New South Wales Supreme Court CITATION : Snelgrove & ors v Swindells [2007] NSWSC 868 This decision has been amended. Please see the end of the judgment for a list of the amendments. HEARING DATE(S) : 2 and 3 August 2006 JUDGMENT DATE : 6 August 2007 JURISDICTION : Equity Division Protective List JUDGMENT OF : Windeyer J at 1 DECISION : Order for part costs made CATCHWORDS : MENTAL HEALTH - protected estates - person subject to order under Protected Estates Act - application for revocation brought to the Guardianship Tribunal - whether manager should be directed to pay costs of solicitors for protected person seeking revocation out of her estate LEGISLATION CITED : Protected Estates Act 1983, s33(2), s35 Guardianship Act 1987, s25E, s58, s69(1) In re an Incapable Person D [1983] 2 NSWLR 590 CASES CITED : JNRD and the Protected Estates Act (1992) 28 NSWLR 728 Re GHI (2005) 221 ALR 589 John Anthony Snelgrove (First Plaintiff) Andrew Gorman (Second Plaintiff) Andrew Spearitt (Third Plaintiff) PARTIES : Brent Hedges (Fourth Plaintiff) Clive Curwood (Fifth Plaintiff) Peter Ford (Sixth Plaintiff) Scott Kennedy (Seventh Plaintiff) Daryl Swindells (in his capacity as the financial manager of the estate of BMH) FILE NUMBER(S) : SC P28 of 2007 COUNSEL : Mr P Whiteford SC with him Mr G Underwood (Plaintiffs) Mr L Ellison SC (Defendant) SOLICITORS : Curwoods (Plaintiffs) Pigott Stinson (Defendant) - 15 - IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION PROTECTIVE LIST WINDEYER J MONDAY 6 AUGUST 2007 P 28/07 IN CLOSED COURT JUDGMENT 1 HIS HONOUR: The question for decision is whether solicitors acting for a person whose estate is under management under the Protected Estates Act 1983 should be entitled to their costs in connection with an application to the Guardianship Tribunal to revoke management and guardianship orders in respect of the protected person. 2 The plaintiffs, who are seeking costs for acting for BH, are the partners in Curwoods Lawyers. The defendant is the financial manager of the estate of BH appointed as such by order of the Guardianship Tribunal on 3 February 2005, pursuant to section 25E of the Guardianship Act 1987. The relevant power under that section is to order an estate be subject to management under the Protected Estates Act. On the same day as the financial management order was made, the Tribunal made a limited guardianship order appointing two nieces and a nephew of BH as her guardians with specified powers for a limited period of 12 months. Those powers included a right to determine accommodation on behalf of BH. 3 BH was unhappy about the orders and wished to challenge them. For this purpose she engaged a firm of solicitors, Messrs Bartier Perry, whom she subsequently discharged, and later Messrs Curwoods. I use "engage" in a general way, not implying a contract of retainer. Messrs Curwoods then represented BH in an unsuccessful application to revoke both orders of the Tribunal. The hearing took place in November 2005 and finally on 23 February 2006. The application for revocation of the financial management order was dismissed. So far as the guardianship order was concerned, it remained in place, however, the Public Guardian was appointed in place of the guardians originally appointed, but with more limited powers in that the power to determine accommodation was removed. Although the Tribunal was dealing with an application for revocation, it would have had to review the guardianship order by February 2006 in any event. 4 The Tribunal made an order at the commencement of the hearing on 25 November 2005, pursuant to s58 of the Guardianship Act, allowing BH to have legal representation at the hearing. An application was made to the Tribunal that the costs of Curwoods be paid from the estate. 5 Section 69(1) of the Guardianship Act is as follows: 69 Costs 1. The Tribunal may, if in the particular circumstances of the case it is of the opinion that it is appropriate to do so, make orders with respect to the payment of costs of proceedings before it. 6 In its reasons for decision, which were for some reason not published until 31 January 2007, that is nearly 12 months after the orders were made on 23 February 2006, the Tribunal in dealing with the question of costs said as follows: The Tribunal has a discretion in relation to legal representation and in the majority of cases before the Tribunal, parties are not legally represented. Leave may be granted if the case involves complex legal or factual issues and the parties, particularly the person with the disability who is the subject of the application, would benefit from the participation of legal representatives. Legal representatives often assist the Tribunal in making the best possible decision in the interests of the person with the disability. It does not follow that a party who has been given leave to be legally represented in a Tribunal hearing is necessarily entitled to a costs order if the Tribunal makes orders which they have sought or support. It would be antithetical to the objectives and purpose of the legislation for the Tribunal to make costs orders on a "winner/loser" basis, Instead, the Tribunal must examine whether there are any circumstances about the particular case which would warrant a departure from its usual practice of not awarding costs, particularly in cases which are not vexatious or frivolous. The Tribunal is not satisfied that there were any such circumstances in these proceedings Mr Underwood's submissions characterise the Tribunal's proceedings as adversarial in nature and speak of Mr Swindells "opposing" the orders sought by BH. Regardless of whether Mr Swindells opposed or supported BH's application, the Tribunal is still obliged to apply the statutory criteria in deciding whether the financial management and guardianship orders should remain in place. The conduct of the parties in accepting or rejecting medical reports about BH's capacity has limited relevance to the weight which the Tribunal may attribute to those reports. Mr Swindells and the guardians are parties to the proceedings by virtue of Section 3 of the Guardianship Act not because they actively sought to be joined as parties. Their participation in the hearing is proper and vital