New South Wales Supreme Court CITATION : HSBC Bank Australia Ltd v Chang [2008] NSWSC 948 HEARING DATE(S) : 20 August 2008 JUDGMENT DATE : 15 September 2008 JUDGMENT OF : Fullerton J 1. The notice of motion is dismissed. DECISION : 2. The defendant to pay the plaintiff's costs. 3. Liberty to apply on 3 days notice for any further directions to facilitate the progress of the substantive proceedings. CATCHWORDS : COMMON LAW - appointment of a tutor under Part 7 of the Uniform Civil Procedure Rules - inherent jurisdiction LEGISLATION CITED : Civil Procedure Act 2005 Uniform Civil Procedure Rules 2005 CASES CITED : HSBC Bank Australia Ltd v Chang [2007] NSWSC 1127 Re P [2006] NSWSC 1082 PARTIES : HSBC Bank Australia Ltd (Plaintiff) Ching Chih Chang (Defendant) FILE NUMBER(S) : SC 2004/12254 COUNSEL : D Pritchard SC (Plaintiff) S Bell (Defendant) SOLICITORS : Blake Dawson Waldron Solicitors (Plaintiff) Lloyd Truman Sadiq Solicitors (Defendant) IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION CIVIL LIST FULLERTON J 15 SEPTEMBER 2008 2004/12254 HSBC BANK AUSTRALIA LTD v CHANG JUDGMENT 1 HER HONOUR: By a notice of motion filed on 17 December 2007 Sheng-Ju Candice Chen ("Ms Chen"), the daughter of the defendant, applies to be appointed as a tutor pursuant to Rule 7.18(1)(a) of the Uniform Civil Procedure Rules 2005 ("UCPR"). That rule provides: "(1) In any proceedings in which a party is or becomes a person under legal incapacity: (a) if the person does not have a tutor, the court may appoint a tutor…" 2 Pursuant to Rule 7.18(4) and 7.18(5) the application seeking the appointment of the tutor must have been served on the person said to be under a legal incapacity, and must include evidence that: (a) the defendant is in fact a person under legal incapacity (as defined); and (b) that the tutor consents to be appointed and does not have any interest in the proceedings adverse to the interest of the defendant. 3 The plaintiff opposed the appointment of a tutor on the primary basis that the defendant had failed to discharge the evidential burden of establishing that she is under a legal incapacity in the conduct of the substantive proceedings in which she is named as the defendant. Section 3 of the Civil Procedure Act 2005 defines a "person under legal incapacity" to include: "(e) Any incommunicate person, being a person who has such a physical or mental disability that he or she is unable to receive communications, or express his or her will, with respect to his or her property or affairs." The substantive proceedings 4 In summary, the substantive proceedings concern a mortgage given by the defendant over land at Artarmon and monies allegedly lent to her by the plaintiff secured by that mortgage. The sum sought under the plaintiff's further amended statement of claim is $634,000 together with an order for possession of the mortgaged premises. There was tendered in evidence before me a proposed defence to the further amended statement of claim, prepared on the defendant's instructions by her solicitor in 2007 and attested by Ms Chen as the proposed tutor on 9 September 2007. It has not been attested to by the defendant. Her solicitor, Ms Sadiq, maintains she is unable to obtain instructions from her client sufficient to permit her to file the defence in accordance with the Rules. The previous application 5 A previous application for the appointment of Ms Chen as a tutor was heard and dismissed by Bell J on 10 October 2007 (HSBC Bank Australia Ltd v Chang [2007] NSWSC 1127). The only evidence bearing upon the question in the proceedings before her Honour was by way of the tender of two medical certificates. One was under the hand of the Superintendent of the China Medical University Hospital in Taiwan which recorded that the defendant suffers from chronic renal failure with the immediate prospect of dialysis and that her medical condition was such that she was not suitable for overseas travel. The second certificate was prepared by Dr Zu's Internal Medicine Hospital Clinic, also in Taiwan, and recorded that the defendant has been diagnosed with suspected angina pectoris. It was Dr Zu's recommendation that she avoid all stress and stimulation otherwise angina pectoris or myocardial infarction may be experienced. 6 Her Honour also noted in an affidavit sworn by Ms Chen that she confirmed her mother took numerous medications on a daily basis and that she spent most of her time in bed, or at least indoors, and appeared to be weak and easily upset. Ms Chen told her Honour that every attempt she made to discuss the case resulted in her mother breaking down in tears. 7 Despite what was the uncontradicted state of the defendant's serious health problems, and the medical advice that stress should be avoided, her Honour was of the view that the evidence fell short of establishing that the defendant was a person suffering from a legal incapacity. Her Honour said: "There is clear evidence that the defendant suffers significant health difficulties but this does not establish that she is an incommunicate person whose physical disability is such that she is unable to receive communications or express her will with respect to her property or affairs". 