McElhinney v Ambulance Service of NSW
[2021] NSWSC 239
•17 March 2021
|
New South Wales |
Case Name: | McElhinney v Ambulance Service of NSW |
Medium Neutral Citation: | [2021] NSWSC 239 |
Hearing Date(s): | 05 March 2021 |
Date of Orders: | 17 March 2021 |
Decision Date: | 17 March 2021 |
Jurisdiction: | Common Law |
Before: | Harrison J |
Decision: | See [16] |
Catchwords: | APPOINTMENT OF CORPORATE TRUSTEE – whether money paid into Court for plaintiff should now be paid to corporate trustee rather than NSW Trustee & Guardian – where plaintiff argues fees of corporate trustee will be considerably less than those of NSW Trustee & Guardian – where consent has been provided by corporate trustee to act as manager of estate of plaintiff under order and direction of NSW Trustee & Guardian – where comparison of fees and investment is provided – power of court to appoint corporate trustee not in doubt – where known sum available for investment – where need to avoid unnecessary delay in appointment of corporate trustee – where Court proposes that an actuary or similar expert provide a professional opinion on the appropriateness of preferring the corporate trustee |
Legislation Cited: | Civil Procedure Act 2005 (NSW) |
Cases Cited: | Dunning v NSW Trustee & Guardian [2015] NSWSC 2095 |
Category: | Procedural rulings |
Parties: | Sophie McElhinney, by her litigation guardian, Corey McElhinney (Plaintiff) |
Representation: | Counsel: |
File Number(s): | 2016/281560 |
Publication Restriction: | Nil |
JUDGMENT
HIS HONOUR: His Honour Wright J approved a settlement of these proceedings on 23 October 2020: see McElhinney by her tutor McElhinney v Ambulance Service of NSW [2020] NSWSC 1471. The sum referred to in the consent judgment less authorised deductions was thereafter paid into Court.
Section 77 of the Civil Procedure Act 2005 is relevantly in these terms:
77 Payment of money recovered on behalf of person under legal incapacity
(1) This section applies to money recovered in any proceedings on behalf of any of the following persons--
(a) a person under legal incapacity,
(b)…
(c)…
pursuant to a compromise, settlement, judgment or order in any proceedings.
(2) All money recovered on behalf of a person referred to in subsection (1) is to be paid into court.
(3) Despite subsection (2), the court may order that the whole or any part of such money not be paid into court but be paid instead to such person as the court may direct, including--
(a) if the person is a minor, to the NSW Trustee and Guardian, or
(b) if the person is a protected person, to the manager of the protected person's estate.
(4) Money paid into court under subsection (2) is to be paid to such person as the court may direct, including--
(a) if the person is a minor, to the NSW Trustee and Guardian, or
(b) if the person is a protected person, to the manager of the protected person's estate.
The plaintiff, by her tutor, has now applied for an order directing that the money paid into Court for the plaintiff now be paid to Equity Trustees Wealth Services Limited as trustee instead of the NSW Trustee & Guardian. The principal, but not the only, reason for wanting this appointment is the anticipation that the fees of the former will be considerably less than the fees of the latter, thereby assisting in the preservation and maintenance of the fund for longer.
The application is supported by an affidavit from Craig Raymond Stubbs made on 12 October 2020. Mr Stubbs is a financial adviser employed by AMP Advice, described by him as a specialist advice and investment management firm. Mr Stubbs is not employed by Equity Trustees Wealth Services Limited. Mr Stubbs deposes to the fees that AMP Advice would charge in the event that Equity Trustees Wealth Services Limited were appointed as the plaintiff’s trustee. He does not refer to the fees that Equity Trustees Wealth Services Limited would charge if so appointed. It is not clear to me whether Equity Trustees Wealth Services Limited in fact charges fees in addition to those charged by AMP Advice.
I have also been provided with an affidavit made on 20 October 2020 by Brielle Straney, the plaintiff’s solicitor. Ms Straney’s affidavit (in almost identical terms to paragraphs 22 and 23 of her 9 October 2020 affidavit) includes the following:
“5. I have reviewed the available documentation from NSW Trustee and Guardian in relation to its fees and have calculated what I think to be the likely fees chargeable. These come to a total of $1,608,607.41.
