BH by her next friend VH v AME Hospitals Pty Ltd - [2010] WADC 47

JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
IN CIVIL

LOCATION: PERTH

CITATION: BH by her next friend VH -v- AME HOSPITALS PTY LTD & ORS [2010] WADC 47

CORAM: MARTINO DCJ

HEARD: 2 MARCH 2010

DELIVERED : 13 APRIL 2010

FILE NO/S: CIV 49 of 2005

BETWEEN: BH by her next friend VH
Plaintiff
AND
AME HOSPITALS PTY LTD (ACN 054813991)
First Defendant
MAURICE FERRI
Second Defendant
JEFFREY STEVENS
Third Defendant

Catchwords:

Trusts and trustees - Public Trustee application for approval of expenditure of monies already spent

Legislation:

Rules of the Supreme Court 1971 O 70 r 12(2)

Result:

Additional expenditure authorised

Representation:

Counsel:

Plaintiff:     No appearance
First Defendant             :     No appearance
Second Defendant         :     No appearance
Third Defendant           :     No appearance
Public Trustee               :     Ms T L Minchin

Solicitors:

Plaintiff:     Not applicable
First Defendant             :     Not applicable
Second Defendant         :     Not applicable
Third Defendant           :     Not applicable
Public Trustee               :     Public Trustee

Case(s) referred to in judgment(s):

