Shannon Jayne Coffey (by her next friend the Public Trustee) v McCarthy - [2015] WADC 114

JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
IN CIVIL

LOCATION: PERTH

CITATION: SHANNON JAYNE COFFEY (by her next friend the PUBLIC TRUSTEE) -v- MCCARTHY [2015] WADC 114

CORAM: MCCANN DCJ

HEARD: 18 SEPTEMBER 2015

DELIVERED : 18 SEPTEMBER 2015

FILE NO/S: CIV 3292 of 2012

BETWEEN: SHANNON JAYNE COFFEY (by her next friend the PUBLIC TRUSTEE)
Plaintiff
AND
RUSSELL SCOTT MCCARTHY
Defendant

Catchwords:

Damages - Catastrophic personal injuries - Compromise - Observations on damages for fees and expenses of a court appointed trustee - Observations on respective roles of the trustee and plaintiff's legal guardian

Legislation:

Nil

Result:

Leave to compromise given
Judgment entered for the plaintiff for $8,588,406
Perpetual Trustee Ltd appointed as trustee of the fund of damages
Directions made

Representation:

Counsel:

Plaintiff: Mr J R Brooksby
Defendant: Mr D M G Burton

Solicitors:

Plaintiff: Donna Percy & Co
Defendant: SRB Legal

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

Nominal Defendant v Gardikiotis [1996] HCA 53; (1996) 186 CLR 49
Sosa v Carter [1978] WAR 123
Willett v Futcher [2005] HCA 47; (2005) 221 CLR 627

MCCANN DCJ:

(Reasons given orally, typed from the transcript and edited [with citations and intercalations.])
I have before me an application for leave to compromise a personal injury claim in respect of a motor vehicle accident which occurred on 10 August 2011. Liability has not been admitted by the Insurance Commission of Western Australia who stand in the shoes of the defendant.
The facts are that two motor vehicle accidents occurred on 10 August 2011.
The plaintiff was a passenger in vehicle 1, travelling east in Pearl Parade, Scarborough. Vehicle 1 collided with vehicle 2, which was parked on the verge of Pearl Parade. This is the first motor vehicle accident. It was caused by, amongst other things, the driver of vehicle number 1 being blinded or dazzled by sunshine coming from the east which affected visibility eastwards.
The plaintiff's claim arises from the second motor vehicle accident. The defendant drove vehicle 3 eastwards along Pearl Parade and came to the scene of the first motor vehicle accident. By this stage the plaintiff had alighted from vehicle 1 and walked around the back of that vehicle and onto the carriageway itself; in other words, onto Pearl Parade, in order to inspect damage to vehicle 1.
Obviously, she placed herself in clear danger. She had her back to vehicle 3. The driver of vehicle 3 would have suffered from the same visual impairments as the driver of vehicle 1, and she was on the road directly where she could expect to be hit.
The driver of vehicle 3, the defendant, hit the plaintiff without having seen any sign of her at all. The plaintiff suffered catastrophic leg injuries and head fractures. She now has significant residual head injuries and partial paralysis. She needs 24‑hour care and has very limited physical functionality, and is intellectually impaired as well.
Moving to the details of the settlement.
Liability has been agreed on the basis that both the plaintiff and the defendant were negligent, and that 90% of the responsibility should be apportioned to the defendant, 10% to the plaintiff for her contributory negligence.
Quantum has been agreed at $8 million, not inclusive of fund management fees. I say 'agreed' for the purposes of compromise, remembering liability was in issue. So the offer, not including fund management fees, is $7.2 million.
The offer in respect of fund management fee is $1,388,406, and that also recognises a 10% reduction for contributory negligence.
The offer also includes payment of 100% of all special damages with costs to be assessed in respect of a catastrophic injury.
The plaintiff under the auspices of her guardian (the Public Trustee) has accepted that offer.
The application falls to be considered pursuant to O 70 r 10 of the Rules of the Supreme Court 1971. The court must be satisfied that the settlement will benefit the plaintiff and that all facts and issues have been properly considered. The court will be slow to disagree with the settlement and counsel's opinion in support, because to do otherwise could push the plaintiff to a risk of litigation which the court cannot underwrite.
The court needs to be satisfied that the plaintiff's guardian understands the above and all relevant factors and approves the compromise. (Amongst other authorities, Sosa v Carter [1978] WAR 123 supports all of the above).
I am satisfied that it is in the plaintiff's interests, and that all relevant requirements have been met, and that the compromise should be approved.
In particular I have read the papers and counsel's opinions. The compromise was negotiated at length and in detail on an item‑by‑item basis, and all of it was supported by evidence.
Counsel (Mr Brooksby's) opinions deal with the compromise on an item‑by‑item basis. The opinions are very thorough and, in effect and in substance, counsel suggests that the defendant's, in other words, the Insurance Commission of Western Australia's, position on each and every head of damage or line item is reasonable and in many instances generous. I cannot see any basis to query or contradict counsel's views
On the matter of contributory negligence, in my opinion the offer of 10% apportionment to the plaintiff made by the Insurance Commission on the defendant's behalf is very reasonable indeed. The plaintiff placed herself in a very dangerous position which was not necessary and not unlike that which had caused the first motor vehicle accident.
This case can be distinguished from cases in which the plaintiff was hit crossing the road; in other words, the crossing‑the‑road cases. That kind of behaviour by a pedestrian is always a possibility which drivers must be on the lookout for.
In this case the plaintiff was walking and/or standing stationary along the road in the same direction as the defendant. She placed herself at a risk which was significantly less foreseeable than that which would normally apply; in other words, the risk was greater to her and less foreseeable to the defendant because of what she was doing compared to the crossing‑the‑road cases.
In my view there would be a very significant risk that any apportionment for contributory negligence at trial would be over 10%.
Moving on to quantum, I cannot fault or query counsel's analysis. In many cases favourable assumptions have been made by the defendant and possible adverse contingencies ignored.
Future attendant care is the biggest head of damage. It is common ground that this will be required for the plaintiff 24 hours a day, seven days a week for the rest of her life. The parties have proceeded on a life expectancy of 88 years; in other words, that she will live until 88 years of age.
The defendant and independent counsel have carefully weighed in the balance the plaintiff's reasonable needs as opposed to her ideal requirements. No reasonable cost has been overlooked, but objection has been correctly raised in instances where the likely benefits of proposed expenditure are likely to be slight, unnecessary or speculative. The plaintiff's figures are on the high side but approach those of the defendant and allowance is made for some quite reasonable contingencies.
In Mr Brooksby's opinion the offer for this item, $5,622,500, is within the range which could be awarded at trial. I see no reason to disagree with that. In other words, it is his opinion that that component is reasonable and in the plaintiff's interests.
The next largest head of damage is for fund management expenses. There have been two quotes obtained. The Public Trustee has quoted $1,798,347 to manage the plaintiff's trust for her life expectancy.
A quote has been obtained from Perpetual Trustees for $1,388,406, which may include significant ancillary fees. Some of the ancillary fees which might come into play here are what are called MERs which relate to secondary or indirect charges paid by people who have the day‑to‑day money under management.
The offer coincidentally is $1,388,406, which is exactly the same – or more or less exactly the same as Perpetual's quote, which makes me wonder whether or not it has been reduced by 10% at all for contributory negligence.
Two questions arise; first of all, who should the trustee be, and secondly, is the compromise enough, i.e., is it the sort of thing that the court can allow?
If the Public Trustee is appointed to manage the money – and this, of course, is a separate trust from that which is imposed on the Public Trustee at the moment pursuant to his legal guardianship – the agreed damages will be too low if, over the life of the trust, the costs assessed in their present‑day terms come to what the Public Trustee estimates, namely $1,798,347. In other words, eventually there would be an impost on the corpus of the trust, or to put it slightly differently, the present‑day value of the trust would be less than what it would need to be.
There are two ways of dealing with this. First, to order that Perpetual Trustees have the management of the funds but the Public Trustee remain as guardian, which, of course, always leaves open the possibility of someone else being appointed guardian. It matters not really. There just needs to be someone in law looking after the interests of the plaintiff, communicating them to whoever has the money, and giving legal discharges as and when required for receipts.
