Horton v Kennedy
[2016] ACTSC 123
•9 June 2016
SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY
Case Title: | Horton v Kennedy |
Citation: | [2016] ACTSC 123 |
Hearing Dates: | 6, 8 & 9 June 2016 |
DecisionDate: | 9 June 2016 |
Before: | Mossop AsJ |
Decision: | See [29] |
Catchwords: | TRUSTS AND TRUSTEES – Application for the approval of a compromise of proceedings – Matter involving claim for compensation to relative under Ch 3 of the Civil Law (Wrongs) Act 2002 – Infant plaintiffs – Risk of the plaintiffs failing on liability if matter proceeded to a contested hearing – Difficulties involved in assessing quantum – Proposed compromise found to be reasonable – Appointment of trustee company rather than the Public Trustee and Guardian – Form of trust deed |
Legislation Cited: | Civil Law (Wrongs) Act 2002 (ACT), ss 25, 27 Public Trustee and Guardian Act 1985 (ACT), ss 25, 25A |
Cases Cited: | Hulanicki v Walton [2014] ACTSC 17 Narayan bhnf Wignall v Morphett [2010] ACTSC 9 Singh v Calvary Hospital ACT Inc (No 2) (2009) 3 ACTLR 247 |
Texts Cited: | Harold Luntz, Assessment of damages for personal injury and death (LexisNexis Butterworths, 4th ed, 2001) |
Parties: | Tanya Horton (First Plaintiff) Jake Horton bhlg Tanya Horton (Second Plaintiff) Jamei Horton bhlg Tanya Horton (Third Plaintiff) Ebony Horton bhlg Tanya Horton (Fourth Plaintiff) Glenn Nicholas Kennedy (First Defendant) Bevan Smart (Second Defendant) |
Representation: | Counsel Mr I Bradfield (Plaintiffs) Ms V Wilkinson (Defendants) |
| Solicitors Maurice Blackburn Lawyers (Plaintiffs) Sparke Helmore (Defendants) | |
File Number: | SC 449 of 2012 |
MOSSOP AsJ:
This is an application for the approval of a compromise of proceedings brought by four members of the same family against two defendants. The first plaintiff is Tanya Horton. She is also the litigation guardian for the second, third and fourth plaintiffs Jake, Jamei and Ebony Horton, her children. The claim is, in part, a claim for compensation to relatives under Ch 3 of the Civil Law (Wrongs) Act 2002 (CLW Act), although there are also nervous shock claims for which amounts have been included in the proposed settlement.
Because the second, third and fourth plaintiffs are minors, amounts paid pursuant to the compromise, if approved, must be paid into Court. The plaintiffs also seek that the court “otherwise direct” for the purposes of s 25 of the Public Trustee and Guardian Act 1985 so as to permit the money to be paid out to a trustee company rather than to the Public Trustee and Guardian.
In support of the application, the plaintiff relied upon:
(a)Affidavit of Tanya Horton dated 1 June 2016;
(b)Affidavit of Jacinta Northam dated 1 June 2016;
(c)Affidavit of Richard Navakas dated 1 June 2016;
(d)Affidavit of Geoffrey Worth dated 31 May 2016;
(e)Exhibits 1 and 3, two opinions of Mr Bradfield of counsel which had not been served and which I treated as confidential;
(f)Exhibit 2, a bundle of documents including the findings of the coroner and various expert reports;
(g)Exhibit 4, a draft trust deed;
(h)Exhibit 5, an amended draft trust deed; and
(i)Exhibit 6, an estimate of the funds management costs and earnings of the trusts proposed to be created, prepared by Mr Navakas.
The claim and its compromise
The claim of the plaintiffs arises out of an accident which occurred on 4 January 2010 when James Horton, the husband of the first plaintiff and father of the second, third and fourth plaintiffs was driving a jet ski towards a bend in the Molonglo River. He had a pillion passenger. Coming in the opposite direction was a ski boat driven by the second defendant. He had on board an observer, who was watching the owner of the boat, the first defendant, ski behind the vessel. The jet ski and the motorboat were powerful watercraft and were travelling at speed. The jet ski was travelling south and the ski boat was travelling north. When going round a bend on the river the watercraft collided with each other. Mr Horton suffered injuries which led to his death at Canberra Hospital from loss of blood some three hours after the accident.
A central issue in the case would have been whether the second defendant was on the wrong side of the river at the time when the accident occurred. The rules applying to the passage of watercraft required that such craft approaching each other alter course to the starboard so that each boat passed to the port of the other.
The issue of the location of the boats immediately prior to and at the time of the collision was addressed in some detail during the course of coronial proceedings. The coroner published his findings on 21 August 2015. He was unable to reach the conclusion, contended for by the plaintiffs, that on the balance of probabilities the second defendant cut the corner onto his incorrect side of the river and failed to take any evasive or avoidance action by slowing down or moving to the right. The coroner did not make a finding to the contrary, but simply recorded that he was unable to reach the conclusion contended for by the counsel for the family.
