Re M

HCMP 25/2005

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 25 OF 2005

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Before: Hon Lam J in Chambers (Not open to public)

Date of Hearing: 21 October 2005

Date of Decision: 21 October 2005

Date of Handing Down Reasons for Decision: 1 November 2005

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REASONS   FOR   DECISION

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1.On 3 February 2005, having been satisfied that M is incapable by reason of mental incapacity of managing and administering his property and affairs, this court appointed a Committee.  The appointment was made against a background of disputes between the relatives of M who were divided into two camps.  One camp accused the other camp of misappropriating the assets of M and wrongfully taking control of several property holding companies which held assets for M.  The other camp disputed the beneficial ownership of the assets.

2.The finance and affairs of M is complex and the dispute involves no less than 46 landed properties and several companies.  The Committee encountered some difficulties in the performance of their task and set out the same in their first report.  To facilitate them to perform their duties, the Committee sought and obtained directions from this court on 6 May 2005.  Those directions envisaged a further report be filed by the Committee and paragraph 15 provided for the filing of affirmation by the Applicants and Non-applicants relatives (“NAR”) by a certain date. 

3.The Committee filed the further report on 30 July 2005.  The NAR filed an affirmation on 26 August 2005.  The Applicants have yet to file their affirmations.  The time for the filing of such affirmations under the directions of 6 May 2005 has expired.

4.On 6 October 2005, the NAR issued a summons (“Unless order Summons”) seeking an unless order regarding the filing of affirmations by the Applicants.  On 19 October 2005, the NAR issued a further summons (“the Report Summons”) seeking the following order,

“Leave be granted for the Committee to file and serve a 3^rd Report concerning the view of the Committee on the beneficial ownership of those assets it has already identified as possibly belonging to M within 6 weeks after the filing and service of the Applicant’s affidavit in reply to the Committee’s 2^nd Report.”

5.I dismissed both summonses on 21 October and ordered the NAR to pay the costs of the Report Summons.  I made no order as to costs for the Unless order Summons.  I now give reasons for these decisions.

6.It should be appreciated that when this court appointed a Committee to manage and administer the property and affairs of a mentally incapacitated person and granted extensive powers in that regard to the Committee, the court generally leaves it to the Committee to decide how such powers should be exercised.  In the absence of allegations of mismanagement or abuses, the court will not interfere with the managerial discretion of the Committee.

7.At the same time, the Committee is in many respects a trustee and owed fiduciary duties towards the mentally incapacitated person.  Hence, the court expects the Committee to act in the best interest of the mentally incapacitated person.  The court still retains a residual supervisory role and such role could be exercised when necessary.

8.It is perhaps worthwhile to emphasize that although the Committee and the court may, in appropriate circumstances, consider the views of the relatives of the mentally incapacitated person, such relatives do not have any right that could be enforced in the context of a Part II proceedings.  They do not have any absolute right to be consulted nor to be heard.  It depends on the circumstances of the case and the Committee and the court shall always be guided by asking what is in the best interest of the mentally incapacitated person.  The beneficiary of the estate is the mentally incapacitate person, not the relatives.

9.Therefore, a relative is not in a position to impose his or her wish on how the property should be managed or how the affairs should be administered on the Committee.  Though it would be wise in many cases for the Committee to take the view of a relative into account, it is perfectly lawful and proper for the Committee to reject such view if they consider the same not to be consistent with the interest of the mentally incapacitated person.  The Committee is not obliged to consult the relatives over its course of action although by the very nature of the committeeship, the Committee would need to ask for information from the relatives from time to time.  However, the Committee will not be doing its duty if it let itself be dictated by a relative whose views may not be in line with the interest of the mentally incapacitated person.

10.In case of doubt, the Committee should apply to court for guidance and directions as in the case of other trustees.  The court will decide, inter alias, the extent to which the relatives should be involved in such application.

11.In the present case, some of the assets held in the names of the NAR (and some shares held by them in the property holding companies) were acquired with funds ultimately derived from M.  The beneficial ownerships of such properties cannot be readily resolved.  It is quite clear that the NAR and the Applicants hold different views over that question.

