Williams v Hoang
[2019] ACTSC 144
•12 June 2019
SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY
Case Title: | Williams v Hoang |
Citation: | [2019] ACTSC 144 |
Hearing Dates: | 23 April 2019, 14 May 2019 |
DecisionDate: | 12 June 2019 |
Before: | McWilliam AsJ |
Decision: | See [40] |
Catchwords: | PRACTICE & PROCEDURE – Settlement in respect of a person with a legal disability – arrangements for funds management – appointment of trustee – public trustee – proposed appointment of a trustee company |
Legislation Cited: | Court Procedures Act 2004 (ACT) s 282 Public Trustee and Guardian Act 1985 (ACT) s 25 |
Cases Cited: | Gray v Richards [2014] HCA 40; 253 CLR 600 Jones bhnf Jones & Anor v Moylan (1997) 18 WAR 492 Singh v Calvary Hospital (No 2) [2009] ACTSC 57; 3 ACTLR 247 |
Parties: | Tobias Williams as represented by his Litigation Guardian, Roslynn Jury (Plaintiff) Luu Hoang (Defendant) |
Representation: | Counsel I.D.M Roberts SC and L.E Edwards (Plaintiff) K.P. Rewell SC (Defendant) |
| Solicitors United Legal (Plaintiff) Moray & Agnew (Defendant) | |
File Number: | SC 650 of 2006 |
McWilliam AsJ
On 23 April 2019 and pursuant to s 282 of the Court Procedures Act 2004 (ACT), I approved a settlement between the parties in the sum of $700,000, plus the costs of funds management. Orders subsequent on that approval included a requirement for the settlement sum to be paid into Court pursuant to s 25 of the Public Trustee and Guardian Act 1985 (ACT) (the Act).
The proceedings were then adjourned to determine whether the settlement amount should be managed by a specific private trustee, or whether the monies should be managed by the default public trustee, here the Public Trustee and Guardian of the ACT (Public Trustee). That is the sole issue for resolution before the Court.
The Court’s power and the applicable legal principles
Section 25 of the Act concerns the payment of monies on behalf of a person under disability. The relevant sub-section is s 25(1), the material parts of which are as follows:
(1) Where, in the proceedings, it is adjudged or ordered, or it is agreed, that money…be paid to a person under disability (whether or not that person is party to a cause or matter), the money –
a) Shall be paid into court; and
b) Shall, unless the court otherwise directs, be paid to the public trustee.
The question is thus whether the Court should ‘otherwise direct’, so as to cause the settlement monies to be paid to a different trustee.
The statutory power coexists with the parens patriae jurisdiction of the court, and is to be exercised in accordance with the principles applicable to that jurisdiction: Singh v Calvary Hospital (No 2) [2009] ACTSC 57; 3 ACTLR 247 (Singh), at [11].
The paramount consideration when exercising such jurisdiction is what is in the interests of the plaintiff who is under a disability: Singh at [14]. In Singh, Refshauge J made the point at [25] that the reference in s 25 of the Act to the funds being paid to the Public Trustee was no more than a predisposition. In the same paragraph, his Honour cited Morris v Zanki (1997) 18 WAR 260 (Morris), where it was stated at 286:
The court has a duty to consider the future management of the verdict moneys and it has a discretion. The governing consideration is “what is best to be done for the [person under the disability]”. The discretion must be exercised judicially. It cannot be determined arbitrarily. Where the court is asked to exercise the power to place funds with a private trustee rather than the Public Trustee the judge must examine all of the circumstances and decide what is in the best interests of the person for whose benefit of the funds are held. This will, of necessity, require a consideration of available options and alternatives. But this is not to say that a predisposition towards the Public Trustee is an impermissible fetter on the discretion. It serves a number of purposes. It indicates that the onus is on the person seeking the exercise of the discretion in his or her favour to establish grounds on which the order should be made. It means that if no application is made or if no good reason is shown for preferring a private trustee, the Public Trustee will assume the role. We have chosen the adjective “good” (in relation to the reasons that are advanced in support of the application) quite deliberately. We would avoid other possible descriptions such as “cogent” or “special” or “exceptional”.
