Re T and the Protected Estates Act [2000] NSWSC 1022

New South Wales Supreme Court

CITATION : Re T and the Protected Estates Act [2000] NSWSC 1022 CURRENT JURISDICTION: Equity Division Protective List FILE NUMBER(S) : SC G304/2000 HEARING DATE(S) : 31/10/2000 JUDGMENT DATE : 31 October 2000

PARTIES : The names of the parties are suppressed in cases in the Protective List. JUDGMENT OF : Young J

COUNSEL : The proceedings were heard in Chambers without representation. SOLICITORS : CATCHWORDS : EQUITY [135]- Trustee- Conflict- Whether trustee should appoint self to be a director of company controlled by trust MENTAL HEALTH [8]- Administration of property- Whether manager should be appointed director of incapable person's company. LEGISLATION CITED : Corporations Law, ss 180-182 Protected Estates Act 1983, s 12 Bartlett v Barclays Bank Trust Co Ltd [1980] Ch 515 Re Gee [1948] Ch 284 Guazzini v Pateson (1918) 18 SR (NSW) 275 In re Macadam [1946] Ch 73 CASES CITED : Mordecai v Mordecai (1988) 12 NSWLR 58 Re Orwell's Will Trusts [1982] 1WLR 1337 Princess Ann of Hesse v Field (1962) 80 WN (NSW) 66 Re Sharp [1945] VLR 31 Re Taylor [1950] VLR 476 DECISION : See para 15.

THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION PROTECTIVE LIST

YOUNG J

TUESDAY 31 OCTOBER 2000

G304/2000 - RE T AND THE PROTECTED ESTATES ACT

REASONS FOR DIRECTIONS

1 HIS HONOUR: Directions are sought pursuant to s 12 of the Protected Estates Act 1983 as to whether the manager of an incapable person should be empowered to appoint himself and another person as directors of a company controlled by the incapable person before her disability. Because the matters that arise for consideration on this application have general application, I have been asked to give detailed reasons. 2 T, the incapable person, is now 91 years of age. She is widowed and has no children. Her assets are estimated to amount to approximately $22,000,000, the bulk of which are held within a private company, L Pty Ltd. At the date of this application for directions, T was the sole director of L Pty Ltd. 3 The current state of affairs came about by chance. Until his sudden death on 28 January 2000, T's accountant, K, was in control of all T's affairs. He was a director of L Pty Ltd and was a signatory on T's cheque account. K paid all T's bills including household expenses. K had for many years been a partner in a well known Sydney firm of chartered accountants. After K's death, R, another former partner of that firm and now a consultant to it, de facto managed T's affairs as far as he could. On 9 May 2000, the Guardianship Tribunal appointed R as T's manager under the Protected Estates Act 1983. 4 The direction sought is that R requisition a meeting of shareholders of L Pty Ltd at which R and a present partner in the firm of accountants will be appointed directors. Whilst I was considering this application, an urgent need for directors to be appointed for L Pty Ltd arose and I gave an authorisation to deal with that emergency. I now deal with the application on a final basis. 5 The question of principle that arises is whether a manager should be the director of an incapable person's companies or whether he or she should appoint a third person as director. 6 There does not seem to be any precedent that would govern the answer to this question. Although this matter was considered in chambers without representation, the Equity Division researcher spent some time considering what precedent might assist. Neither her research, nor mine, has absolved me from approaching the problem from first principles. 7 The same problem arises where a trustee may appoint himself or herself as a director of companies controlled by the trust. 8 Scott on Trusts 4th ed (Boston, 1987) at [170.22] says: "It not infrequently happens that a trustee holding shares of a corporation as a part of the trust estate is or becomes an officer or director of the corporation. In such a case the question arises whether he is accountable to the trust for the salary he receives from the corporation. In some cases he has been held accountable."