T v Mrs F

[2005] NSWSC 781

CITATION:	T v Mrs F & Ors [2005] NSWSC 781
HEARING DATE(S):	25 July 2005
JUDGMENT DATE :	2 August 2005
JURISDICTION:	Equity Division Protective List
JUDGMENT OF:	Windeyer J at 1
DECISION:	Declaration sought in paragraph 1 of the Notice of Motion dismissed. Balance of notice of motion stood over.

CATCHWORDS:	MENTAL HEALTH - protected persons - application by son of protected person for payment of his children's school fees out of estate - evidence of past payment of school fees but whether from trust or protected person's estate not clear - whether the Protective Commissioner has power under the Protected Estates Act 1983 to make such payments - whether evidence sufficient to show that protected person had entered into an engagement to pay the fees from her estate. - STATUTES - interpretation - Protected Estates Act 1983 s 28(1)(a) - meaning of "engagements".
LEGISLATION CITED:	Protected Estates Act 1983 s24(2) s28(1)(a), s32
CASES CITED:	Protective Commissioner v D (2004) 60 NSWLR 513
PARTIES:	T (Plaintiff) Mrs F (First Defendant) M (Second Defendant) D (Third Defendant) The Protective Commissioner (Fourth Defendant)
FILE NUMBER(S):	SC P66 of 2002
COUNSEL:	Ms D V Robinson (Plaintiff/Respondent) Mr J A Trebeck (First and Fourth Defendants) Mr A A Robins (Second Defendant/Applicant) No appearance (Third Defendant)
SOLICITORS:	TressCox (Plaintiff/Respondent) Craddock Murray Newmann (First and Fourth Defendants) Dibbs Abbott Stillman (Second Defendant/Applicant) No appearance (Third Defendant)

LOWER COURT JURISDICTION:

- 8 -

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
PROTECTIVE LIST

WINDEYER J

TUESDAY 2 AUGUST 2005.

P66/02

JUDGMENT

1 As is usual in Protective matters the names of the persons involved are not published. For that reason I refer to the protected person as “Mrs F”, her husband as “T” and one of her sons as “M”. She has two other sons, but only one is a defendant and he has taken no part in the proceedings.

2 On 18 December 2003 the court declared Mrs F was incapable of managing her affairs and made an order committing the management of her estate to the Protective Commissioner.

3 By notice of motion filed on 28 June 2005, M seeks orders which, if made, will result in school fees for his children at Kambala and Cranbrook Schools being paid from either one or both of the estate of his mother, subject to management by the Protective Commissioner, or out of the income and corpus of the assets of a family trust, which I will refer to as the “FFT”.

4 There is no conclusive evidence of the assets of Mrs F or of the trust before the court on the hearing of this motion. There is, however, evidence that the separate assets of Mrs F include a property at Palm Beach worth about $2.5 million and that the assets of the FFT may be in the vicinity of $15 million.

5 The trustee of the FFT is a company, Pyroclastic Pty Limited. At the time the management order was made its directors were T, Mrs F and M. Under the articles of association of the company the office of Mrs F was vacated on the making of the management order. As T and M were at loggerheads it seems that trust affairs could not be properly managed. This has at least now been overcome through the appointment, sought in the motion and subsequently agreed, of Mr Graham Paterson as a director of the company.

6 The FFT was established by deed dated 6 May 1981 which has been amended on occasions. It is not necessary to take much time over its provisions which are similar to those in many discretionary trust deeds. Pyroclastic Pty Limited is trustee. Mrs F is the appointor with the power to remove the trustee and appoint a new trustee. Mrs F is the first corpus beneficiary, her children the second corpus beneficiaries, and her grandchildren the third corpus beneficiaries. T is the alternate corpus beneficiary. The discretionary corpus beneficiaries are the first, second and third corpus beneficiaries and the alternate corpus beneficiary and an extended range of other persons. The distribution date is likely to be 1 January 2020. The income beneficiaries are such of the first, second, third and alternate corpus beneficiaries as the trustee determines. Failing any determination in respect of income by the trustee by 30 June in that year the income goes to Mrs F. There has been no determination for the year ended 30 June 2005 and the evidence does not show whether or not there has been a determination for the year ended 30 June 2004. There is power to make payments of corpus for the maintenance, education and advancement of any corpus beneficiary. Clause 20 of the trust deed makes the power of the trustee to determine distributions of capital and income subject to the consent of the person having the power to appoint and remove the trustee, that person at present being Mrs F. Whether that consent is required for payments of corpus pursuant to cl 8(b) of the trust deed was not the subject of argument.

7 The estate of Mrs F is subject to some particular liabilities. Costs of T agreed at about $138,000 in respect of earlier proceedings between the parties here are payable out of it. Costs of M of an unknown amount are payable out of that estate. Certain amounts are payable to T to repay amounts he has outlaid for his wife. There is also a contingent claim by T which relates to one half of the proceeds of sale of a property near Moss Vale, sold by Mrs F and T to the trust, the purchase price apparently being applied to satisfy a liability of the vendors to the trust. T disputes that he has any liability to the trust and says that any debt due to the trust was due by his wife alone.

8 The Palm Beach property produces no income. It is used from time to time by M and his family for holidays. The Protective Commissioner has made no decision as to what should be done with it. As I understand it was put to me M does not wish the property to be sold.

9 M has three children, Alexandra aged 10, Victoria aged 8 and Richard aged 6. The girls have attended Kambala School since the age of three and Richard has attended Cranbrook School since he was three. The evidence of M is that when Alexandra was born the following conversation took place with Mrs F:

Mrs F: “M, you must send her to the best school in Sydney. I believe that school to be Kambala.”
M: “Mum, I cannot afford private school education.”
Mrs F: “You don’t have to worry about that. I will take care of that completely. As you know M I have a trust set up for you and my grandchild. You will never have to worry.”

