C v H & Anor [2002] NSWSC 733

New South Wales Supreme Court

CITATION : C v H & Anor [2002] NSWSC 733 CURRENT JURISDICTION: Equity Division Protective List FILE NUMBER(S) : SC 79 of 1998 HEARING DATE(S) : 2 and 3 July 2002 JUDGMENT DATE : 3 July 2002

C (Plaintiff) PARTIES : H (First Defendant) PC (Second Defendant) JUDGMENT OF : Windeyer J at 1

COUNSEL : W. Haffenden (Plaintiff) R Cheney (Defendants) SOLICITORS : Beilby Courtney Poulden (Plaintiff) Connery Partners (Defendants) CATCHWORDS : PROTECTED ESTATES ACT - appointment of a manager of the estate of a protected person - conflict of interest where proposed manager who is a financial advisor, will earn fees as a result of the investments made through his management LEGISLATION CITED : Protected Estates Act 1983, s13 DECISION : See paragraph 26

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

WINDEYER J

WEDNESDAY 3 JULY 2002

79/98 JUDGMENT

1 HIS HONOUR: These matters are always difficult, because in the end in a case such as this one side or the other will be disappointed, and by one side I do not mean the Protective Commissioner, but rather the mother or father of the person in respect of whose estate it is accepted that a management order should be made. 2 I also think it best in a case such as this that I tell the parties now what my decision is and then give the reasons, so that there is no unnecessary suspense of waiting until the end. I therefore say that I have decided that the Protective Commissioner should be appointed as manager, and now I will give the reasons for that. 3 As these proceedings are original proceedings for the appointment of a manager of the estate of the first defendant pursuant to s13 of the Protective Estates Act (1983), I say at the commencement that the evidence is sufficient, and makes it perfectly clear that the first defendant B, who is now a girl aged eleven years, is incapable of managing her affairs, and therefore it is necessary that her affairs be subject to management. Her estate is quite considerable, as it comprises a sum of approximately $1,350,000, plus the value of a house. 4 It has been agreed, although the Centrelink document does not say so in clear terms, that there is what is commonly now described as a preclusion period of nearly 47 years from the date of the accident until the time when B would be entitled to Social Security benefits. 5 The plaintiff by substitution is Mr R, who is now the husband of B's mother. He seeks an order that Mr P be appointed as manager of B's estate, either solely or with some other fit and proper person. 6 As earlier constituted, there was an application for appointment of Mr P and Mrs R, but it was thought that there might be some conflict if Mrs R were appointed, and as I understand it that is the reason why she has dropped out. 7 Generally speaking in cases such as this where both parents agree, there is no difficulty whatsoever in the Court appointing a family member as manager, provided where a considerable sum of money is involved, the Court is satisfied that family member has access to and will rely on appropriate advice. 8 As was pointed out by Mr Haffenden for the plaintiff, the Protective Commissioner has no higher right to an appointment than does anybody else. In fact, appointments of the Protective Commissioner are generally made when it is inappropriate for a family member to be appointed. 9 I should also say that although the affairs of B have been under the management of the Protective Commissioner for some four years because an interlocutory order was made for the appointment of the Protective Commissioner as receiver and manager, I do not think that this bears upon the decision as to who should be appointed now, but nevertheless the dealings between Mrs R and the Protective Commissioner are of some relevance in the making of the appropriate decision. 10 B is in the care of her mother. Her parents are divorced. Mrs R has married again, and I think her father H has also remarried. The fact that H does not have the custody of his daughter does not mean that he does not have a real interest in her life, in her welfare and in her progress. However, the financial dealings with whoever is manager are likely to be, and remain for the most part dealings between mother and manager, rather than father and manager. That is apparent, at least while the present care arrangements remain. 11 Mrs R, and of course her husband who did not file an affidavit, but who seeks the appointment of Mr P - who I should state immediately is a cousin of Mr R - put forward various reasons why Mr P should be appointed. Some of these relate to problems with the Protective Office, which I will refer to later. For the most part, the prime reason put forward for the appointment of Mr P as manager is that his investment plan will produce superior results to the investment plan of the Protective Office, and that if the projected returns in that plan come to fruition, then the fund will last for the expected life of B, and will certainly last until the expiration of the preclusion period, which expiration date will be reached when B attains the age of 50 years. 12 It is possible that under the Protective Office plan, the fund may run out when B attains the age of 39 years. I should say that the evidence does not establish that to be a fact, as on the plan put forward there would remain the sum of $600,000 at the present day values when B attains the age of 36, and it could not be in any way determined how long that money at its then worth might last. 13 There are then other reasons why Mrs R would prefer to have Mr P rather than the Protective Commissioner. These relate to problems which she has stated have arisen during her communications, negotiations, arrangements and discussions with the Protective Office during the time the Protective Commissioner has been receiver and manager. She has complained that bills have not been paid on time, that there has been reluctance to pay some accounts which she would say were necessarily incurred for the welfare of B, that there was a fine imposed for a late tax return - although that has since been recovered - and that there has been a lack of consultation rather than a desire to assist. 14 It is fair to say that many of these matters are contested by the estate manager, Miss C, responsible at the time for B's welfare and management of the fund. It is not really necessary to decide these matters. Some of the outgoings which Mrs R has sought to have refunded or paid by the Protective Commissioner out of her daughter's funds could be said to have been incurred partly for the benefit of B, and partly for the benefit of Mrs R, and perhaps her husband and their children. 