RE LWO, MENTALLY INCAPACITATED PERSON

HCMP 2965/2001

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 2965 OF 2001

____________

____________

______________

J U D G M E N T

______________

1.  This matter has a long history.  The mentally incapacitated person [“MIP”] was a victim of an industrial accident on 5 September 1983 when he was 19 years old.  He suffered widespread brain damage.  In 1985, his mental state was assessed by a doctor to be about 5% of normal.  With the support and care provided by his family, he managed to have some progress in his recovery.  According to the report of a clinical psychologist based on assessment done in November 2000, he was intellectually functioning within the lower range of the Borderline range.  Higher cognitive functioning, such as memory, abstract reasoning, judgment, and planning abilities, was grossly impaired.  He was able to be almost independent in simple self-care tasks such as walking, feeding, toileting and bathing, minimal assistance and supervision were advised for safety reasons and prevention of accidents.

2.  In September 1990, his claim in respect of the accident was settled by a lump sum payment of $4,460,418.00.  Apart from a payment out of $500,000, the balance of such sum was retained in the Suitors’ Fund for the benefit of the MIP.  In December 1990, a brother of the MIP (who acted as the next friend of the MIP in the personal injuries claim) applied to the Registrar for the release of further $2,200,000 to be used together with the $500,000 for the purchase of a flat to cater for the accommodation needs of the MIP and his family members.  In March 1991, the brother applied for a further payment out of $120,000 to facilitate the purchase.  The requests were approved and a total sum of $2,320,000 was released to the brother.  Therefore, out of the settlement money obtained by the MIP, a total sum of $2,820,000 was paid out to his brother for the acquisition of the flat.

3.  The flat was purchased in the name of the brother and he was therefore registered as the owner of the property.  The brother did not execute any trust deed in favour of the MIP.

4.  In the meantime, for the maintenance of the MIP, on the application of the brother, the Registrar approved a monthly sum of $15,000 be paid to him starting from November 1992.  The monthly payment was increased to $19,000 from 1 July 1995.  At the moment, there is still monthly payment to the brother in the same amount.

5.  With the depletion of the settlement money by such payments, the remaining balance held in the account of the Suitors’ Fund as at 18 May 2005 was $331,887.56.

6.  In 1998, the Official Solicitor investigated into the desirability of appointing a committee under Part II of the Mental Health Ordinance for the MIP.  The recommendation of the Official Solicitor, as set out in a letter of 12 March 1999, was that the brother was a suitable person to be appointed as the committee.  The Official Solicitor also suggested a trust deed be executed to reflect the beneficial ownership of the MIP in the property.

7.  There was some apparent delay in the matter.  Eventually, on 28 May 2001, the brother applied for his appointment as committee of the estate of the MIP.  On 12 July 2002, having been satisfied that the MIP was incapable, by reason of his mental incapacity, of managing and administering his properties and affairs, Pang J appointed the brother as committee.  His Lordship also directed the committee to take steps to arrange the family members of the MIP to repay to the court the amount of total payment out from court for the purchase of the property.

8.  The latter direction was the option preferred by family members as opposed to the execution of a trust deed in favour of the MIP.  By a letter dated 17 July 2002, the Director of Legal Aid, acting as solicitor for the brother, indicated agreement to the figure of repayment proposed by the Official Solicitor.  The agreed figure was $2,820,000 which is in line with the records kept by the Registrar regarding Suitors’ Fund set out above.  

9.  Despite the agreement, the repayment is still outstanding.  The case was brought to my attention and on 10 June 2005, I held a hearing in respect of the matter.  The brother indicated at that hearing the siblings proposed to sell the property and applied for public housing to cater for the accommodation needs of the MIP.  I had grave concern about such a course.  The Official Solicitor needed time to consider the viability of the proposal.  That matter was adjourned with directions given. In the meantime, the brother gave an undertaking to the court that he would not sell, mortgage, license, enter into tenancy or otherwise encumber the property without the prior leave of the court.  

10.  Let me make it clear at this junction that there is no suggestion whatsoever before me that the brother or any of his family members have been acting without regard to the interest of the MIP in the matter.  In fact, from what I know, they have been taking good care of the MIP and to an extent this is reflected in the satisfactory progress of the MIP in his recovery.  The brother also assured this court at the hearing that he and his siblings would continue to shoulder the responsibility in looking after the MIP irrespective of the outcome of these proceedings.  He also told me that they were prepared to take up the financial burden of maintaining the MIP if the settlement sum were completely depleted in the future.

11.  The brother explained why there has been a lack of progress in complying with the direction of Pang J.  He said it was due to some unexpected developments in the finance of the siblings.  I do not think it is necessary for me to set out the details. Suffice for me to say for the disposal of the matter presently before me that in the circumstances of this case I do not consider it to be in the interest of the MIP to examine the past in minute details.  What is more important is what should happen in the future.

