RE L

HCMP 1120/2003

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 1120 OF 2003

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REASONS FOR DECISION

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1.  Mentally incapacitated person, like other persons, might engage in litigation with others.  However, given his or her mental incapacity, someone else would have to conduct the litigation as next friend.  Sometimes, it may be in the interest of the mentally incapacitated person [“MIP”] to settle the dispute.  By reason of the disability, the settlement has to be approved by the court in which the litigation is conducted.  In cases where a committee has been appointed for the MIP under Part II of the Mental Health Ordinance, and where the committee also acts as the next friend in the litigation, the committee should also seek approval under Part II of the Mental Health Ordinance [“MHO”] before it agrees to settle on behalf of the MIP.  Logically, the committee should get the approval under Part II of the MHO first before it goes before the court in which the litigation is conducted seeking approval of the settlement under Order 80.  Unfortunately, this has not been done in the present case and as a result problems have arisen.

2.  The MIP in the present case, whom I shall call L, was injured in a traffic accident at work in 1992.  The resultant brain damage led to impairment in his mental capacity.  His daily life was severely affected.  He used to be a police officer and he had to retire early in 1996 when he was in his thirties.  He received a sum slightly more than $1 million by way of employee’s compensation.  Later, in the personal injury action, he received a sum of $3.4 million in 1998 by way of settlement.  The monies were paid into court.  The balance remaining in court in September 2005 was about $2.6 million.

3.  He had a wife and a son.  Problems in terms of personality disorder had brought about behavioural changes.  Social disinhibition, poor control of impulses, inconsiderateness for others and inability to delay gratifications led to poor interpersonal relationships with people close to him.  The family had tried to save the marriage by moving to England.  Sadly, that attempt was unsuccessful.  The wife petitioned for divorce and a decree was granted in 2004.

4.  A committee was appointed by the court on 1 April 2003 and the committee conducted the divorce suit on behalf of L.  The order of 1 April 2003 did not specifically provide for the conduct of any litigation on behalf of L.

5.  The wife applied for ancillary relief for herself and the son in the divorce proceedings.  On the first day of the ancillary relief hearing, the Committee reached a settlement with the wife.  The terms of the settlement was approved by the Family Court and set out in the order made by that court on 1 August 2005.  The order provided for monthly maintenance for the wife as well as monthly maintenance for the son.  It further provided for the transfer of a UK property (which had been purchased by monies received by L by way of compensation) to the wife subject to certain restriction.

6.  The Committee then came to this court to apply for sanction to implement the terms of the order of the Family Court.  In particular, an increase in the monthly payment out from monies in court is needed in order to meet the maintenance obligations provided for in the order.  Previously, the court in the exercise of its Part II jurisdiction only directed payment in the sum of $6,000 per month.  The monthly maintenances ordered by the Family Court are $8,000 for the son and $6,000 for the wife respectively.  Hence, approval from the court as to the $8,000 increase has to be secured.  Further, this court’s sanction is required for the transfer of the UK property.

7.  At this juncture, it is helpful to reiterate several propositions regarding the conduct of litigation by a committee on behalf of a MIP,

(a)	A committee appointed under Part II of the MHO is a statutory agent subject to the supervision of the court;
(b)	Before bringing or defending an action, a committee should obtain the sanction of the court, otherwise he will act at his own risk as to costs (see The Supreme Court Practice 1999, Vol 2 Para. 10A-116; Halsbury’s Laws of England, 4th Edn 2005 Reissue, Vol 30(2) Para. 703);
(c)	A solicitor acting for committee who fails to advise his client to obtain the sanction of the court may also be at risk as to costs;
(d)	In deciding whether to sanction a particular course of conduct in litigation involving a MIP, the court is obliged to have regard to the matters set out in Section 10A(2) of the MHO;
(e)	Whilst the substantive merits in the litigation is an important factor, the consideration of the court transcend beyond that.  As observed by Ungoed-Thomas J in Re W (EEM) [1971] 1 Ch 123 at p. 135F to 136D, in this context benefit to a patient has a wider meaning than financial or material benefit;
(f)	Moreover, the court will have to balance the costs against the benefit that may be derived from a particular step;
(g)	The court will also consider whether there are alternative means to resolve the dispute.  Negotiation and mediation could be a more cost effective means to settle civil dispute in some cases.

8.  Regarding cases where a MIP (with a committee appointed for his estate), like L, is a respondent to an ancillary relief application, the following principles are applicable,

(a)	The finding of mental incapacity and appointment of a committee under Part II of the MHO would not bar the other spouse from petitioning for divorce and applying for ancillary relief under the MPPO;
(b)	However, the Family Court in the exercise of its power under the MPPO will have due regard to the jurisdiction of the High Court under Part II of the MHO.  The Family Court will ensure that the order it makes would not interfere with the jurisdiction under Part II, so much so that if it deems appropriate to make an order under the MPPO when an order had previously been made for the maintenance of the spouse before the High Court has any opportunity to reconsider the matter, it would limit the operation of the MPPO order to the death or recovery of the MIP and further provide that such order would be subject to and without prejudice to whatever order the High Court may make under Part II (see CL v CFW [1928] P 223);
(c)	The Family Court in the exercise of its jurisdiction under the MPPO does not have the power to direct how a committee of a party to ancillary relief proceedings should administer the estate of the MIP (see Swettenham v Swettenham [1939] 3 All ER 989; (1939) 55 TLR 801).  That lies within the exclusive province of the High Court in the exercise of its jurisdiction under Part II of the MHO.

