PERPETUAL TRUSTEE COMPANY LIMITED and MSC - [2011] WASAT 127

JURISDICTION : STATE ADMINISTRATIVE TRIBUNAL

STREAM: HUMAN RIGHTS

ACT: GUARDIANSHIP AND ADMINISTRATION ACT 1990 (WA)

CITATION: PERPETUAL TRUSTEE COMPANY LIMITED and MSC [2011] WASAT 127

MEMBER: JUDGE D R PARRY (DEPUTY PRESIDENT)
MR M ALLEN (SENIOR MEMBER)
MR J MANSVELD (MEMBER)

HEARD: EDITED REASONS DELIVERED ORALLY ON 8 AUGUST 2011

DELIVERED : 8 AUGUST 2011

FILE NO/S: GAA 2219 of 2011

BETWEEN: PERPETUAL TRUSTEE COMPANY LIMITED
Applicant
AND
MSC
Represented Person

Catchwords:

Review of administration order Application for appointment of trustee of court compensation trust as limited administrator for allocation of most of trust money to superannuation for represented person Proposal is to the considerable financial advantage of represented person Whether appointment is in the 'best interests' of the represented person Protective jurisdiction of the court Application refused

Legislation:

Guardianship and Administration Act 1990 (WA), s 4(2)(a), s 80, s 86(1), s 87(1), s 89(3)
Rules of the Supreme Court (WA), Order 70 r 12
Trustees Act 1962 (WA)

Result:

Appointment of limited administrator refused
Proceeding adjourned in order to enable applicant to seek directions from District Court or variation of terms of court compensation trust from District Court or Supreme Court

Category: B

Representation:

Counsel:

Applicant:     Mr C Marshall and Mr P Whitehead
Represented Person       :     Self-represented
Public Trustee               :     Mr M Bowyer

Solicitors:

Applicant:     N/A
Represented Person       :     Self-represented
Public Trustee               :     Public Trustee

Case(s) referred to in decision(s):

Harold Joseph Martin Cadwallender by his next friend Stavroulla Cadwallender v- The Public Trustee [2003] WASC 72
McInnes (by her next friend Gail McInnes) v- Insurance Commission of Western Australia [2011] WADC 17

REASONS FOR DECISION OF THE TRIBUNAL:

Summary of Tribunal's decision

Perpetual Trustee Company Limited applied to become a limited administrator for the estate of a represented person so as to transfer the bulk of trust money that it held as trustee under a compensation court trust to superannuation for the represented person. The evidence indicated that this would be to the considerable financial advantage of the represented person.
Following the hearing, the Tribunal gave an oral decision in which it refused to appoint Perpetual Trustee Company Limited as a limited administrator. The Tribunal was not satisfied that the best interests of the represented person would be served by the making of the order proposed, because the contemplation in the making of the order is that the vast bulk of the trust fund would be removed from the protective jurisdiction of the court, without the court having made any direction to that effect or having amended or varied the terms of the trust. The Tribunal was also not satisfied that the making of the administration order would have utility, as the transfer of the bulk of the trust fund from the protective jurisdiction of the court appears to be inconsistent with the terms of the trust.
The Tribunal's reasons, edited from the transcript, were as follows.

Introduction

This proceeding involves an application brought by Perpetual Trustee Company Limited (Perpetual Trustee) under s 86(1) of the Guardianship and Administration Act 1990 (WA) (GA Act) for review of an administration order concerning the represented person MSC (represented person) granted to HRL on 5 October 2006.
The represented person was born on 8 March 1964 and was involved in a motor vehicle accident on 10 July 2001. It is unnecessary, for the purposes of these reasons, to describe the circumstances of the accident or of its consequences. HRL is the partner and primary care giver for the represented person. The administration order made by the Tribunal in 2006 constituted HRL as the plenary administrator of the estate of the represented person.
Perpetual Trustee has been appointed as the trustee of a court compensation trust for the represented person. The court trust was established by an order of the District Court made on 27 May 2011. Perpetual Trustee has brought this proceeding in order to be appointed as a limited administrator of the represented person with specific functions relating to the allocation of funds from the court trust into superannuation for the benefit of the represented person.
Perpetual Trustee proposes that approximately $5 million out of a trust fund of approximately $5.25 million would be placed into superannuation. The trustee of the superannuation fund into which Perpetual Trustee proposes to allocate the money from the court trust is Perpetual Superannuation Limited, which appears to be a related company to Perpetual Trustee.
In particular, Perpetual Trustee seeks to be appointed limited administrator of the estate of the represented person with the following functions:

