It is quite disheartening to see our loved ones suffering from conditions like strokes, dementia or Alzheimer’s disease that affect their memory and other cognitive abilities. As such conditions progress to later stages, it is apparent that the persons concerned have become mentally incapable of conducting their own affairs, including financial affairs. Such persons are usually referred to in the legal setting as mentally incapacitated, or an MIP for short.
Where an MIP has not previously appointed an attorney by way of an Enduring Power of Attorney to deal with their financial affairs when he/ she had a clear mind, their family members, relatives or caretakers may have various practical reasons in wanting someone to legitimately step into their shoes to act on their behalf on those matters:-
- In law, where a party to a contract is an MIP, and the other party knows or ought to have known of his/ her lack of mental capacity, the contract is voidable: Imperial Loan Co Ltd v Stone  1 QB 599. This may affect the MIP in a material manner. For example. they may be denied access to basic financial services (e.g. withdrawal of funds from their own bank accounts, selling of unpromising stocks, renting out of properties to generate income, etc.), which further impacts on their financial well-being;
- Following from the above, where an MIP is entitled to certain sums under pre-existing contracts or arrangements (be it rental payments from a tenant, distributions from a trust, or proceeds paid out from an insurance policy), the payors who are aware of the situation of the MIP may, sensibly, refuse to make payments to that MIP as they are unsure whether he/ she can give valid receipt and may have concerns that he/she is subject to financial abuse or other kinds of influence. There is also the legal question of whether payments made to the MIP directly (or other persons claiming to represent him/ her without a valid order) would constitute a good discharge of obligation;
- On the other hand, since mental incapacity is not something immediately obvious to others, people who possess such knowledge may financially abuse the MIP in different ways. For example, an abuser may persuade an MIP to sell properties to third parties and subsequently take the money. An abuser may also ask an MIP to directly transfer money to the abuser’s accounts, and coach them to confirm the transactions with the staff of the financial services companies;
- Furthermore, these conditions may have taken a huge financial toll on the family/ caretakers of the MIP, leaving them with no choice but to use the money of the MIP for his/ her care, medical treatment and accommodation. There needs to be a legitimate and unchallengeable way of disposing of the assets of the MIP so that proper care can be given, in particular when there is mistrust or even hostility among the family members; and
- Where an MIP has family members dependent on them financially, the dependents may be concerned about whether their reliance on the assets/ income of the MIP for their benefits remain legitimate.
Appointment of a Mental Health Committee
The above problems are likely resolved by the appointment of a Mental Health Committee (or simply a Committee) for the MIP pursuant to the statutory scheme of protection contained in Part II of the Mental Health Ordinance, Cap 136 (MHO). Under the regime, the Committee so appointed would “step into the shoes” of the MIP to manage the finances, property and sometimes businesses of the MIP. The relevant application has to be made to the High Court and is usually done through lawyers. Upon receiving evidence, the Court would consider whether the MIP is really incapable of managing his/ her own property and affairs (which can usually be easily satisfied by medical certificates signed by doctors), whether it is then in the interests of the MIP for a Committee to be formed, the constitution of the Committee and the specific orders to be granted. In most cases, after the basic enquiry of the Court being done on paper, there would be a private hearing where the Committee Order is announced. The whole process usually takes a few months.
From our experience, the utilization of the Committee regime is underappreciated and here we set out ten reasons why a Committee should be formed for an MIP.
Since the case of Re Madam A HCMP 44/2004, a number of costs-saving measures have been introduced to further reduce the costs for an application for a Committee Order:-
- The proceedings are considered ex parte in nature and there is no need to join any other parties (including the MIP). This can reduce legal costs caused by service of documents and the number of physical hearings can also be reduced. There is usually one court hearing (the Inquiry Hearing) where the Committee Order will be announced;
- At the Inquiry Hearing, where no other party attends the Court to raise any objection, the Court would declare its satisfaction about the mentally incapacitated status of the person concerned, appoint the Committee for the MIP, and make the relevant orders concerning the property and finances of the MIP. The hearing can be completed in less than 15 minutes; and
- Normally, the doctors are not required to attend the Inquiry Hearing. The MIP is also not required to attend the Inquiry Hearing.
It is therefore fair to say that costs of Committee proceedings can generally be kept low. Part of the Applicant’s costs can be recovered from the estate of the MIP as a matter of general principle.
The word “Committee” is somewhat a misnomer because one person (usually the applicant) can already constitute the Committee, and this is also usually the case. Where the Committee comprises more than one person, usually they are expected to act jointly meaning that they cannot make decisions alone.