8 In the alternative to the appointment of a tutor under Part 7 of the UCPR, her Honour was invited to exercise the Court's parens patriae jurisdiction. Her Honour was not satisfied there was any evidence that the defendant was in a mental state such that she was not able to give instructions to those acting for her and, in those circumstances, did not regard the Court's inherent jurisdiction to have been properly invoked. 9 I should also note that after her Honour refused the application to appoint Ms Chen as the defendant's tutor, the plaintiff made application to strike out the defence in circumstances where the defendant has not filed a defence despite there having been orders requiring her to do so. The application was heard before Walmsley AJ on 10 December 2007. The defendant resisted the application on the basis of a report from Dr Potter, consultant psychiatrist, dated 7 December 2007, in which he expressed the view that the defendant was "not capable of having an informed involvement with any current legal procedure". Dr Potter was not available to be cross-examined at that time and, in circumstances where it was his Honour's view that on a closer examination of his report the defendant's mental condition may not as grave as first appears, his Honour granted an adjournment of the plaintiff's application. He expressed concern however that the substantive proceedings, originally commenced by a statement of claim filed in March 2004 (which I note have been a subject of significant amendment since that time) ought not be permitted to linger indefinitely. In adjourning the application his Honour directed that any further application to appoint a tutor, together with any further supporting documentation, be filed within seven days. The current proceedings 10 The notice of motion with which I am concerned was filed on 17 December 2007. Three affidavits from Ms Chen, in addition to the affidavit sworn in support of the motion before Bell J, were read in the proceedings. Those affidavits are variously dated 17 December 2007, 9 June 2008 and 14 August 2008. An affidavit from Ms Sadiq, the defendant's solicitor, was also read. The defendant also relied on a report of Dr Brian Potter, consultant psychiatrist, dated 7 December 2007. Both Ms Chen and Dr Potter were required for cross-examination. 11 There was no affidavit sworn by the defendant in support of the application. I note that she is currently resident in Taiwan, on what would appear to be a permanent basis, having left Australia in March 2007. I also note that she has travelled to Australia on at least two occasions since her Honour gave judgment in October 2007, the first in December 2007 when she attended a consultation with Dr Potter and in February 2008 when she attended a consultation with Dr Lewin, a psychiatrist retained by the plaintiff. 12 The plaintiff relied upon a report of Dr Lewin dated March 2008 and a supplementary report dated 19 May 2008 together with affidavit sworn by the plaintiff's solicitor to which the reports were annexed and further affidavit evidence from the plaintiff's solicitor directed to the progress of the substantive proceedings. The defendant's physical health 13 So far as the defendant's current medical condition is concerned it would seem that she continues to suffer from heart disease, hypertension and renal failure and that it is recommended that she avoid vigorous agitation and that she receive regular intensive medical care. The plaintiff did not seek to put that diagnosis in issue. The plaintiff does emphasise however that while the basis for the defendant's first application for the appointment of a tutor was that she was physically unable to return to Australia, and therefore unable to conduct legal proceedings, it would appear that the state of her physical health is no longer relied upon as either a discrete basis for the appointment of a tutor or because it relates in some way to what is claimed to be a mental incapacity to focus on her case or convey instructions. In the absence of any evidence before me suggestive of any deterioration in the defendant's physical health I am satisfied that she is able to undertake international travel without any adverse impact on her physical or mental health. The proceedings to date 14 By reference to Ms Aguis's affidavit, the plaintiff also emphasises that since the commencement of the proceedings in 2004 there has been a repeated failure on the part of the defendant to comply with court orders. On most occasions her absence from the jurisdiction was offered by way of explanation. It is only since service of Dr Potter's report that the defendant's mental instability has emerged as an issue. A chronology of her dilatory approach to the litigation since 2004 is as follows: - From July 2004 to June 2005 the defendant was overseas seeking special medical treatment and her lawyers advised she could not comply with court orders to file a defence during that time; - From June 2005 to November 2005 the defendant was overseas on business and again her lawyers advised that she was in those circumstances unable to comply with court orders; - From November 2006 to July 2007 the defendant was again overseas on business and on that occasion was unable to return to Australia due to illness, again with her lawyers advising that she was not in a position to comply with court orders; - On 13 September 2007 she filed an application to appoint a tutor on the basis of a physical incapacity giving rise to a legal incapacity which was dismissed by Bell J in October 2007; and - On 17 December 2007 the current application was filed on the basis of a mental incapacity amounting to a legal incapacity. 