[Emphasis added.]
There are two later cases which also guide how the Court is to exercise the discretion. The first is Gray v Richards [2014] HCA 40; 253 CLR 600 (Gray). The case was slightly different from the present, as an order had already been made at first instance for the funds to be managed by a private trustee rather than the public trustee in New South Wales (NSW Trustee). The trial judge found that the appointment of a private trustee was entirely reasonable in the circumstances. That finding was not challenged on appeal, and so, in the High Court, the matter proceeded on the unchallenged assumption that a manager other than the NSW Trustee should have been appointed to manage the appellant's damages. One of the issues was whether the damages to be paid in respect of funds management should be quantified at the rate that the relevant public trustee would have charged, or whether the plaintiff was entitled to the more expensive rate to be charged by the private trustee. French CJ, Hayne, Bell, Gageler and Keane JJ held at [46] that:
…the question of reasonableness of funds management expenses is not at large as a matter of judicial discretion. The court does not make an open-ended judgment about the reasonableness of the fund management expense component of damages. The court is not concerned to regulate the market for the provision of funds management services. The court’s concern is to ensure that the plaintiff’s actual loss is compensated. There is, for example, no scope for the court to say that the amount is simply “too much” as a matter of intuition or impression if the plaintiff has no practical utility to bargain for a lesser charge.
Their Honours went on to state at [47] that the question was:
…whether the management arrangement with the [private trustee] was so unreasonable in its terms that it could not be regarded, as a matter of common sense, as a consequence of the appellant’s injury. If the fund management expense component of an award reflects actual market conditions, and is not contrary to any statutory control, then it may be seen, as a matter of common sense, as an expense consequent upon the tortfeasor’s wrong and, therefore, compensable.
The second case of relevance is Pel-Air Aviation Pty Ltd v Casey [2017] NSWCA 32; 93 NSWLR 438, where Macfarlan JA (with whom Ward and Gleeson JJA agreed) held at [106] that once a prima facie case had been established of a causative connection of the tortfeasor’s conduct and the reasonableness of the expense, the onus was on the tortfeasor to prove that the plaintiff had failed to mitigate her loss by appointing a private trustee instead of the NSW Trustee. His Honour went on to state in the same paragraph:
…This could not be achieved simply by proving that there was a cheaper alternative to the course taken by [the plaintiff], particularly when the appointment of a manager would be likely to create a long-term relationship in which its expertise in producing returns and securing the safety of capital, as well as in maintenance of a satisfactory working relationship, would loom large.
His Honour held (at [107]) that the tortfeasor had not explored the plaintiff’s reasons for appointing the private trustee or adduced evidence of market rates, and in failing to do so, had failed to counter the prima facie case made against it. If there was no evidence that the private trustee’s fees were ‘outside the market’, reliance simply on a disparity between the rates of the appointed trustee and those of the NSW Trustee would not suffice.
Before the Court will appoint a particular private trustee, the Court should also consider:
(a) Whether there is sufficient evidence of the structural and financial security of the trustee: Singh at [42].
(b) Whether there are appropriate safeguards in place to protect the contents of the fund, the investment strategy and the probity of the trustees and their dealings. This can generally be satisfied by the fact that trustee companies recognised by the relevant legislation are subject to such safeguards: Singh at [44], citing Jones bhnf Jones & Anor v Moylan (1997) 18 WAR 492 (Jones) at 496. This may include ensuring that the proposed trust deed appropriately protects the long-term interests of the plaintiff: Singh at [48].
(c) That the trustee nominated has thought through how to invest the funds: Singh at [43], drawing from Re L [2000] NSWSC 721. In an appropriate case, this might form part of an assessment of the comparative skills, investment strategies and experience of the likely appointees: Singh at [45].
(d) The express wishes of the litigation guardian and other family members: Morris at 286 and 294; and, Jones at 501.
(e) The likely relationship between the trustee and the family or other caregivers: Singh at [45].
