Riaz LLC v Sharil bin Abbas (through his deputy and litigation representative, Salbeah bte Paye)

AR Sngeeta Devi:

[3] On 28 June 2010, a notice of change of solicitors for Sharil was filed wherein the conduct of Suit 539 was taken over by Messrs Lee Shergill LLP with Mr Raj Singh Shergill (“Mr Singh”) acting on behalf of Sharil. At a Pre-trial Conference on 8 July 2010, Mr Singh informed the Court that in the process of interviewing Sharil, he started having doubts over his mental capacity and hence he would be sending Sharil for a medical examination. On the basis of the resulting medical evidence, Mr Singh filed an application under the Mental Capacity Act (Cap 177A, 2010 Rev Ed) (“the MCA”), on behalf of Sharil’s mother, Mdm Salbeah bte Paye, seeking for, inter alia, an order that she be appointed as Sharil’s Deputy. On 11 November 2010, a District Judge made an order declaring Sharil as being “unable to make various decisions for himself in relation to a matter or matters concerning [his] personal welfare and property and affairs because of an impairment of, or a disturbance in the functioning of [his] mind or brain” and appointed Sharil’s mother as his Deputy. The order gave her, inter alia, the power to conduct legal proceedings in Sharil’s name or on his behalf. Thereafter, Mr Singh applied to amend the writ of summons in Suit 539 to show that Sharil was suing through his Deputy.

[6] Section 18 of the Motor Vehicles (Third-Party Risks and Compensation) Act (Cap 189, 2000 Rev Ed) (“the MVA”) seeks to ensure that solicitors’ remuneration is fair, to both the solicitor and the client. The relevant portions of s 18 are as follows:

In his submissions before me, Mr Singh argued that the contract was voidable, at the option of the client.

[13] In an affidavit filed on 3 January 2013, Sharil’s mother, as the litigation representative, asserted that Mr Riaz would have surely known that Sharil had no mental capacity to enter into any sort of contractual agreement with him. The key reasons highlighted by her were as follows:

[14] Through a letter dated 22 March 2012, Mr Singh had informed Messrs Riaz LLC, that Sharil’s mother had decided to treat the contract between the applicant and Sharil as void. By a letter dated 2 April 2012, Mr Singh had also requested for a copy of their warrant to act. However, this was not provided.

[15] Interestingly, neither party filed any application to determine whether the contract was voidable or to seek any redress on the issue.

[17] The affidavit also annexed the warrant to act, which stated that Sharil had authorised Messrs Riaz Advocates & Solicitors to act on his behalf, in respect of the accident. The warrant to act was not dated and contained a signature with a thumbprint next to it. Mr Ezekiel Peter Latimer (“Mr Ezekiel”) who represented the applicant in this bill, explained that the thumbprint was Sharil’s and the signature belonged to his mother. The respondent did not deny this.

[18] In an affidavit filed on 28 May 2013, Mr Riaz asserted that:

[19] Before me, Mr Ezekiel took the position that while his mother had signed the warrant to act, only Sharil was the client. There was no reason for Mr Riaz to suspect that Sharil lacked mental capacity. He added that the Order of Court declaring Sharil to lack mental capacity was only obtained in 2010 while the warrant to act was executed much earlier. Sharil may have had the mental capacity to execute the warrant to act at that point. Even if he did not have the requisite mental capacity, it was not immediately apparent to the solicitor.

[20] A contract executed by a person who had no mental capacity to do so, was voidable but not void. If the contract was not to be enforced against him, the person who lacks capacity has to prove that the other contracting party knew or ought to have known of the lack of capacity. The test for whether a person lacked capacity to enter into a transaction was whether there was understanding of the transaction on his part: see Che Som bte Yip and others v Maha Pte Ltd and others [1989] 2 SLR (R) 60 (“Che Som”) at [23]–[24] and The Law of Contract in Singapore, (Andrew Phang Boon Leong gen ed) (Academy Publishing, 2012) at pp 530–531.