12.  There is no dispute that something should be done to recognize the interest of the MIP in his contribution to the purchase of the property.  There are some factual disputes about the extent to which the settlement monies had actually been used for the purchase of the property.  To their credit, the brother and his siblings were able to put aside such disputes and agreed to repay the whole sum of $2,820,000 to the Suitors’ Fund for the benefit of the MIP.  In a letter dated 16 June 2005, the brother proposed to repay the sum by instalments and two proposals were put forward.  The Official Solicitor supported the idea and recommended one of the proposal be accepted, viz.

(a) $320,000 be paid forthwith;

(b) $1,500,000 be paid on or before 31 July 2005;

(c) $1,500,000 be paid on or before 30 September 2005.

13.  Having considered these proposals against the background of the present case, I conclude that subject to what I shall say as regards the safeguard for the accommodation needs of the MIP it is in the interest of the MIP to approve the proposal recommended by the Official Solicitor.  On the face of it, it might sound like a sanction for an interest free loan to the brother for the purchase of the property and the brother enjoyed a free ride in the rise in the value of the property over the years.  However, in the present circumstances, it may not be fair to consider the matter solely from that perspective.  Given the affinity and support provided by the siblings to the MIP in the past, it is of great importance that they should continue to maintain a harmonious relationship of trust and confidence with the MIP.  In the exercise of its power under Part II of the Mental Health Ordinance, the court should not look at the matter purely from a monetary point of view.  This approach is supported by Section 10A(1)(c) and (2)(d) of the Mental Health Ordinance.

14.  However, the court must be satisfied that the accommodation needs of the MIP would be well taken care of before it could sanction the proposal.  This has not been addressed in the letter of 16 June 2005.  I do not think it is satisfactory to leave the matter to the goodwill of the brother.  One way to deal with it is a modified form of the undertaking given by the brother: in addition to the existing undertaking, there will be a further undertaking that the MIP shall be allowed to live at the property until further order of the court.  That would mean that the MIP can continue to live at the property until the court approves some other arrangement.  

15.  I will therefore direct that the brother should indicate in writing within 21 days whether he is prepared to give the following undertakings to the court,

(a) Not to sell, mortgage, license, enter into tenancy or otherwise encumber the property without the prior leave of the court;

(b) That he would permit the brother to live at the property until further order of the court.

16.  If such undertakings were forthcoming, this court would consider the proposal set out in Paragraph 12 above without further hearing.  Otherwise, I would have to hear parties on the concerns I raised above and other matters.  In that case, given the potential conflict of interest between the brother and the MIP, this court may also consider whether it is appropriate to appoint someone else to act as the committee in place of the brother.   

17.  It would appear that there have been changes in the condition of the brother since 1995.  It is high time that the monthly payment of $19,000 should be reviewed.  I therefore direct the brother as committee to file an account of the monthly expenditure of the MIP for the last year within 30 days. 

18.  I will take this opportunity to say a few words about settlement monies obtained by person under disability in personal injuries cases.  Very often, the monies are kept in the Suitors’ Fund with regular payments being made to a person who acts as the primary carer for the maintenance of the person under disability.  There are also occasions where larger sums were applied for specific purposes for the benefit of the person under disability.  A lot of these applications are made by letters and dealt with informally.  I am sure that on most occasions, this procedure is appropriate.

19.  However, the facts of the present case shows that even with the best intention in the world, a family member acting without legal representation could overlook some legal formalities that might cause problems in the future.  I sincerely hope that in the present case, the brother could give the undertakings in order to resolve the matter.  Otherwise, it might develop into another piece of costly litigation on beneficial ownership of the property which may take years to resolve and cause much damage to the relationship between the parties.

20.  Hence, it is important before a large sum is authorized to be paid out from the Suitors’ Fund to a family member, consideration should be given as to proper legal documentation to record the interest of the person under disability.  One option is to direct an application be made under Part II of the Mental Health Ordinance.  In England, the practice is that before a compromise involving a patient is sanctioned, the approval of the Court of Protection is required and the settlement sums or damages awarded would be transferred to the Court of Protection, see The Supreme Court Practice 1999 Paras.80/11/20 and 80/11/21.  It is a moot point as to whether payment out to a next friend can be authorized in the light of Order 80 Rule 12(3) and Leather v Kirby [1965] 1 WLR 1489.  I am not going to express any conclusion in that regard since I have not heard arguments.  That point would have to be decided on another occasion.  However, putting aside the question whether a next friend is functus after the litigation have been concluded by a judgment of the court, I wish to point out that on its face, Rule 12(3) only authorizes payment to the next friend “in respect of moneys paid or expenses incurred”.  The next friend therefore has to show that the money has been spent before he could apply for reimbursement.  From a practical point of view, although we do not have a separate Court of Protection in Hong Kong, practitioners are well advised to consider whether it is necessary to apply for direction under Part II of the Mental Health Ordinance in cases involving substantial awards in favour of a plaintiff suffers from mental incapacity.     

21.  Since the matter is of some general importance, I will hand down this judgment in open court with suitable editing to preserve anonymity of the MIP.  My clerk will make an appointment with the brother to have this judgment interpreted to him by a court interpreter.