Re L

[2000] NSWSC 721

CITATION:	Re L [2000] NSWSC 721
CURRENT JURISDICTION:	Equity Division Protective List
FILE NUMBER(S):	SC 47/2000
HEARING DATE(S):	11/07/2000
JUDGMENT DATE:	11 July 2000
PARTIES :	The names of parties are suppressed in cases in the Protective List
JUDGMENT OF:	Young J

COUNSEL :	Considered in Private Chambers on the papers
SOLICITORS:	C Poulden (P)
CATCHWORDS:	MENTAL HEALTH [3]- Manager- Appointment- What private managers need to demonstrate.
DECISION:

THE SUPREME COURT

OF NEW SOUTH WALES

EQUITY DIVISION

PROTECTIVE LIST

YOUNG J

Tuesday 11 July 2000

47/2000 - RE L

JUDGMENT

1    HIS HONOUR: L is a single woman currently aged 38. She sustained severe injuries as a result of a motor vehicle accident on 12 July 1997. In due course she settled her claim and received a net sum of $990,000. The settlement was made on 16 March 2000 and on that day the disability pension which L was receiving ceased.

2    The evidence is that L will not be able to claim social security again until 23 July 2021.

3    The settlement funds are currently held in a holding account with the Protective Commissioner.

4    The plaintiff, who is L’s father, seeks a declaration that she is incapable of managing her own affairs. On the evidence that declaration must be made. However, the plaintiff also seeks an order that he and an accountant be appointed joint managers of L’s funds.

5    I have now twice declined to make this order. It has been impressed on the Court that L has no funds currently flowing to her and that urgency is required to have the order made so that funds can start flowing. As to this I would say three things:

(1) the summons was only filed on 5 June 2000, almost three months after the verdict (normally one would expect people to have this sort of application prepared and ready to make even before the verdict is handed down);

(2) the requisition made on 26 June 2000 was not properly answered; and

(3) what needs to be done is to ensure the long term financial security of L and one should not sacrifice short term advantages for long term assurance.

6 The plaintiff seeks private managers for the estate. Under the Protected Estates Act 1983, the Protective Commissioner can be the manager of the estate or private managers can be appointed under the superintendence of the Court. The Protective Commissioner does not receive government funding for his task and the cost of management has to be borne by the user of the Protective Commissioner’s services. This involves a capital and income commission. In recent days, many people involved with persons incapable of managing their affairs have taken the view that the commission is too high and that the Protective Commissioner is restrained from investing money in the most effective way. The second of these problems is currently being addressed. Unfortunately, the more people withdraw from having their estates managed by the Protective Commissioner, the harder it will be to take any steps at all to reduce commission rates. However, this is not a matter which can affect judgment as to what is best for any particular estate.

7    Accordingly, if a responsible member of the incapable person’s family, with the consent of other members of the family and particularly when joined with a person with financial expertise, seeks to be the manager, such an order will, at least at present, usually be made almost as of course.

8    It should be pointed out that financial managers are under the direction of the Court and that the Deputy Registrar spends a considerable portion of her time supervising private managers.

9    This means that the cost of supervision is being shifted from a user pays basis with the Protective Commissioner, to payment out of the Court’s budget. The Court has traditionally provided some superintendence of the management of estates of incapable persons in its Protective List as well as some supervision of what executors and administrators are doing with deceased estates in its Probate List. However, the Court has never had any control over its budget and there are pressures to limit the functions of registry staff to filing and processing of court documents and to minimise the supervisory services currently provided. In addition, the private manager supervisory service is structured on the basis that the majority of estates will be managed by the Protective Commissioner and the more private managers are appointed, the more work is thrown on to the State system.

10    These are the problems. However, in each individual case the Court looks to see what is for the benefit of the incapable person. She is entitled to throw some of the costs of administering her estate on to the public purse if that can legitimately be done, as at present it can be.

11    However, both in the interests of the incapable person and in the interests of minimising later supervision, the Court needs to be satisfied that the managers are able to provide for the incapable person the service she needs.

12    In the case of a relative, the Court must look to see that there are minimal conflicts of interest, or, if conflicts of interest cannot be avoided, that they are properly dealt with. In the case of a private manager who purports to have financial expertise, the Court needs to be satisfied not only of that person’s good fame and character and of his or her ability generally to manage funds, but also that that person has a good conception as to what is required of a fund manager.