a)To call upon funds from the compensation court trust established for the benefit of the represented person for placement into an appropriate superannuation fund for the benefit of the represented person;
b)to act on behalf of the represented person with respect to that superannuation investment;
c)from time to time, to call for funds from the said superannuation investment for the represented person's benefit; and
d)to receive such funds and to apply and expend the sum for the maintenance, necessaries [sic], comforts and benefits of the represented person in such a manner and to such extent as the administrator, having regard to the circumstances and the value of [the] represented person's estate, considers proper and reasonable, including the option of depositing such funds back into the compensation court trust on the represented person's behalf.

There is urgency in the making of this application because the money must be placed into superannuation within 90 days of the receipt of the money by the trustee, that is, on or before 30 August 2011.
On 19 July 2011, Member Jack Mansveld granted Perpetual Trustee leave under s 87(1) of the GA Act to apply for a review of the administration order. On 29 July 2011, the matter was listed for final hearing today.

Financial advantage

It is clear that the represented person would save some considerable amounts in taxation if Perpetual Trustee were to allocate $5 million out of the trust fund into superannuation. The evidence presented by Perpetual Trustee indicates that, because of the ability to earn income on money that would otherwise have to be paid in taxation, by the represented person attaining the age of 82, the fund of available money for his benefit would be approximately $10 million more if the proposed transfer into superannuation were made than would otherwise be the case.
It is plain, therefore, that there would be a financial advantage to the represented person as a result of the proposal put forward by Perpetual Trustee. HRL and the represented person were both present at the hearing today and strongly supported the application made by Perpetual Trustee.

Terms of court compensation trust

The terms of the court compensation trust are set out in the orders made by her Honour Judge Sweeney SC on 27 May 2011 in District Court proceeding 1212 of 2007 brought by the represented person by his next friend, HRL, against Mr Raymond Lindsay Kay. By Order 3(c) made by the District Court on that day, in satisfaction of the judgment, the defendant was to pay:
… To Perpetual Trustee Company Limited the balance of the judgment sum[,] namely[,] the sum of $5,250,000.00 for investment on behalf of the Plaintiff, and Perpetual Trustee Company Limited be empowered at its discretion to apply from time to time the whole or any part of the income from the investment monies with recourse if considered necessary to the capital thereof for the maintenance, welfare and advancement or otherwise for the benefit of the Plaintiff, pending further order of the court.