The findings of the coroner of themselves do not determine anything for the purposes of a contested hearing. I note that Mr Smart, the second defendant, was called as a witness before the coroner, but was excused because he declined to answer questions on the ground that the answers may tend to incriminate him. The competing lay and expert evidence, to the extent to which it is set out in the coroner’s findings, indicates that there would be a real contest as to what occurred immediately prior to the collision. As the conclusion reached by the coroner indicates, it is possible that the conclusion reached at trial would be that the plaintiffs, who obviously bear the onus, had failed to establish that Mr Smart was negligent in the control of the boat that he was driving. It is thus a case where the risk of the plaintiffs failing on liability exists. However, if negligence was established the damages would not be reduced by reason of contributory negligence: CLW Act s 27.
At a trial there would also be a significant contest over quantum in relation to the compensation to relatives claim. The expert evidence in relation to this issue would be competing expert reports of forensic accountants assessing the quantum of the loss. Mr Horton and the first plaintiff had a 50% interest in a business known as Adrenaline Plus Sports which was a retail store. Mr Horton also had a 50% interest through a family trust in another business known as Straightline Ski and Scuba Gear. At the time of Mr Horton’s death the first plaintiff worked at Adrenaline Plus Sports on a part-time basis. She had previously worked there full-time. Following Mr Horton’s death his interest and the first plaintiff’s interest in those businesses were sold. The assessment of the losses resulting from his death ranged from $2.1 million being the highest figure amongst the various scenarios canvassed in the expert report served by the plaintiffs to $497,467 being the lowest of the alternatives in the expert report served by the defendants.
There are also separate claims for damages for nervous shock for which an award of $100,000 for the first plaintiff and $40,000 for the second plaintiff are proposed as part of the settlement. Those amounts appear to be consistent with the psychological evidence that is available to the parties.
The overall settlement proposed is $1.125 million plus $131,658 on account of funds management plus an agreed sum for costs. Leaving aside the amounts to be awarded for the nervous shock claims gives an amount of $985,000 for the compensation to relatives claim. Having regard to the risk that the plaintiffs may not succeed on liability and the considerable uncertainties involved in valuing the loss caused by the Mr Horton’s death, I consider that this amount involves a compromise which is reasonable.
Apportionment
Jake is presently 12 years old, Jamei 8 and Ebony 6. The apportionment originally proposed in relation to that portion attributable to the compromise of the compensation to relatives claim is as follows:
(a)first plaintiff $460,000 or 47%
(b)second plaintiff $152,000 or 15%
(c)third plaintiff $168,000 or 17%
(d)fourth plaintiff $205,000 or 21%
The respective percentages represented by the sums closely correspond to the percentages identified in the expert forensic accountants report which sought to calculate the respective losses of each of the plaintiffs in accordance with the methodology set out in Table 9.1 of Luntz’ Assessment of Damages for Personal Injuries and Death (4th ed).
Following the initial hearing of the application the proposed apportionment was amended. The amendment was proposed in order to permit each child to receive, from the amounts derived from the compensation to relatives claim, an equal amount at the point where the respective trust was terminated and monies paid to the beneficiary. The calculations have proceeded on the basis of various assumptions which are outlined in Exhibit 6. They included annual payments during the existence of the respective trust of $10,000 per annum for the maintenance, education or advancement of the child. While the application proceeded on the basis of the assumed balance between payments for maintenance, education and advancement and payments upon the determination of the trust, these matters will ultimately be a matter for the trustee as such payments are not compelled by the terms of the trust deed. However, I have assessed the present application on the basis that it is likely that the proposed payments during the pendency of the trust will be able to be made. The effect of the amendments in order to achieve equality of payment upon determination of the trusts is to alter the apportionment of the judgment amount so that it is as follows:
(a)first plaintiff: $460,000 or 47%
(b)second plaintiff: $169,000 or 17%
(c)third plaintiff: $176,500 or 18%
(d)fourth plaintiff: $179,500 or 18%
The effect of the amendment is to increase the percentage received by the second plaintiff, Jake, and reduce the percentage received by the fourth plaintiff, Ebony. It occurs in the context where Jake will receive an amount of $40,000 in relation to the nervous shock component of his claim, although it must be noted that this amount is awarded as a result of the evidence as to the effect of the circumstances of his father’s death upon him.
In a case such as the present where the surviving parent will in any event provide for the needs of the children, in assessing for the purposes of s 25(3) the shares of each beneficiary of the action it is reasonable to take into account the wishes of the surviving parent in relation to the equality of benefit for each child. While reasonable minds might differ on the significance of such equality as between children, I consider the approach to be a reasonable one in the circumstances of this case and as a consequence I will approve that apportionment.
