New South Wales Supreme Court CITATION : Re Estate of BL [2006] NSWSC 1483 HEARING DATE(S) : 28 August 2006 JUDGMENT DATE : 28 August 2006 JURISDICTION : Equity Division Protective List JUDGMENT OF : Windeyer J at 1 DECISION : Section 13 declaration. Manager appointed. CATCHWORDS : MENTAL HEALTH - incapacity to manage affairs - management of judgment moneys in professional negligence action by incapable person- trust approved by court appointing mother of plaintiff and trustee company as trustees - trust including beneficiaries other than common law plaintiff - order made for immediate payment to mother of part judgment sum prior to constitution of trust for purpose of purchasing home in name of mother as trustee for the son - mother mortgaged house and applied proceeds for benefit of third party in breach of trust - manager appointed so that action could be considered on behalf of beneficiary against trustee - consideration of problems where such trust approved - necessity for the sole trust beneficiary to be person to whom damages are awarded - statement that problems would not have arisen if management order under Protected Estates Act 1983 made in first place LEGISLATION CITED : Protected Estates Act 1983, s13 Perpetual Trustee Company Limited (Plaintiff) PARTIES : BL (First Defendant) SL (Second Defendant) FILE NUMBER(S) : SC P29 of 2006 COUNSEL : Mr P Whitford SC with him Ms V McWilliams (Plaintiff) No appearance (Defendants) SOLICITORS : Henry Davis York (Plaintiff) No appearance (Defendants) - 1 - IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION PROTECTIVE LIST WINDEYER J MONDAY 28 AUGUST 2006 P29 of 2006 JUDGMENT 1 HIS HONOUR: In this matter Perpetual Trustee Company Limited, which is the trustee of a trust constituted under a declaration of trust dated 20 December 2001, seeks orders that it be appointed manager of the estate of BL in accordance with the Protected Estates Act 1983. This is a somewhat difficult matter. In protective matters the identity of the person involved is not normally disclosed and I will refer to the beneficiary of that trust as BL. 2 What happened was that proceedings for damages for negligence were commenced in the Professional Negligence list of this Court and were settled upon terms that certain monies be paid to the Health Insurance Commission, but more importantly, that the balance of the judgment monies, namely $5,547,536.60 be paid into court. The court then approved a trust deed in favour of the then plaintiff BL. Under the trust deed the grandmother was appointed as trustee with the Perpetual Trustee Company Limited but she has since resigned as trustee. 3 Prior to the final order being made there had been proceedings for an interim order as a result of which the sum of $750,000 was paid to the mother of the plaintiff on her understanding that she would purchase in her name, but on trust for BL, a house for BL to live in and be shared, as I understand it, with her. What has happened is that unfortunately she has allowed that property to be mortgaged. The evidence appears to show that this happened at the request of the grandmother of BL for her benefit, contrary to the trust, and that the lender of funds secured against that property has called up that loan and has taken proceedings for possession. Whether or not there would be any defence to those proceedings it is not possible to tell but it is unlikely there would be. In other words it appears there has been a clear breach of trust and that it has caused loss to the trust fund and therefore to the beneficiary. It will probably be necessary for steps to be taken to remove the mother as trustee and for consideration to be given to proceedings against the grandmother. 4 Under the principal trust which involved the whole of the fund other than the $750,000, BL is the principal beneficiary. Over the last few years I have endeavoured to make it clear in cases such as this that there is only one party who is entitled to damages. There should be only one beneficiary, that being the common law plaintiff, entitled to the damages. It is not appropriate that there be a principal beneficiary and general beneficiaries. If the beneficiary dies the fund should be held for the estate of the beneficiary and not at the discretion of the trustee. 5 However, the trust has been put in place and remains in place. The purpose of this application for appointment of a manager, is so that if Perpetual Trustee Company Limited is appointed manager it can take proceedings on behalf of BL for removal of SL as trustee of what might be described as the house trust, consider whether it is appropriate to defend the present possession proceedings and/or to take proceedings against the former trustee SL or the grandmother or both. But that seems to be a matter for the future. 6 While the position will be somewhat strange as Perpetual Trustee Company Limited will be sole trustee of the major trust and manager of the estate of the person who ought to be the only beneficiary of that trust. I do not think in this case that any conflict should arise so as to make it inappropriate and I propose to make the order. I should say, however, as I have pointed out during the course of the hearing that as the trustee has power to fix a determination date for the trust, then in my view an appropriate course might be for the trustee to fix a determination date a few days in the future and at the same time determine that the whole of the trust fund be held for the primary beneficiary, which is the only determination which ought to be made. 7 In those circumstances, if that is done, Perpetual Trustee Company Limited would end up manager of the whole of the fund. It would then be in a position to consider what action ought to be taken in respect of the trust which I have described as the house trust. While I have made the suggestion I do not think it ought to be imposed upon the Perpetual Trustee Company Limited but in my view it could well be the most sensible way of proceeding into the future. 8 I do point out also that had a manager been appointed at the time the first application was made in respect of what I have described as the house trust in the sum of $750,000, then even if the mother had been appointed as manager, the property would have had to have been purchased in the name of BL and would have been under the supervision of the Protective Commissioner and there would then have been no problem of the type which arises at the present time. 9 I make orders in accordance with the short minutes of order initialled by me and placed with the papers. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. 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