Analysis
Mrs D had lost her mental capacity and a committee of guardians was appointed by the court to look after her financial affairs including her interest as primary beneficiary of a Cayman Islands family trust. Before she lost capacity Mrs D entered into a settlement agreement (the peace accord) with her family, settling many years of litigation in the Cayman Islands. Two of the committee of guardians (the other members of the committee were conflicted by reason of their own interest in the settlement agreement) applied to the Grand Court under the Mental Health Law (1997 Revision) seeking directions as to whether and, if so, what provisions should be made out of her estate:
- (i) in respect of any potential tax liabilities of Mr D, arising out of the proposed release of his contingent income under the family trust, taking the form of a proposed indemnity from Mrs D or her estate; and
- (ii) in respect of the costs of all parties of and incidental to Cause Nos 557 of 2008 and 128 of 2009.
Held
Order in respect of the proposed indemnity made final. Order in respect of costs deferred to be decided in the context of the family trust proceedings [50]:
Under s13 of the Mental Health Law (1997 revision), where the court had appointed a guardian over a person, it might:
‘… with respect to the property and affairs of such person, do or secure the doing of all such things as appear desirable for the maintenance or benefit of such person, of his family, of those for whom he might be expected to provide if he were not mentally disordered and for otherwise administering his affairs…’
The statute was almost identical to that in force in England prior to the wide changes made by the Mental Capacity Act 2005. In applying the pre‐2005 legislation, the English court had sought to determine what the patient themselves would have done by supposing a hypothetical ‘lucid interval’ during which the patient regained a sound state of mind for sufficient time to review the matters in hand and communicate their wishes before lapsing back into incapacity; the court would then give directions informed by these wishes. The 2005 English legislation replaced this approach with a structured decision‐making process taking into account all relevant circumstances, only one of which was the patient’s wishes. The ‘mental gymnastics of the counterfactual lucid interval’ were to be rejected. Section 13 of the Mental Health Law (1997 revision) was entirely accommodating of an approach such as that which was applied by the courts, in England, since the Mental Capacity Act 2005 [42]. In the absence of binding or persuasive Cayman authority this modern approach should be adopted even without express statutory authority [46].
Mrs D continued to lack mental capacity to administer her property and affairs and the application by two of her court-appointed guardians was one which they could properly bring. Mrs D would not be financially or otherwise prejudiced by the proposed provision out of her resources for securing the indemnity and it was necessary that these provisions came from her resources rather than being imposed upon any other party or parties. Mrs D, having herself been a party to the peace accord and being the person financially placed so as to be able to provide the proposed indemnity without risk of financial or other prejudice to herself, would have wished to give the indemnity for the sake of securing harmony within her family. This would be of real emotional and financial benefit to Mrs D’s family and for that reason it was desirable, in her and their best interests that the indemnity agreement be entered into. This latter basis by itself provided jurisdiction to give the directions for the provision of the indemnity by the applicants as her guardians on behalf of Mrs D [50].
There were questions as to whether a direction as to costs in the causes cited would be in Mrs D’s best interests and as to whether the trust itself should bear some or all of those costs. That being the case the hearing of that aspect of the summons was stood down until after the hearing of the family trust proceedings.
JUDGMENT ANTHONY SMELLIE: [1] Before me is a summons brought by Mr B and Mr C in their capacities as two of the guardians of Mrs D appointed by order of the court on 22 December 2005 following the mental incapacitation of Mrs D. [2] The two guardians seek directions as to whether and, if …Continue reading "Re D 576 of 2005"