Consideration of application for appointment of limited administrator

As Mr Michael Bowyer, who appeared on behalf of the Public Trustee, submitted with reference to the proposed transfer of the bulk of the court compensation trust into superannuation by Perpetual Trustee:
…
3.The immediate issue is not whether this financially would be in the best interests of [the represented person]. Rather, the immediate issue is whether it is legally possible.
4.There are three proposed entities:
a)Perpetual Trustee Company Limited (as trustee of the court trust);
b)Perpetual Trustee Company Limited (as limited administrator of [the represented person]); and
c)Perpetual Superannuation Limited (as trustee of the superannuation fund).
They are not the same.
5.The first is subject to the direction and control of the District and Supreme Courts, and could be removed by those courts.
6.The second is subject to the direction of the State Administrative Tribunal, and could be removed by that body. It is also subject to the ongoing supervision of the Public Trustee, under section 80 of the Guardianship and Administration Act 1990.
7.The third is subject to the supervision of various bodies, including the Superannuation Complaints Tribunal.
In the decision of McInnes (by her next friend Gail McInnes) v- Insurance Commission of Western Australia [2011] WADC 17 (McInnes), Wisbey DCJ refused an application by the plaintiff for an order that ANZ Trustees Limited, which was the trustee of a court compensation trust for the benefit of the plaintiff, be authorised to invest a substantial part of the trust fund in a superannuation fund administered by a wholly owned subsidiary of the Australia and New Zealand Banking Group.
At [3] of the judgment, his Honour said the following:
Upon the transfer of the moneys to that entity, the Trustee would cease to be the legal owner and administrator of the funds, although it is said that it would continue to manage the investment of the funds in the superannuation account on the same basis as it manages investment of the balance of the trust fund.
At [5] [7] of the judgment, his Honour observed and held as follows:
… The Trustee's powers of investment are regulated by Pt III of the Trustees Act 1962 and pursuant to s 17 it may invest trust funds in any form of investment. What is proposed here, however, cannot be categorised as an investment, since the Trustee intends to divest itself of the legal estate in the money.
The trustee of the Portfolio One Superannuation Fund is not an entity in respect of which the court would have any control, and it seems that the superannuation trustee would be obliged to disgorge monies to the plaintiff on demand, subject to any statutory restriction.
What is fatal to the application is that upon the Trustee divesting itself of the funds, the court having no relationship with the superannuation trustee, would be deprived of any protective control, contrary to the parens patriae jurisdiction reflected by O 70, and particularly r 12(2) which provides:
'The court may at any time, and from time to time, give directions for the application of the income or of the capital and income of the investment for the maintenance, welfare, advancement or otherwise [for] the benefit of the person under a disability.'
His Honour, therefore, refused the application.
So, too, in this case, it appears that, if Perpetual Trustee's application to be appointed as limited administrator were granted, it intends to divest itself of the legal estate in the vast bulk of the money in the trust fund. Moreover, and of significance, the court would then be deprived of any protective control to give directions for the application of the money transferred to superannuation for the maintenance, welfare, advancement or otherwise for the benefit of the represented person.
The concerns expressed by his Honour Judge Wisbey at [6] of the decision in McInnes, that the superannuation trustee would be obliged to disgorge moneys to the plaintiff on demand subject to any statutory restriction, could arguably be addressed by the terms of the administration order, enabling the administrator to administer any such moneys in the interests of the represented person.
However, while the trust money remains in the superannuation account of the represented person, Perpetual Trustee would not be the legal owner of the money and, most importantly, the court would be deprived of protective control, particularly the ability to give directions in relation to the money in the superannuation account and also the ability to remove the trustee in respect of that money, that is Perpetual Superannuation Limited.
It is also to be noted that in the decision of the Supreme Court in Harold Joseph Martin Cadwallender by his next friend Stavroulla Cadwallender v- The Public Trustee [2003] WASC 72, EM Heenan J said the following, at [40], in relation to the protective powers of the court approving a compromise and establishing a courtappointed trust, particularly as expressed in O 70 r 12(2) of the Rules of the Supreme Court (WA).
That subrule expressly recognises a far reaching continuing jurisdiction by the court in respect of all matters concerning the administration of the trust which, in my view, continues for as long as the trust remains in operation. As it includes a power to gives directions for the application of the capital and income of the trust, including advancements from income and capital, I consider that it also includes a power to terminate the trust in appropriate circumstances.
The 'primary concern' in the administration jurisdiction of the Tribunal is 'the best interests of [the] represented person': s 4(2) of the GA Act. Ordinarily, this consideration would be satisfied where the represented person would be substantially better off financially in consequence of a contemplated administration order.
In this case, however, we are not satisfied that the best interests of the represented person would be served by the making of the order proposed, because the contemplation in the making of the order is that the vast bulk of the trust fund would be removed from the protective jurisdiction of the court, without the court having made any direction to that effect, or having amended or varied the terms of the trust.
Furthermore, an important consideration in this area is also whether the making of an order for administration is necessary and/or whether it has practical utility. We are not satisfied, in the circumstances of this case, that the making of the administration order sought by Perpetual Trustee would have utility, as it contemplates a transfer of the bulk of the trust fund from the protective jurisdiction of the court, which appears to be inconsistent with the terms of the trust.
Perpetual Trustee made three principal submissions in support of its application for the making of a limited administration order. First, it was submitted that the proposed limited appointment and transfer of the bulk of the trust fund to superannuation is not contrary to the terms of the District Court's order because:
… The Orders specifically provide that Perpetual [Trustee] can use its discretion to apply capital from the Funds for [the represented person]'s benefit. Perpetual [Trustee] considers that an advance of capital to place in superannuation is for [the represented person]'s benefit.
However, it is important to recall the actual terms of the order made by the District Court in May 2011. The order empowers Perpetual Trustee:
… at its discretion to apply from time to time the whole or any part of the income from the investment monies with recourse if considered necessary to the capital thereof for the maintenance, welfare and advancement or otherwise for the benefit of the Plaintiff pending further order of the court.
The trustee can only have recourse to the capital if that is 'considered necessary'. The implication from the order is that, if income is not sufficient to provide for a particular necessary amenity or circumstance for the maintenance, welfare, advancement or otherwise for the benefit of the represented person, then there can be recourse to capital. This does not appear to contemplate the proposed transfer to superannuation. Furthermore, while the term 'benefit' is undoubtedly broad, it does not appear, in our view, to contemplate what would be, in effect, the removal of the protective jurisdiction of the court in relation to the vast bulk of the trust fund, unless the court has made a direction or has altered the terms of the trust fund to contemplate that result.
Secondly, Perpetual Trustee submitted that the Perpetual Superannuation Limited is a 'responsible entity'. That is no doubt the case; however, it does not address what Judge Wisbey referred to as the 'fatal' matter in relation to the application in McInnes, namely, that, in his Honour's words:
… the court[,] having no relationship with the superannuation trustee, would be deprived of any protective control …
The protective control of the court through the supervision of the trust is a matter of considerable public importance.
Thirdly, Perpetual Trustee submitted that, during the period of incapacity, the powers and responsibilities of the represented person in relation to the superannuation fund are found with the administrator under the GA Act, and Perpetual Trustee, as the administrator, would act in the represented person's best interests in exercising the powers and responsibilities with respect to the superannuation funds and would call upon those funds for the represented person's benefit.
However, the administrator, like the represented person, were he not under incapacity, would be subject to the terms of the superannuation trust. Subject to the terms of the superannuation trust, the superannuation moneys would be under the control of the superannuation trustee and, most significantly, would be removed from the control of the court.