[21] In Wong Meng Cheong and another v Ling Ai Wah and another [2012] 1 SLR 549, Justice Lai Siu Chiu held that the statutory test under the MCA on mental capacity was consistent with common law definitions. She observed, at [27], that:

[22] According to s 3(2) of the MCA, a person is assumed to have capacity unless it is established that he lacks capacity. Section 4(1) of the MCA provides that:

[23] Section 5(1) of the MCA defines a person as being unable to make a decision for himself if he is “unable to understand the information relevant to the decision, to retain that information, to use or weigh that information as part of the process of making the decision or to communicate his decision (whether by talking, using sign language or any other means)”.

[24] Therefore, while this was not an application under the MCA, the principles above should be instructive when determining whether a person lacks the necessary mental capacity to understand and enter into a transaction.

[25] Applying the law to the facts, Sharil would have to show, first, that at the time of entering into the contract with Messrs Riaz LLC, he lacked the mental capacity to understand what he was doing and second, that this incapacity was known or ought to have been known by Messrs Riaz LLC. The warrant to act was not dated but Mr Ezekiel submitted that it was likely to have been executed in the time period between January and June 2008. Mr Singh did not dispute this.

[26] Three issues arose for my decision:

[27] I had asked both counsel to make submissions on whether, as the taxing Registrar, I could determine whether the contract was voidable.

[28] Mr Singh submitted that a taxing Registrar definitely had the power to make this determination. In aid of his submission, he cited O 59 r 13 of the Rules of Court which reads as follows:

By virtue of the above provision, a taxing Registrar would have the power to examine witnesses.

[29] Mr Singh also relied on O 92 r 4 of the Rules of Court, which provides that nothing in the Rules of Court “shall be deemed to limit or affect the inherent powers of the Court to make any order as may be necessary to prevent injustice or prevent an abuse of the process of the Court”.

[30] Mr Ezekiel, on the other hand, preferred to limit his submission to saying that the taxation process was not suitable for the determination of such an issue. He did not register any arguments on how the issue should be resolved and if a trial was necessary.

[31] In Giannarelli v Wraith (No 2) [1991] 171 CLR 592, the High Court of Australia held that that if the taxing officer was of the opinion that there is a genuine factual issue between the parties, he could exercise the powers under O 71 r 70 of the High Court Rules of Australia applicable then, which provided as follows:

[32] McHugh J observed, at 599–600, that:

The relevant rule remains unchanged in their current High Court Rules, 2004.

[34] Moreover, O 32 r 9 (1) provides as follows:

Neither the Chief Justice nor the Rules of Court have directed that issues relating to mental capacity have to be determined by a Judge in person. In fact, both ex parte and inter partes applications under the MCA, are heard by the District Court by virtue of the Supreme Court of Judicature (Transfer of Mental Capacity Proceedings to District Court) Order 2010 (S 104/2010). Previously, applications for an inquiry on the mental state of a person and the appointment of a committee of the person and/or the estate under the Mental Disorders and Treatment Act (Cap 178, 1985 Rev Ed) could be heard by a Registrar, see Practice Direction No. 2 of 2008, The Supreme Court of Singapore.

[35] Having validated my power to preside over the determination of the issue, I needed to assess if I should stay the proceedings for the issue to be determined by a Judge, after a trial. By virtue of O 5 r 2, proceedings in which a substantial dispute of fact is likely to arise, shall be begun by writ.

[36] However, upon examining the cases put forth by both counsel, I was convinced that a substantial dispute of fact was unlikely to arise in this case. While the parties had differing views on the issue of whether Sharil had the mental capacity to enter into a contract with the applicant, there was little evidence or counter argument from the applicant to dispute the material facts presented by the respondent. Therefore, I did not see any reason to stay the proceedings for a trial which would undoubtedly cause unnecessary delay and expense.

[37] After the taxation proceedings had already commenced and partially heard before me, the parties agreed on a settlement which would require the respondent to pay $8,000 exclusive of disbursements to the applicant. According to Mr Singh, Sharil’s mother wanted to avoid additional expenses and conclude the matter immediately through the settlement.

[38] The applicant submitted that I should recognise the fact that the parties had agreed to conclude the matter and record the consent agreement accordingly.

[39] In Wong Foong Chai v Lin Kuo Hao [2005] 3 SLR(R) 74 [“Wong Foong Chai”], Judicial Commissioner Andrew Phang (as he then was) made the following observations on the rationale of the MVA, at [42]:

[40] The learned Judge went on to add at [51]:

[42] Having confirmed my authority to determine whether the contract was voidable at a taxation hearing and that the Court has the power to depart from an agreement between the parties, I began to assess whether the contract was indeed voidable.

