to Lam such registration was subsequently withdrawn or stopped.

8.On 16 February 2011, pursuant to the Mediated Agreement, Lam’s solicitors YT Szeto & Co (“YTSC”) and Leung’s/Yuen’s solicitors Tang Lee & Co (“TLC”) in the Consolidated Action signed and filed the following:

(a) a consent summons in respect of which an order in terms was granted by the court on 21 February 2011 (“Consent Summons”);

(b) a Tomlin Order based on the terms of the Mediated Agreement (“Tomlin Order”).

9.By the Tomlin Order, all further proceedings in the Consolidated Action were stayed except for the purpose of carrying such order and the terms contained in the Schedule thereto (“Tomlin Schedule”) into effect and for that purpose the parties had liberty to apply for such purpose.  By the Tomlin Schedule, Lam and Leung/Yuen agreed inter alia that:

“1. [Leung and Yuen] agree to transfer the title and ownership of [the Property] to Lam or the designated representative of [Lam];

2. [Leung and Yuen] shall execute all necessary documents for the transferal in favour of [Lam] or the designated representative of [Lam] and the completion of the transferal of the [Property] shall take place by 31^st March 2011 (“the Completion Date”);

3. [Lam] shall bear all stamp and/or other duties for the transferal and [Leung and Yuen] shall bear all the fees incurred before the transferal and the decoration fees and each party shall bear its own legal fees for the transferal;

4. [Lam] hereby acknowledge [the Property] is subject to a tenancy at the monthly rental of HK$7,000.00 and the tenancy shall expire no later than 31^st December 2012;

5. [Leung and Yuen] shall pay the security deposit of the tenancy in the sum of HK$7,000.00 to [Lam] and provide the duly stamped original tenancy agreement to [Lam] by the Completion Date;

6. [Leung and Tam] shall inform the tenant of the aforesaid tenancy to pay the monthly rental to [Lam] and/or the designated representative of [Lam] from the Completion Date onwards;

7. [Lam, Leung and Tam] agree that the documents in relation to the title of [the Property] are incomplete and/or defective and the parties agree to the transferal without claiming each other;

8. [Lam] shall pay [Leung] a lump sum of HK$100,000.00 as maintenance by the Completion Date;

9. The claim by [Lam] and the counterclaim by [Leung and Yuen] be stayed with no order as to costs of the claim by [Lam] and the counterclaim by [Leung ad Yuen].

10. There be no order as to costs for the preparation of this Tomlin Order.”

10.Lam claimed that prior to 31 March 2011 (ie the completion date under clause 2of the Tomlin Schedule (“Completion Date”)) he discovered that Yuen and Tam had entered into the Tam Agreement.

11.On 23 March 2011, Tam commenced HCA 490/2011 against Yuen for specific performance of the Tam Agreement, damages for breach of the Tam Agreement and other reliefs.  On 25 March 2011, Tam’s solicitors caused a sealed copy of the writ of summons in HCA 490/2011 to be registered against the First Floor and the Property at the Land Registry.

12.On 27 June 2011, YTSC lodged a sealed copy of the Tomlin Order with the Land Registry for registration against the Property.

II.  LAM’S CLAIM

13.Lam claimed it was implied under the agreements made between him and Leung/Yuen including the Mediated Agreement and the Tomlin Order (with the Tomlin Schedule) (collectively, “Settlement Agreement”) inter alia that Leung and Yuen were under a duty:

(a) to make full and frank disclosure of all claims, interests, rights, benefits, liabilities, encumbrances and matters affecting the Property before, as at and after the Mediation and/or when the Mediated Agreement, the Tomin Order (with the Tomlin Schedule) and the Settlement Agreement were entered into;

(b) to show and give good title to the Property free from all encumbrances in accordance with the requirements under sections 13 and 13A of the Conveyancing and Property Ordinance Cap 219 and common law, and to deliver to Lam or his solicitors all the title deeds and documents relating to the Property which they had in their possession;

(c) to make full and frank disclosure of the particulars/details of the incompleteness and defects in the documents in relation to the title of the Property;

(d) to clear and remove all claims, interests, rights, benefits, liabilities, encumbrances and matters adversely affecting the Property at a reasonable time before completion of the transfer of the Property to Lam;

(e) to transfer the Property to Lam free from all claims, liabilities, encumbrances and matters adversely affecting the Property on completion of the transfer of the Property;

(f) to take such steps and actions as may be necessary for the transfer of the Property with the best title and ownership they had in the Property,

and in the absence of special circumstances or express agreement to the contrary, the time for completion shall be of essence for the Settlement Agreement, and Leung/Yuen shall show good title at a reasonable time before the Completion Date and to give good title at the Completion Date.

14.Lam claimed that wrongfully and in breach of the express/ implied terms and conditions of the Settlement Agreement, Leung and Yuen failed to perform/observe the terms and conditions of the Settlement Agreement and/or to transfer the Property to him in accordance with the terms thereof in that they failed to:

(a) make full and frank disclosure of all claims, estate, interests, rights, benefits in/to the Property when, before and/or after the Mediation and/or when the Mediated Agreement, the Tomlin Order (with the Tomlin Schedule) and the Settlement Agreement were entered into by Lam, Leung/Yuen and their respective solicitors;

(b) clear off and remove the claims, estate, interests, rights and benefits of Tam under the Tam Agreement and in/to the Property, and therefore they had failed and were not and still are not in a position to transfer the Property to Lam or his designated representative in accordance with the Settlement Agreement free from such claims, estate, interests, rights and benefits;

(c) clear off, remove and vacate the registration of the writ of summons in HCA490/2011 at the Land Registry or otherwise settled, cleared off or removed all of Tam’s claims under such writ of summons which constituted a lis pendens and encumbrance on the Property and also a doubt and blot on the title of the Property, and therefore they had failed and were not and still are not in a position to transfer the Property to Lam free from all claims, liabilities, encumbrances and matters adversely affecting the Property in accordance with the Settlement Agreement;

(d) show good title at a reasonable time before the Completion Date and give good title at the Completion Date;

(e) deliver the original of the duly stamped tenancy agreement in respect of the Property to Lam by the Completion Date.

15.On 20 September 2011, Lam commenced the present action against Leung, Yuen and Tam. Lam claimed that by reason of breach of the Settlement Agreement by Leung/Yuen, he suffered loss and damages. He further claimed against Leung/Yuen for specific performance of the Settlement Agreement and/or alternatively damages for breach of the terms thereof.  Lam also claimed against Tam for (a) an order to vacate the registration of the writ of summons in HCA 490/2011 against the Property at the Land Registry, (b) further/alternatively a declaration that Lam’s interest in and claim to the Property under the Consolidated Action and the Settlement Agreement rank in priority over Tam’s claim to and interest in the Property under the Tam Agreement and/or the writ of summons in HCA 490/2011, and (c) damages for wrongful registration and slander of title in respect of the writ of summons in HCA 490/2011 against the Property at the Land Registry.