15 When the matter came before me for hearing on 11 June 2008 the proceedings were adjourned on the application of both parties to enable Dr Lewin and Dr Potter to be cross-examined, it being clear on service of their reports that they were not agreed on the question of whether the defendant suffered under a relevant legal incapacity despite the fact that they were agreed as to a diagnosis of her current psychiatric condition. I directed that their evidence be given concurrently. Ms Chen's evidence 16 Ms Chen confirmed that she lives with her mother in Taiwan travelling to Australia every two or three months where she remains for weeks at a time. She confirmed that she was in Australia at the time of the hearing solely for the purposes of the hearing. Whilst it would appear from her affidavit evidence and under cross-examination that she has considerable difficulty, and apparently little success to date, in encouraging her mother to confront the reality of her position as a defendant in the substantive proceedings, it would also appear that the defendant is vocal in maintaining the consistent position that she is not at fault. She claims she did not receive the funds advanced by the bank and secured against the property the subject of the substantive proceedings. It would also appear that the defendant has strong views as to how the fraud was perpetrated and potentially the identity of the perpetrator, without, to date, taking the necessary next step of confirming her instructions to her solicitor, attesting to the defence and perhaps providing, in due course, a proof of evidence from which an affidavit might be drawn. Ms Chen appears to be confronted with an understandable moral dilemma. She has been advised by her mother's doctors not to apply pressure to her mother lest her physical condition deteriorate whilst at the same time appreciating the importance of ensuring that her mother is aware that the litigation is current and continuing, that her solicitors are continuing to act in her best interests in resisting the plaintiff's claim, and that her continued participation is important to a successful outcome. 17 Ms Chen gave evidence that she has shown her mother the defence to the further amended statement of claim and that the defence was the subject of a discussion in a conference with Ms Sadiq in February 2008. She said that Ms Sadiq explained to her and her mother what the defence meant in the course of the conference which extended over 30 to 40 minutes. Ms Chen said that her mother sat quietly at her side throughout the conference, simply saying the words (in Mandarin) "I understand, I understand". Ms Chen also confirmed that she was present with her mother when she attended upon Dr Potter and Dr Lewin for a consultation preliminary to the preparation of their reports. 18 In summary, Ms Chen agreed that from her observations her mother was able to understand the questions asked of her by both consulting doctors and her lawyer and provide answers despite it causing her some distress. Ms Sadiq's evidence 19 The defendant's solicitor gave evidence that from 2004 to March 2007 her observations of her client were such that she was capable of conversation and appeared to understand the nature of the litigation in which she was involved despite some physical ill health. 20 In March 2007 she convened a conference with the defendant for the express purpose of having her listen to recorded conversations and obtaining instructions given their significance in the context of the additional allegations set out in the further amended statement of claim. Ms Sadiq confirmed that she received those instructions from the defendant on the basis of which she drafted the defence. 21 Ms Sadiq said that she was not aware that the defendant was intending to leave Australia until late in March 2007 and only then because of contact with the defendant's son. Since that time she maintains that her concerted efforts to communicate with the defendant via telephone have been frustrated by the defendant crying or wailing with a repetitive refrain to the effect that "I did not do anything wrong" and "My heart will stop, I will not survive". 22 There can be no doubt that Ms Sadiq has endeavoured to discharge her professional obligations to her client by both assembling the material in support of successive applications for the appointment of a tutor and her concerted but ultimately unsuccessful endeavours to locate a psychologist in Taiwan who could assist the defendant and provide a medical legal opinion as to her psychiatric state. She claims she has been unsuccessful in her endeavours. 