[45] In his medical report dated 22 July 2010, Dr Ho, who has more than 20 years of experience as a neurologist, opined that Sharil’s memory and cognitive deficits were such that he was not able to handle his own affairs. Apart from his own examination of Sharil, his report also took into consideration, information from Sharil’s mother and some available documents, which included a medical report dated 15 April 2008 from Dr Chou Ning. The relevant portions of Dr Ho’s report are as follows:

[46] Before me, Dr Ho basically reaffirmed the content of his medical report. He added that while he did not examine Sharil in 2008, there was a record of his admission to Tan Tock Seng Rehabilitation Centre on 23 January 2008 and it was clear to him that Sharil could not have appeared normal, either physically or mentally at that time. I asked Dr Ho for his opinion on whether it was possible that the organic brain syndrome developed some time after the accident. The material portion of his response is as follows:

[47] In relation to the warrant to act, the following exchange between Mr Singh and Dr Ho is pertinent:

[48] Dr Ho’s evidence was clear and consistent with his earlier findings. There was no reason for me to doubt his evidence. Neither was there any contrary medical evidence provided by the applicant. From Dr Ho’s evidence, it is difficult to imagine how Sharil could have given instructions to Mr Riaz to act on his behalf or how he could have possibly understood the effect of the warrant to act. It was thus, clearly evident that he could not have appreciated the nature of the document on which he was affixing his thumbprint on.

[49] The contract between the applicant and Sharil was therefore voidable. If the contract was not to be enforced against Sharil, it must be shown that Mr Riaz either knew or ought to have known about the lack of mental capacity.

[50] Mr Ezekiel cross-examined Dr Ho on whether it was possible that the symptoms of mental incapacity were subtle. The relevant portions of Dr Ho’s evidence are as follows:

In light of the above, it is obvious that any reasonably minded person dealing with Sharil would have reason to suspect that Sharil lacks mental capacity.

[51] In fact, Mr Riaz’s own actions provide evidence that he was indeed aware of Sharil’s lack of mental capacity:

(a) First, is his decision to get Sharil’s mother to sign the warrant to act. I failed to understand why a solicitor would get the mother of his client to sign the warrant to act if there was no reason to suspect a lack of mental capacity. The warrant to act did not name the mother as a client and therefore her signature on the warrant to act was irrelevant. In fact, it is imperative to note that upon hearing the medical evidence, the applicant sought to orally amend its bill to add Sharil’s mother as a respondent, arguing that she was also a client for Suit 539. I dismissed the application as it was made very late in the day and would cause prejudice to the respondent which could not be compensated by costs. Moreover, the applicant had not complied with the provisions of the Legal Profession Act (Cap 161, 2009 Rev Ed) on the delivery of a bill of costs to the client (Sharil’s mother in this case) and/or obtaining an order for taxation. My dismissal of the oral application to amend was made without prejudice to the applicant’s right to file any application against Sharil’s mother for costs separately.

(b) Second, in his letter to the Traffic Police dated 27 May 2008, Mr Riaz stated as follows:

(a) If Mr Riaz held the belief that Sharil may not be able to file a police report, how could he have then reasonably believed that Sharil was able and competent to execute a warrant to act?

[52] Based on the above, I can confidently conclude that Mr Riaz knew about Sharil’s lack of mental capacity.

[53] It is interesting to note that The Law Society in New South Wales has published a guide, When a client’s capacity is in doubt, A Practical Guide for Solicitors”, 2009, to provide guidance to their solicitors on what to do and what resources are available to assist them, if they are concerned that their client may lack capacity to give instructions or make their own legal decisions. The guide also provides a list of “warning bells and red flags”, at p 4, to identify when a client’s capacity may be an issue. The list included the following scenarios:

[54] While the above guide may not be conclusive and much depends on the circumstances of each case, the above indicators were present in this case.

[55] The evidence before me unwaveringly pointed to the conclusion that Sharil could not have had the mental capacity to understand the contract with the applicant and that it was inconceivable that Mr Riaz was not aware of this lack of capacity. The contract was therefore undoubtedly voidable, at the option of the client.