III. PRESENT ACTION

16.On 4 October 2011, Yuen by her former solicitors Leung Kin & Co (“LKC”) and Tam by his solicitors Lennon & Lawyers (“L&L”) filed their respective acknowledgment of service giving notice of intention to defend.  On 31 October 2011, Tam filed his Defence disputing liability.  On 28 November 2011, Lam filed his Reply thereto.

17.Yuen filed her Notice to Act in Person on 10 February 2012. At the hearing on 13 February 2013 in respect of the case management summons filed on 29 December 2012 and attended by Lam’s solicitors Messrs Lo, Wong & Tsui (“LWT”), Yuen acting in person and L&L, and  with Leung absent, Registrar KW Lung (“Registrar”) granted case management directions for inter alia mediation, discovery and witness statements, and adjourned for a case management conference (“CMC”) to be heard on 12 September 2012 (“CMS Order”).

18.On 11 April 2012, Wilson Yeung & Co (“WYC”) filed Notice to Act on behalf of Leung and Yuen. On the same day, WYC wrote to ask LWT about the “current state of this matter”.  On 25 April 2012, LWT sent a copy of the CMS Order for WYC’s information.  On 21 May 2012, WYC filed Notice of Change of Address for Service.

19.On 8 June 2012, LWT wrote to WYC to propose exchange of witness statements on 11 June 2012.  On the same day, WYC replied that they “still have not been given the full set of Court documents from our client’s former solicitors, [LKC]”, and again asked LWT to fax to them a copy of the CMS Order. On 11 June 2012, LWT again sent a copy of the CMS Order to WYC.  On the same day, LWT urged WYC for a reply on their proposal for exchange of witness statements. Still later on the same day, LWT wrote to WYC to say that L&L requested for exchange of witness statements the following week, and suggested that Yuen should also consider the same arrangements.

20.On 11 June 2012, WYC wrote to LWT to state they “recently discovered that [Leung and Yuen] have not filed any Defence”, and asked whether LWT would agree to their filing a Defence and Counterclaim as soon as possible.  On 12 June 2012, LWT replied as follows:

“We wish to inform you that [Yuen] has previously informed us through her former solicitors that she does not intend to defend [Lam’s] claims. She also agrees to act as a witness in the Action in relation to the disputes between [Lam] and [Tam], regarding the alleged agreement for sale and purchase between [Yuen] and [Tam]. This is a sensible decision since costs will be reduced. This has been a decision of [Yuen] and such decision has been communicated to us. The Action has been proceeding on the basis that [Yuen] does not intend to defend [Lam’s] claims in the Action. You should first ascertain the position from [Yuen] and give appropriate advice on the matter.”

LWT complained that any Defence and Counterclaim would be about 9 months late, and there was inexcusable delay on Yuen’s part.  Noting that WYC had filed their Notice to Act two months ago, LWT found it surprising that WYC only “recently discovered” Yuen had not filed any Defence. LWT indicated that Lam would resist Yuen’s intended application.

21.On 12 June 2012, Yuen filed a summons to seek leave to file/serve her Defence and Counterclaim as per the draft annexed thereto (“Draft”) within three days from the date of the order to be made notwithstanding that the time for filing/serving the same had expired (“Yuen Summons”).

22.On 13 June 2012, WYC wrote to LWT to allege that “there is a serious conspiracy or even more seriously to defraud the Court by the relevant parties.  This is a very serious matter. We cannot advise [Yuen] to take the former stance stated by you as she was wrongly advised by her solicitors.  In light of the evidence which you should also have, we also invite you to consider your position as well and any conflict of interest you have faced or may have faced”.  On the same day, LWT replied to seek enlightenment as to “what position we should consider and the conflict of interest we now face or [may face]”.

23.On the same day, WYC wrote to LWT to refer to the medical evidence about Leung’s mental condition in the Consolidated Action and the Draft.  “In our evidence, [Leung] was at all material times retarded. If you represent [Lam] to enforce the document signed by a retarded person and you are fully aware of it, and do not inform the Court of this situation in any pleadings, we are of the view that you have failed to fulfill the duty of an officer of the Court”.

24.Also on the same day, LWT replied to say that the allegations by Leung and Yuen in the Consolidated Action were mere allegations and not proven fact since there was no trial.  There was no evidence to prove that Leung lacked the mental capacity to give the necessary consent. In any event, LWT only acted for Lam after the Tomlin Order was made, and the present action was for enforcement of the Tomlin Order, so there was no need for them to have all the documents in the Consolidated Action. Further, Yuen had been legally represented. LWT said there was no basis for her to dispute the Tomlin Order. LWT also claimed there was no explanation as to why there had been such a long delay in taking out the Yuen Summons which Lam considered was not justified. In any event, Yuen agreed to the Mediated Agreement and the Tomlin Order, and she did not lack mental capacity.  It was suggested that she had no basis to dispute the validity of the Tomlin Order, and the enforcement was mainly directed against her.

25.On 15 June 2012, Master Ho gave directions for filing/serving affirmation evidence and for adjourning the Yuen Summons for argument. Master Ho further directed that no further affirmation be filed without leave of the court, and any application for leave to file further affirmation must be made no less than 14 days before the substantive hearing supported by reasons on affirmation.

26.On 28 June and 2 August 2012 respectively, Yuen filed her affirmations in support and in reply for the Yuen Summons (“Yuen 1^st Aff and Yuen 2^nd Aff”).  On 12 July 2012, Lam filed his affirmation in opposition (“Lam 1^st Aff”).

27.On 24 August 2012, Lam filed a summons to seek leave to file/ serve further affirmation to oppose the Yuen Summons and to reply to the Yuen 2^nd Aff (“Lam Summons”).

28.At the hearing of the Yuen and Lam Summonses on 4 September 2012 (“Master Hearing”), the Registrar dismissed both summonses with costs and entered judgment against Yuen with costs.  By a sealed copy judgment dated 4 September 2012, Yuen was adjudged to (a) carry out specific performance of the Tomlin Order (with the Tomlin Schedule), (b) pay damages for breach of the Tomlin Order (with the Tomlin Schedule) to be assessed, (c) pay interest, and (d) pay costs of the action to Lam against Yuen to be taxed if not agreed (“Judgment”).

29.At the hearing of the CMC on 12 September 2012, the Registrar adjourned for a second CMC on 16 January 2013 with directions for exchange of witness statements and other case management directions.

30.On 1 November 2012, Yuen filed a Notice to Act in Person. Since then, she had no legal representation in the present action.

31.I am informed by Mr Cheung, counsel for Lam, that on 10 January 2013 Leung issued fresh legal action HCA 50/2013 to set aside the Tomlin Order, and such fresh action was still pending.

32.At the hearing of the second CMC on 16 January 2013, the Registrar granted leave for Lam to set the present action down for a four-day trial within 42 days.

33.By an Amended Order of L Chan J dated 6 August 2013 pursuant to Lam’s and Tam’s joint application by Consent Summons filed on 6 August 2013,

(a) the registration of the writ of summons in HCA490/2011 against the Property at the Land Registry be vacated;

(b) there be a declaration that Lam’s interest in and claim to the Property under the Consolidated Action, the Mediated Agreement and the Tomlin Order (with the Tomlin Schedule) rank in priority over Tam’s interest in (if any) and claim to the Property under the Tam Agreement and the writ of summons in HCA490/2011;

(c) the proceedings between Lam and Tam in the present action be discontinued;

(d) there be no order as to costs of such application and of the present action between Lam and Tam.