Here a distinction needs to be drawn between the applicant (the person who makes the application) and the proposed members of the Committee. The Committee can also be the applicant but this may not necessarily be the case. Though the applicant is usually expected to be a family member/ relative of the MIP, the proposed members of the Committee are not so restricted. In practice, friends and caretakers of MIP who have some bookkeeping knowledge can also become members of the Committee. Where the asset size of the estate of the MIP is substantial or there are ongoing disputes among the family members, professional candidates (like accountants and solicitors) may also be appointed.
There is no requirement that the Committee members must be residing in Hong Kong although it is preferable that one of them is and can facilitate execution of documents on the MIP’s behalf.
Likewise, if necessary, a Committee can also be set up for an MIP not residing in Hong Kong: Re LYO, HCMP 961 of 2004. While in such situation the requirements of certificates signed by two local doctors cannot be waived, the Court indicated it is possible for an MIP to be examined through video-link by local doctors to complete the certificates: Re EDWA  3 HKLRD 452.
With powers come responsibilities. A Committee formed under the MHO is a statutory agent appointed by the Court, and owes a legal duty to the Court (see Re P, HCMP 136 of 1981). After the initial application to the Court, the Committee has to record monthly income and expenditures of the MIP and submit accounts of the estate of the MIP to the Court on an annual basis. Such accounts are vetted by judicial officers of High Court and if necessary, matters will be referred to the Official Solicitor’s Office (OSO) for further investigation (see SPLP v Guardianship Board  3 HKLRD 670, para 35).
The OSO acts as a last resort as Committee for MIPs from time to time. The OSO also vets all Mental Health applications. The OSO therefore has the knowledge, expertise and resources to protect the estate of the MIP.
As the policy is to encourage laypersons to take up the role as Committee so as to reduce the strain on public resources, where the wrongdoings are not serious, the Court may simply require the Committee to take the corresponding remedial actions without further penalties. In case of serious mismanagement or misconduct, the Committee is subject to replacement by further order of the Court (s. 26B of the MHO).
The Court is very careful not to disclose the identity of the MIP. The default position is that the Court would not disclose their full names in public domain and the MIPs would be represented by their initials in public documents. This measure is not merely a formality as the Court will take other measures with the ultimate aim to ensure the privacy of the MIP is preserved. Furthermore, by default, hearings of mental health proceedings are not open to the public to further preserve the confidentiality of the relevant parties.
It is thought that there are many good reasons why the anonymity of the MIP should be preserved in Committee proceedings. For example, such proceedings would inevitably include sensitive matters like the MIP’s health records and details of his private life. It would also be unethical to disclose the identity of the MIP when he/ she was unable to give any meaningful consent.
As a measure to reduce legal costs, the Court has published a set of standard court directions (Annex F of Practice Direction 30.1) that an applicant could expect the Court to make at the Inquiry Hearing.
The Court is not bound by the standard directions when exercising its underlying powers pursuant to s.10A(1) which are in the “widest possible” terms: see Re Madam L  4 HKC 115, para 15. The Court is therefore prepared to make orders for all such things as appear necessary or expedient: (a) for the maintenance or other benefit of a MIP; (b) for the maintenance or other benefit of the MIP’s family; (c) for making provision for any other person or purposes for whom or for which the MIP might be expected to provide if he were not mentally incapacitated; and (d) for administrating the MIP’s property and affairs.
Other than the usual orders allowing the Committee to use/ receive money for the MIP and to allow the Committee to resort to the capital of the MIP for his/ her maintenance and general well-being, depending on the unique situation of the MIP, the applicant (or subsequently the Committee) may also seek orders for:
- Financial provisions for persons other than the MIP
- Acquisition and sale of property
- Setting up trusts
- Executing a statutory will
- Conducting legal proceedings
- Letting of land property for a term less than 3 years
The whole process of applying for a Committee Order would take a few months. What if the MIP or his/ her family members have other emergent needs during this period?
In case of emergency, pending the determination of the mental capacity of the person concerned, the applicant may ask the Court to exercise its emergency powers pursuant to s. 10D of the MHO. Since these orders are made before the formal Inquiry Hearing, the applicant cannot expect the Court to make extensive orders, and has to be specific in his/ her requests. For example, the applicant may show to the Court that there are some medical bills that have to be immediately settled and cannot be paid by other family members, and ask for a specified sum to be paid out from the account of the MIP to settle those bills. This approach also applies to children’s educational fees, household expenses, etc.
When a full Committee Order is made, it would cover the whole estate of the MIP. A Committee is therefore regarded as a court-appointed agent and would usually encounter no difficulty in entering into transactions (or terminating transactions) on behalf of the MIP. When in doubt, a third party can always ask for a sealed copy of the Committee Order to ascertain the authority of the Committee in a specific transaction.