The competing arguments of the parties
Plaintiff’s position
The plaintiff, through his mother (who is his litigation guardian), seeks a direction from the Court that Australian Executor Trustee Ltd (AET) be appointed as trustee of the protected estate of the plaintiff, with financial advice being separately provided by Aeran Pty Ltd (Aeran).
The plaintiff contends that the AET is an experienced trustee, subject to regulation, and that the fees AET and Aeran would charge ($511,443), while significantly higher than those of the Public Trustee ($202,821), fall within the market rates for private trustees.
The evidence as to what constitutes ‘market rates’ in the private funds management sector is found in the quotes obtained by the plaintiff’s litigation guardian from two other funds. The first is from Perpetual Trustees (Perpetual) in the amount of approximately $572,000, and the second is from AMP in the amount of approximately $515,000.
The plaintiff relied on the affidavit of Mr Tim Grant-Allan, Senior Relationship Manager at AET, and a letter from Ms Rachel Maher who is the proposed main contact person at AET for the plaintiff. Mr Grant-Allen deposed to the experience of AET in the industry and of Ms Maher in particular (16 years). He explained the division between the trustee and the advice/investment role that Aeran would carry out, to avoid the duplication of fees. Ms Maher stated that her service would include making herself available to the plaintiff out of hours if necessary, and that she is prepared to communicate with the plaintiff or his litigation guardian via a variety of communication methods. She provided the example of sending text messages attaching photos with an invoice for payment.
The litigation guardian has considered the Public Trustee as part of her investigations as to who would be most suitable to manage the plaintiff’s settlement fund and accepts the fees are significantly lower, but the litigation guardian has two main concerns.
First, her communications with the Public Trustee to date have not provided her with any confidence that this particular plaintiff’s interests will be well served by the appointment of the Public Trustee. Examples listed by her in affidavit evidence include: that the Public Trustee has so far failed to respond to emails sent by the litigation guardian in a timely manner; that the litigation guardian has received unsatisfactory responses when she managed to speak with the Public Trustee by telephone, including a lack of proper advice about the investment strategy for the plaintiff’s funds (other than general comments about the funds being invested by way of Australian Super); and, the quote for managing the funds originally obtained from the Public Trustee was grossly wrong – being over $900,000, as compared to the $202,821 finally quoted. While the quote was subsequently amended by the Public Trustee to the aforesaid amount, the error has contributed to a real doubt in the litigation guardian’s mind as to the Public Trustee’s ability to deliver the best service for her son.
This leads to the second concern. The litigation guardian wants to ensure that if at all possible, her son has an ability to deal with one continuing designated person. The litigation guardian deposes that it takes some time for her son to build up confidence with people. She believes there is a better chance of achieving confidence and trust by maintaining an ongoing relationship with an allocated manager employed by the private trustee. The litigation guardian believes that the plaintiff requires a trustee who can provide a properly tailored service and advice to the plaintiff. While the plaintiff has a disability that requires funds management, the plaintiff is nevertheless someone who takes an interest in his financial affairs and he would like to be in a position to have regular contact with his trustee, so as to understand how his financial affairs are being managed over time. There was no evidence as to what might be the situation regarding the Public Trustee.
Defendant’s position
The defendant does not dispute that the plaintiff requires funds management and has settled the case on that basis. However, the defendant contests the reasonableness of choosing a private trustee in light of the significant disparity between the amounts to be charged by the Public Trustee and AET. The defendant submits that the Public Trustee should manage the settlement funds.
The defendant argues that the largely anecdotal evidence provided by the plaintiff to support his position should be given little weight, and that the Court should find that insufficient reasons have been provided to disturb the legislative presumption in favour of the funds being entrusted to the Public Trustee.
With regard to the Public Trustee’s non-responsiveness to the litigation guardian’s requests for information, the defendant submits this should not be relied upon as evidence for how any potential relationship may function between the plaintiff and the Public Trustee, should any appointment be made. The Public Trustee is not selling a product, it is delivering a service. It is understandable that its advice and the responses it provides to members of the public who make enquiries, but who do not have a relationship with the Public Trustee, may only be very general in nature.