Conclusion

The result in this case is that, while we accept that the proposed arrangement would be to the significant financial advantage of the represented person, we are not satisfied that it is appropriate to make the order sought at this time.
There was discussion during the course of the hearing today as to what options are available to Perpetual Trustee. One option discussed is an urgent application to the District Court for directions that would authorise the payment of funds from the trust, as proposed, into superannuation. Another option discussed is the making of an application to amend the order constituting the compensation trust. A third option proposed by Mr Bowyer is for the making of an application to the Supreme Court under the Trustees Act 1962 (WA).
We recognise that each of these options has its difficulties, costs and uncertainties. However, it appears that if the contemplated proposal, that is, the payment of moneys into superannuation from the court trust, is to be effected lawfully, then such an application needs to be made urgently.
Mr Bowyer suggested, and we accept, that, rather than dismissing the application, in the unusual circumstances of this case, it is preferable to adjourn the final hearing to a date sufficiently distant to give Perpetual Trustee the greatest opportunity to seek directions or orders from the District Court or Supreme Court, but prior to 30 August 2011.
This would enable the Tribunal to then consider, in light of any directions, amendment of orders or variation of the terms of the trust made by a court, whether to make a limited administration order. The Tribunal is conscious that if the court were to give directions or make an amendment to the terms of the trust, it may impose a requirement for the granting of a limited administration order to Perpetual Trustee. The Tribunal notes that, were it not for the current terms of the court trust, it would appear that the Tribunal would have granted the administration order sought today.

Orders

For these reasons, the Tribunal makes the following orders:
1.Pursuant to s 89(3) of the Guardianship and Administration Act 1990 (WA), time for service of notice of hearing is shortened.
2.The hearing is adjourned to 4.15 pm on Thursday, 25 August 2011.

I certify that this and the preceding [38] paragraphs comprise the reasons for decision of the State Administrative Tribunal.
___________________________________
JUDGE D R PARRY, DEPUTY PRESIDENT