6. Accordingly, I believe the fees chargeable by NSW Trustee and Guardian will exceed those proposed by the private trustee, Equity Trustees Wealth Services Limited, which I have been advised are expected to total approximately $1,147,000.00.”
The plaintiff’s tutor, Corey John McElhinney, made an affidavit on 9 October 2020 in which he said:
“13. I have considered the advantages and disadvantages of using a private trustee as opposed to the public trustee and prefer the option of Equity Trustees Wealth Services Limited over the NSW Trustee and Guardian.”
Mr McElhinney’s affidavit does not provide material or supporting documentation that explains his preference. I am aware, however, that Mr McElhinney has had a two hour meeting with Mr Stubbs and Susan Barrett, the Client Relationship Manager at Equity Trustees Wealth Services Limited. Ms Barrett has sworn an affidavit dated 12 October 2020. At the risk of including too much information, the following matters from Ms Barrett’s affidavit should be noted:
“Equity Trustees
5. Equity Trustees is a licensed Trustee Company under the terms of the Corporations Act 2001 (Cth).
6. Equity Trustees is one of Australia’s leading private trustee companies, with over 130 years’ experience in managing its clients’ individual needs. It has over $5.5 billion in funds under administration for approximately 3,000 private clients and beneficiaries of a variety of trusts. Equity Trustees manages approximately $345 million on behalf of 150 clients who are under a legal disability.
7. Equity Trustees acknowledges that the damages awarded by this Court are required to provide for the care of the Plaintiff (Sophie) during her lifetime. As an independent and impartial professional body, Equity Trustees is able to provide personalised service to its clients and their family and carers on an ongoing basis.
8. As trustee, Equity Trustees takes control and custody of the assets of the trust. Trust assets are recorded separately and distinctly from assets of Equity Trustees and any other person or trust.
9. Equity Trustees is regulated by the Australian Securities and Investments Commission (ASIC).
10. Equity Trustees holds all the relevant licences and approvals to conduct its trustee, custody and administration activities in accordance with the applicable legislation. In addition, Equity Trustees complies with the policies and guidelines issued by ASIC when providing services to its clients.
Application to appoint Equity Trustees
11. I am informed and believe that Corey McElhinney (Corey) has or will make an application to have Equity Trustees appointed as manager of Sophie’s estate, if this Court sees fit to so appoint it, to act subject to the orders and direction of the NSW Trustee and Guardian (NSWTG).
12. Equity Trustees consents to act as manager of the estate, if so appointed by this Court.
The functions of Equity Trustees as financial manager
13. In the event that Equity Trustees is appointed manager of Sophie’s estate, I will be allocated as the [sic] Sophie’s dedicated Client Relationship Manager. I will be responsible for managing the day-to-day administration of Sophie’s account, including:
(a) payment of regular and ad-hoc expenses;
(b) remittances to bank accounts to cover personal expenditure such as food and clothing;
(c) recording and reporting of all transactions to NSWTG;
(d) if necessary, preparing and lodging Sophie’s tax returns;
(e) ongoing liaison with health care professionals and medical experts, as required;
(f) dealing and liaising with Sophie’s family or carers with purchases of residential real estate or other significant expenses;
(g) requiring and obtaining regular Occupational Therapist reports; and
(h) maintaining regular contact with Sophie’s family and her carers.
Equity Trustees and AMP Advice
14. When exercising its power of investment, Equity Trustee’s has and will have regard to the ‘Prudent Person’ principles set out in section 14A of the Trustee Act 1925 (NSW).
15. The relationship between AMP Advice and Equity Trustees in respect of the management of the estate, assuming the Court makes the orders as sought, is as follows:
(a) Equity Trustees will act as manager of Sophie’s estate.
(b) Equity Trustees will engage AMP Advice to provide financial advice in respect of Sophie’s damages.
(c) Equity Trustees retains control of the investment process and monitors the investment performance on an ongoing basis.
(d) AMP Advice will provide ongoing financial advice as to the investment of Sophie’s damages.