34.By a Notice of Discontinuance filed on 20 August 2013, Lam discontinued his claims against Leung in the present action.

35.On 22 August 2013, Yuen (who was then acting in person) filed Notice of Appeal seeking leave to appeal against the Judgment out of time (“Leave Application”), and if such leave were granted, to set aside such Judgment (“Appeal”).

36.On the same day, Yuen filed her affirmation in support of her Leave Application (“Yuen 3^rd Aff”) as follows:

(a) the Master Hearing was unfair because it was held in camera;

(b) Yuen suffered from mental illness, and had two medical reports that she wanted her legal representatives to present to the court, but her legal representatives had failed to do so, which meant the court had failed to consider her mental condition when granting the Judgment against her.

37.On 12 September 2013, the Director of Legal Aid refused Yuen legal aid in respect of the present action.

38.On 4 October 2013, Lam filed a summons pursuant to Order 45 rule 8 of the Rules of the High Court (“RHC”) (“Enforcement Summons”) that sought the following reliefs:

(a) an order that all the estate, right, title, interest and benefit of Yuen of and in the Property now registered in her sole name be transferred by Yuen to Lam in the form of Assignment as per the copy annexed thereto within 28 days of the order to be made pursuant to the Judgment, and the Registrar of the High Court be invited and requested to execute the assignment in the event of default by Yuen;

(b) an order that Yuen do pay Lam a sum of HK$210,000.00 as damages and further damages as loss of rental at the rate of $7,000.00 per month commencing from 1 September 2013 to the date when assignment of the title and ownership of Property to Lam is completed together with interest at judgment rate thereon;

(c) other orders/directions as the court may give;

(d) an order that Yuen do pay to Lam costs of this application.

39.At the hearing of the Leave Application, Appeal and Enforcement Summons before me on 29 October 2013 (“Hearing”), Mr Cheung applied forand I granted) leave for Lam to withdraw paragraph 2 of the Enforcement Summons.[2] This must be correct because Lam should have proceeded with the assessment of damages under Order 37 of the RHC.

IV.  DRAFT

40.In the Draft (the contents of which were verified by Yuen in Yuen’s 1^st Aff), Yuen pleaded that:

(a) Leung is the lawful and natural son of Leung Hing Cho. He became/is the only beneficiary of the estate of Leung Hing Cho under Chinese customary law and practice applicable to New Territories land in 1974. By succession, Leung was solely entitled to Lot 120 which was subsequently exchanged for Lot 642.

(b) Leung had below average intelligence and his Intelligence Quotient (“IQ”) was 79.

(c) Lam exerted duress and undue influence upon Leung in the following manner, and hence the Transfer Deed  (as defined in the Statement of Claim in the Consolidated Action) was invalid, void and unenforceable:

(i) Leung was/is still not in a healthy condition in that his left ear was totally deaf and his right ear had difficulty in hearing. He was/is (1) still taken care of by his wife Yuen, and (2) illiterate and could only write his name.

(ii) The evidence in the Consolidated Action (including expert medical evidence concerning Leung’s mental condition) would show that any person who approached Leung would sense (and Lam being Leung’s nephew was/is aware) he was under mental disability, his IQ was well below average, he had no ability or was incapable of understanding or reading “apprehensively” the document(s) he signed or signs, and he was unable/incapable of giving instruction to his solicitors.

(iii) In 1993, SHK started to acquire land in Ma Wan from various owners and nominated Messrs Liao, Ho & Chan (“LHC”) to act for the owners and indigenous residents. Leung as an indigenous resident in Ma Wan was entitled to and did participate in the exchange of land scheme proposed by SHK whereby Lot 120 would be exchanged for a new three-storey village type house (with an area of 700 sq ft per floor) to be erected on another site in Ma Wan (which eventually turned out to be Lot 642).

(iv) In appreciation of her love, care and affection, Leung repeatedly told Yuen and agreed he would assign all his interest, estate and title in Lot 120 (and hence Lot 642) to Yuen. In/about March 1993, Leung and Yuen went to see Mr Lung Siu Wing (LHC’s handling solicitor) and gave specific instructions to Mr Lung that Leung wanted to assign Lot 120 to Yuen. Mr Lung replied that he needed one or two days to prepare the documents.

(v) One or two days later, Lam went to Leung’s place of work to beat him by slapping his face and to threaten him not to assign Lot 120 to Yuen. Lam further told Leung he would have a new home and he must go to LHC to sign some documents. Lam again went to Leung’s place of work the following morning and asked Leung to go with him to LHC.

(vi) Since Leung was in a weak condition/state and he could not locate Yuen, he went with Lam to LHC to sign the Transfer Deed. Leung was under the impression (as told to him by Lam) that he was to get a new home (收樓), and the Transfer Deed was not fully or adequately explained to him. Leung signed the Transfer Deed under/upon duress and undue influence exerted/procured by Lam without understanding/knowing the contents, meaning and effect of the same.

(vii) Leung further relied on the defence of non est factum.

(d) In January/February 2011, Lam, YTSC, Yuen and TLC (then solicitors for Leung/Yuen), the mediator and other person(s) present at the Mediation (“Misleading Parties”) were actually and fully aware of and/or should have been aware of Leung’s aforesaid mental condition, but the Misleading Parties, whether for the purpose of misleading the court or otherwise, allowed Leung to sign the Mediated Agreement. The Consent Summons and the Tomlin Order were signed by TLC without proper instructions by Leung. By reason thereof, the Mediated Agreement, the Consent Summons, the Tomlin Order (with the Tomlin Schedule) and the Settlement Agreement were all void, ineffective and invalid.

(e) Yuen therefore counterclaimed for a declaration that the Mediated Agreement, the Consent Summons, the Tomlin Order (with the Tomlin Schedule) and the Settlement Agreement were all void, ineffective, invalid and unenforceable and ought to be set aside.

41.The averments in paragraph 40(c)(v) above should be contrasted to the allegations pleaded in paragraph 5 of Leung’s/Yuen’s Defence in HCA 96/2008 filed on 30 June 2008 as follows:

“(f) Next day, when [Yuen] was not at home, Lam phoned [Leung] and represented to [Leung] that [LHC] wanted to see [Leung]. Lam told [Leung] to wait at home and he would pick up [Leung] to go to LHC.

(g) When Lam saw [Leung] at the entrance of [Leung’s] home, Lam beat [Leung] by slapping [Leung’s] face few times, and threatened [Leung] that he should not assign [Lot 120] to [Yuen], and that [Leung] must go to [LHC] and sign the Deed. Lam told [Leung] that if [Leung] did not sign the Deed, Lam would continue to beat [Leung].”

