Re Howard (Dec) - [2004] WASC 258

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION: RE HOWARD (DEC); EX PARTE THE PUBLIC TRUSTEE [2004] WASC 258

CORAM: MASTER SANDERSON

HEARD: 25 NOVEMBER 2004

DELIVERED : 25 NOVEMBER 2004

PUBLISHED : 1 DECEMBER 2004

FILE NO/S: CIV 2407 of 2004

MATTER :Section 58 of the Public Trustee Act 1941-1979
and
The Estate of JAMES MARTIN HOWARD
EX PARTE
THE PUBLIC TRUSTEE
Applicant

Catchwords:

Trusts - Money paid to Public Trustee after settlement of action - Person entitled to funds not represented by next friend - Whether trust created - Whether trust subject to O 70 r 12 - Whether Public Trustee entitled to invest proceeds other than in Common Fund

Legislation:

Rules of the Supreme Court 1971 (WA), O 70 r 1, O 70 r 12(1)

Result:

Declaration that trust created
Investment not subject to O 70 r 12

Category: A

Representation:

Counsel:

Applicant: Mr D L Jones

Solicitors:

Applicant: Public Trustee

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

James v Holmes (1862) 45 ER 1266
Taylor v Walawski, unreported; FCt SCt of WA; Library No 8992; 9 August 1981

Case(s) also cited:

Nil

MASTER SANDERSON: This is an application by the Public Trustee for directions. The application is brought under s 58 of the Public Trustee Act. There is no dispute about the facts and they may be shortly stated.
James Martin Howard ("Mr Howard") brought an action claiming damages for personal injuries in the District Court. The action was commenced in 1994 and it was compromised by the parties in terms of a minute of consent judgment, dated September 1997. The judgment pursuant to the minute of consent orders was entered on 26 September 1997 for the sum of $696,875, plus costs to be taxed. The consent order anticipated payment of all amounts recoverable under the Health and Other Services (Compensation) Act 1995 (Cth) from the judgment sum. The judgment then contained the following three clauses:
"(5)The defendant do within the same period pay the plaintiff's solicitors 50% of all amounts paid by or payable by the plaintiff for medical expenses incurred to date which the defendant has not paid to date.
(6)The plaintiff's solicitors do pay the Public Trustee in and for the State of Western Australia the balance of the sums mentioned in paragraphs 4 and 5 after payment of any amount to a third party where such payment has been authorised by the plaintiff.
(7)The defendant do pay the Public Trustee 1.25% of the value of the sum so invested in satisfaction of the Public Trustee's fee thereon."
The Public Trustee was not a party to the proceedings in the District Court and had no input into the orders that were made. The first the Public Trustee knew about the matter was when they were forwarded a copy of the orders and a sum to be invested.
It seems that the solicitor who represented the plaintiff in the District Court proceedings took the view that the plaintiff was capable of issuing instructions in relation to those proceedings but was probably not capable of managing his affairs. Consequently, and presumably on his client's instructions, the judgment sum less proper deductions was paid to the Public Trustee.
The Public Trustee created a share portfolio on behalf of the plaintiff with stockbrokers J B Were. Initially, $303,232 of the judgment sum was invested. During the course of the investment in the share portfolio the funds invested on behalf of the plaintiff had at one stage been increased to $375,003.46. Some of the shares have been sold and as at 19 October 2004 the share portfolio had a value of $277,240.18. During the period the share portfolio operated it produced an income of $197,488.95.
Earlier this year a question arose as to whether the Public Trustee had authority to invest any of the funds received under the compromise of the plaintiff's claim in investments other than the Common Fund. If the funds invested in the share portfolio had been invested in the Common Fund, these funds would have produced an income during the period 13 March 1998 to 22 October 2004 of $101,550.02. All of these facts are taken from an affidavit of Shaun William Conlin, sworn 28 October 2004.
Given the doubt over the power of the Public Trustee to invest the funds, the Public Trustee sought directions. First, it was asked if the trust created pursuant to the District Court orders was subject to O 70 r 12 of the Rules of the Supreme Court 1971. Second, it was asked whether the Public Trustee had the authority to invest part or all of the funds received under the judgment in investments other than the Common Fund.
Order 6 of the minute of consent to judgment directs the plaintiffs to pay the Public Trustee the balance of the judgment sum. Although the orders do not expressly create a trust, the funds paid to the Public Trustee were intended to be applied for the benefit of the plaintiff. In these circumstances the law presumes that a trust was intended, notwithstanding the absence of language expressing such an intent: see James v Holmes (1862) 45 ER 1266. Whilst the terms of the trust are not express, payment of these funds to the Public Trustee would appear to have the same object as a court appointed trust for a person under a disability. It is clear then that a trust has been created for the benefit of the plaintiff and that the trust is to be administered by the Public Trustee.
Order 70 r 12(1) of the Rules of the Supreme Court 1971 is in the following terms:
"12. Control of money recovered
(1)Where ¾
(a)in any proceedings money is recovered by or on behalf of or is adjudged or ordered or agreed to be paid to or for the benefit of a person under disability; or
(b)in any proceedings money paid into court is accepted by or on behalf of a plaintiff who is a person under disability; or
(c)in an application under Rule 11(1) the Court has ordered the payment into court or investment of any moneys relating to a settlement or compromise,
the money shall, unless otherwise ordered by the Court, be paid to the Public Trustee for investment on behalf of the person under disability, and if the Court so orders may be invested by the Public Trustee in investments outside the Common Fund."
Order 70 r 1 defines a "person under disability". It is in the following terms:
" 'person under disability' means ¾
(a)a person who is an infant;
(b)a represented person; or
(c)a person not being a person referred to in paragraphs (a) or (b), who, by reason of mental illness, defect or infirmity, however occasioned, is declared by the Court to be incapable of managing his affairs in respect of any proceedings to which the declaration relates;"
The plaintiff was not an infant, nor a represented person within the definition of the Guardianship and Administration Act in the District Court proceedings. Nor was he represented by a next friend in those proceedings. It follows then, under the provisions of O 70 r 1 that Mr Howard could only become a person under a disability if the Court declared him to be incapable of managing his affairs in respect of any proceedings to which that declaration relates.
In Taylor v Walawski, unreported; FCt SCt of WA; Library No 8992; 9 August 1981, the Full Court of this Court confirmed that a Court cannot make a declaration when entering judgment for a plaintiff that the plaintiff is a person under a disability if the litigation has proceeded without a next friend. It follows then that in this case Mr Howard cannot be described as a person under a disability. Consequently, O 70 has no application.
Once that point is reached it is clear that the Public Trustee's powers to invest funds held by it on behalf of Mr Howard are governed by the provisions of s 40 of the Public Trustees Act. The Public Trustee is not restricted to investments in the Common Fund. It can continue to invest on behalf of Mr Howard in the future as it has done in the past.
I indicated to counsel that I would make declarations which reflect these reasons.