The defendant accepts that the original quote from the Public Trustee was erroneous. It has since been corrected and now highlights the stark difference between the fees the plaintiff will be charged by the Public Trustee when compared to the AET. The defendant relied on the affidavit evidence of Ms Julia Bossert, a Chartered Accountant employed by Vincents, who has significant experience in the funds management industry. Her opinion was given as to the reasonable costs of funds management for the plaintiff in these proceedings. Ms Bossert’s opinion was that the reasonable costs of managing the plaintiff’s fund, having regard to the plaintiff’s likely needs, are the costs of funds management by the Public Trustee.
As to the plaintiff’s likely needs, the defendant disputes the level of management or interaction with the Public Trustee that the plaintiff will require. Based on the medical evidence relied upon to support the approval of the initial settlement, the defendant contends the plaintiff’s disability is not profound. The defendant distinguishes the present plaintiff from the situation in Gray where the plaintiff required management of care from the funds, in addition to financial assistance. The defendant submits that the plaintiff has not demonstrated that his needs are such as to require close and regular attention and communication, which might or might not be provided by AET and Aeran.
Alternatively, if the Court was to find, based on the medical evidence, that the plaintiff did require substantial assistance (beyond the management of his finances), such assistance could ably be provided by the Public Trustee. No concrete, non-anecdotal evidence was adduced by the plaintiff as to the inability of the Public Trustee to handle even the most onerous of cases. Senior Counsel for the defendant submitted there would be real questions asked by the public if it were the case that the Public Trustee was unable to provide services tailored to the varied needs of the numerous clients that have their funds managed by the Public Trustee.
Is the plaintiff’s choice of trustee unreasonable?
As seen from the extracts of the authorities above, where the expense of funds management has been accepted to be a compensable expense, and the cost of the service to be provided by the trustee nominated reflects actual market conditions, it is not for the Court to say that the amount is simply ‘too much’, nor to judge reasonableness by reference to whether the Public Trustee’s fees were cheaper, even significantly cheaper.
I fully appreciate the defendant not wanting to pay more than twice the amount that the Public Trustee would charge for what it sees as provision of a similar service. However, the proposition that reasonableness is not to be judged by reference to the disparity in fees between a public and private trustee would appear to apply here, even though the circumstances in Gray were that the appointment of a private trustee had already been accepted.
I accept that long term fund management by a private trustee may be significantly more expensive than if the Public Trustee were appointed. However, as the quote from AET is within the market range, as judged by the quotes which were provided by Perpetual and AMP, the disparity in fees alone does not establish that the plaintiff’s choice was unreasonable.
The defendant submitted that if the plaintiff’s argument were to be accepted, then in almost every case where there was a dispute about whether a private or public trustee should be appointed, a court would appoint a private trustee. This would be contrary to the legislative intention that the Public Trustee constitutes the default trustee and it is for the plaintiff to establish a case to depart from that position.
In my view, the fact that the Public Trustee is the ‘default’ trustee under the legislation does not necessarily equate to the Public Trustee being the preferred trustee, so that plaintiffs need to prove a sufficient reason to depart from the statutory predisposition. Rather, on the authorities above, the legislature has given to this Court a discretion. If the Court is not called upon to exercise the discretion, then the Public Trustee is automatically appointed. However, if this Court is called upon to exercise the discretion and ‘good’ reasons are given for its exercise, balancing all the circumstances, it may be in the plaintiff’s interests for a private trustee to be appointed.
As for whether the plaintiff will require a high or low level of interaction with his trustee, although the parties were both content for this Court to have regard to the medical evidence to determine that question, by a general finding as to how to characterise the plaintiff’s needs, ultimately I do not consider it relevant to do so when the case has been settled or compromised on the basis that funds management will be required.
Once the defendant has accepted that there is a medical need for funds management, it is not for the Court to make a finding as to the extent of that medical need. The plaintiff does not need to persuade this Court that his medical needs will require a certain level of contact with the trustee, because the plaintiff is entitled to communicate with the appointed trustee as and when he sees fit.