VI.  YUEN SUMMONS: YUEN’S AFFIRMATION EVIDENCE

42.Yuen claimed that in September 2011 she was served with the writ of summons in the present action. She was introduced to LKC by a friend, but she did not personally know any solicitor thereat.  On 4 October 2011, LKC filed acknowledgment of service on her behalf. She told the solicitor in charge at LKC (“LKC Solicitor”) the whole story of the Consolidated Action and the events leading to the signing of the Mediated Agreement, the Consent Summons and the Tomlin Order, and he was given the court documents in respect of the Consolidated Action. Yuen trusted the LKC Solicitor to protect her interest in the present action and believed he would file a Defence for her.

43.Yuen further claimed she did not receive any formal education and did not understand English or civil procedure.  In/about February 2012, the LKC Solicitor advised her to act in person as she did not have any good defence and it would save money for her to attend the hearing of the case management summons on 13 February 2012 herself. Yuen therefore signed the Notice to Act in Person on 10 February 2012.

44.On 11 April 2012, Yuen instructed WYC to act for her.  WYC later discovered that LKC had never filed any Defence for Yuen, and they wrote to LKC for an explanation. LKC replied on 13 June 2012 as follows:

“ After we received your letter dated 10^th April 2012 enclosed with the Notice of Change of Solicitors filed on 11^th April 2012, we have sent all the relevant documents for the captioned proceedings by our letter to you dated 19^th April 2012. Not until 19^th May 2012, we received your letter dated 19^th May 2012 asking for our confirmation whether there was any defence filed by [Leung, Yuen and Tam] and requesting for a copy. Despite having sent you all the documents, we being helpful sent to you again copies of the defence of [Tam] filed on 21^st October 2011 and the Reply to Defence of [Tam] filed on 28^th November 2011 and confirmed that we did not file a Defence for [Yuen] by our letter dated 21^st May 2012.

On 9^th June 2012, we received your letter dated 6^th June 2012 by fax asking for the reason why no defence was filed for [Leung and Yuen]. All along, we have not acted for [Leung] and only acted for [Yuen] in the captioned proceedings. We were surprised that you having taking up the case for more than a month asked us why no defence was filed for the [Leung and Yuen]. In any event, we replied with the letter dated 11^th June 2012 to explain why no defence was filed for [Yuen].

In the captioned proceedings, [Lam] claims against [Yuen] for the specific performance of the Tomlin Order and the [Tomlin Schedule] filed on 16^th February 2011 under the [Consolidated Action]. We have taken instructions from [Yuen] in respect of the Statement of Claim herein, [Yuen] admitted the allegation pleaded in the Statement of Claim including but not limited to having informed [Lam] of the existence of the [Tam Agreement] before the said Tomlin Order was duly signed and filed to Court. [Yuen] could not provide any possible defence to the Statement of Claim and agreed to assign [Lam] the title and ownership of [the Property] pursuant to the said Tomlin Order (“the said Instructions”)

With the said Instructions, we did not file the Defence for [Yuen] and tried to settle the dispute between [Lam] and [Yuen] for the sake of saving time and costs. We for and on behalf of [Yuen] negotiated with [Lam’s] solicitors for the settlement of various letters. Copies of which have already been sent to you by our letter dated 19^th April 2012 but enclosed hereto for your easy reference.

When we received any reply letter from [Lam’s] solicitors in respect of the said negotiation, we would have a meeting with [Yuen] accompanied by Mr. Tang, a relative of [Yuen], and take instructions from [Yuen]. [Yuen] repeatedly confirmed to us in different meetings that she was willing to comply with the said Tomlin Order and did not provide any defence to [Lam’s] claim.

Finally, we re-iterate that we deny each and every allegation made against us in your letter dated 13^th June 2012 to [Lam’s solicitors] ……”

45.Yuen claimed she was advised it was not proper conduct of the case on her behalf for LKC to concentrate on settlement and not file any Defence based on their belief that she could not provide any possible defence to the Statement of Claim.  She believed the LKC Solicitor knew and should have known from the documents in the Consolidated Action that Leung was mentally incapacitated and had a below average IQ, but still LKC did not file any Defence in relation to Leung’s mental incapacity.  She referred to the relevant medical reports about Leung’s mental capacity produced in the Consolidated Action,[3] and added that she herself suffered a “relapse of the psychotic symptoms in recent months”.[4]

46.In the Yuen 2^nd Aff, Yuen recalled that at the Mediation she told the mediator that Leung was retarded with below average IQ. The mediator advised her to reconsider carefully because otherwise Leung would lose his right as an indigenous villager.  At the Mediation, Leung stayed by Yuen but could not understand what was happening or say anything meaningful.  The mediator simply ignored Leung and only took instructions from Yuen without asking Leung anything.  At the end of the Mediation, the mediator drafted the Mediated Agreement and passed it to the parties for signing. Leung signed as instructed by counsel engaged by TLC but no one interpreted the contents of the Mediated Agreement to Leung. The Tomlin Order and the Tomlin Schedule were signed without approval/consent or meaningful instruction by Leung who was “mentally incapable”.

47.Yuen claimed that although she was legally represented most of the time, she was not fully advised by LKC who told her she had no defence. Because they were unaware of Leung’s mental incapacity, LKC did not file any Defence on her behalf but instead advised her to contemplate settlement. “[WYC] was aware of this matter when they represented [Yuen and Leung] in the Consolidated Action, [Yuen] however changed solicitors in late 2010.  When [Yuen] instructed [WYC] again in April 2012, they needed to take full instruction from [Yuen] about what happened since their retainer was terminated in late 2010.  They had to collect papers and documents from [LKC] and [TLC]. Furthermore, [WYC] needed time to consider and review the documents”, and taking two months for such exercise was not a delaying tactic. Yuen claimed the court was truly misled by Lam and LWT, and justice required that time be allowed for her to file her Defence and Counterclaim. She claimed that Lam would not be prejudiced by the time extension sought by Yuen.

VII.  YUEN SUMMONS: LAM’S AFFIRMATION EVIDENCE

48.In the Lam 1^st Aff, Lam claimed that Yuen should have filed her Defence by 1 November 2011, and the Yuen Summons for leave to file her Defence was about 8 months late. Lam further claimed Yuen’s suggestion that she did not understand civil procedure was specious because she was legally represented ever since the filing of her acknowledgment of service on 4 October 2011 until 10 February 2012 (ie three months after the expiry of the deadline for filing the Defence) and no application had been made for any time extension during such period.  As evident from the letter from LKC to WYC dated 13 June 2012, Yuen was represented by WYC since 11 April 2012 and LKC had sent all relevant court documents to WYC on 19 April 2012, yet it was only on 19 May 2012 that WYC asked LKC whether any Defence had been filed on behalf of Yuen.  On 21 May 2012, LKC confirmed no such Defence had been filed. It was only on 11 June 2012 (ie two months after WYC took over Yuen’s representation in the present action) that WYC wrote to LWT to say they recently discovered that Yuen had not filed any Defence and to take out the Yuen Summons on the following day. During this second period, Yuen was also legally represented, so her personal ignorance of civil procedure would not excuse her inaction. Lam claimed that Yuen and her legal representative had more than sufficient opportunity/time to consider their case/defence and where appropriate to file her Defence or seek extension of time to do so, and her delay was inexcusable.

