Luke as tutor for Luke v Workers Compensation Nominal Insurer (No 2)

[2010] NSWDC 197

CITATION:	Luke as tutor for Luke v Workers Compensation Nominal Insurer (No 2) [2010] NSWDC 197
HEARING DATE(S):	27 May 2010
JUDGMENT DATE:	18 June 2010
JURISDICTION:	District Court - Civil
JUDGMENT OF:	Sidis DCJ
DECISION:	1) Verdict and judgement for the plaintiff in the sum of $538,483.10 calculated in accordance with Exhibit B on the Funds Management application. 2) The defendant is to pay the plaintiff’s costs on a party/party basis with the exception that: a) in accordance with the orders of Justice Price in the Supreme Court on 7 September 2009 each party is to pay their own costs of the motion dealt with by him on that date; and b) the plaintiff is to pay the defendant’s additional costs occasioned by reason of the commencement of proceedings in the Supreme Court 3) The exhibits are retained. 4) These Orders are stayed to the extent of the component allowed for funds management in the sum of $108,280.00 for 28 days or if appeal proceedings are commenced within that period until further order
CATCHWORDS:	FUNDS MANAGEMENT FEES - Bases for assessment - Appropriate management entity - Period required for management - Likely assets of plaintiff, uninjured, at time of retirement - Interest - Offer made by defendant at mediation - Costs - Final offer of plaintiff at mediation to be assessed by reference to income loss to that date
LEGISLATION CITED:	Workers Compensation Act 1987 Workers Compensation Regulation 2003
CASES CITED:	Willett v Futcher [2005] 221 CLR 627
PARTIES:	Gary Luke by his tutor Matthew Luke (Plaintiff) Workers Compensation Nominal Insurer - A State Government Statutory Authority (Defendant)
FILE NUMBER(S):	2009/00332912 (Previously 274/09)
COUNSEL:	Mr C A W Hart (for the Plaintiff) Mr G Sarginson (for the Defendant)
SOLICITORS:	Bale Boshev Lawyers (for the Plaintiff) Hickson Lawyers (for the Defendant)

JUDGMENT

1 In this matter my reasons were published on 17 February 2010 and the matter adjourned to deal with a number of outstanding issues. There were three issues remaining to be determined. The first related to the amount to be awarded for fund management, the second related to interest and the third, costs.

2 In respect of fund management, the evidence indicated that after payment of costs and disbursements it is estimated that there will be a fund in the amount of about $360,000. This may be increased following the recovery of costs from the defendant.

3 The plaintiff’s son, Matthew Luke, was appointed his financial manager by the New South Wales Guardianship Tribunal on 28 October 2009. He already has in place plans to follow the recommendations concerning investment of the funds made by Andrew Price of Lambourne & Partners Pty Limited, Financial Planners. Those recommendations are set out in annexure B to the affidavit of Mr Matthew Luke of 26 March 2010. Effectively, they comprise a plan that is designed to meet the requirements of the New South Wales Trustee and Guardian as to the filing of tax returns, account keeping and filing of accounts with the Trustee and Guardian.

4 The plan was also designed to ensure that the plaintiff has capital and income to cover his needs for the remainder of his life expectancy. Those needs extend to a period of exclusion from Centrelink benefits of 11 years by which date the plaintiff will be aged 69 and entitled to Aged Pension benefits.

5 The plan is to invest a small amount of the fund in a cash management account and the balance in a superannuation fund that will provide a set annual pension sufficient to meet his living expenses.

6 It is anticipated that the balance of the fund, at the end of 11 year exclusion period, will be about $150,000 and that at the time of the plaintiff’s death, in accordance with the life tables, there will be a 20% residual, or $72,000.

7 The cost of fund management has been estimated by Mr Katos of Furzer Crestani, on the basis proposed by Lambourne & Partners, with oversight by the Trustee and Guardian and on the other bases already referred to.

8 The calculation refers also the fees proposed by Mr Lambourne, which appear to me to be moderate and results in a figure of $98,348, plus a further figure of $9932 in order to meet the fund management costs. The total amount sought by the plaintiff, therefore, is $108,280.

9 The defendant argued a number of alternative bases upon which the allowance for fund management should be calculated and provided figures arrived at by Ms Lindsay of Forensis Accounting. Ms Lindsay’s view was that the fees proposed were excessive. She said that the fees, were the fund to be managed by the Trustee and Guardian, would be about half of that proposed for the initial establishment of the fund by Lambourne & Partners and one-third in the final 12 months.

10 Ms Lindsay’s view was that there were too many layers of management, that is by Lambourne & Partners, various arms of Macquarie Bank, the funds in which the capital was to be invested and the Trustee and Guardian.

11 Ms Lindsay also took issue with the duration over which it was claimed that management would be required. Her position was that the compensation awarded to the plaintiff related to his income loss and therefore management ought to be allowed only until he was likely to retire at the age of 65, on the basis that the fund would be exhausted by that date. In her view, it was unlikely that the plaintiff would save the sum of $289,000 by the age of 65, this being the estimated value of the fund at that stage.

12 She did acknowledge that the award contained a superannuation component of $48,870 but said that if the plaintiff were earning $818 net it would leave little in an average household after expenses for savings.

13 In reaching my conclusions I took into account that this fund will have to last for at least 11 years because of the exclusion period. Further, it is not possible to say what the plaintiff might have done with his income for the balance of his income earning life, except that he expressed an expectation that he would leave some assets for the benefit of his children.

