Re Lsmh

HCMP 869/2005

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 869 OF 2005

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

Date of Hearing: 9 December 2005

Date of Decision: 9 December 2005

Date of Reasons for Decision: 23 December 2005

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R E A S O N S   F O R   D E C I S I O N

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1.On 9 December 2005, an inquiry was held to decide whether LHY is incapable by reason of mental incapacity of managing and administering his property and affairs.  Upon being so satisfied, this court appointed LCK as committee for the estate of LHY.  I now give reasons for this decision.

2.There is no dispute that LHY is a mentally incapacitated person.  All current medical evidence, including a psychiatric report by Dr Wong obtained on instructions from the Official Solicitor, points to that conclusion.  He is suffering from advanced dementia and had a history of treatment from the Queen Mary Hospital since 1998.  A diagnosis of Alzheimer’s Disease was made on 1 November 2000.

3.I also took into account of a report by a Dr Tsang dated 28 August 2002.  In that report, the doctor gave an opinion that LHY was mentally fit for judgment and making statement.  Dr Tsang is not a specialist in psychiatric examination.  Enquiries had been made with Dr Tsang as to the tests he had undertaken in coming to those conclusions.  Dr Tsang replied briefly on 10 July 2005.  Since the mental capacity of LHY as at August 2002 is not the focus of the inquiry and the issue may well be litigated in the future, it is not appropriate for me to express any conclusion as to the weight that could be attached to the report of Dr Tsang.  It suffice to say Dr Tsang’s report cannot cast any doubt in my mind as to the medical evidence on the current mental incapacity of LHY and my conclusion below as to the need to have a committee being appointed.

4.The real issues are,

(a)	whether the court should appoint a committee in view of the meagre balances found in the bank accounts of LHY;
(b)	who should be appointed.

5.On the first issue, the evidence shows that LHY had been a man of substantial means.  He had been a successful businessman and upon retirement, the sale proceeds of his shareholdings were, according to the younger son, about $200 million.  He had distributed some of his assets to his wife, his sons and other relatives.  He made some donations, including a donation of RMB 10 million to a hospital in Jiangsu.  It would be quite natural that he would keep something for his own maintenance.  Yet, based on the enquiries by the Official Solicitor and the evidence filed in these proceedings, LHY’s bank balances are unlikely to be sufficient to bear all the costs incurred in these proceedings, let alone his future maintenance needs.  In the report dated 31 August 2005, the Official Solicitor asked rhetorically why such a successfully businessman would distribute monies to such an extent that there is insufficient left to maintain himself.

6.The evidence shows that at least there were two substantial withdrawals from LHY’s accounts which merit further investigation,

(a)	a sum of $10,575,455.32 was transferred on 21 December 2001 to a company owned by the younger son;
(b)	a cash withdrawal of $1.4 million was made on 13 January 2003.

7.The younger son had offered explanations about these two transactions in his Third Affirmation.  He said the first transaction was a gift from LHY to him and the second transaction was a cash withdrawal for LHY’s own use.  The explanation is disputed by others involved in this inquiry and evidence had been filed for the purpose of contradicting such explanations.

8.It is not appropriate for this court to resolve such dispute in the context of these proceedings, see Re Chao Tsao Yee [1998] 3 HKC 665.  On the evidence before me, I agree with the submissions of Miss Wong and Mr Dawes that there are matters regarding the affairs of LHY which should be investigated.  Given his mental incapacity, a committee should be appointed to undertake the task on behalf of LHY.  I do not read the judgment of Rogers JA in Re Chao Tsao Yee as prohibiting the appointment of a committee when the main purpose is to investigate and pursue claims on behalf of the mentally incapacitated person.  Each case must be decided on its own facts.  As far as general principle is concerned, I think His Lordship only held that difficult claims involving extensive and lengthy litigations should not be resolved in the context of Part II proceedings. 

9.Although one alternative is to proceed under Order 80 by appointing a guardian ad litem for LHY, I do not think that should militate against the appointment of a committee under Part II.  Both routes are viable as it is recognized in Order 80 Rule 3(3) that the committee appointed under Part II shall be entitled to be the guardian ad litem.

10.There are advantages in proceeding under Part II.  The committee will be under supervision of the court in the exercise of its jurisdiction under Part II in any litigation brought on behalf of LHY.  In particular, the court can consider whether it is appropriate to commence litigation and the sanction of the court is required for major steps in the litigation, see Re M, HCMP 25 of 2005, 1 November 2005.  In deciding whether to sanction a claim to be brought and whether it should continued to be pursued, the court will exercise its power in accordance with Part II of the MHO and may adopt procedures similar to those in a Beddoe application with modifications.

11.In contrast, the court’s control over a guardian ad litem under Order 80 is more limited.

