Personal injury settlements for seafarers in Hong Kong must be fair and realistic taking into account the prevailing conditions. Shipping insurance P&I Club Gard noted in its latest update about obtaining the court approval for settlements involving mentally incapacitated crew.
It is a known occupational hazard that severe personal injuries may occur on board a vessel leaving a seafarer mentally incapacitated. Such claim against the shipowner and a settlement will require an approval by a court.
In a recent case involving a crew member of a Hong Kong registered vessel, becoming mentally incapacitated, the settlement offer was rejected by the Hong Kong court as the ship owner failed to provide for alternative accommodation costs due to rent increases. The parties could renegotiate but it is time-consuming and incurring additional costs.
Order 80 Rules 10 and 11 of the Rules of the High Court (Cap 4A) clearly indicate court’s requirements. These rules provide that a settlement in relation to money claims by or on behalf of a mentally incapacitated person as defined under Order 80 Rule 1 of the RHC shall not be valid unless approved by the court.
The purposes of the rules are to:
- To protect the person under disability from the lack of skill and experience of their legal advisers accepting an imprudent settlement.
- To obtain fair and beneficial settlement for the person under disability.
- Provide a means by which a defendant may obtain a valid discharge from the mentally incapacitated person’s claim.
- Ensure that a legal adviser acting for the mentally incapacitated person is not influenced to recommend an unfavourable settlement by a defendant’s offer to agree his costs.
- Ensure that the settlement money is properly looked after and applied.
- Ensure that the interests of all dependants entitled to a possible share in the settlement are properly protected.
The court will not accept the settlement based on counsel’s recommendations. The means by which the parties arrived at the settlement and the reasons why the court should grant its approval have to be clearly explained.
- The settlement funds are usually paid into court and the court may also rely on Part II of the Mental Health Ordinance (Cap 136), under which the court may order the appointment of a committee to manage and to administer the property and affairs of the mentally incapacitated person.
- The costs of appointing the committee are usually required to be paid by the paying party to the settlement.
- Where settlement approval is refused, the court must issue directions as to the further conduct of the matter. If proceedings for the claim have been commenced, it may give directions to bring the action to trial. Alternatively, it may order that the proceedings be continued as if begun by writ.
- A settlement which does not include an agreement for costs is unlikely to be approved by the court as it is not a full compromise of the claim.
- Similarly, the court may not approve a settlement where there is an uncertainty that a settlement sum may be reduced by a liability for costs. Normally, where a settlement provides for costs on a common fund basis, the plaintiff’s solicitors would be expected to waive any claim for further costs and no issue should arise.
- In Hong Kong a settlement out of court does not bind a mentally incapacitated plaintiff unless it can be proved to have been for their benefit.
- It is therefore sensible for a shipowner defendant to negotiate a settlement which is fair and realistic in the current economic climate rather than risk refusal by the court.
- Once the court has approved the settlement the liability of the shipowner defendant is formally discharged.