RE SMJ

HCMH 30/2014

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MENTAL HEALTH CASE NO. 30 OF 2014

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D E C I S I O N

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1. The Applicant, the niece of the mentally incapacitated person (“MIP”) SMJ, applied to be appointed the Committee of SMJ under Part II of the Mental Health Ordinance (Cap. 136). This is an application on costs between the Applicant and the Intervener, and the decision is given openly suitably anonymised and redacted.

Background

2. SMJ was aged 90 at the time of the application in April 2014.  In the Certificate of Family and Property, the Applicant stated the total balance of SMJ’s bank accounts (including joint accounts held by SMJ and the Applicant) was $26,901.88.  Real property included a flat jointly held by SMJ and her brother SFC (“Property A”).

3. SFC intervened in the proceedings.  There was no issue as to the mental capacity of SMJ.  The issue was membership of the Committee. 

4. The grounds of the intervention and objection were:

(1)  There was misappropriation or squandering of SMJ’s assets by the Applicant;

(2)  There was material non-disclosure of SMJ’s estate by the Applicant.   

5. The Intervener used to jointly hold two properties with SMJ.  The Intervener is still holding Property A with SMJ jointly.  The other property (“Property B”) was already sold and SMJ was entitled to half share of the proceeds of sale of about HK$7 million being held in the client’s account of the solicitors for the vendors. 

6. The Intervener alleged he had lent about $1.3 million to SMJ, and investigation undertaken subsequent to the intervention disclosed that the Applicant had transferred $1,328,180.74 from the joint account with SMJ to her sole account.

7. The matter was first placed before Lok DHCJ (as he then was) on 13 June 2014, and the issue was mainly membership of the Committee, as it was then not yet fully realized that $1.3 million had been transferred from the MIP’s joint account to the Applicant’s sole account.  His Lordship expressly invited the parties to resolve the disputes by mediation.

8. On 20 June 2014, solicitors for the Intervener wrote to the solicitors for the Applicant proposing mediation.  On 8 July 2014, solicitors for the Applicant replied that they would seek their client’s instructions.  There was no further response by them.  On 25 July 2014, the Intervener took it that mediation was refused and proceeded to file an affidavit opposing the Applicant as the Committee, and the Applicant also filed an affidavit opposing the Intervener as a more suitable Committee. 

9. The Applicant did state in the Certificate of Family and Property that $1.3 million had been transferred from the MIP’s joint account to her sole account, and that she had paid moneys on behalf of the MIP for her maintenance.  But she did not give any detailed explanation, nor list the $1.3 million (nor any balance as the case may be) under assets of the MIP either as cash or property held on trust for the MIP.

10. At the Inquiry before me, the Applicant did not dispute that the $1.3 million transferred to her personal account should belong to the MIP, and she agreed to pay the full amount into Court (which had been done).  Further, it was agreed that a professional committee should be appointed.  A solicitor, nominated by the Applicant, was appointed the Committee on 9 December 2014. 

11. The MIP has since passed away on 26 December 2015.

12. The Applicant is applying for costs and disbursements of $307,695 to be paid out of SMJ’s estate.   

13. The Intervener also applied for costs and disbursements of $903,475, and also that:

(1)   The Intervener’s costs be borne by the Applicant personally, or alternatively, be paid out of the estate of SMJ, to be taxed if not agreed, with counsel’s certificate;

(2)   The Applicant’s costs (except for the 2 medical certificates) be borne by the Applicant personally.

14. I have said it time and again that Court of Protection or mental health proceedings for persons lacking in mental capacity to deal with their own financial affairs are administrative in nature for the protection and maintenance of the MIP, and not for different factions of the family to vie their differences in affections, or as precursor to the hereditary claims. Collateral disputes will have to be resolved in separate proceedings.  Once the parties started making vile allegations of misdeeds and mistrust against each others, those advising them legally should act as the wet blanket rather than to fuel them by spending hours taking copius instructions for unnecessarily length affidavits.  They should advise their clients on the good sense of setting up a neutral third party or professional Committee unless the choice between the contenders is demonstrably clear and obvious, especially when the value of the estate or the age of the MIP so justifies (such as in the present case).  No costs should be wasted on washing dirty linen in public. 

15. At the Inquiry before me, the parties sensibly and effectively consented to a professional Committee, which they should have done so in the first place.  I wonder how family members could really set out looking after a MIP relative without talking it through (or worse still by arguing), and why the talking had not taken place sooner, especially when mediation had expressly been suggested by the Court.