9.  But it does not follow that the Family Court has no role to play under the MPPO when the matter can be considered by the High Court under the MHO.  These are two conceptually different exercises.  Under the MPPO, the Family Court strives to achieve a fair and just distribution of the assets of the family between the parties upon dissolution of marriage having regard to the circumstances of the case and the statutory guideline in Section 7 of the Ordinance.  It is an inter partes process.  On the other hand, the court exercises a protective jurisdiction under the MHO and Section 10A (2)(a) dictates that the paramount consideration is the requirements of the MIP.  Although there are provisions for ordering maintenance for family members under the MHO (see Sections 10A(1)(b), 24 and 25), the court is still essentially considering the matter from the perspective of the MIP.  An MHO application is not the proper forum for resolution of substantive inter partes disputes (see Re Chao Tsao Yee [1998] 3 HKC 665; Re M HCMP 25 of 2005, 1 Nov 2005).

10.  Hence, the focus of the courts under the two sets of proceedings will be different.  It is quite possible that the High Court may authorize the committee under the MHO to take a position on behalf of a MIP that is eventually rejected by the Family Court on full consideration of all the evidence before it.  This is particularly likely where there are factual disputes and the evidence from either side is not incontrovertible.  It is the duty of the Family Court to resolve such conflict in the light of the materials before the court with the assistance of the parties.  A decision by the Family Court against the MIP in such circumstances is not an interference of the jurisdiction of the High Court under Part II of the MHO.

11.  In the light of these principles, it would generally be better if a committee were to seek directions from the High Court with regard to a settlement proposal first before it agrees to the same on behalf of a MIP and seeks approval from the Family Court.  This was how the matter was eventually resolved in Swettenham.  The Court of Appeal discharged the order of Henn Collins J and adjourned the matter to allow the parties to seek the sanction of the Master in Lunacy before coming back to court seeking provisions for ancillary relief.  The same procedure was adopted in Re W (EEM) [1971] 1 Ch 123, see p. 140E and p. 145B).

12.  Coming back to the facts of the present case, the committee did not seek the prior approval of this court in entering into a settlement with the wife.  Mr Ko, solicitor for the committee, explained that it was a settlement arrived at on the first day of trial and there was no time to come to this court to seek approval.  In my view this is not a good excuse.  Parties were aware that L was mentally incapacitated and I fail to see why they could not invite the Family Court to stand down the matter for, say, half a day to enable the committee to come to this court to seek the necessary sanction before proceeding further.  This court can consider the matter at short notice if the circumstances warrant the same and the solicitor acting for the committee should be able to explain to this court why the settlement was in the interest of L as he was prepared to recommend to the committee to accept the terms of settlement.

13.  As mentioned, the committee should have come to this court to seek direction before it takes any step in the ancillary relief application and those advising the committee should have suggested this course.

14.  More regrettably, there is a problem with the settlement.  The solicitor recommended the Committee to accept the settlement based on a valuation of the UK Property provided by the wife without proper valuation evidence.  The wife stated in her affirmation of means that the value of the UK Property was $500,000.

15.  Given the overall financial position of the parties, the UK Property represents a significant portion of the family assets.  Hence, when the matter came before this court on 16 September 2005, I expressed reservations in this regard.  The Committee obtained a valuation report in January 2006.  According to the surveyor, the UK Property had an open market value of £104,000 as at 1 August 2005, the date of the settlement agreement (equivalent to $1,456,000). 

16.  The Committee therefore sought sanction for making an application to the Family Court for variation of the consent order of 1 August 2005 regarding maintenance for the wife.

17.  The Committee did not seek to re-open the maintenance for the son.  Having considered the matter, I am of the view that an increase to $8,000 per month is reasonable and in line with the interest of L and his requirement.  I therefore approved an increase in payment out for that purpose on 27 April 2006.

18.  As regards the transfer of the UK Property and the maintenance for the wife, the valuation of the UK Property obviously presents a rather different picture to the overall position.  However, going back to the Family Court seeking variation will involve substantial legal costs and deplete the monies available for meeting the needs of the parties in the future.  Bearing in mind the financial position of the parties, I am anxious to keep down the costs involved.

19.  It seems to me that it would be in the interest of all parties concerned if the problem could be resolved through amicable settlement.  I was told that the wife might be open to negotiation.  The Committee is willing to go for mediation and I think there is a good chance that this might lead to a solution in a cost effective manner.

20.  In these circumstances, instead of authorizing the Committee to apply for variation in the Family Court right away, I adjourned the application to 2 August and directed the Committee to try to explore settlement with the wife (subject to approval by this court) through mediation or negotiation in the meantime.

21.  Solicitors acting for a committee should familiarize themselves with the procedures under Part II of the MHO and duly advise their clients about their duties towards the MIP and the court.  It is hoped that with the publication of this judgment (on which the parties have no objection), similar mistakes will not be made in the future.

22.  In cases where there is no appointment of committee, the next friend and those advising the next friend should also be aware of their duties towards the mentally incapacitated person.  In case of difficulties, an application should be made to this court under Part II of the MHO for directions.

23.  Since the matter is of general importance, leave is granted for publication of this judgment.