Duffell v Duffell (No 2)
[2015] ACTSC 301
•1 October 2015
SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY
Case Title: | Duffell v Duffell (No 2) |
Citation: | [2015] ACTSC 301 |
Hearing Date(s): | 27 March 2015 |
DecisionDates: | 1 October 2015 |
Before: | Refshauge ACJ |
Decision: | The plaintiff be heard as to the orders to be made. |
Catchwords: | PRACTICE AND PROCEDURE – Application for approval of settlement – persons with legal disability – involvement by the litigation guardian – arrangements for funds management – appointment of trustee – appointment of a trustee company – administration of a trust – need for detail as to how trust established – purposes of the trust |
Legislation Cited: | NSW Trustee and Guardian Act 2009 (NSW), s 59(g) Protected Estates Act 1983 (NSW), s 28(1AA) Court Procedures Rules 2006 (ACT), rr 1616, 1618 |
Cases Cited: | Duffell v Duffell [2015] ACTSC 123 Jones v Moylan (1997) 18 WAR 492 |
Texts Cited: | Charles Rowland and Phillip Bailey, Discretionary Testamentary Trusts, Precedents and Commentary (LexisNexis Butterworths: Sydney, 2013) |
Parties: | Jon Duffell by his litigation guardian Jane Derrin (Plaintiff) James John Duffell (Defendant) |
Representation: | Counsel Mr A J Bartley SC and Mr S J Longhurst (Plaintiff) Mr D Wilson (Defendant) |
| Solicitors Porters Lawyers (Plaintiff) Curwoods Lawyers (Defendant) | |
File Number(s): | SC 112 of 2007 |
Refshauge J:
On 26 May 2015, I approved a compromise made between the parties to resolve the claim made by the plaintiff, Jon Duffell, who sued, by his litigation guardian, Jane Derrin, for damages to compensate him for very severe and disabling injuries he had suffered in a motor vehicle accident. See Duffell v Duffell [2015] ACTSC 123.
In addition to approving the compromise, I was asked to make orders waiving the usual statutory arrangement for the judgment sum, payable under the compromise, and that it not be administered by the Public Trustee but, instead, by National Australia Trustees Ltd.
I was generally satisfied that the fund could be administered by National Australia Trustees Ltd but required to be satisfied of two matters of concern. I set them out in Duffell v Duffell at [70]-[72] as follows:
70.There are, however, two other considerations that need to be addressed. The first is that I have not seen the arrangements under which the funds are to be managed, whether under a special trust or otherwise. As is clear from Singh (No 2) at 257-8; [41]-[48], issues such as the nature and tenure of the trust arrangement, the relationship between the trustee, Mr Duffell and any guardian or carers for him, the proposed investment strategies and the safeguards to protect the corpus of the fund need to be addressed.
71.The second is that the proposed trustee is, as I have noted, a wholly-owned subsidiary of a large bank which is involved in the financial services sector. That involves the bank in providing investment opportunities which may or may not be appropriate for the investment of part or all of the trust funds to be managed.
72.It seems to me that it is desirable for the guardian or manager who will assist Mr Duffell in dealing with these issues should have a source of independent advice on the appropriate investment strategy to be adopted by the trustee.
I have now received an affidavit of Richard Navakas, the Principal of Capital Private Wealth Pty Ltd, an authorised representative of Hillross Financial Services Ltd. It addresses some of these issues.
Mr Navakas has been providing advice on investments and superannuation for over 25 years. He also provides financial planning services to National Australia Trustees Ltd. He stated that, in this role, he is the first point of contact with clients and, significantly, is “authorised to provide clients and/or his/her representatives with independent advice regarding investment strategy”.
He set out his contact with Ms Derrin, which commenced about five or six years ago. He provided advice to the plaintiff’s lawyers about Mr Duffell’s future financial requirements.
He also referred to the primary concern of Ms Derrin that the settlement monies are properly invested and continue to grow in value. In the immediate term, they will be required to purchase a residential unit for Mr Duffell so that he can have somewhere available to him as a residence when Ms Derrin is no longer able to care for him. Mr Navakas has continued to make himself aware of the progress of the claim. He has, since the settlement, been able to provide “informed advice to Ms Derrin on investment strategy”.
Subsequent to that, Mr Navakas was present when Ms Derrin discussed with a representative of National Australia Trustees Ltd investment of the settlement sum now paid into court as a result of my approval of the compromise of the action.
This arrangement meets the second of my concerns, namely that, in the light of the relationship between National Australia Trustees Ltd and a large bank involved in the financial services sector, there is a source of independent advice as to investment strategy.
As to the first consideration, Mr Navakas points out that National Australia Trustees Ltd is an authorised trustee under the Trustee Companies Act 1964 (NSW). He also annexes an affidavit of Shivani Singh, of National Australia Trustees Ltd which makes the same point. This was, however, an affidavit that I had already read prior to the earlier hearing and taken into account. See Duffell v Duffell at [52], [61]-[69].
Mr Singh’s affidavit set out the structure, governance and corporate situation of the proposed trustee, as well as fee information. I was satisfied with the financial and structural security of National Australia Trustees Ltd. See Duffell v Duffell at [67]. I also considered the fees reasonable. See Duffell v Duffell at [68].
The Trustees Companies Act, however, is by no means a comprehensive regulatory framework. It is principally directed to the administration by trustee companies of the estates of deceased persons. In that regard, but not necessarily more widely, it permits, under s 17, the mixed investment of monies from various estates in the one fund.
There were additional safeguards that I mentioned in Duffell v Duffell at [63], namely regulation by the Australian Prudential Regulation Authority and the Australian Securities and Investments Commission.
