D'ERCOLE v WOOD - [2005] SASC 57

SUPREME COURT OF SOUTH AUSTRALIA
(Civil: Application)
D'ERCOLE v WOOD
Judgment of Judge Lunn a Master of the Supreme Court
24 February 2005
EQUITY - TRUSTS AND TRUSTEES
Aged and Infirm Persons Property Act 1940 - application by protected person for the funds of the estate to be applied to purchasing in his name a half-interest in a rental property - held the protected person's interest in such rental property was part of the protected estate and would be subject to the control of the manager in the exercise of the manager's duties under the Act - held manager would be required to maintain a permissive caveat under s 28 of the Act over the title to the property.

D'ERCOLE v WOOD
[2005] SASC 57
Civil

JUDGE LUNN On 1 May 1993 the plaintiff Gabriel D’Ercole suffered head injuries in an accident. In 1996 he instituted this action by a next friend, claiming damages for those injuries. On 14 October 1998 this Court approved a settlement reached between the parties, entered judgment for $95,000.00 plus the costs of action and appointed Public Trustee as the manager of that part of the plaintiff’s estate constituted by the damages under the Aged and Infirm Person Property Act 1940 (“the Act”). That protection order remains in force.
On 23 June 2004 solicitors acting for the plaintiff took out an application to have the protection order rescinded. Public Trustee filed an affidavit opposing such a recision. The application has not been pursued.
On 1 November 2004 the plaintiff by his solicitors took out another application seeking an order:
“The balance of funds held by Public Trustee be released to fund purchase of a half-share in a property currently owned by the plaintiff’s father on behalf of the plaintiff, and to provide for associated costs.”
Public Trustee is currently holding about $54,480.00 in the protected estate. It is proposed that subject to the approval of this Court this amount, less an allowance for costs and expenses, should be used to purchase a half-interest in a rental property at Whyalla owned at present in its entirety by the plaintiff’s father and valued at $102,000.00. In general terms Public Trustee is agreeable to this proposal. If implemented, its effect would be that Public Trustee would be left without any significant funds in the protected estate, but the protection order would remain in force. It is thought to be good for the self-esteem of the plaintiff for him to have the title to his major asset in his own name and directly to receive the income from it.
In the course of negotiations Public Trustee has insisted that she should have a caveat on the title to the rental property over the half-interest of the plaintiff. The plaintiff opposes this. I have been asked to rule whether the approval of the Court for the purchase of the half-interest in the rental property is to be subject to such a condition.
While the protection order remains in force, its effect is to place the legal responsibility for the proper management and investment of the plaintiff’s damages award, and the assets into which it may be converted, on Public Trustee. Only a discharge of the order under ss 11(1) or 32(2) of the Act can terminate this responsibility. The obligation and responsibilities of Public Trustee as manager will continue in respect of the half-interest in the rental property which is proposed to be obtained from the moneys now held by Public Trustee. Although Public Trustee is prepared to allow, subject to the approval of the Court, the legal title to the half-interest in the rental property to be in the name of the plaintiff that half-interest will continue to be subject to the protection order under the Act. While steps to bolster the self-esteem of the plaintiff are permissible they cannot override the obligation of the manager under the Act to manage the assets responsibly.
The precise legal relationship between a manager under the Act and the protected estate is not entirely clear. S 18 of the Act provides that the manager is deemed to be a trustee for all the purposes of the Trustee Act 1936. However, it has been held that the manager is not a trustee for other purposes: Goodridge v Jenkins (1973) 5 SASR 288 at 292. In Beasley v Marshall (No 4) (1986) 42 SASR 407 the position of a manager was treated as analogous to that of a trustee for some purposes. In the present context it does not matter precisely what is the source, or the extent, of the duties owed by the manager in relation to the protected estate. Clearly the manager has fiduciary obligations and duties, as recognised in Equity, to ensure that the assets represented by the protected estate are invested and managed in the best interests of the protected person. This includes any interest which the protected person may acquire in real estate, even if the title is held in the protected person’s own name.
S 28(3) of the Act authorises the manager to lodge a caveat over Real Property Act land to which the manger claims that the protected person is entitled or beneficially interested. That section is apparently wide enough to encompass what Public Trustee proposes in this matter. If such a caveat is not lodged, the plaintiff, with or without the concurrence of his father, could dispose of or encumber his interest in the rental property in a way which may not be in his ultimate best interests. To take an extreme example the plaintiff and his father could sell the property and the plaintiff could secretly dissipate his share of the proceeds of sale in any way he chose. That would be quite contrary to the spirit and intent of the Act.
Accordingly any order empowering and approving Public Trustee entering into the proposed transaction must include a term that Public Trustee will maintain a permissive caveat over the title to the plaintiff’s interest in the property.
I was asked to rule initially on this aspect of the matter. I have not considered whether it would otherwise be proper for the Court to make the necessary order to enable the purchase to occur.
In preparing these reasons another potential difficulty has become apparent. It is proposed that the plaintiff and his father would hold the rental property as joint tenants so that it will pass in its entirety to the survivor on the death of either of them. I presume the plaintiff does not have a Will and has no spouse or issue. If he dies intestate his property would be shared equally between his father and his mother. I note the medical reports suggest that his parents are separated. If the property is purchased as joint tenants such a joint tenancy may prejudice a potential entitlement of the plaintiff’s mother if the plaintiff was to pre-decease his father, which is contrary to the intent of s 16A of the Act