16. No remuneration is paid to AMP Advice or Equity Trustees upon referral of business by the other.
…
Investment Summary
19. In the event that Equity Trustees is appointed manager of Sophie’s estate, Equity Trustees will engage AMP Advice to provide financial advice and invest the damages received by Sophie, net of costs, disbursements and any statutory repayments and after allowing for immediate expenditure. The investment strategy proposed by AMP advice will:
(a) take into account Sophie’s financial circumstances and needs;
(b) include an appropriate asset allocation;
(c) be flexible so as to change in line with Sophie’s circumstances and to provide an appropriate balance between liquidity and income in the short term and capital growth in the long term; and
(d) meet the requirements of Section 14C of the Trustee Act 1925 (NSW).
Fees
20. The fees that will be charged by Equity Trustees, AMP Advice, and any investment related costs are set out in Table 1. The fees are based on an assumed investment of $4,500,000. All fees include GST where applicable.
21. Equity Trustees charge an annual management fee which covers the management of the trustee duties as set out at paragraph 13.
22. The fees that will be charged by AMP Advice are addressed in the affidavit of Craig Stubbs. Equity Trustees works with financial advisers other than AMP Advice and considers AMP Advice fees are reasonable.
Table 1
| Fee Type | Fee (inclusive of GST) |
| Equity Trustees | |
| Establishment fee | Nil |
| Ongoing management fee | First $1m – 0.66% pa Next $4m – 0.55% pa Above $5m – 0.44% pa Minimum fee of $5,500 pa |
| AMP Advice | |
| Initial advice and account set up fee | $8,590 |
| Ongoing advice fee | $7,750 pa (minimum fee of $4,055) |
| Investment Related Costs | |
| Investment management fee | 0.41% pa |
| Administration fee (incl. platform and superannuation trustee fee where applicable) | 0.10% pa |
23. In addition, the NSW Trustee and Guardian will charge a one-off establishment fee and ongoing administration and account checking fees.
24. The only payment or consideration received by Equity Trustees in respect of the management of Sophie’s estate will be by way of remuneration disclosed in this affidavit.
25. Equity Trustees will not receive any payment or other consideration from any third party as a result of the investment of Sophie’s estate in any financial product. Equity Trustees undertakes that if it were to receive any such payment or other consideration, it will be accounted for to Sophie’s estate.”
Although not presently relevant, I have also been provided with a consent executed by Equity Trustees Wealth Services Limited to act as manager of the estate of Sophie McElhinney under the order and direction of the NSW Trustee & Guardian pursuant to Chapter 4 of the NSW Trustee and Guardian Act 2009 if so appointed.
Finally, the application is supported by an affidavit of Ms Straney affirmed on 2 March 2021. That affidavit annexes an email received by her from Angela Ehsani on 2 November 2020. Ms Ehsani is the National Manager – Law Sector for AMP Advice. She has provided a schedule containing a comparison of the fees that would be charged by AMP Advice and those that she anticipates would be charged by the NSW Trustee & Guardian on an invested corpus of $4,750,000 held on trust for the plaintiff.
Disposition
A comparison between the relative benefits of investment with a public institution and a private corporate trustee is regularly made in proceedings in which the quantum of a plaintiff’s claim for damages is in issue. Competing submissions in such cases are directed to the assessment of the likely or probable longevity of a fund, depending on investment returns and fee structures of the proposed trustees: see, for example, Richards v Gray [2013] NSWCA 402; Hulanicki (bhnf Hulanicki) v Walton [2014] ACTSC 17.
The power of the Court to appoint a corporate trustee cannot now be doubted. The matter was considered in an analogous setting by Brereton J in Dunning v NSW Trustee & Guardian [2015] NSWSC 2095 as follows:
“[21] The starting point for considering how these funds can be dealt with and who has jurisdiction in that respect must be Civil Procedure Act, s 77. It was always apparent that the moneys were paid into court in conformity with the Tribunal's order pursuant to s 77(2). The court referred to in s 77(4) is the court into which the money is paid under subsection (2), and not some other court. The effect of s 77(4) is to give that court power to make directions as to the payment out of court of the moneys paid in. When read in conjunction with ss 78 and 79, the intent is that the moneys ordinarily be paid out, in the case of a minor to the NSW Trustee to be held on trust and for the benefit of the minor, and in the case of a protected person, to the manager of the protected person's estate to be held and applied by the manager as part of that estate [s 79]. But the court in question can make an order under subsection (4) that the money be paid to persons other than the NSW Trustee (in the case of a minor) or a manager (in the case of a protected person).