12.As contended by Leading Counsel for the NAR on previous occasions, in the light of the complicated issues of facts and law involved, it would not be appropriate for the court to try to resolve the question of beneficial ownership in the context of Part II proceedings, see Re Chao Tsao Yee [1998] 3HKC 665.

13.Part II proceedings are not ordinary adversarial civil litigation.  Those advising the relatives must bear this in mind.  In these proceedings, the court is exercising a protective jurisdiction regarding the property and affairs of the mentally incapacitated person.  The role of the relatives is to provide the court (and after the appointment of Committee, to provide the Committee) with the necessary information to facilitate the court (and the Committee) in reaching a decision which is in the best interest of the mentally incapacitated person.

14.In cases where dispute between relatives cannot be properly resolved without a full trial in a piece of ordinary civil litigation, neither the court nor the Committee is in a position to form a final view on the merits of these competing claims in the context of Part II proceedings.  Whatever view that can be formed should only be regarded as provisional which must be reviewed from time to time as new evidence or information come to light.  Against such background, the Committee have to ask themselves what course of action is in the best interest of the mentally incapacitated person.  In particular, the Committee have to consider whether the estate of the mentally incapacitated person should take any active part in the dispute in terms of either commencing or defending fresh proceedings.  As a rule, after the Committee have formed a view on the course of action, they should apply to this court for sanction.  It must be emphasized that a view on a proposed course of action is not the same as a view on the merits of competing claims.  There are circumstances where a Committee have to act in order to protect the interest of the mentally incapacitated person despite they may not have all the information which they would like to have on the merits of competing claims.  It is a matter of judgment to be exercised by the Committee.

15.It is up to the Committee to consider what information they need and how much time should be given to a relevant party to supply them with such information, and what steps to take if the party does not give the information within a time limit prescribed by them.  A Committee is perfectly entitled to take a view that in the light of developments since the setting of original time limit, further time should be given to a party and the taking of any legal action to enforce the original time limit in the meantime is not justified.  If the Committee, for good reasons, is not ready to form a view on the course of action to be taken, it would require a very strong case before the court will intervene and direct the Committee to take a particular step.  All these form part of the managerial discretion of the Committee.

16.In the present case, there is no evidence suggesting that the Committee have not been doing their job properly.  Mr Ng for the NAR categorically disavowed any suggestion of that sort.  The NAR did not consult the Committee before the issue of the Report Summons.  The Committee found that summons objectionable in principle.  As regards the Unless order Summons, although the Committee did not have objection, Mrs Tong indicated that the Committee understood why the Applicants needed a bit more time in responding to the very substantial affirmation filed on behalf of the NAR which went beyond the scope of matters hitherto raised.

17.It should be apparent from what I said above that the NAR should not dictate how the Committee should conduct the investigation into the affairs of M.  If the Committee considered it reasonable to grant indulgence to the Applicants to furnish information, in the absence of mismanagement, the court would respect that decision.  If the Committee considered that action should be taken to speed up the process, it is up to the Committee to apply to this court for directions.

18.Those advising the NAR mistakenly adopted an adversarial mindset and regarded the present proceedings as a piece of litigation between the NAR and the Applicants.  For reasons given above, that is a complete misunderstanding of the nature of Part II proceedings.

19.Mr Ng contended that the delay in the filing of the affirmation by the Applicants caused prejudice to the NAR.  I do not agree.  The NAR could assert their beneficial ownership and if necessary establish their titles by issuing ordinary civil proceedings.  What they cannot do, however, is to force the Committee to come to a view when the latter considers that there were still matters which required to be investigated.

20.Hence the two summonses were misconceived.  In view of the stances taken by the parties, I made no order as to costs for the Unless order Summons.  The costs of the Report Summons must follow the event.

21.The issues discussed above are of general interest and I propose to release the judgment for circulation.  A party who has any comment in that regard should convey the same to court in writing within 7 days.

Mr Edwin Ng, of Messrs Winnie Leung & Co., for the Applicants

Mr Lawrence Ng, instructed by Messrs Kwok, Ng & Chan, for the Non-applicants relatives (“NAR”)

Mrs Daisy Tong, of Messrs Deacons, for the Committee (KPMG)