14 At the time of the accident he was single and his children were adults, thus $818 net per week might well have permitted him to increase payments to superannuation to invest in a home or other real estate or shares or other income generating capital assets. I do not accept, therefore, that there was no prospect that he would have assets or other income at the age of 65.

15 I therefore considered it reasonable to allow for fund management for the balance of his life expectancy and for a modest 20% fund to remain at the time when he is expected to die.

16 In respect of the suggested duplication of fees, Ms Lindsay appeared to suggest that various administration fees and fees charged by underlying investment funds could be avoided if the fund was managed by the New South Wales Trustee and Guardian. I saw some problems with this proposition.

17 The first was the High Court specifically ruled that fees of this nature were properly included in calculating the reasonable costs of fund management in Willett v Futcher [2005] 221 CLR 627.

18 Secondly, there was no evidence from the New South Wales Trustee and Guardian concerning the amount of its fee and what its fee would include. I have assumed that the Trustee and Guardian would invest funds in some fashion and that those investments would attract administration and management charges of the underlying investment funds, pension managers or cash management providers.

19 I am, therefore, not satisfied that it has been established that there would be any substantial saving were the monies to be placed with the Trustee and Guardian.

20 The cost of managing the sum allowed for funds management appeared to me to be a rational claim. The sum for fund management was awarded because the plaintiff cannot manage his financial affairs. It is as compensatory in nature as the award for the loss of income earning capacity and it needs to be managed in a similar fashion.

21 A number of other questions that were raised by Ms Lindsay were dealt with in the revision undertaken by Mr Katos in his report of 30 April 2010, or not pursued by the defendant and they have, therefore, not been considered further.

22 I therefore allow for funds management the sum calculated by Mr Katos of $108,280.

23 Interest was claimed by the plaintiff in the sum of $23,924.35. That sum was mathematically agreed by the defendant. The award of interest is permissible if the conditions contained in section 151M of the Workers Compensation Act 1987 were met. Those conditions require that the defendant be provided with sufficient information and a reasonable period of time within which to make an offer but failed to do so, or that the defendant was provided with further information and a further reasonable period of time to make a revised offer but failed to do so, or that the defendant made an offer and the amount awarded by the court, excluding interest, was 20% higher than that offered by the defendant and the amount offered was unreasonable having regard to the information available to the defendant at the time the offer was made. Any such offer was required to be in writing.

24 The plaintiff said that no written offer was received. The parties, however, did attend a mediation conference on 25 September 2008 at which the defendant offered $330,000 clear of compensation paid plus costs.

25 The amount awarded, even if interest and costs of funds management were disregarded, was more than 20% greater than $330,000. It was not suggested by the defendant that this offer was made at a time when information available to it was insufficient.

26 I find, therefore, that the plaintiff is entitled to interest on the sum claimed.

27 In respect of costs, regulation 89 of the Workers Compensation Regulation 2003 provides that an insurer is to pay a claimant’s costs on a party and party basis if the claimant obtains an order or judgment on the claim that is no less favourable than the final offer made in mediation as certified by the mediator.

28 Nothing is said in this regulation about excluding an interest component. I have, therefore, calculated the sum involved on the basis that it is to be included in determining the amount that was the subject of the order of the court or payment on the claim.

29 The plaintiff’s final offer was certified to be $460,000, clear of compensation already paid, plus the costs of application for management of the estate by the Office of the Protective Commissioner, now the New South Wales Trustee and Guardian, plus the cost of management of the fund by the New South Wales Trustee and Guardian.

30 The amount awarded was calculated by the parties to be $407,378.70.

31 Having regard to the finding that the plaintiff was effectively unemployable, the figure for the income loss component incorporated in that offer would vary only slightly between the date of mediation and the date of judgment. It was suggested, therefore, that to calculate the value of the claimant’s offer I should deduct compensation paid to the date of the offer made at mediation, being $90,753.36, rather than compensation paid to the date of judgment of $124,691.48. I consider this a valid proposition and thus deducting from the gross sum $532,680 and interest of $23,924.35, amounting to $555,994.53, the sum of $90,753.36, I arrive at a figure of $465,241.70; in other words, a figure no less successful than the terms of the final offer, regardless of legal costs and disbursements and the costs of fund management.

32 There remains to be dealt with the costs of the Supreme Court proceedings. These proceedings were initially commenced in the Common Law Division of the Supreme Court. A motion relating to fund management was dealt with by his Honour Judge Price on 7 September 2009 and dismissed. Justice Price ordered that the plaintiff not have the costs of that motion. He also reserved on the question of the additional cost incurred as a result of the commencement of proceedings in the Supreme Court. No reason was put forward for denying the defendant the right to recover the costs wasted by that exercise.

33 The result is that the final orders in this matter are as follows:

1. Verdict and judgment for the plaintiff in the sum of $538,483.10, calculated in accordance with exhibit B on the fund management application.

2. The defendant is to pay the plaintiff’s costs of the proceedings on a party and party basis, with the exception that in accordance with the order of Justice Price in the Supreme Court on 7 September 2009, each party is to pay their own costs of the motion dealt with by him on that date and the plaintiff is to pay the additional costs incurred by the defendant by reason of the commencement of the proceedings in the Supreme Court.

3. The exhibits are retained.

4. The orders are stayed to the extent of the component allowed for funds management in the sum of $108,280 for twenty-eight days, or if appeal proceedings are commenced within that period, until further order.

5. The application to stay the costs order is rejected.

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