BH by her next friend VH v AME Hospitals Pty Ltd & Ors [2010] WADC 5

MARTINO DCJ: The background to this matter is contained in my reasons in BH by her next friend VH v AME Hospitals Pty Ltd & Ors [2010] WADC 5. Following publication of those reasons Mr Conlin swore an affidavit on 23 February 2010. Ms Minchin appeared for the Public Trustee before me on 2 March 2010. On 22 March 2010 the Public Trustee filed an affidavit of the plaintiff's mother sworn on 15 March 2010.
In his affidavit of 23 February 2010 Mr Conlin deposed as to the following matters. Since the filing of the Public Trustee's application which was before me on 18 January 2010 a refund of $2,445 has been received by the Public Trustee for a duplicated payment made to the wall and floor tiler. The Public Trustee therefore reduces the amount it is seeking to apply to the construction of the plaintiff's residence to $437,107.22, an increase of $57,107.22 on the sum authorised by this Court on 21 July 2008.
On 20 January 2010 Mr Joseph Agnello, a certified practising valuer, valued the property in Banjup at $1,175,000. In that evaluation Mr Agnello valued the improvements to the property at $455,000. The sum spent by the Public Trustee on those improvements was $437,107.22.
On 23 June 2005 the land was purchased for the plaintiff for $395,000. The total of that purchase price and the sum of $437,107.22 spent on building the house and improvements is $832,107 so there has been increase in the value of the assets of the plaintiff under the management of the Public Trustee of $342,893.78.
In entering into the building contract the Public Trustee took the best interests of the plaintiff into account and consulted with her mother as to what property she wished to purchase on the plaintiff's behalf and the house that would best suit the plaintiff's needs. At all stages the Public Trustee consulted with the plaintiff's mother as to the variations in the contract and additional expenses. All additional expenses were approved by the plaintiff's mother.
The Public Trustee engaged the services of Western Projects which provided expertise in inspection of the property throughout the building process and advised the Public Trustee whether or not to pay the builder for each progress payment. Western Projects was paid $1,540 for those services.
Some of the more significant unforeseen increases in the building expenses that were not included in the budget were:
(a)$25,174 for earthworks, site clearing and finished floor level. The earthworks and site clearing were originally budgeted at $4,000. The City of Cockburn required an increase in the finished floor level which meant that an additional $21,174 was required to be spent;
(b)$13,600 for an Ecomax System pump and sump and $750 for the electrical connection. The original budget provided for a Reodrain System at a cost of $8,000. The City of Cockburn required the Ecomax System be installed which meant that an additional $6,350 was required to be spent; and
(c)The additional electrical costs of $14,675 were due to the fact that the original building contract only made provision for the standard number and position of light switches and power points in each room. Due to the plaintiff's medical requirements and comfort needs additional outlets were required for medical equipment, additional air‑conditioning and entertainment appliances.
Some of the more significant unforeseen increases in the finishing expenses that had not been included in the original budget were:
(a)The concrete veranda that cost $4,500 was required for wheelchair access for the plaintiff;
(b)The water pump expense of $977.08 was to provide water to the house as there was no access to scheme water;
(c)The total cost of flooring was $27,019.14. The plaintiff's mother chose all the floorings. The plaintiff's mother was advised by an occupational therapist that bamboo flooring is a better option than wood flooring as it is longer lasting, harder wearing and has better thermal properties and will require sanding back less often than wood so that it is a better material to handle the plaintiff's wheelchair and other medical equipment;
(d)The plaintiff's mother chose all of the window dressings which cost $11,830. This expense meant that window dressings were provided for the entire house including block‑out curtains and blinds that will reduce heating and cooling costs;
(e)$4,268 was required to be spent on a limestone wall as a result of the City of Cockburn's requirement to increase the finished floor level. The limestone retaining wall was required for there to be wheelchair access around the house and up to the veranda;
(f)The installation of air‑conditioning cost $16,870. This was a necessary expense as the plaintiff is unable to regulate her body temperature and is therefore reliant upon an effective air‑conditioning system.
The Public Trustee currently holds on trust for the plaintiff approximately $160,115. This sum does not include the sum of $57,107.22 which the Public Trustee has spent on the construction of the residence and which is the subject of this application. The plaintiff's current expenses are approximately $474.95 per week. The income from the trust is approximately $154.23 per week, this equates to a deficit of approximately $320.73 per week. The current trust fund of $160,115 will last approximately 9.6 years before it is exhausted. The plaintiff is precluded from receiving a disability support pension until 2 April 2012.
The Public Trustee has also made an application on behalf of the plaintiff to obtain a First Home Owner's Grant of $21,000. The Public Trustee anticipates that this application will be successful and will increase the amount held on trust by the Public Trustee for the plaintiff.
The trust officer at the office of the Public Trustee who manages the plaintiff's trust has advised Mr Conlin that she only became aware of the additional expenditure upon completion of the building project and once all accounts had been rendered and settled. This was in about May 2009. Mr Conlin considers that the trust officer's relative inexperience was responsible for the oversights, first in noticing that the accounts she had approved exceeded the approved sum and secondly in failing to seek approval prior to exceeding the approved amount.
Mr Conlin considers that at all times the Public Trustee acted in the best interests of the plaintiff. Once it was determined that the plaintiff required her own purpose built residence and the Public Trustee entered into the contract for the building of that residence the Public Trustee was bound to see the contract through to completion. The Public Trustee was not in the position to refuse to pay the variations on the contract which would leave the residence incomplete and therefore uninhabitable by the plaintiff. All increases in expenditure were approved by the plaintiff's mother who also acts in the plaintiff's best interests.
In her affidavit sworn on 15 March 2010 the plaintiff's mother deposed to the following matters. In consultation with the plaintiff's mother the Public Trustee engaged Plunkett Homes (1903) Pty Ltd to construct the plaintiff's home at a price of $318,700.81.
The plaintiff's mother is aware of the variations and extra finishing costs to which Mr Conlin deposed in his affidavit of 11 December 2009. The plaintiff's mother considers that all those costs were necessary to complete the plaintiff's home and that they were reasonable and appropriate expenses, without which the home would have been uninhabitable.
The plaintiff's mother worked closely with the Public Trustee and the plaintiff's trust officer during the construction of the home. The plaintiff's mother chose the floor and window dressings.
The plaintiff's mother considers that all monies spent on the home were spent in the best interests of ensuring a comfortable, accessible and workable residence for the plaintiff. The plaintiff's mother asks that the additional expenses be approved as she does not consider that the Public Trustee should be held responsible for those expenses.
The Public Trustee makes the application under O 70 r 12(2) of the Rules of the Supreme Court 1971.
As I said in my reasons of 18 January 2010, in considering the application I understand that I am to consider what is in the best interests of the plaintiff.
I accept that some, but not all, of the additional expenses were necessary. For example the additional earthworks, site clearing and finished floor level expenses appear to have been necessary. The additional flooring and window dressing expenses may not have all been necessary. I also accept that the Public Trustee was bound to complete the construction of the residence and could not leave the residence uninhabitable by the plaintiff.
I also accept that all increases in expenditure were approved by the plaintiff's mother. However it was the Public Trustee, not the plaintiff's mother, who had both the ability and the responsibility to ensure that the cost of construction of the house did not exceed the approved sum.
With all due respect to Mr Conlin it is in my view inappropriate for him to lay the blame for the Public Trustee's failure to do so on a relatively inexperienced trust officer. The Public Trustee should have systems and procedures in place to monitor the costs of a project such as the construction of a house so that if the cost of an item will exceed the budgeted cost that item and other items can be reviewed so that the Public Trustee can make a decision as to whether it is appropriate to incur the expense on the item and, if so, whether it is appropriate to endeavour to reduce the expense on other items so that the total cost did not exceed the approved sum. If, after that analysis, it were established that it was not possible to complete the construction of the house for the sum approved then application could have been made to the Court for approval to increase the sum to be spent. It is not now possible to do that analysis because the Public Trustee failed to identify at the appropriate stage that the cost of items would exceed the budgeted cost for those items.
In my view the fact that the value of the house and land exceeds the total spent on those items is of only very limited relevance because the plaintiff requires suitable accommodation in which to live.
If the First Home Owner's Grant of $21,000 is deducted from the cost of the construction of the house the total cost will be $36,107.22 more than the sum authorised by Scott DCJ.
I am satisfied that it is appropriate to authorise the additional sum of $21,000 for the construction of the house because I am satisfied that it would be in the plaintiff's interest to use the amount of the First Home Owner's Grant to improve the house.
I have had considerable reservations as to the balance of $36,107.22 by reason of the matters to which I have referred. However having regard to the facts that the plaintiff's mother has been closely involved in the construction of the house and continues to support the Public Trustee's application I have decided that it is appropriate to grant the Public Trustee's application because I am satisfied that it is in the plaintiff's interest to do so. If, before the expenditure had been incurred, the Public Trustee had made application for approval of the additional expenditure the application would have been supported by the plaintiff's mother and it is very likely that it would have been approved.
I authorise the Public Trustee to apply a maximum of $437,107.22 towards construction of the plaintiff's residence.