49.Yuen also had experience in litigation since she was involved in the Consolidated Action and in HCA490/2011 in which Tam sued her for enforcement of the Tam Agreement which was then still in progress.  She was also involved in DCMP 1502/2011 in which a charging order nisi dated 30 August 2011 and charging order absolute dated 23 September 2011 were made against her.  In such circumstances, she must be aware of the relevant court procedure, the importance of complying with such procedure as well as the consequence of not taking necessary action in litigation.

50.Lam believed that Yuen had given up defending Lam’s claims against her but had a late change of mind. As a matter of fact, Yuen through LKC had informed LWT that she did not intend to defend Lam’s claims, and she agreed to act as witness to resolve the dispute between Yuen and Tam.  This was corroborated by LKC’s letter dated 13 June 2012.[5] Pursuant to such instructions by Yuen, LKC did not file any Defence on her behalf.  LKC’s letter also confirmed that in various meetings Yuen in the presence of her relative Mr Tang repeatedly instructed them that she was willing to comply with the Tomlin Order and that she would not defend Lam’s claim in the present action. Yuen had time/opportunity to give instructions to her legal advisers and she had received legal advice from her legal advisers.  Lam claimed it was only for the reason that she had no defence to Lam’s claim that she indicated willingness to comply with the Tomlin Order, and she made a deliberate decision not to file any Defence. For Yuen now to blame the LKC Solicitor would be tantamount to adopting a mere delaying tactic.

51.In the Draft, Yuen merely repeated her case in the Consolidated Action. But as the present action concerned breach of the Tomlin Order and the Tomlin Schedule, those averments were irrelevant.  Yuen’s claim that all the Misleading Parties who attended the Mediation had “conspired” to mislead or defraud the court was wholly unmeritorious and incredible:

(a) Under the CMS Order dated 13 February 2012, the parties were to exchange witness statements on or before 11 June 2012. It was only upon LWT’s request for an appointment to exchange witness statements that Yuen made the serious allegation via WYC’s letter dated 13 June 2012 that “…… there is a serious conspiracy to mislead or even more seriously to defraud the Court by the relevant parties. This is a very serious matter ……”, but such serious allegation had yet to be particularised.

(b) When Lam attended the Mediation with his wife/son and accompanied by the solicitor acting for him in the Consolidated Action, Leung/Yuen attended with their former counsel and representative of their solicitors in the Consolidated Action, so they must have been sufficiently advised by their legal advisers and would not have been misled by the Mediated Agreement. On that occasion, Lam was informed by Yuen that her daughter returned from Singapore to assist her during the Mediation. It would be impossible for Leung to be misled when Yuen and her daughter were present. At the very least, Yuen must have been fully aware of the contents of the Mediated Agreement, the Tomlin Order and/or the Tomlin Schedule.

(c) Quite oddly, Yuen alleged in the Draft that the Misleading Parties included herself. Since Yuen admitted that she was one of the tortfeasors, her case was plainly contradictory and unarguable.

(d) Further, Leung was also represented by WYC in the present action, but no Defence was filed on his behalf to support/verify the allegations made by Yuen. In any event the Property was registered in Yuen’s name at all material times and Leung had no interest in it. The main terms of the Mediated Agreement, the Tomlin Order and the Tomlin Schedule were for Yuen to transfer the Property to Lam, and Lam’s claims were essentially directed essentially at Yuen and not Leung. Thus, Yuen’s allegations in relation to Leung were irrelevant.

(e) Even if Yuen’s allegations were true, which was denied, Yuen in fact was not mislead at all. There was no allegation of any ground for vitiating or rendering invalid the overall settlement insofar as Yuen was concerned.

52.Lam pointed out that it was shortly before trial that settlement was reached in the Consolidated Action by the Mediated Agreement, Tomlin Order and Tomlin Schedule, so he was entitled to assume there would be no further dispute or issue over the Property.  In fact, Yuen through her legal representatives did represent she was not going to defend Lam’s claims.  Alternatively, when Yuen did not file any pleadings in the previous months, Lam was entitled to assume there was no defence and/or evidence from Yuen, and he proceeded to fix trial dates with Tam in accordance with the materials at hand.  Any leave granted in favour of Yuen under the Yuen Summons would inevitably cause substantial delay and prejudice to the parties especially Lam.  As the case had proceeded on the basis that Yuen would not defend Lam’s claim, Lam had conducted his case accordingly, and if any leave were granted, Lam would have to take further steps under time pressure and incur further costs to respond to the late compliance.

53.If one were to look at the Mediated Agreement or the Tomlin Order, Leung was to benefit from such settlement. Leung was not the one who was required to transfer the Property to Lam or to pay any money to Lam.  Rather, if Yuen would honour the terms of the Tomlin Schedule, Leung would receive a sum of money from Lam.  It was only due to Yuen’s breach of the Tomlin Order that led to the present action.

VIII.  LAM SUMMONS: AFFIRMATION EVIDENCE

54.Lam’s 2^nd Aff explained that by three letters in Chinese by LWT dated 30 April, 9 May and 7 June 2013, Yuen was requested to carry out the terms of the Judgment to inter alia transfer the Property to him in accordance with the Tomlin Order, the Tomlin Schedule and the Judgment.  A pro forma assignment was sent to Yuen under cover of LWT’s letter dated 9 May 2013, and Yuen was invited/requested to execute the assignment. But Yuen failed to reply or execute the assignment in favour of Lam.

VIII.  APPEAL FROM MASTER

55.It is trite that an appeal from the master to judge in chambers is dealt with by an actual rehearing of the application which led to the order under appeal, and the judge treats the matter as though it came before him for the first time.  The judge will give the weight it deserves to the previous decision of the master; but he is in no way bound by it.[6]

IX.  LEAVE APPLICATION

56.Order 58 rule 1(3) of the Rules of the High Court (“RHC”) provides inter alia that unless the court otherwise orders, the notice of appeal against a master’s decision or order must be issued within 14 days after the decision or order appealed against was given or made. Yuen’s Notice of Appeal issued on 22 August 2013 was 11 months out of time.

57.Under the proviso “unless the court otherwise orders” in Order 58 rule 1(3) of the RHC and pursuant to Order 3 rule 5 of the RHC, the court has a discretion to grant enlargement of time to appeal. Yuen filed the Yuen 3^rd Aff in support of the Leave Application.[7]

58.Lam opposed the Leave Application principally on the ground that the delay was extensive, that there was no proper explanation for the delay, that he would be prejudiced, and ultimately that there were no merits to the Appeal.

59.In Postwell Ltd v Cheng Kap Sang,[8] DHCJ Wong Yan Lung SC stated that:

“…… Although I agree with Hartmann J that the absence of an acceptable explanation for the delay does not preclude the court’s discretion to extend time, I am of the view that in applications for extension of time to appeal an adverse order or adjudication, as opposed to extension of time to remedy other procedural default, the court should be slow to accede to the application in the absence of an acceptable reason for the delay.”