[22] Although the moneys have been paid to the NSW Trustee pursuant to UCPR, r 41.7, they remain ‘money paid into Court’ under s 77(4). In my view, an application could have been made to the Tribunal for a direction under s 77(4) that the money be paid out to [the plaintiff], and that would probably have been the preferable course, since plain statutory provision is made in that respect. But that is not the only available course. Civil Procedure Act, s 77, does not appear (at least in this respect) to have been the subject of judicial consideration in this State. However, similar provisions have been considered in other Australian jurisdictions, and have consistently been held to be procedural in character, and not to affect the inherent jurisdiction of the Supreme Court to make orders dealing with moneys paid into any court by way of satisfaction of a damages award in favour of a mentally infirm person [Smith v Reynolds [1989] VR 309 (Kaye J); Morris v Zanki (1997) 18 WAR 260 (Full Court); Jones v Moylan (1997) 18 WAR 492 (Full Court); Singh (by her next friend Singh) v Calvary Hospital ACT Inc (No 2) (2009) 3 ACTLR 247; (2009) 166 ACTR 78; (2009) 3 ASTLR 50; [2009] ACTSC 57; Diver v Diver [2007] VSC 146; (2007) 16 VR 318; Dickson v Australian Associated Motor Insurers Ltd [2010] QSC 69; [2011] 1 Qd R 214 (Mullins J)]. In the light of those authorities and their analysis of equivalent provisions, the proper construction and application of s 77(3) and (4) is that those sections confer on the other courts to which the Civil Procedure Act applies an element of this Court's parens patriae jurisdiction to deal with funds paid into court or recovered on behalf of an incapable person; but they do so without affecting or detracting from this court's inherent protective jurisdiction. Thus, if this Court were satisfied that [the plaintiff] were an incapable person, it could appoint a manager of the funds that had been recovered for his benefit, notwithstanding that the funds were paid into another court.
[23] A question arises whether the jurisdiction can be exercised, in circumstances where I am not only not satisfied that he is now an incapable person, but am affirmatively satisfied on the evidence now tendered that he is not and that he has the capacity and competence to resume full responsibility for management of his affairs. The touchstone of the jurisdiction is the need of an incapable person for protection. In the statutory jurisdiction, it is clear that if the court, having made an order for the management of a person's estate, was subsequently persuaded that a manager was no longer required, the orders can be revoked and consequential orders made for the disbursement of estate [NSW Trustee and Guardian Act, s 86]. Even if the Court were satisfied that [the plaintiff] was incapable, it could nonetheless decide that some of the moneys could be paid to him rather than to a manager.
[24] In my view, it is a necessary incident of the protective jurisdiction that if the circumstances that once required protective measures no longer obtain, the court must be able to make consequential orders for the vacation of those measures. If this court is satisfied that moneys paid into court for the benefit of a person who was at that time incapable but is no longer incapable, then it must be able to order that the moneys be paid to him personally. This view is consistent with that expressed by Lindsay J in H v H [2015] NSWSC 837 (particularly at [6]), and with the course adopted by his Honour in CJ v AKJ [2015] NSWSC 498. In the former case, his Honour, in the course of explaining the relationship between protective proceedings and common law proceedings for recovery of damages, said (at [5]):
‘Absent satisfaction that the person is indeed incapable of managing his or her affairs, and that there is a real need for and utility in the appointment of a protected estate manager, the court may decline to make a protective order, instead simply ordering that moneys paid into court be paid out to him or her personally’.”
In Morris v Zanki bhnf Zanki (1997) 18 WAR 260, a decision of the Full Court of the Western Australian Supreme Court to which Brereton J referred, albeit dealing with a different statutory regime, the issue of the choice between public and private trustees was considered in the context of an appeal where the measure of damages awarded to a plaintiff under a legal disability was in issue. The Court said this at [42] and [43]:
“In our opinion it is appropriate to start from the position that there is a pre-disposition towards the Public Trustee. In Wood v Public Trustee (1995) 14 WAR 251 at 256-57 Owen J set out some of those reasons by reference to the decisions in Phillips v Munro (1957) StR Qd 427 at 430 and Payne v Egan (1967) 86 WN (Pt1) (NSW) 64 at 68. Briefly they are, the role of the Crown as parens patriae, the fact that the Public Trustee is a statutory office holder established specifically to administer estates that require protection and the existence of flexibility within schemes for disabled persons.