15 It is not unlikely or unusual for there to be some conflict in these matters, and one expects the Protective Office to take a reasonably benign approach to claims for payment, provided that they in fact can be seen to be associated with the welfare of a protected person. There may have been misunderstandings in some of the matters. There is now a new estate manager, and one does not know whether or not communications will improve. 16 However, it is I think relevant to this decision to say that Mrs R considers that she has had difficulties, and presumably thinks that she will continue to have difficulties. It is also proper to say that she has looked after her daughter for the past seven years, and this has been no easy matter. 17 Mrs R points out that some of the matters which have been in contest between her and the Protective Commissioner relate to the requirements for therapy treatment for B, relate to a claim on an insurance policy, relate to whether or not care which has been provided has also been provided for other children, whether or not care should be arranged through agencies rather than through her own contacts and other matters. When one is looking after a child like B, this type of matter can be seen to be interference, although it is not intended to be. 18 It is now necessary to deal shortly with the financial plans. As I said earlier, in my view it is fruitless to compare one plan with the other in circumstances such as this. One cannot know what will be the result in thirty years time. 19 The differences between the two plans can basically be stated by saying that the Protective Office plan has a greater proportion of funds invested in cash and fixed interest securities than does the P plan. The P plan therefore - with more investments in shares and other growth type stocks - might be expected to have greater capital growth than the Protective Office plan, although of course it is subject to the risk of greater capital loss than the Protective Office plan. It seems to rely on a projected rate of return of over 11 percent, which one cannot assume will be achieved. The Court however is not in a position, with just the two plans, to decide that it will not be achieved. It is also based on an inflation rate of 2.5 percent, as opposed to the Protective Commissioner's plan, which is based on an inflation rate of 4 percent. Once again the Court cannot decide, but the inflation rate for the P plan, like the growth rate in the P plan, is, to say the least, somewhat optimistic. 20 Whichever plan is adopted, its investment will be outsourced so far as the growth funds are concerned. It is not clear to me, even after the evidence of Mr Farrell, quite what arrangements the Protective Office now has in place for outsourcing of its funds under management so far as these are to be invested in what are thought to be growth stocks. All that can be said is that it seems that investment of these funds will be outsourced through the New South Wales Treasury Corporation to a company called State Street Investments Limited, and that company will then direct the funds into the appropriate areas as determined by the Protective Office in its plan, with the percentages as determined by the Protective Office. 21 The other matter to be determined is the question of fees which will be charged. I have, in another case, expressed great concern at the level of fees charged in these matters, and I still have that concern. Nevertheless, in the plans put forward, the level of fees which would go either to the Protective Commissioner or to Mr P, or as a result of the investments made pursuant to his management, are not shown to be very different, and I do not think the matter should be decided on the question of the fees. 22 There is, however, another matter of some concern. There can be no doubt that a manager who is a financial advisor and who to earn fees as a result of the investments made through his management, is in a position of conflict. This does not necessarily apply where the fees are fixed by statute, and there is therefore a statutory right to those fees. 23 I think that the question of conflict is of some significance, and I also consider the fact that the relationship between the parties would or must be expected to bring about a result under which Mr P would try, quite properly I think, to satisfy requests of Mrs R for payments, without perhaps looking so closely at them as would the Protective Commissioner. Once again, that matter of itself would not be sufficient to refuse his appointment, or to require the appointment of the Protective Commissioner. 24 The fact which I think determines the question, having regard to the other questions which I have raised, is the attitude of the father. As I have said, he still has an interest in his daughter, although he does not have the very considerable difficulties involved with bringing her up. Nevertheless, he has expressed a strong preference and desire that the Protective Commissioner be appointed. He is not happy with the suggestion that Mr P should be appointed. While the interests of the protected person are paramount, concerns expressed by one parent about a proposed manager of his young daughter's estate and the possibility of conflict or suspicion which might occur as a result, are relevant to the interests of the protected estate. 25 As I have said, if H were happy with Mr P I would have made that appointment, but a father is entitled to, and must be able to take an interest in questions which will arise in the management of the estate of his daughter. It is clear that this concern would be more readily satisfied by the appointment of the Protective Commissioner. I propose to make that order. 26 I make the declaration sought in paragraph 1 of the further amended summons. I make the order sought in paragraph 2 of the further amended summons. I order that the estate of the first defendant be committed to the Protective Commissioner for management. I think that the costs of both parties should come out of the estate. I order that the costs of the plaintiff and the first defendant be paid out of the estate of the first defendant. If such costs are agreed, then I direct they be not paid until approved by the Deputy Registrar in the Protective Office.