23 In a conference on 5 December 2007 Ms Sadiq advised the defendant of the pressing need to prepare documents for the purposes of the litigation whereupon the defendant began to cry which continued unabated over 40 minutes. As she was concerned about her client's physical and mental welfare she claimed in her affidavit she has had no further conversation with her about the litigation at that time. She did however arrange for the defendant to see Dr Potter. 24 In cross-examination she confirmed that during the course of the conference in December she had explained the defence to the defendant and to Ms Chen. She also confirmed that when the defendant returned to Australia in February 2008 for the purposes of seeing Dr Lewin she spoke with her again with respect to the defence. It was the solicitor's understanding that the defendant was not saying "I understand, I understand" when she took her client to the various paragraphs of the defence as reported by her daughter but "I do, I do". Although Ms Sadiq has facility with the Mandarin language I prefer Ms Chen's evidence as to what her mother said to the extent that the difference in their evidence is material. Ms Sadiq's impression was that the defendant just wanted things dealt with quickly and that she was distracted and unfocused during the conference. That said, she confirmed that the defence prepared on the defendant's instructions in March 2007 has been explained to her on at least two occasions since that time. She has not however invited her client to attest to the defence. 25 Ms Sadiq was of the considered view that she needed further instructions from the defendant in order to progress the matter, including the defendant's confirmation that she understood the nature of the proceedings and exactly what the defence was directed to in the context of the proceedings. She also wanted the opportunity to sit down with the defendant and to explain the further amended statement of claim, to go through the file with her and confirm her appreciation of the matters in issue and her ongoing instructions. She formed the view that it was not that her client did not understand the nature of the proceedings but that it was difficult for her to understand. She agreed that it is not uncommon for clients to be unwilling to participate in the preparations for litigation to the extent that a solicitor might consider necessary, and that part of the task that falls to a solicitor in those circumstances is to convey the need for the client's participation even if that involves the provision of written advice so a means of avoiding confronting matters of delicacy or difficulty. 26 Ms Sadiq accepted that she had not made any effort at any time to furnish the defendant with a written advice. The plaintiff did not suggest that this was a deliberate omission on Ms Sadiq's part but rather that it would seem that the further application to appoint a tutor had overtaken the option of providing written advice and that her continued efforts to obtain instructions would seem to have been continually frustrated by her client, quite independent of any question as to whether that lack of cooperation is as a result of a legal incapacity or a state of avoidance. The medical evidence 27 At the time of consulting with the defendant in December 2007 and February 2008 both Dr Potter and Dr Lewin agreed that she was suffering from an adjustment disorder which was defined to mean clinical anxiety or depression caused by a significant stress or stressor. Both doctors acknowledged that the severity of the condition varies from individual to individual dependant on the psychological robustness of the individual and the type of stressor which has triggered the condition. It was agreed that litigation may be a stressor giving rise to clinically significant reactions, such as anxiety or depression, and which dependent on their severity may warrant diagnosis as an adjustment disorder. 28 Dr Potter agreed that an interpreter was present throughout the course of both of the consultations he had with the defendant and that she was able to provide a short but coherent history of the litigation and issues relevant to matters in dispute in the proceedings without reference to any documentation. Not unimportantly, the defendant was able to accurately nominate dollar figures as part of that quoted history without prompting. Dr Potter also said that in the course of giving the history the defendant was tearful. 29 Dr Potter was of the opinion that her condition was such that her understanding of legal documents, complex or simple, was compromised by her disorder and that any signature applied to a document would not reflect an informed acknowledgement of its contents. Despite the fact that Dr Potter was invited to accept that the account the defendant gave him was consistent with her defence as drafted, he remained doubtful as to whether she would be in a position to understand the significance of that fact because of the interference with her cognitive functioning. He was also of the view that her level of anxiety would also interfere with her ability to follow and participate in legal proceedings. It is principally from that conjunction of views that Dr Potter expressed his opinion that she was incapable of having an informed involvement with any current legal procedure. 