Re NLS

David Lok J in Chambers
Mental Health
17, 24-26, 31 March, 15-16 April, 10 May, 27 July 2021

Facts

[Mental Health Ordinance (Cap.136) s.2, Pt.II]

NLS, aged over 90, was a widower and had five children. He used to be a successful businessman running a chain of restaurants. He was the main shareholder and director of various related companies. He also invested in properties. The estimated total value of NLS’s estate ranged from about $300 million to $800 million.

Between October 2018 and November 2019, over $16 million had been withdrawn from NLS’s bank accounts. SN, NLS’s grandson, had received at least $15 million from NLS during that period. This “favourable treatment” had caused the building up of tension within the family.

Xs, NLS’s third and fourth sons together with a certified public account, made an application under Pt.II of the Mental Health Ordinance (Cap.136) (the MHO) and an ex parte application for Mareva injunction to freeze NLS’s assets. NLS and SN, who intervened the proceedings, opposed the injunction application. An injunction was granted and subsequently continued. NSL’s eldest son and SN’s father also joined as intervener in the proceedings.

There were other proceedings taken out by Xs for discovery of various documents, including NLS’ last will and the enduring power of attorney (EPOA) purportedly executed by NLS with SN as the donee.

There was conflicting medical evidence from the two camps as to whether NLS was a mentally incapacitated person under Pt.II of the MHO (MIP). The Judge eventually appointed an independent expert to conduct an interview with NLS (the Interview) and opine on whether NLS was a MIP. The Court observed the Interview via a video-link facility. Each camp then called one expert to testify on the evidence of the court expert. The court expert and Xs’ expert opined that NLS was a MIP. On the other hand, the expert for NLS and the interveners opined that whilst the clinical picture of NLS was consistent with a diagnosis of mild cognitive impairment, the Interview was not sufficient to show that NLS was a MIP.

Held, finding NLS to be a MIP, that:

Relevant legal principles

  1. As there was no dispute that NLS was suffering from mental disorder, the real question was whether his mental incapacity caused by the mental disorder was so serious that he was “incapable of managing and administering his property and affairs” within the definition of “mentally incapacitated person” under s.2 of the MHO for the purpose of a Pt.II inquiry. This test applied only to business matters, legal transactions, and other dealings of a similar kind, but did not extend to physical care or treatment (Re LG (HCMH 78/2012, [2014] HKEC 19), Re CML (Mental Health) [2020] 3 HKLRD 481 applied).
  2. When considering a person’s capacity to manage and administer his property and affairs, it was necessary to have regard to the complexity and importance of that person’s property and affairs. While it was common for a person, in particular a wealthy person, to delegate the task of managing his wealth to others, he must have a general understanding as to how his wealth was managed and sufficient mental capacity to understand and make decisions based on such advice as he may receive (White v Fell (12 November 1987), Masterman-Lister v Jewell [2003] 3 All ER 162 applied).
  3. In exercising the Pt.II jurisdiction, the Court always had to respect the alleged MIP’s dignity, and his welfare and interests were the paramount consideration. If NLS was found to be a MIP, there were various ways for his finances to be managed to give effect to his “wishes”. If the relevant EPOA was found to be validly executed, the Court could allow the donee to manage NLS’s financial affairs giving effect to his wishes. Even if the Court were to appoint a committee to manage his finances, the Court could supervise and ensure that its decisions were in NLS’s best interests. In case of disagreement, the Court may ascertain the notional wish and view of NLS as if he had not lost his mental capacity in making the relevant decision, or if he could express his view at a snapshot moment (Re Koch [1997] OJ No 1487 applied; Masterman-Lister v Jewell [2003] 3 All ER 162, Ho Po Chu v Tung Chee Wah [2006] 3 HKLRD 553, Moral Luck Finance Ltd v Law Kin Leung (2015) 18 HKCFAR 343 considered).
  4. Even if the risk of being subject to influence by another person might not by itself justify a finding of incapacity, vulnerability of a person was a matter that should be considered when assessing mental capacity (Masterman-Lister v Jewell [2003] 3 All ER 162, Re R [2014] NSWSC 1810 applied).
  5. Mental capacity to manage one’s affairs was a different concept from mental capacity to make isolated decisions and related to a continuous state of affairs whose demands might be unpredictable and occasionally be urgent. A person who had mental capacity in a snapshot to do a specific act did not mean that he had the requisite mental capacity to manage his own finances. In the case of NLS, he must have a general understanding of the operation of the companies in which he was a main shareholder, the nature of the businesses operated by him and the rental market for shops before he could make decisions on these financial matters. This might be different from his capacity to execute a will or an enduring power of attorney (EPOA) at a particular point in time, which might not require such extensive knowledge and memory at the time of the execution of the said document (A, B, C v X, Z [2013] WTLR 187 applied).
  6. It was the Court’s duty to assess whether NLS was a MIP, and the experts were only there to assist the Court. Whilst the medical evidence submitted by the parties before the Interview were relevant and should be considered, the Interview, which was conducted in a controlled and comfortable setting, should provide the best clue about NLS’s mental condition.

    Findings on NLS’s mental condition

  7. NLS was a MIP within the meaning of Pt.II of the MHO. The positive factors supporting that NLS was not a MIP, including knowledge about his assets, only showed that NLS might still retain some cognitive and memory functions. In contrast, the negative factors, in particular his inability to remember the money he gifted away in recent years, the legal fees purportedly spent on his behalf in these proceedings and the number of children he had and his probable inability to make rental and business decisions relating to his properties and businesses, showed that NLS was incapable of managing his property and affairs.
  8. NLS’s gifting of a large sum of money to SN was either a case of severe impairment of memory or lack of knowledge. Either case was strong evidence that NLS lacked mental capacity to manage his own finances. NLS had no appreciation of the situation in these proceedings, and in particular that Xs were concerned because large sums of money were inexplicably paid out of NLS’s bank accounts to SN
  9. The Court had to intervene in NLS’ interest in the circumstances. Due to the composition of his assets, NLS had to make various decisions relating to his finances and there was serious doubt as to whether he could do so. One such task was planning for the distribution of his wealth after his own demise, which he was unlikely to be able to do so as he did not even know how many children he had or the money that he had already gifted to particular family members in recent years.

Hearing

This was an inquiry pursuant to an application under Pt.II of the Mental Health Ordinance (Cap.136) to determine whether an individual was a mentally incapacitated person.

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