16. Miss Tam, for the Applicant, accepted that mediation is part and parcel of the civil procedure under the Civil Justice Reform since 2010, and unreasonable refusal to mediate is a conduct that can be taken into account adversely in the general discretion on costs. 

17. Miss Tam submitted that as the Intervener suggested he was more suitable to be the Committee, mediation would not seem to be fruitful in making the choice between the two factions, especially where much unwarranted allegations had been exchanged.

18. In mediation, the sky is really the limit and there is no cause for self-imposing restraints on one’s imagination as to whether the results might be fruitful.  The issues could always be narrowed, if not resolved.  And judging from what transpired at the Inquiry, I daresay it would have be exactly the same result had mediation been attempted between the parties.

19. The MIP is incapacitated and the application itself is necessary.  The Intervener conceded that the Applicant should have the costs of the 2 medical certificates.  In the same vein, the costs of the originating summons and other usual supporting certificates and supporting documents etc. and the 2 preliminary hearings before the other judges should be paid out of the MIP’s estate. 

20. I have indicated earlier that in the run of the mill Part II cases, the costs of the application should be in the range of $35,000 to $50,000.  Sometimes, costs in applications consequential upon settlement in personal injuries cases could be as low as $25,000.  Expectedly, the size and diversity of the estate might often affect the degree of vigilance and attention of the lawyers. 

21. There are of course disputes in the present case, but the correct approach is to identify and sensibly get around them, rather than to come to a head for no real benefit of the MIP.  There is no cause for pouring good money after bad, and wasteful costs should not be allowed.  Mental health cases should never be regarded as milking of a cow.

22. I assess the costs of preparation and disbursements apart from the hearing of the Inquiry itself for the Applicant to be $50,000.  There are usually no issue on mental capacity.  I have also indicated many times that many doctors are charging $5,000 to $8,000 for the medical certificate depending on the work done (such as paying the MIP a visit(s) or liaising with other practitioners).  I hope solicitors will take heed of this in future.

23. At the Inquiry, the Applicant has sensibly consented to the order after discussions.  Ergo, I do take that into account and I would deem it to have been achieved by mediation (which should have been done). Having taken some preliminary exchanges must have had between the parties’ solicitors by nature of the disputes, I would allow the hypothetical costs for mediation with representation of $50,000 to the Applicant.  Hence, total costs of $100,000 is allowed for the Applicant out of the estate. 

24. The Intervener was successful in opposing the Applicant as the Committee, and in securing the return of $1.3 million to the MIP’s estate, and the Intervener should not be out of pocket.  The question is whether the estate or the Applicant is to pay.

25. Since the Applicant’s reason for refusing mediation in presupposing pessimistically that it might not be successful is unreasonable, I shall order that the Applicant pay the costs of the Intervener.

26.  Prima facie, quantum of the Intervener’s costs is unreasonable as they are 3 times those of the Applicant.  The investigation into the transfer of the $1.3 million would be additional work following up on the incomplete disclosure, but arguments as to suitability of the contending candidates of the Committee were not, and by looking at the work done, much costs must have been such.

27. Further, both parties have instructed counsel, the Applicant for the Inquiry only and the Intervener also for the costs hearing as well.  Counsel’s fees for the Intervener are not as clearly set out as those for Applicant, but in any case almost 3 times as much.  I note the 10 years difference in call, but I do not see the justification in the markedly different fees charged by the nature of the work required.

28. Mental health cases are not heard in open court and are usually handled by solicitors alone. Appearance by counsel may be justified by reason of requirement of any special expertise, research and/or advocacy.  Parties are of course at liberty to retain counsel, but where appearance by counsel is not justified by any value added, the costs awarded should not be over and above those of a suitably experienced solicitor.

29. This case could have been adequately handled by solicitors on both side, given the proper understanding of the nature of the issues and the sensible resolution thereof, such as eventually resulted.  Some practitioners may not be familiar with the subject, but clients are regarded as providers of continuing professional development for the lawyers. Granted the Applicant did refuse to mediate, but the work done for the objection needed not to be taken to such lengths.  Judging on what ought to be have been done from my experience, I assess the costs of $150,000 for the Intervener, to be paid by the Applicant.  I did not assess the Intervener’s costs on the basis of a hypothetical mediation.

30. There is no objection from the parties for this Decision to be made public.  Finally, I wish to thank counsel for their assistance.