M said that a similar conversation took place shortly after the birth of the second daughter and after the birth of his son, except that Cranbrook was the school selected for Richard. According to the affidavit of M, sworn on 30 May 2005, school fees have been paid either by Mrs F or by cheque from the trustee company, or if the school fees were paid by him, he was reimbursed from one of those sources. It has not been established how those payments have been dealt with in the books of FFT. It seems on the evidence the trust has no separate bank account. Since the protective order was made the school fees have not been paid.

10 There is a pressing need for payment of the school fees due to both schools. The sum of about $53,000 is required for this. It seems likely that the girls at least will be required to leave Kambala if the fees are not paid in the next few weeks. M says that he cannot pay the fees and that he has borrowed all the moneys which he can to make payments on account of the fees. He lives in a house owned by the trust and it appears that he has no source of funds available to him to enable the fees to be paid.

11 I turn now to the terms of the notice of motion. Paragraph 1 seeks the following:

1. A declaration be made that payment of school fees (the “ School Fees ”) by the fourth defendant for the education of the children of the second defendant, out of the estate of the first defendant (the “ Protected Person ”) is within the power of the fourth defendant under the Protected Estates Act 1983.

12 As a preliminary matter I point out that a declaration is a substantive order and in ordinary circumstances cannot be made in interlocutory proceedings on motion. It is however best to deal with the claim on the basis that this procedural problem can be put in order and, in any event, in protective proceedings there is, as a matter of convenience, only one file kept, substantive matters being dealt with in the original proceedings.

13 The power in the Protective Commissioner to make payments for the school fees for the grandchildren out of the estate of Mrs F, if that power exists, must come from s28(1)(a) of the Protected Estates Act 1983 (the Act). Wide-ranging submissions as to s24(2)’s powers and the scope of s32 of that Act do not bear on this question. The declaration sought is as to power without the authority of court order, authority, approval or direction. It follows that the question is whether Mrs F engaged, or entered into any engagement, to pay the school fees of the children of M from her own funds, not from trust funds. Counsel for the Protective Commissioner did not argue that there was no such power if payment was appropriate. What he contended was that until it is shown that funds are available to discharge all debts of Mrs F and until the Protective Commissioner is satisfied that her assets, if diminished by school fees, are sufficient for her ongoing requirements, no decision should be made. Counsel for T argued that there was no power in the Protective Commissioner to make the payment.

14 It is established by Protective Commissioner v D (2004) 60 NSWLR 513 that the word “engagements” where it appears in s28(1)(a) of the Act is not synonymous with “debts” and extends to obligations other than legally enforceable obligations. The evidence before the court in this matter does not satisfy me that Mrs F engaged to pay the school fees out of her separate estate, nor that she had a moral obligation in respect of future fees for the whole of the schooling of these particular grandchildren, although I think that M was entitled to believe that the fees would continue to be paid by the trust. It follows that the declaration sought should not be made.

15 It was accepted that once the declaration question was determined it would be appropriate to stand over the balance of the motion to await the outcome of consideration by the trustee of the FFT of the question of payment of trust moneys for school fees pursuant to the various powers in the trust deed. Trust accounts are not in evidence, at least in a way which shows accrued income. It is however clear that there are assets which over a time could be realised and that the amounts required to pay the present outstanding school fees would, as counsel for the applicant put it, be just a “drop in the ocean”. However the distribution of trust income, and the advancement of trust corpus, is a matter for the trustee. The trustee is not a party to these proceedings. Clearly enough, a meeting of directors should be called as soon as possible and Mr Paterson as the new director has indicated the steps appropriate to bring the trust affairs into order to enable proper consideration to be given. If the trustee determines on a distribution of income or corpus advancement then any necessary application could be made to the Protective Commissioner to exercise the power of consent of Mrs F under the trust deed pursuant to his powers under s24(2)(m) of the Act.

16 What is needed with this matter is a little goodwill and urgency. It is difficult to understand why the Protective Commissioner has failed to put before the court a full statement of the assets and income of the protected person. The estate after all has been under management since December 2003. It seems almost unhelpful to put before the court only the transaction record annexed to the affidavit of Mr Thurgood. Nevertheless it is clear that the requirements of Mrs F and the extent of moneys available to meet those requirements and commitments cannot be properly assessed by the Protective Commissioner until the trust affairs are if necessary put into order and the expected income from the trust established. M may decide in due course to apply for an order for payment of the fees out of the estate pursuant to powers under s32(1) of the Act, in which event consideration would have to be given to the extent of that power. That does not arise now. On the present evidence it is, I think, apparent that Mrs F would have wished to provide from some source for payment of the school fees. The present falling out between father and son should not necessarily prevent that from happening.

17 As this is a protective matter, rather than dismiss the claims in paragraphs 2 and 3 of the notice of motion, which cannot be dealt with on the evidence now available, I will stand those claims over for a period of some six weeks with leave to file an amended motion when proper financial information is available. The matter can be relisted before that new date on any Monday on notice to the parties.

18 The parties actively involved with this motion should give serious consideration to referring their dispute to mediation. It is not in the interests of the protected person for the dispute to continue.

19 Orders

1. Dismiss the claim in paragraph 1 of the notice of motion of 28 June 2005.

2. Stand over the balance of the notice of motion to 12 September 2005 with liberty to file an amended notice of motion returnable on that date and liberty to restore the motion to the list before that date on any Monday on three days’ notice.

3. Costs reserved.

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