60.In considering whether to extend time to appeal, the court has to consider all relevant factors, particularly: (a) the length of the delay; (b) the reasons for the delay; (c) the merits of the proposed appeal; and (d) the degree of prejudice to the other party.[9]

61.DHCJ Peter Ng SC (as he then was) in Hady v Bazar[10] reminded that in the post Civil Justice Reform (“CJR”) era, it is incumbent on the court to give effect to the underlying objectives of the RHC when exercising any of its powers,[11] but the court must always recognise that the primary aim in exercising the powers of the court is to secure the just resolution of disputes in accordance with the substantive rights of the parties.[12]

62.I note that Yuen remained legally represented until 1 November 2012 (ie about 1½ months after the expiry of the deadline for lodging notice of appeal against the Judgment), and she would have been under legal advice as to her right of appeal.  As pointed out by Mr Cheung, there was no evidence or suggestion by Yuen that she did not know about the prescribed deadline for appeal. 

63.Even if Yuen were not aware of the deadline for appeal against the Judgment, she has not explained what efforts/enquiries (if any) she has made to ascertain the procedure for appeal against the Judgment during the period from 4 September 2012 to 22 August 2013.  Upon receipt of an adverse decision or order which a litigant does not accept, it is incumbent on him/her to make enquiries as to how and when to challenge such decision or order. I bear in mind that during the aforesaid period LWT issued 3 Chinese letters in April, May and June 2013 requesting Yuen to carry out the terms of the Judgment to inter alia transfer the Property to him in accordance with the Tomlin Order, the Tomlin Schedule and the Judgment.[13]  They served as clear reminder to Yuen that she should take action to challenge the Judgment if she disagreed with the same.  No explanation was forthcoming as to what steps she took upon receipt of such letters.  Furthermore, ever since the Judgment to date, Yuen did not make any application for stay of execution.

64.On any view, a 11-month delay is a very substantial one, especially when one bears in mind that this is not the first occasion of protracted delay by Yuen in the present action. Although she was represented most of the time either by LKC or WYC in the course of the present action against her, she failed to file any Defence and only issued the Yuen Summons about 8 months later. 

65.Such lengthy delay for lodging the Appeal cries out for a good explanation, but for reasons below I am not persuaded that she has any satisfactory justification for the delay.

66.In the Yuen 3^rd Aff in support of the Leave Application, Yuen claimed she suffered from mental illness. In this respect, she relied on the psychiatric report dated 24 May 2012 by Dr Lam King Seng of Tai Po Hospital.  It was noted in such report that Yuen first attended Alice Ho Miu Ling Nethersole Hospital in January 2004 for depressive symptoms and was diagnosed to suffer from a depressive episode.  She was prescribed antidepressants and her mental condition fluctuated over the years with more depressive symptoms when she was facing more stress.  She was noticed to have persecutory delusion since November 2006, but her drug compliance was not good. Antipsychotics were stopped since April 2011 “as she reported to her case officer that she had not been taking it for some time and she had no psychotic symptoms at that moment”.  On 20 April 2012, she reported that she signed a document under the influence of hallucinatory noise which resulted in a dispute over the ownership of the property where she resided, which was likely to be a relapse of psychotic symptoms due to increased stress and lack of antipsychotic medication. Schizophrenia was a possible differential diagnosis and antipsychotics were resumed.  When seen on 18 May 2012, she was quite anxious and depressed and was still hearing hallucinatory noises.

67.Whilst the above report suggests that Yuen may have had or perhaps even still has psychiatric issues, there is no suggestion in the report that she was/is incapable of handling her affairs or pursuing her rights by lodging an appeal or complaint against the Judgment with which she disagreed.  As Mr Cheung reminded, Yuen did not even respond to LWT’s Chinese letters or inform LWT of her disagreement with the Judgment.  I am not persuaded that such report offers a satisfactory reason for the delay.

68.At the Hearing, Yuen asked the court to further consider a psychiatric expert report dated 25 May 2013 by Dr Tam Mo Shing Paul (“Dr Tam”) of Union Hospital (“Yuen Report”).  Mr Cheung objected to the admission of such late evidence, but agreed that the court could receive the Yuen Report on a de bene esse basis. I will return to the issue of admissibility of such evidence below.  But for the present purpose, even if the Yuen Report is admissible, I am not persuaded that it will aid Yuen for the purpose of the Leave Application.

69.According to the Yuen Report, Yuen had a history of both depression and schizophrenia for which she received regular treatment. She also had cancer of the thyroid for which she had an operation to remove the tumor and chemotherapy at regular intervals.  According to Dr Tam, Yuen was distressed by the result of the present action against her and she had poor sleep/appetite, but “[her] speech was coherent”.  All Dr Tam said was that Yuen was understandably worried about being evicted from her home with her old and deaf husband (ie Leung), but he (Dr Tam) had “no intention to interfere with the court proceedings”.  In my view, the Yuen Report fell far short of saying that Yuen’s ability to lodge an appeal against the Judgment within time was vitiated by mental issues.

70.Nevertheless, the lack of any satisfactory reason for the delay is only one factor to be taken into account in the exercise of my discretion.  The primary consideration is to secure the just resolution of the dispute between the parties.  In my view, as a result of Yuen’s inaction over the 11-month period, Lam (acting on the basis that there was an enforceable Judgment against Yuen) had taken steps to compromise the dispute with Tam and, more importantly, to discontinue his claim in the present action against Leung.  To now grant leave to appeal out of time in favour of Yuen despite such lengthy delay would cause prejudice to Lam as it would enable Yuen to appeal against the Judgment and to seek time extension to defend Lam’s claim upon a successful appeal (if any) when Lam had already altered his circumstances on the basis of the Judgment in hand. But more importantly, for reasons below, I consider the Appeal unmeritorious, and therefore dismiss the Leave Application.

71.Before I proceed to consider the merits of the Appeal on the assumption that leave would have been granted for Yuen to appeal against the Judgment out of time (which assumption I do not accept),[14] I turn to the new evidence received de bene esse at the Hearing.

X.  NEW EVIDENCE

72.In the Yuen 3^rd Aff in support of the Leave Application,[15] Yuen raised two grounds which she also intended to rely for the purpose of the Appeal itself.

73.At the Hearing, in addition to the Yuen Report, Yuen applied to adduce into evidence two further documents: (a) a discharge slip in respect of Leung upon his discharge from hospitalisation at Alice Ho Miu Ling Nethersole Hospital in May 2013 (“Discharge Slip”), and (b) a psychiatric expert report dated 2 October 2012 on Leung by Dr Tam (“Leung Report”).

74.After the CJR, Order 58 rule 1(5) of the RHC provides that “[no] further evidence (other than evidence as to matters which have occurred after the date on which the judgment, order or decision was given or made) may be received on the hearing of an appeal under this rule except on special grounds”.

75.The phrase “special grounds” is the same expression as in Order 59 rule 10(2) of the RHC and requires the conditions laid down in Ladd v Marshall[16]to be satisfied.[17]  The Ladd v Marshall conditions are: (a) the evidence could not have been obtained with reasonable due diligence for use at the hearing below, (b) the evidence must be such that, if given, it would probably have an important influence on the result of the case, though it need not be decisive, and (c) the evidence must be such as is presumably to be believed.