12.In circumstances where there are disputes or potential disputes as to the identity of the person to be appointed to act as the guardian ad litem for a mentally incapacitated person or where the claims are difficult or controversial (as opposed to simple personal injuries claims), I am of the view that a Part II appointment is the better route.  Not only is the court in a better position in the exercise of its Part II jurisdiction to determine who is the more appropriate candidate and to exercise supervision over the conduct of the proceedings by the guardian ad litem, it would also have wider power to deal with the monies recovered from the claims.  There is doubt if Order 80 Rule 12 provides proper legal authority for the money to be released to the guardian ad litem, see Leather v Kirby [1965] 1 WLR 1489.  Although time and costs would be incurred in the Part II application, given the practice set out in PD 30.1, they should not be disproportionately excessive. 

13.Mr Leo submitted that LHY is unlikely to enjoy the benefit of any recovery of assets and his present needs are well taken care of by the younger son.  I am not impressed by this contention.  I would not exclude the possibility that LHY may derive real improvement in his daily living standard from any recovery of assets.  For example, he may then be able to afford treatment in private hospital as opposed to public hospital.  He would not be dependent upon the goodwill of others for his maintenance.  He would be able to make provision for someone he cares for.  Based on the evidence before me, I believe these could be important for LHY had he been mentally capable of deciding matters for himself.  There is evidence suggesting that he had serious grievance about the withdrawals of funds from his bank accounts.  As I said, I cannot say at this stage whether the evidence is to be believed and whether LHY’s grievance, if any, is justified.  However, I am of the view that LHY may derive benefit from an investigation into the administration of his financial affairs and it is something he would have done himself had he been mentally capable.

14.Turning to the question as to who should be appointed, the mother supported the appointment of LCK whilst the younger son opposed the same.  Given the conflicts within the family, the court will usually give consideration to the appointment of an independent person as committee.  However, that factor has to be weighed against the lack of funds in the current assets held in the name of LHY.  To require the Official Solicitor to act as the committee without any indemnity is to pass the burden onto public fund.  Whilst there are cases where such a course is justified, I am of the view that this is not such a case for the following reasons,

(a)	The costs of administration of the affairs of LHY is principally costs pertaining to the investigation of the disputes within the family.
(b)	The investigation may or may not yield any result in terms of recovery of assets for the estate of LHY.  In the meantime, quite substantial costs have to be incurred.
(c)	Given the distribution by LHY to his family members, each of them is financially capable of paying the costs of the investigation.  There is no good reason why such burden should be passed onto taxpayers.
(d)	LCK is willing to take the risk in funding the investigation in the meantime even though he may or may not be able to get reimbursement from the estate of LHY.
(e)	Even though there are conflicts between LCK and his younger brother, there is no conflict between LCK and LHY.

15.Mr Leo opposed the appointment of LCK on the basis that he is untruthful, biased against the younger son and had his own interest to serve in demanding investigation of the affairs of LHY.  The younger son advanced certain allegations against LCK in his affirmations regarding attempts by LCK to get money from LHY.  There are also allegations of LCK trying to mislead the court and the experts.

16.Whilst LCK may not be the best candidate, I am not satisfied on the evidence that he had deliberately tried to mislead the court and the experts.  The opinions of the experts were confirmed by the independent expert engaged by the Official Solicitor.  Quite rightly so, there has not been any cross-examination of the deponents of affirmations.  Given the nature of the Part II proceedings and issues that I can properly decide at this stage, it would be totally out of proportion to permit cross-examination.  However, it does not mean that I must accept the allegations of the younger son against LCK on their face value.  Even in the absence of cross-examination, having regard to all the evidence filed, I am unable to accept the evidence filed on behalf of the younger son as sufficiently cogent to establish any mala fide on the part of LCK.

17.Likewise, I am not going to decide without any cross-examination that the younger son has been guilty of any impropriety in relation to the withdrawals of funds from LHY’s accounts.

18.At this stage, the matter can only be looked at broadly.  LCK is represented by experienced counsel and this court expects him to be properly advised about his duty as committee.  Bearing in mind that at this stage the committee is only authorized to embark on investigation into LHY’s affairs, I am of the view that the concern of the younger son as to the bias of LCK against him can be adequately addressed by the supervision exercised by this court upon the conduct of such investigation to ensure that it does not steer towards irrelevant areas.  Miss Wong indicated that LCK is willing to file report to the court on regular basis.  The court, with the assistance of the Official Solicitor, will be vigilant in ensuring that LCK does not abuse his power in acting as the committee.  If the younger son has any legitimate cause for complaints about how the committee acts, he can make application to this court for directions.

19.For these reasons, I appointed LCK as the committee for the estate of LHY on terms set out in the approved order.

20.I propose to release this judgment for circulation after editing the names of the parties to preserve their anonymity.  If any party wishes to comment on such a course, he should do so in writing within 5 days.

Mr Victor Dawes, instructed by Messrs Or, Ng & Chan, for the Applicant

Mr Donald Leo, instructed by Messrs Chiu & Partners, for LCC

Ms Lisa Wong, instructed by Messrs Fairbairn Catley Low & Kong, for LCK

Mrs Annie Williams, of the Official Solicitor