30 Even with her compromised level of functioning Dr Potter agreed that the defendant was of above average intelligence and was oriented in time and place. He agreed that she was not a person with a mental disability, such that she is unable to receive instructions or express her will, but rather that her mind is disorganised by anxiety. He did agree that her level of functioning was something that may improve, but this would be dependent upon the quality of support she was offered and her preparedness to accept support in the lead up to the litigation and in the course of the hearing itself. With support Dr Potter conceded that his concerns as to her ability to cope with the proceedings would be satisfied. 31 Dr Potter also conceded that it was difficult to meaningfully differentiate between a person who has a compromised capacity to understand a legal scenario by reason of anxiety and a person who becomes anxious because of the stresses of litigation and who may become resistant to participating in litigation as a result. In the latter case he agreed that while resistance coupled with extreme anxiety may be productive of a reaction measurable in clinically significant terms, it would not necessarily equate with a compromised cognitive capacity. 32 In Dr Lewin's opinion the defendant's psychiatric condition was not such as to render her incapable of participating in the litigation at the level he was given to understand would, or might be, expected of her. Dr Lewin said that anxiety is a symptom which is ubiquitous in the sense that people suffer anxiety about various things from time to time. So as to meaningfully address in clinical terms whether her level of anxiety was incapacitating, in circumstances where he was unable to measure in any objective way the defendant's capacity to understand a legal document, Dr Lewin assessed her capacity by reference to her ability to function in related fields of her life, principally the operation of her business. He concluded that in light of her history of functioning in situations analogous to the current litigation (of which he claimed there were abundant examples) it was unlikely that one particular situation, even though more feared and emotionally laden, would render her incapable. 33 Dr Lewin also agreed with Dr Potter that on the assumption that the defendant's anxiety is capable of being addressed, whether with professional counselling or medication or both, her ability to receive information and process it, and thereby to meaningfully participate in the proceedings, would be expected to improve. He also agreed that the extent to which that might occur would be dependant upon her voluntary participation. 34 Both doctors agreed that an adjustment disorder was a fluctuating condition and, while the underlying physiological or psychological state might be present, the degree to which the symptoms of anxiety and or depression are manifest at any one time is dependent upon a range of variables. In Dr Potter's view, whilst ever the stress of litigation is immediate the defendant is likely to suffer severe and debilitating anxiety. However, if she is preoccupied with other matters, the symptoms of anxiety will likely diminish. Dr Lewin made observations of that very kind in the course of his consultation with her. When the focus of his inquiry was on her legal predicament she was distressed, tearful and experienced difficulty in expressing herself, whilst at other times in the course of the same consultation she presented quite differently. Dr Lewin sought to emphasise that the defendant's mood state and her state of arousal or anxiety was very much dependent upon and responsive to circumstances in which she found herself. In that sense Dr Lewin was firmly of the view that she did not suffer from a morbid psychiatric condition but rather from a condition which was treatable. Is the defendant under a legal incapacity? 35 Taking into account all the evidence, I am not satisfied that the defendant has established that she is suffering under a legal incapacity, as defined. In particular, there is no evidence that she is incommunicate or that she is unable to receive communications or express her will with respect to her property or affairs. At its highest, the evidence is that commensurate with her current and persisting psychiatric disorder fluctuating levels of anxiety render her resistant to participating in the litigation. Despite the earnest endeavours of her daughter and her solicitor neither have been able to overcome that resistance. In addition, by reference to what the defendant apparently reported to a psychologist in Taiwan in October 2007, it seems to me entirely possible that she may have been encouraged to believe that her daughter could attend the hearing in her place