76.DHCJ Au-Yeung (as she then was) in Bank of China (Hong Kong) Limited v Certain Aim Limited[18] said as follows:[19]

“… Order 58, rule 1(5) was introduced to curb the undesirable practice before the [CJR] when parties sought to adduce a further round(s) of evidence on appeal after an unfavourable decision from a Master. Rule 1(5) aims at effecting a change of culture so that parties should prepare their application properly at the earliest possible opportunity and lay all cards on the table prior to the hearing before a Master. The spirit of this rule will be defeated if a party is allowed to revert to the pre-CJR practice. …”

77.Mr Cheung objected to the new evidence on the basis that the Ladd v Marshall considerations had not been satisfied.  However, I note that the Yuen Report, the Discharge Slip and the Leung Report were all made after the Judgment. Further, the Leung Report appeared to be an updated report by Dr Tam subsequent to his report dated 5 January 2010 on Leung which is already in evidence before me. In respect of the Yuen 3^rd Aff, whilst the fact that she suffered from mental issues admittedly had some history, her complaint about the unfairness of the Master Hearing must necessarily be a new matter not available at the hearing below.

78.Since medical reports on Leung’s and Yuen’s mental state were already before the Registrar at the Master Hearing, I cannot say that the new evidence does not have an influence on the case (albeit not necessarily decisive). There is also no criticism as to the authenticity of the Yuen Report, Discharge Slip and Leung Report.

79.In my view, notwithstanding Mr Cheung’s objection, had I been prepared to grant leave to appeal out of time (but I disagree), Yuen should be allowed to adduce the additional evidence referred to in paragraphs 72-73 above. 

XI.  APPEAL

80.I now turn to the merits of the Appeal on the assumption that leave would have been granted for Yuen to appeal against the Judgment out of time (which assumption I do not accept).[20]

81.The starting point is that the Mediated Agreement was signed by inter alia Lam and Yuen, and the Tomlin Order (with the Tomlin Schedule) was made with the consent of YTSC (solicitors for Lam) and TLC (solicitors for inter alia Yuen).  Yuen did not dispute that (a) she signed the Mediated Agreement and/or (b) the Tomlin Order (with the Tomlin Schedule) was made with the consent of her then solicitors TLC.  In the circumstances, Lam is plainly entitled to enforce the terms of the Tomlin Order (with the Tomlin Schedule) unless Yuen were able to raise an arguable defence on the merits.

82.The focus of Yuen’s arguments (as evident from the Draft and the Yuen 1^st and 2^nd Aff) is Leung’s mental incapacity.  It is said that Leung was mentally retarded and had limited intelligence, and that Transfer Deed (as defined in the Statement of Claim in the Consolidated Action) was invalid, void and unenforceable because Leung executed it under duress and undue influence exerted by Lam. Leung/Yuen also made similar assertions in their Defence filed on 30 June 2008 in HCA 96/2008.  However, on the affirmation evidence before me, there is no explanation as to when exactly  the Transfer Deed was signed by Leung (possibly in 1993), what the Transfer Deed was about, what happened after the signing of the Transfer Deed and/or how the Transfer Deed was relevant to viability of the Mediated Agreement, the Tomlin Order (with the Tomlin Schedule) and the Settlement Agreement.

83.Yuen submitted that Leung’s mental incapacity was borne out by Dr Tam’s report dated 5 January 2010, the psychological report by Ms Monica Yam-King Mok dated 2 November 2009, the Leung Report and the Discharge Slip.  The essence of those reports showed that the medical personnel considered Leung’s intelligence was below normal, and his limited intelligence was most likely due to an attack of meningitis when he was an infant. Dr Tam opined that Leung was not suffering from formal mental disorder, but his intelligence was so low that “he would be unable to understand the contents of the “Deed” and the importance of putting his signature on it, even with translation. [Dr Tam] should point out that though his hearing and vision might have been better in 1993, his intelligence would not be any better than now. Intelligence does not change with age after a person reaches 17 years of age” (see Dr Tam’s reports).  The Discharge Slip does not add anything further except to state that the diagnosis was “fever, essential hypertension, dementia and history of ischemic stroke”.

84.Further, since the Transfer Deed was a subject matter of dispute in the Consolidated Action and in the Draft Yuen was repeating (with some variation) her defence in the Consolidated Action, the disagreements between Lam and Yuen over the Transfer Deed would have been compromised and settled by the Mediated Agreement and the Tomlin Order (with the Tomlin Schedule) unless the Settlement Agreement was and/or could be vitiated on good and sufficient grounds.  Consequently, it is more fruitful to turn to the Settlement Agreement.  But if Transfer Deed were relevant, Yuen had not explained why there were differences in the alleged acts of duress and undue influence that led to the signing of the Transfer Deed as pleaded in the Draft[21] and in the Leung’s/Yuen’s Defence filed in HCA 96/2008.[22]

85.According to the Draft and the Yuen 1^st and 2^nd Aff, Yuen claimed that Leung stayed by her during the Mediation and did not say anything meaningful.  She further claimed that he was ignored by the mediator and could not understand what was happening. Yuen stated that although the Misleading Parties (including Lam and Yuen) were actually aware of and/or should have been aware of Leung’s limited intelligence (since anyone who approached him would sense this), they allowed Leung to sign the Mediated Agreement, and TLC entered into the Consent Summons and the Tomlin Order (with the Tomlin Schedule) on his behalf.  Yuen claimed that as a result the Mediated Agreement, the Consent Summons, the Tomlin Order (with the Tomlin Schedule) and the Settlement Agreement were void, ineffective and invalid.[23]

86.Mr Cheung submitted (and I agree) that, even assuming Leung did not have the requisite mental capacity to understand and execute the Mediated Agreement and/or to agree to the Tomlin Order (with the Tomlin Schedule), it has no relevance to Yuen and does not vitiate the binding effect of such documents on her.  First, it is Yuen’s case that in appreciation of her love, care and affection, Leung agreed to assign all his interest in Lot 120 (and hence Lot 642) to Yuen. Indeed, Yuen acquired the Property from Leung in 2009 for a consideration of $500,000.00.[24]  Hence, the Property (being part of Lot 642) was at the time of the Mediation and is now still registered in Yuen’s sole name, and as between Leung and Yuen she was both the sole registered and beneficial owner of the Property.  That being the case, the obligations under clauses 1-2 and 4 of the Mediated Agreement and clauses 1-3 and 5-7 in the Tomlin Schedule to transfer the Property to Lam, to account for the rent from the Property etc fell primarily on Yuen as sole owner of the Property rather than on Leung (who was to benefit from a payment in his favour under the Transfer Deed upon transfer of the property from Yuen to Lam)[25] even though Yuen doubted the viability of his endorsement/approval.  I cannot see how Leung’s alleged incapacity would raise an arguable defence for Yuen.