13    In the present case, the plaintiff is L’s father. The evidence that was going to be led before the District Court to justify L’s damages claim and which is before this Court, includes a report from Professional Injury Management Pty Ltd as to L’s needs. The report indicates that L has two children, neither of whom live with her, that she is currently living alone in her father’s house which she is intending to buy, that she recently reunited with a boyfriend who is not living with her though visits regularly, and she has a carer who is one of her closest friends. Her carer needs to go shopping with her and help her with laundry and ironing. The report made recommendations that the home be modified by work which would cost approximately $3,000 plus labour.

14    The plaintiff and L give the same address in their affidavits.

15    The Court would need to know what is happening about the purchase of the house, what is the beneficial interest of the plaintiff in the house if any, what his rights are going to be, and to see that there are going to be no substantial conflicts of interest if the plaintiff is to be appointed manager of L’s estate.

16    It is most acceptable that a parent who is the manager of a person who cannot manage her affairs live in the same house rent free, but care needs to be taken that such person is not receiving a real benefit at the expense of the incapable person.

17    Whilst on the matter of the house, the Court normally takes the view that when a person has presented a picture to the District Court of what modifications need to be made for her accommodation, that when she obtains her verdict she will carry out the majority of those improvements.

18    I realise that this may not be the position with people who are capable of managing their affairs, but this Court does not countenance people who have obtained money in the District Court on the basis that certain improvements to their house are absolutely necessary, then not substantially carrying out those improvements with their verdict moneys. At present there is not a skerrick of evidence, despite my requisition of 26 June, as to what is happening with respect to these improvements.

19    I now turn to the position of the financial manager.

20    The initial advice from the financial manager was that the scheme which he had invented for L’s funds would be a very tax effective one involving private superannuation schemes. As to this, two comments could be made; the first is that something that is tax effective is attractive up to a point, but the saving of income tax is not the prime purpose of life. The second is that often tax effective schemes involve high management costs which diminish the net amount received by the client.

21    The Court is not particularly impressed by complicated schemes involving minimisation of income tax. Nor is it particularly impressed, as is becoming more and more of the custom with the appointment of private managers, at receiving 20 or 30 pages from a financial planner downloaded from a computer setting out all sorts of facts and figures and pie charts, but not providing any real information as to what is the bottom line for the client. The present financial plan proffered is in this category, and includes a disclaimer that the recommendations of the report should only be considered current for one month from its date and “after that time you should not act on any of the recommendations without further reference to us”. For a strategy that has to be in place for 21 years, this is hardly of much use though one understands the reason why financial planners include such disclaimers.

22    In the present case, as often happens, the financial planner asked the incapable person herself for input and instructions. By definition such an exercise, whilst necessary as a matter of courtesy, cannot be held to have a large impact on the strategy devised.

23    Doing the best I can with the papers supplied, it would seem that there is to be an investment of $800,000 and that the cost of the investment is to be an initial brokerage of $4,000 and then $4,000 per year. In addition, the manager would charge $150 per hour without any cap.

24    There is little real information as to how much money would be received net each year. The manager’s initial affidavit talked about the investment of a fund of $990,000. There wont be this amount because some amount will be used to buy the house and to effect improvements. One would think that it should be possible to have an investment of a fund of $800,000 which would secure an income for L until at least 2021 and also allow her to have the security of a home. However, the Court needs to be assured that the manager with financial expertise has directed his mind to this particular problem and has produced some outline plan to demonstrate how this can be achieved. The Court, of course, realises that all sorts of market pressures and interest rate changes may affect the future. What has to be established, however, is not only that the manager is a person with the appropriate expertise and probity (and about those two matters I am satisfied in the instant case), but also that he or she has directed his or her mind to the actual issues in this case.

25    Accordingly, I have made the following further requisitions:

“A. How much is to be paid for L’s housing and for what fittings?

B. Provide a simple statement of the proposed investments and the net annual income 2000-2021 as best estimated;

C. Provide an independent expert’s (or the Deputy Registrar’s) view that the statement referred to in B is prima facie acceptable.”

26    Because these sort of problems are occurring in a considerable number of cases, I thought it best to state my reasons at some length so that they can be of guidance not only in this, but also in other cases.

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Last Modified: 09/26/2000