The other alternative is to appoint the Public Trustee [to manage the funds] and hope that in the fullness of time for various reasons, all of which can be imagined or speculated upon, or perhaps even foreseen if things change, the costs come in less than the Public Trustee currently anticipates that office will charge.
Three sound points have been made by counsel.
First, the plaintiff's day‑to‑day carer is her mother, Linda Hinwood. She would prefer Perpetual Trustees to have the day‑to‑day running of the money. Her wishes are important, but ultimately it is for the Public Trustee or whoever is the guardian under the Guardianship Act from time to time to make all decisions on behalf of the plaintiff, and it will be necessary for her mother to continue to deal with the guardian in all matters.
If going forward by arrangement between the guardian and Perpetual Trustees, who will have management of the funds, they come at some sort of modus vivendi, that's fine. But in law the situation will remain that the lines of communication are through the guardian. So whilst the first point is superficially attractive, it does not carry much weight.
Secondly, the point is made that if Perpetual are appointed, the Public Trustee will remain as plenary administrator. This is so. But I stress again it could be anyone going forward.
That is a good reason for appointing Perpetual to be the manager of the money; in other words, to be trustee of one trust, and for the guardian to be trustee of another. The guardian will from time to time come into possession of funds and be trustee of those and disperse them in the plaintiff's best interests. The corpus will remain under the care of a different trustee whose beneficiary will be the trust constituted under the Guardianship Act.
This situation will avoid conflicts of interest, will ensure that at all times whoever is handling the money and charging fees has no conflict of interest, and that there is always someone looking after the plaintiff's interests to make sure that the person making the decisions in relation to the money is trying to maximise the returns, doing everything that can reasonably be done to protect the corpus and minimise the costs to the plaintiff.
Which brings me to the third point. The defendant is entitled to mitigate its loss and/or to go to trial on this significant issue, which requires me to now deal with a matter I raised during submissions.
This is the conundrum or possibly anomalous situation which came to my attention when I considered the award for future economic loss, namely about $880,000, which is the equivalent of about $1,000 per week for the remainder of the plaintiff's life.
A person who is intellectually capable, no matter how sound or sharp their intellectual acuity, would have to manage their own fund [uncompensated for the cost of so doing]. (Authority for this is Nominal Defendant v Gardikiotis [1996] HCA 53; (1996) 186 CLR 49 and Willett v Futcher [2005] HCA 47; (2005) 221 CLR 627 and there are other authorities to this effect).
In cases of large awards for catastrophic sums professional assistance would be a very good idea. It is no easy task to manage a fund in such a way that it provides throughout one's entire life expectancy and yet is exhausted in the process. It seems reasonable to me to infer that a capable person who received a payout for catastrophic damages would elect to use advice and assistance of a professional kind, but such person would never set aside such a large sum of $1.4 million for that purpose.
Hypothetically a retainer of, say, in today's dollars $30,000 per annum might be adequate – or more than adequate to secure access to the very best review, advice and active assistance (such as cash flows, to move money around, budget, disperse money, receive receipts and so on).
Staying with this example of $30,000 per annum (or $600 per week), applying a multiplier of 880, one arrives at a figure of $528,000. If one added MERs, which everyone has to pay, capable or otherwise, one can see that the sum comes in at well under $1 million and certainly well under $1.4 million. Which raises the question, why would anyone allocate on the day their damages are assessed a fund of not less than $1.4 million?
In this country trustee arrangements are currently such that figures in the order of not less than $1.4 million are routinely quoted and taken into account and awarded in damages sums or approved in compromises.
In my respectful opinion, there is a significant disconnect between that kind of provision and what might be regarded as sufficient if the damages were [not] held in trust and managed as they would for a capable person who had no way of managing these things themselves (having regard to the difficulties or complexities that I alluded to earlier). It may well be that in the future that disconnect is addressed and change might occur.
Having regard to the life expectancy of the trust we are concerned with, in my respectful view, it is in the plaintiff's interests to have the possibility left open that her fees and costs will be less than are currently estimated. For that to occur, the person managing the funds and therefore charging for it should be answerable to her, or in this case her guardian, in such a way that there could be no possible conflict of interest.
I pause at this point to make it perfectly clear that I see no conflict of interest at this stage. The Public Trustee has, as far as I can tell, done an extremely good job in arriving at the proposed compromise, and there are no grounds whatsoever to suggest that the Public Trustee has a conflict, or that Mr Brooksby has a conflict, here today. Everything that has been done has been done solely in the interests of one person, and that is the plaintiff and her trust. I am only concerned now with what happens once the money is paid.
The plaintiff's and therefore her legal guardian's role is to try to get the costs of managing her fund as low as possible. A sum of not less than $1.4 million is a vast sum of money. It will become hers when the damages are paid, but the court's role today is not to be taken to approve an allocation, or an expectation, that the fees will be such that a capital reserve of $1.4 million should be put in place. So the arrangements are not being approved. On the contrary, what I am approving seems to be a very advantageous settlement in this regard.
The $1.4 million sum we are talking about is just part of an award of general damages to be managed and dispersed prudently and entirely in her interests over a very lengthy period of time.
I see considerable advantages in her guardian, in other words, the person who stands in her place because she is incapable of doing so (who might be anyone going forward) being separate from the person who is paid to advise and manage her money. A lot could change over the decades to come. Over the next 60 or more years, the plaintiff will need a strong and independent legal advocate.
So my findings are that the offer (I have been calling it $1.4 million but that is because MERs and ancillary expenses will probably come into it, - the actual offer is $1,388,406) is quite reasonable as matters presently stand and would be approved. In fact, one might think going forward it will prove to be more than enough.
To avoid conflicts of interest and ensure that the plaintiff's position is all that matters – is all that anyone considers - going forward, it seems to me that Perpetual Trustees or anyone else approved by the court should be the manager of the money with all that that entails, but their legal obligation should be to account to the plaintiff as represented by her lawful guardian from time to time, who will no doubt take all necessary measures, including his own remuneration, to ensure that this is done as well as possible in accordance with everyone's fiduciary obligations. At the moment it is envisaged the Public Trustee will have that role, but that is all subject to the jurisdiction of the State Administrative Tribunal.