First Passport Application - Supporting Documents

[HongKongtoBritish]

My brother in law is applying for his first British Passport after getting BC. Problem is that his family is very slow and paranoid and gets worried about officialdom so often bury their head in the sand rather than asking questions.

Problem is:
1) He came to UK on a Hong Kong passport 13 years ago
2) Got a Home Office Travel document - Home Office kept the original Hong Kong passport - luckily has kept letter
3) He has since lost his Home Office Travel document - they did not report it and never travelled abroad since arriving

So, should he:
1) Inform Home Office of missing Travel document and to send back original Hong Kong passport so we can send it for passport application, or
2) Just attach letter from Home Office saying they kept his Hong Kong passport?

Thanks for advice