Payment to a trustee company
In relation to the payment out of the judgments in favour of the second, third and fourth plaintiffs to a private trustee, the relevant considerations are set out in Singh v Calvary Hospital ACT Inc (No 2) (2009) 3 ACTLR 247 (Singh No.2) and also discussed by Burns J in Hulanicki v Walton [2014] ACTSC 17 at [170]-[173] (Hulanicki). In the present case the reason put forward for the desire to have a trustee other than the Public Trustee and Guardian is that the first plaintiff has had dealings with and has a degree of trust in the advice that she has received from a particular financial adviser and that financial adviser is prepared to act as an advisor to the trustee company appointed to manage the funds.
The amount to be awarded for funds management has been agreed by the defendants on the basis of the estimate provided by Mr Navakas. That estimate includes the fees payable to the trustee company as well as the fees that the trustee company would be required to pay to his company for advice on the investment of the funds. It also incorporates an estimate of the likely fees that would be payable for investments in particular managed funds. There is thus some certainty as to the fees paid to the trustee and its financial advisor, but an educated estimate in relation to the “management expense ratios” arising from the particular investments. I note that the fees that may be charged by the trustee have not been specified in the proposed deed of trust although they might have been. I have proceeded on the basis that the annual fees charged by the trustee for its fees and the investment advice that it will obtain are the amounts set out in Exhibit 6 namely 0.66% and 0.33% per annum respectively. Mr Bradfield informed the Court that he had satisfied himself that those rates would not change during the terms of the trusts.
There was no specific evidence as to the comparability of the fees proposed to be charged with those that would be charged by the Public Trustee and Guardian on a similar investment although Mr Worth, a manager of Australian Executor Trustees Ltd, the proposed trustee, stated in his affidavit that the company’s fees were “competitive with” those of the ACT Trustee and Guardian. In an ordinary case that may be a significant issue (as it was in Hulanicki). However, in the present case where the defendants have agreed to pay particular amounts as damages for funds management, which have been based on the estimates of the cost of that management provided by a private trustee company, that lessens the significance of any comparison between the respective fees that would be charged. That is even clearer because the funds management amounts incorporated within the proposed compromise were calculated on the basis of the funds being held in trust until the children reached the age of 21. Notwithstanding that now the funds will only be held in trust during the children’s period of minority, the defendants have maintained their offer to pay the damages originally agreed to. Thus, the amount allowed on account of funds management is likely to exceed that actually incurred.
Having regard to the fact that a trustee company has been identified as the proposed trustee the security and standing of the trustee company is not in my view a significant issue: cf Singh (No 2).
However, the terms of the trust deed proposed were, as unfortunately is often the case, problematic. It should go without saying that if a private trustee is to be appointed then the terms of the trust deed must be carefully scrutinised so as to ensure that the interests of the beneficiaries are protected. Most obviously that requires that any change in the trustee or the terms of the deed must be subject to the approval of the Court. The other obvious point is that the terms of the trust deed must have been carefully scrutinised so that they make sense and be specifically tailored to the circumstances surrounding the trust to be established. In formulating the terms of a trust deed a party seeking approval for the payment out to a trustee company will often be assisted by examination of the terms of the deeds previously approved by the Court. An example of such a deed is that which was approved in Narayan bhnf Wignall v Morphett [2010] ACTSC 9.
In the present case a proposed trust deed was provided and subsequently revised. In my view the terms of that deed are sufficient to permit the payment of the judgment sums out to the trustee on the terms disclosed in that document so long as the amendments that I set out below are made.
The case for payment out to a private trustee is not compelling. It reflects a preference for the financial advice that would be provided by an identified adviser in circumstances where there is an existing relationship with that financial adviser and where it will be necessary to have some funds paid out during the existence of the various trusts for the maintenance, education or advancement of the relevant children.
Having regard to the statutory nature of the Public Trustee and Guardian, the framework within which it must manage amounts to be held on trust and the capacity of the Court to give directions under s 25A of the Public Trustee and Guardian Act 1985, there will often be considerable advantages (including the saving of legal costs) in payment out to the Public Trustee and Guardian because no separate application for payment out will usually be necessary and it will not be necessary for the Court to carefully scrutinise the terms of any proposed trust deed. The advantages of such a simple process are all the more so where, as here, the funds must be held on trust for a relatively limited period.
In my view, having regard to the fact that the estimated costs of fund management are met by the defendants and the fact that the proposed trustee is a trustee company rather than anything more exotic, the plaintiffs have established a sufficient basis for departing from the default position under s 25 of the Public Trustee and Guardian Act 1985.
The orders that were proposed by the parties to be made did not appear to me to properly reflect the judgments that should be entered having regard to the terms of the CLW Act and the existence of claims under that act as well as claims for nervous shock.