However, it is no more than a pre-disposition. Counsel for the respondent submitted that as the duty had its roots in the ancient protective role of the Crown (a proposition that we accept) the discretion was fiduciary in character and could not be fettered by a rule such as O70 r12 construed in this way. We do not think that is correct. The court has a duty to consider the future management of the verdict moneys and it has a discretion. The governing consideration is ‘what is best to be done for the [person under the disability]’. The discretion must be exercised judicially. It cannot be determined arbitrarily. Where the court is asked to exercise the power to place funds with a private trustee rather than the Public Trustee the judge must examine all of the circumstances and decide what is in the best interests of the person for whose benefit the funds are to be held. This will, of necessity, require a consideration of available options and alternatives. But this is not to say that a pre-disposition towards the Public Trustee is an impermissible fetter on the discretion. It serves a number of purposes. It indicates that the onus is on the person seeking the exercise of the discretion in his or her favour to establish grounds on which the order should be made. It means that if no application is made or if no good reason is shown for preferring a private trustee, the Public Trustee will assume the role. We have chosen the adjective ‘good’ (in relation to the reasons that are advanced in support of the application) quite deliberately. We would avoid other possible descriptions such as ‘cogent’ or ‘special’ or ‘exceptional’.”
Ms Ehsani’s schedule indicates that the comparison she has provided may change “depending on the actual investment amount”. This was one issue that concerned Wright J in these proceedings when approving the settlement but declining, clearly for the time being, to deal with the appointment of Equity Trustees Wealth Services Limited. His Honour said this at [22]:
“[22] In these circumstances and in order not to delay the approval and making of orders in this matter, it appears to me to be preferable to make an order in accordance with the original form of par 5 of the proposed consent judgment at this time rather than to make an order under s 77 of the Civil Procedure Act for payment of the ‘Judgment Sum’ less deductions to Equity Trustees to be held in trust while there is some confusion as to the precise arrangements to which Equity Trustees are consenting and as to the amount of fees that might be charged. An application can be made for an appropriate order under s 77(4) once those matters have been clarified and the relevant deductions have been made, as envisaged in the original form of the consent judgment.”
In the present case, the schedule provided by Ms Ehsani is unfortunately not sufficiently detailed for me to be able to understand or assess where the balance lies. I do not have a clear appreciation of the likely progress of the settled fund over time having regard to the respective fee structures and investment philosophies. I would therefore be assisted by the provision of an updated schedule with calculations made upon the known sum now available for investment. Additionally, although the terms of the trust are undoubtedly contained in a deed in current use, I am presently not aware of the form of any proposed trust deed or the extent to which its terms differ in any significant and relevant way from those administered by the NSW Trustee & Guardian.
However, I am mindful of the fact that delay in the appointment of a trustee will itself mean that the plaintiff is not earning income and that that circumstance is to be avoided as far as possible. Accordingly, without seeking to abdicate my responsibility to determine the ultimate issue, but bearing in mind the role played by suitably qualified experts in providing opinions to assist the Court to make such decisions, the provision of such an opinion may be of considerable assistance to me in reaching a quick and cheap decision. I do not have in mind anything particularly lengthy or expensive to produce. I anticipate that I would be able confidently to proceed to finalise the matter with the benefit of an actuary or similar expert expressing his or her professional opinion about whether there is good reason in the particular circumstances of this case to prefer Equity Trustees Wealth Services Limited as the trustee of the plaintiff’s damages. I would not anticipate there to be a need to hear from the parties further if the opinion were expressed in unambiguous terms.
In the anticipation that the proposed course is suitable to the parties, I will reserve further consideration of the application, granting liberty to restore the matter for directions at some convenient time if that becomes necessary. If I am to be provided with an opinion of the type I have mentioned, the plaintiff should also furnish my Associate with a draft minute of the final orders for which she contends.
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