The recognisability of a Committee Order is also shown by the fact that major banks in Hong Kong are often willing to open a special bank account for a Committee such that the bank accounts will be in the name of the Committee (XXX as committee for YYY) to cater for the special needs of the Committee. Assets belonging to the MIP can then be segregated for better management.
A Committee is also expressly empowered by statute to execute documents on behalf of the MIP pursuant to s. 17 of the MHO.
Unlike a Guardianship Order which has an initial period of 1 year only (and up to 3 years for each subsequent term), once made, a Committee Order remains valid for an indefinite period and shall take effect until the passing away of the MIP, or until further order.
When the Committee Order remains valid, the relevant Committee can also apply from time to time for addition and variation of powers to suit the change of circumstances of the MIP, pursuant to s. 26B(1)(a) of the MHO.
#9. Advantages over Guardianship proceedings
Due to historical reason, the Guardianship regime is contained in the same Ordinance (i.e. the MHO) as the Committee regime. However, applications for a Guardianship Order are made to an independent statutory institution called the Guardianship Board, instead of the Court. The person appointed to represent the MIP in a Guardianship proceedings is called the Guardian. If necessary, one can take on both the roles of Committee and Guardian by initiating two sets of proceedings in two different fora. This is however not recommended due to time and costs concerns.
We understand it may not be an apple-to-apple comparison to start with because Guardianship proceedings are mainly concerned about the health and specific welfare matters (like residence and access) of the MIP. Still, to provide a full picture to the reader, we draw the comparison as follows:-
- As said above, a Guardianship Order is for an initial period of 1 year only and is thereafter subject to review from time to time, whereas a Committee Order once granted is for an indefinite period. Before the expiry of the Order, the Guardian has to apply for a review of the Order and to seek extension and variations if necessary. Updated social reports have to be read and considered;
- In both Committee and Guardianship proceedings, two medical opinions by two local doctors are necessary to confirm the mental incapacity of the MIP. In Committee proceedings this will be in the form of certificates; while in Guardianship proceedings this will be in the form of medical reports;
- In Guardianship proceedings, a social enquiry report is mandatory and a social worker of the Social Welfare Department will then be assigned to work on the case by visiting the MIP and interviewing the relevant parties. The applicant is expected to cooperate with the social worker. There is no such requirement for Committee proceedings;
- Hearings before the Guardianship Board are open to public by default (s. 59X(4) of the MHO). Confidentiality of the MIP may therefore not be able to be preserved;
- After a Guardianship Order is made, the assigned social worker will have to follow up on the case and visit the MIP regularly. Updated social reports will have to be prepared and submitted. The Guardian is expected to cooperate with the social worker from time to time;
- A Guardianship Board can only go so far as to order the Guardian to receive and pay a specified sum (currently HK$20,000, subject to price index) for the MIP per month. Third parties may refuse to pay to the Guardian even if the sum is lesser than that specified sum, because they may claim to have no knowledge about the previous sums received by the Guardian that month; and
- A Guardianship Order can in no way cover other assets like land property and stocks.
#10. Extended Application
In the 2019 case of SPLP v Guardianship Board, Lok J lamented the fact that Hong Kong is not adopting a “one-stop” model such that guardianship and financial matters are heard at the same forum, since the issues are often inter-related.
Since then, there is a tendency for the Mental Health Court to make orders that are traditionally made in Guardianship proceedings, by resorting to the “rediscovered” inherent jurisdiction of the Court.
In Re TBS, HCMH 51/2019, the Court made interim access orders in Committee proceedings pending application for a Guardianship order.
In 2020, in Re CML, HCMH 20/2018, the Court directly made access orders after the Court had recommended the applicant to apply for a Guardianship order but the applicant failed to do so.
In 2021, in Re HVD, HCMH 48/2021, a case that our firm handled, the Court granted an ex parte injunction to compel a family member, who had taken advantage of the MIP’s vulnerable state and removed the MIP to Singapore, to return the MIP to Hong Kong. The injunction was upheld even when presented with a statutory declaration signed by the MIP a month prior to the removal that the MIP was content with living with that family member.
In the recent case of Re LYM  2 HKLRD 329, most exceptionally, B Chu J directly made a Guardianship order to appoint a Guardian in a Committee proceedings where for some reason no one is eligible to make a Guardianship application to the Guardianship Board.
As Lok J pointed out in Re CML, multiplicity of proceedings may result in delay and misunderstanding, and may cause additional costs and stress to the family members. It is most welcome if the Court is now more willing to grant some orders that are traditionally regarded as orders that can only be granted before the Guardianship Board, provided that the relevant parties have presented all the relevant materials before the Court.
Disclaimer: This article is for reference only. Nothing herein shall be construed as legal advice, whether generally or for any specific person. Oldham, Li & Nie shall not be held liable for any loss and/or damage incurred by any person acting as a result of the materials contained in this article.