If the plaintiff is someone who wants to keep a close oversight of how his money is being spent or invested, that must surely be his right, with the level of communication to be managed between him and the trustee. The trustee might adopt a ‘set and forget’ investment strategy. Alternatively, the trustee might adopt a particular investment strategy on advice by the financial adviser that requires regular contact with the plaintiff. In either case, the level of contact required might have nothing to do with the plaintiff’s underlying medical condition and this is why I ultimately have decided that it would not assist to delve into the medical evidence. This is particularly so in circumstances where the Court is dealing with a compromise position reached by the parties, which avoided the need for a hearing and for the Court to make any findings about which medical expert was to be preferred.
The appropriateness of AET as the private trustee
There is no dispute between the parties as to the security of the trustee. AET is a licensed trustee company under the Corporations Act 2001 (Cth). It is a long-standing trustee company, managing over 1,300 trusts. The trustee is an experienced entity, and this includes the experience of the proposed manager of the plaintiff’s trust.
There are plainly appropriate safeguards in place to protect the contents of the fund, including the fact that as trustee, AET does not actively take part in the investment of the funds held on trust, but instead engages Aeran to provide investment advice before then investing and managing the funds. Aeran is itself a professional advice and investment body subject to regulation and there is no evidence that Aeran might not properly consider the long-term investment strategy for the plaintiff.
The proposed trust deed was also in evidence and there was no suggestion that it will not adequately protect the long-term needs of the plaintiff.
It is the express wish of the litigation guardian that AET be appointed. The litigation guardian has given her reasons for preferring a private trustee and she has come to this view after what seems to be adequate investigation and consideration of the alternatives available, to us the language of Wallwork J in Jones at 501. It is perhaps an unnecessary gloss on the broad exercise of the discretion to embark upon whether the reasons amount to ‘good reasons’ as discussed in Morris, but if it were necessary to do so, reasons directed to the potential relationship between this particular plaintiff and his trustee and the unsatisfactory history of interactions with the Public Trustee would probably satisfy that language. If the litigation guardian desires a close ongoing working relationship and having researched the options, believes that this would be best achieved through this particular trustee, that is an important consideration, and one that I have taken into account.
The ability of AET to provide a personal service that allows for regular access and communication is in the plaintiff’s interests. Such a finding is not to be taken as a finding that the Public Trustee would not also endeavour to provide a tailored response if the plaintiff’s funds were to be paid to the Public Trustee. However, a professional private trustee charging such significant fees for the service of managing the trust would be expected to meet a level of service above and beyond a statutory body such as the Public Trustee, and indeed, this is what Mr Grant-Allen holds himself and his colleague out to be providing.
Conclusion
Having examined the evidence and considered the arguments of the parties as set out above, and particularly having regard to the above finding that on the proper application of the authorities, the mere disparity of fees is not enough to find that the appointment of a private trustee as opposed to a public trustee is unreasonable, the remaining considerations establish that it is in the interests of the plaintiff for this Court to exercise the discretion to appoint AET as the private trustee.
As to costs, it appears that this is an application where the usual order as to costs ought to follow, namely on the basis that costs follow the event. If either party wishes to seek a variation of that order, they are to contact my associate to apply for a variation within 7 days.
The orders of the Court are as follows:
(1) Pursuant to s 25 of the Public Trustee and Guardian Act 1985 (ACT) the funds paid into the Supreme Court pursuant to orders made on 23 April 2019 shall be paid out to the Australian Executor Trustees Ltd (AET) as trustee, to be held pursuant to the terms of the trust established by a Deed substantially in the form annexed to the affidavit of Tim Grant-Allan sworn 7 May 2019 and marked “B”.
(2) The defendant is to pay to AET the sum of $511,433 as the costs of funds management, to be held as part of the corpus of the trust fund.
(3) The defendant is to pay the plaintiff’s costs incurred from 23 April 2019 limited to the question of whether AET should be appointed as trustee.
(4) Order 3 is stayed for 7 days.
| I certify that the preceding forty [40] numbered paragraphs are a true copy of the Reasons for Judgment of her Honour Associate Justice McWilliam Associate: Date: 12 June 2019 |
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