87.In the Draft and on the affidavit evidence before me, there is nothing to suggest that Yuen herself was in any way misled at the time of the Settlement Agreement. In the Yuen 2^nd Aff, Yuen confirmed that at the Mediation the mediator took instructions from her.[26]  She was legally represented and had the benefit of legal advice at the time of the Mediation, her signing of the Mediated Agreement and the filing of the Tomlin Order (with the Tomlin Schedule).  Strangely, she confessed that she herself was one of the Misleading Parties who knew of Leung’s limited intelligence and still allowed Leung to sign the Mediated Agreement.[27]  But apart from such confession, Yuen had not particularised the alleged serious conspiracy to mislead or defraud the court.[28]

88.Yuen claimed that she had not received any formal education and did not understand English or civil procedure.[29]  But she was legally represented by counsel and solicitors at the time of the Mediation and the Settlement Agreement and supported by her daughter who had returned from Singapore to assist her for the Mediation,[30] and for most of the time in the present action she was legally represented by LKC and later WYC.  So her alleged lack of understanding of English and/or civil procedure would not amount to inability that would invalidate the Settlement Agreement.

89.In my view, all the above sits well with LKC’s explanation in their letter dated 13 February 2012[31] as to why no Defence was filed on behalf of Yuen for 8 months, namely, that Yuen simply had no defence to Lam’s claim in the present action, and Yuen had been advised and all along knew about this. At the Hearing, Yuen said she knew of Leung’s mental state and of his inability to understand the Mediated Agreement and/or to agree to the Tomlin Order (with the Tomlin Schedule) all along. It is strange indeed for her not to mention this to LKC when LKC took instructions from her and/or advised that she had no defence in the present action.[32]

90.In the Yuen 3^rd Aff, Yuen stated that she herself suffered from mental illness.  But as explained in paragraphs 66-69 above, despite references to depression, anxiety and hallucinatory noise, the medical evidence fell short of what is required to establish that she lacked sufficient understanding of the general nature and/or the particular terms of the Mediation, the Mediated Agreement, the Tomlin Order (with the Tomlin Schedule).

91.First of all, such ground of objection as to the viability of the Settlement Agreement was not pleaded in the Draft or referred to in the Yuen 1^st and 2^nd Aff.  In the circumstances, even if the Appeal is allowed and the Judgment be set aside and further an order is granted in terms of the Yuen Summons for Yuen to file her Defence, her Defence still does not contain such ground of defence.

92.Secondly, even if I am wrong and Yuen was at the time of the Mediation and the Settlement Agreement mentally incapacitated or at least unable to understand the general nature of what she was doing in signing the Mediated Agreement and agreeing to the Tomlin Order (with the Tomlin Schedule), this alone does not demonstrate any arguable defence.  As explained in Chitty on Contracts:[33]

“In the case of contracts other than for necessaries, the general rule is that a person who is mentally disordered or otherwise lacking in mental capacity is bound by his contract unless he can show that this lack of capacity meant that he did not understand what he was doing and that the other party was aware of this incapacity. On the other hand, where these two conditions are satisfied, the contract is voidable at his option. This rule was laid down in Imperial Loan Co Ltd v Stone where Lord Esher MR said:

‘When a person enters into a contract, and afterwards alleges that he was so insane at the time that he did not know what he was doing, and proves the allegation, the contract is as binding on him in every respect, whether it is executor or executed, as if he had been sane when he made it, unless he can prove further that the person with whom he contracted knew him to be so insane as not to be capable of understanding what he was about.’

This means that in general:

‘…the validity of a contract entered into by a lunatic who is ostensibly sane is to be judged by the same standards as a contract by a person of sound mind, and is not voidable by the lunatic or his representatives by reason of ‘unfairness’ unless such ‘unfairness amounts to equitable fraud which would have enabled the complaining party to avoid the contract even if he had been sane.’

……”

93.Given that Yuen was able to give instructions to the mediator and she claimed to be one of the Misleading Parties in “misleading” Leung to sign the Mediated Agreement, that she was represented by counsel and solicitors at the Mediation and in reaching the Settlement Agreement, that she signed the Mediated Agreement, and that she was silent on such defence until the Yuen 3^rd Aff, I am not persuaded that Yuen has raised any arguable basis to show that Lam or his legal representatives were aware of her alleged mental incapacity. In such circumstances, the Settlement Agreement (including the Tomlin Order (with the Tomlin Schedule)) remained/remains binding on her in every respect.

94.Yuen raised other arguments. In the Yuen 3^rd Aff, she claimed that the Master Hearing was unfair since it was a hearing in camera (“閉門審訊”).  Such argument reflected Yuen’s misunderstanding of the Master Hearing which was held in chambers but was open to the public.  There was no unfairness as complained.

95.In the circumstances, the Appeal (even if this court were to grant leave to appeal out of time) is unmeritorious.

XII. ENFORCEMENT SUMMONS

96.As a corollary to my refusal of the Leave Application, it is plain that Lam is entitled to enforce the Judgment by requiring Yuen to carry out specific performance of the terms of the Tomlin Schedule to assign to him title and ownership of the Property by 31 March 2011. Yuen had failed to do so to date, and given her submissions for the Leave Application she is plainly reluctant to do so.

97.Section 25A of the High Court Ordinance Cap 4 provides inter alia that:

“(1) Where the Court of First Instance has given or made a judgment or order directing a person to execute any conveyance, contract or other document, or to endorse any negotiable instrument, then, if that person-

(a) neglects or refuses to comply with the judgment or order; or

(b) cannot after reasonable inquiry be found,

the Court of First Instance may, on such terms and conditions, if any, as may be just, order that the conveyance, contract or other document shall be executed, or that the negotiable instrument shall be endorsed, by such person as the Court may nominate for that purpose.

(2) A conveyance, contract, document or instrument executed or endorsed in accordance with subsection (1) shall have the same effect as if it had been executed or endorsed by the person originally directed to execute or endorse it. ……”

98.In the circumstances, I see no reason why I should not grant an order in terms of paragraph 1 of the Enforcement Summons.[34]

XIII.  CONCLUSION

99.I therefore dismiss the Leave Application and the Appeal, and decline to grant leave for Yuen to appeal against the Judgment out of time.  I further grant an order in terms of paragraph 1 of the Enforcement Summons.  There is no reason why costs should not follow event, so I grant a costs order nisi that Yuen do pay Lam costs of the Leave Application and the Appeal, and half of the costs of the Enforcement Summons to be taxed if not agreed.

100.For Yuen’s convenience, I set out a Chinese translation of the orders made in the above paragraph:

「本席現撤銷第二被告人的日期為2013年8月22日的上訴通知書, 並不給予第二被告人許可, 就高等法院司法常務官龍劍雲的日期為2012年9月4日裁決, 逾期提出上訴。本席亦進一步頒令, 就原告人於2013年10月4日存檔的傳票第1 段作為法庭命令。本席看不到理由為何相關訟費不應跟隨上述的結果而作出訟費命令, 因此本席現頒下暫准訟費命令, 第二被告人須支付予原告人有關上述上訴通知書及逾期提出許可上訴申請的訟費和原告人於2013年10月4日存檔的傳票的一半訟費, 如果雙方未能同意訟費款額，則交由法庭評定。」

101.My clerk will inform Yuen that if she so requires a court translator will be arranged to verbally translate this Decision into the punti language for her at the High Court Building at a mutually convenient date and time.

Mr Lincoln Cheung, instructed by Lo Wong & Tsui, for the plaintiff

The 2^nd defendant appeared in person