This oversight permits the court to have greater confidence in administration by a trustee company, not significantly different, in that respect, to the Public Trustee. See Jones v Moylan (1997) 18 WAR 492 at 496. This does distinguish this case from the situation of a private trustee and a bespoke trust where greater scrutiny is required as in Singh v Calvary Hospital ACT Inc (No 2) (2009) 3 ACTLR 247 at 257; [44].
These are all important. They are, however, not really to the point, so far as the matter I raised, namely the actual arrangements under which the money was to be managed.
Nevertheless, I had some information about matters such as investment strategy and safeguards to protect the corpus of the fund in the affidavit of Mr Singh and on which I am prepared to rely.
Thus, I had extensive details in Mr Singh’s affidavit of matters including the Investment Management Process and details of the Prudent Person Rule said to be “a statutory code of conduct which trustees and their financial advisers must follow”. There was a helpful summary of the risks that need to be understood, as well as the importance of diversification. These are all important matters about which the court will benefit from having appropriate information.
There was no information, however, about the precise structural arrangements for administration of the trust, such as who would make decisions about the payments from the fund to be made to or for Mr Duffell and how those decisions would be made.
This would not necessarily require a trust to be established by deed for the fund, though that would always be a possibility. I shall, however, assume that no such trust deed is to be created.
There is, however, a practical matter that I need to bring into consideration. The decision to permit the funds to be administered by National Australia Trustees Ltd was made by me on 26 May 2015. The affidavit of Mr Navakas was filed on 26 June 2015. Regrettably, by an oversight in the Court, it did not, however, come to my attention until recently. The judgment sum has now been paid into court.
In other circumstances, I would probably have required further submissions to be made on the issues about which I have expressed a need for some clarity. Having regard to the delay in the affidavit coming to my attention, however, I can dispense with that if I am satisfied that these issues can be otherwise managed.
It seems to me that the order I make will, if appropriately drafted, be the relevant terms of the trust under which National Australia Trustees Ltd will hold and administer the trust.
Accordingly, I will take that approach rather than delay further.
The moneys paid into court under my order made in Duffell v Duffell can only be paid out by order of the court: r 1616 of the Court Procedures Rules 2006 (ACT). I have a wide discretion as to the way in which that money is to be dealt with under r 1618 of those rules. I accept that, in making the orders as part of the approval of the settlement, I have a wide power to impose appropriate terms. See The Application of VS [2011] NSWSC 47 at [44].
It seems to me, then, that I should make clear that the money is to be held in trust for Mr Duffell to be paid for his benefit.
I should specify the trust under which National Australia Trustees Ltd should hold the funds. The usual formula is that the funds are to be held for the “maintenance, education, advancement and benefit” of Mr Duffell. I am influenced, however, by suggestions of appropriate terms to be found in Charles Rowland and Phillip Bailey, Discretionary Testamentary Trusts, Precedents and Commentary (LexisNexis Butterworths: Sydney, 2013) and by s 28(1AA) of the Protected Estates Act 1983 (NSW) (now the NSW Trustee and Guardian Act 2009 (NSW), s 59(g)) and propose the following wording for the purposes of the Trust: maintenance, clothing, medicine and care, education (including travel to broaden the mind), advancement and benefit of Mr Duffell.
National Australia Trustees Ltd should, also, have power to make payments of capital and income given the stated intention that Mr Duffell will need a residence in due course. The payments, however, should have regard to the need for the trust funds to provide for Mr Duffell, for his life, though having regard to any other source of income he may have.
Finally, there should be power to vary the trust should that become necessary. That can be done by reserving to Mr Duffell liberty to apply to vary the order should circumstances permit. This is akin to the power reserved in Singh v Calvary Hospital ACT Inc (No 2) at 258; [49] that any amendments to that Trust Deed must be approved by this Court.
Subject to any submissions to the contrary, the orders I propose are, accordingly:
1. That the solicitors for the plaintiff provide to the Court, within ten days, the appropriate details of the National Australia Trustees Ltd reasonably required by the Registrar for payment to it of the judgment sum paid into court under the order made on 26 May 2015.
2. That, upon receipt of the details referred to in Order 1, the Registrar pay out of court the judgment sum to National Australia Trustees Ltd in accordance with those details.
3. National Australia Trustees Ltd hold the judgment sum paid to it under Order 2 on trust for Jon Duffell in accordance with the following terms:
(a) that it may pay the capital or income of the trust fund for the maintenance, including but not limited to clothing, medicine and care, education (including travel to broaden the mind), advancement or benefit of Jon Duffell;
(b) that in making any payment of capital National Australia Trustees Ltd shall have regard to the need to provide for Mr Duffell for his life but shall also have regard to any other sources of income available to Mr Duffell;
(c) that any such payment may be made to any parent, guardian, carer or administrator of Mr Duffell if it is to be used for a permitted purpose; and
(d) that in determining an investment strategy, National Australia Trustees Ltd shall have regard to independent advice on such strategy provided by an independent financial adviser appointed by Mr Duffell, his guardian or his mother who, in the first instance, may be Capital Private Wealth Pty Ltd, the costs of such independent advice being a proper payment from the trust funds.
4. Liberty be reserved to the plaintiff to apply on 7 days notice to vary the terms of this order.
5. The costs of this application shall be paid out of the judgment sum paid to National Australia Trustees Ltd.
I shall give the plaintiff the opportunity to make any submissions on these proposed orders or, in the absence of any such submissions, shall make them. In the event that the plaintiff wishes to seek advice on the proposed orders, I am prepared to make them in chambers if there are no submissions or with any amendments which I am prepared to make in accordance with any submissions made by the plaintiff to that effect.
| I certify that the preceding thirty [30] numbered paragraphs are a true copy of the Judgment of his Honour Acting Chief Justice Refshauge. Associate: Date: 30 September 2015 |
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