and that since that time she has taken understandable comfort, and perhaps refuge, in that belief. While the defendant may prefer to have her daughter assume control of the proceedings, the appointment of a tutor under the UCPR is not an option that a party to litigation may exercise but a serious and significant step that may only be taken with the approval of the Court and only where the circumstances justify it. As I have said, I do not regard the appointment as warranted in this case. Parens Patriae 36 Although the defendant's counsel did not expressly abandon the application to appoint Ms Chen as a tutor under the Rules he acknowledged that the weight of the evidence did not compel a finding in her favour. In the alternative, he urged me to exercise the inherent and discretionary parens patriae jurisdiction and to appoint Ms Chen as a tutor, as if under the Rules, on the basis that she had what he described colloquially as "mental block" which is preventing her from providing ongoing instructions to her lawyers. He submitted that in the interests of the future conduct of the proceedings generally it is expedient to relieve the defendant of providing those instructions and to have her daughter take on that role and responsibility in her place. 37 I was taken in that connection to the judgment of Young CJ in Eq in Re P [2006] NSWSC 1082 where his Honour exercised his discretion in favour of a litigant in what is said to be analogous circumstances. The plaintiff submitted that his Honour was dealing with a situation that is on any number of bases distinguishable from the circumstances of the present case. 38 In the first instance, the litigation with which his Honour was concerned was part heard in the District Court. The matter was apparently heard by his Honour ex parte, the District Court judge being wrongly of the view that she had no jurisdiction to appoint a tutor under Part 7 of the UCPR. In those circumstances the matter was urgently removed to this Court. In the second instance, his Honour noted, without apparently undertaking any searching inquiries, that a medical report tendered on the application did not support a finding of mental disability, such that the defendant was unable to express his will with respect to his property or affairs, but that he had what his Honour referred to as: "…a problem which stops him from giving proper instructions to his layers and the lawyers would have difficulty in doing what they were instructed by the client because they could not be assured that his mind was proceeding his mouth." 39 In effect his Honour concluded that the defendant had got himself into a mental state where he could not give meaningful instructions. In those circumstances, whilst his Honour would appear to have been of the view that the defendant did not satisfy the definition of a person under legal incapacity as defined in s 3 of the Civil Procedure Act, he nevertheless regarded the court's protective power under the patriae jurisdiction as appropriately invoked to deal with the situation in the somewhat unique circumstances that presented. 40 By contrast, I have the benefit of three reports upon which each doctor has been cross-examined, each of which make it clear that the defendant is an intelligent woman who is able to deal confidently with her affairs in other respects. In addition, the authors of the reports express the unqualified view that with the assistance of medication and or counselling the anxiety which is currently overwhelming the defendant will abate to the point where she can participate in the litigation at an appropriate level. 41 While I accept that Ms Sadiq considers she is at an impasse, I am by no means confident that the defendant has had sheeted home to her, in an appropriate way, that her desire to have her daughter assume conduct of the proceedings in her place is not an option that is for her to choose. There is no evidence before me to indicate that with the provision of a carefully and emphatically worded advice to that effect, and the assurance that medication or counselling might well enable her to participate, that she will persist in avoiding focus on the litigation. 42 The plaintiff's counsel also sought to emphasise as a point of distinction between this case and in Re P that I would not be satisfied that Ms Chen is an appropriate person to act as a tutor when her clear evidence is that her mother will not speak to her meaningfully about the case in any event. Be that as it may, I am not satisfied that an adequate basis has been made out on the current evidence for the appointment of a professional tutor in circumstances where I am not persuaded that the defendant is incapable in the relevant sense of providing ongoing instructions to her solicitor so as to enable the litigation to proceed. Orders 43 Accordingly, the orders I propose are as follows: 1. The notice of motion is dismissed. 2. The defendant to pay the plaintiff's costs. 3. Liberty to apply on 3 days notice for any further directions to facilitate the progress of the substantive proceedings. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.