The evidence indicates that there will be a sum of $53,077.20 payable by the plaintiffs to their solicitors over and above the amount agreed to be paid by the defendants. It is proposed that this amount be paid by the first plaintiff with the effect that it does not affect the amounts paid to the second, third and fourth plaintiffs. Section 25(3) of the CLW Act requires that the amount recovered by the plaintiff’s be apportioned after any solicitor and client costs are deducted. Although this is not precisely how the proposed settlement has been structured I am satisfied for the purposes of s 25 that it is appropriate to divide the judgment between the plaintiffs in the manner proposed leaving the liability for solicitor and client costs with the first plaintiff.
I have included notes in the orders I will make in case at some future point the apportionment or rationale for the particular amounts becomes of significance.
For similar reasons I would retain as exhibits the opinions of Mr Bradfield in relation to the appropriateness of the compromise, but not permit access to those documents without an order of a judge.
The orders that I will make which give effect to the substance of the orders that were proposed are as follows:
1. Judgment be entered for the first plaintiff in the sum of $560,000.
2. Judgment be entered for the second plaintiff in the sum of $244,374.
3. Judgment be entered for the third plaintiff in the sum of $216,064.
4. Judgment be entered for the fourth plaintiff in the sum of $236,220.5. The compromise of the claims of the second, third and fourth plaintiffs is approved under rule 282.
6. No interest is payable on the judgment sums if the defendants pay those amounts not later than 28 days after the latest of the following:
(a) the day the defendants receive a sealed copy of these orders;
(b) the day the defendants receive a signed Medicare notice of settlement or judgment and an authority to receive from the first plaintiff.
7. The defendants pay the plaintiffs’ costs of the proceedings agreed in the sum of $199,476.17.
8. No interest is payable on costs if they are paid within 28 days of today.
9. The amount referred to in order 2 is to be paid into Court and shall be paid out to Australian Executor Trustees Ltd as trustee to be held pursuant to The Jake Horton Trust established under the deed which is Exhibit 5 amended as set out in order 12.
10. The amount referred to in order 3 is to be paid into Court and shall be paid out to Australian Executor Trustees Ltd as trustee to be held pursuant to The Jamei Horton trust established under the deed which is Exhibit 5 amended as set out in order 12.
11. The amount referred to in order 4 is to be paid into Court and shall be paid out to Australian Executor Trustees Ltd as trustee to be held pursuant to The Ebony Horton Trust established under the deed which is Exhibit 5 amended as set out in order 12.
12. The payment out to Australian Executor Trustees Ltd provided for in orders 9, 10 and 11 may only be made upon the Registrar being provided with an executed copy of a deed in the form of Exhibit 5 except incorporating the following amendments:
(a) Delete recitals A-D and insert:
A. The trustee has agreed to act as the trustee of trusts to be created upon receipt by the trustee of certain amounts arising from the compromise of litigation brought by the Settlor on behalf of the beneficiaries.
B. The parties anticipate that the trustee will receive the sums specified in part 9 of the Schedule as a result of payments out to the trustee of funds paid into the Supreme Court of the Australian Capital Territory.
C. The terms of this deed will govern each of the trusts established pursuant to this deed.(b) Clause 6: delete “on the vesting age of 18 years for each beneficiary” and insert “on the distribution date”.
(c) Clause 8.1: delete “Court” insert “Supreme Court of the Australian Capital Territory”
(d) Clause 10.2: Delete the clause and insert: “This deed may not be revoked or amended except with the leave of the Supreme Court of the Australian Capital Territory.”
(e) In the Schedule:
Part 6: Delete the text and replace it with “In relation to each trust the distribution date is the date upon which the beneficiary turns 18 years old.”
Part 7: Delete the words “Principal and Financial Advisor of Capital Private Wealth Pty Ltd”.
13. The Court notes
(a) The amounts referred to in orders 1, 2, 3, and 4 are comprised as follows:
$100,000 to the first plaintiff for her nervous shock claim.
$40,000 to the second plaintiff for his nervous shock claim.
$460,000 to the first plaintiff for her compensation to relatives claim.
$169,000 to the second plaintiff for his compensation to relatives claim.
$176,500 to the third plaintiff for her compensation to relatives claim.
$179,500 to the fourth plaintiff for her compensation to relatives claim.
$35,374 for funds management for the second plaintiff.
$39,564 for funds management for the third plaintiff.
$56,720 for funds management for the fourth plaintiff.(b) The amount of costs awarded under order 7 is arrived at as follows:
$90,000 for solicitors costs;
$109,476.17 for disbursements.
14. Exhibits 1 and 3 remain on file in a sealed envelope to which access may not be given without an order of a judge.
| I certify that the preceding twenty-nine [29] numbered paragraphs are a true copy of the Reasons for Judgment of his Honour Associate Justice Mossop. Associate: Date: 10 June 2016 |
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