to the decision-making. They are entitled to participate in the hearing and to disagree with documents or reports obtained on BH's behalf. Similarly, BH is entitled to apply to the Tribunal for a review of the guardianship and financial management orders which affect her. It is important that she is able to exercise that right without the `fear' that if she is unsuccessful a costs order could be made against her. The Tribunal would not like to use Section 69 of the Act to in any way discourage people from exercising their right to apply to have orders reviewed or revoked. The fact that BH has a substantial estate is not relevant in deciding whether she should pay the costs of other parties. For these reasons, having considered the submissions made on behalf of the parties, the Tribunal determines to make no award of costs in this matter. Recommendation The matter of costs is complicated by the fact that BH was, at the time of the application, and remains a person whose estate is under management. Decisions about the payment of BH's legal costs from her estate are made by her financial manager, presumably in consultation with the Protective Commissioner. The Tribunal does not consider it appropriate to make any order which would alter this situation. The Tribunal however recommends to the private financial manager and the Protective Commissioner, that consideration be given to an appropriate portion of the costs of the guardians and financial manager being paid out of BH's estate. The Tribunal considers that the actions of CH, AN, WM and Mr Darryl Swindells in relation to the application and reviews were appropriate and undertaken with the best interests and welfare of BH in mind. 7 On 12 March 2007 Curwoods wrote to the solicitors for the manager, asking for payment of their costs up to the end of the hearing. In fact they sought a little more, but they do not do so now, so that does not matter. The application was refused on grounds that BH had no capacity to instruct Curwoods; that neither the manager nor the guardians accepted the reports of Professor Watson and Ms Roberts, to which I will refer; that the original hearing on 3 February 2005 was thorough; and that it was unrealistic to think that the position as to capacity, including capacity to give instructions, would have changed in six months. 8 By summons filed on 24 April 2007, the plaintiff sought orders: 1. Dispensing with the requirement to make an application to the Protective Commissioner in the first instance. 2. For an order that the manager, Mr Swindells, pay the costs of Curwoods on an indemnity basis out of the estate of the protected person. 3. In the alternative, that the costs be assessed and then so paid. 9 For reasons I gave on an earlier occasion, I gave the leave sought in paragraph 1. 10 There was a rather limited submission by Mr Ellison, senior counsel for the defendant manager, that the plaintiffs could have brought an appeal either to the Administrative Decisions Tribunal, or, by leave, to this Court ,against the decision of the Tribunal refusing costs. While that is true, I do not think that it should conclude the matter. The Tribunal said quite reasonably that the matter of costs was a matter for the manager. An application was made to him and he refused to pay. What is now sought is an order under section 33(2) of the Protected Estates Act directing the manager to pay the costs. That direction is within the power of the court under that Act. 11 It is neither necessary nor desirable to go too fully into the facts surrounding this matter. It is sufficient to say that BH was introduced to the solicitors by her next door neighbours, who are both barristers; that the application that she made for revocation was prepared by one of those neighbours; that Messrs Bartier Perry, a firm of solicitors originally retained by BH for the purposes of the application, had their retainer, if they had one, terminated by BH; that BH was very angry that the order of 3 February 2005 had been made and was expressing dislike of her relations, and that there is, to say the least, disharmony between the relatives and the next door neighbours. 12 It is not suggested that the original Tribunal decision was flawed in any way, neither could it be, and the same applies to the second decision. Nevertheless, it is clear that when the first order was made, although BH was present at the hearing she was still in hospital care there were discussions as to her future welfare. There was evidence given on that occasion by a Dr Beveridge, which was not contested, that she was suffering from dementia. There was a proper basis for the appointment of guardians and of a financial manager. As I have said, it is important to understand that the Tribunal would have had to review its guardianship orders at about the same time as it was considering the revocation claim. As to financial management, the evidence before the Tribunal in February 2005 was that BH was in substantial arrears and default on her income tax returns; that she had not paid land tax; and that a company, which she controlled and which was the owner of some land at Bowral, had been deregistered for failure to lodge the necessary returns. BH was capable of writing cheques and paying small amounts of money, doing her ordinary shopping and attending to the more mundane affairs of life. She was not capable of managing her affairs, as she thought that she did not need any professional help and, in fact, had dismissed her accountant about five years earlier. 13 BH was examined on a number of occasions by Professor Watson, a specialist neurologist, and by Ms Corinne Roberts, a consulting neuro-psychologist, prior to Messrs Curwoods being involved. Who arranged the appointments and examinations is not the subject of evidence, but, in any event, reports of Professor Watson and Ms Roberts of August 2005 were made available to the Tribunal, apparently having been sent there direct, and were made available via the next door neighbours to Mr Mitchell, an employed solicitor of Messrs Curwoods. Mr Mitchell was approached by the next door neighbours to see if he would act for BH on the application for revocation after Bartier Perry ceased to act for her. Mr Mitchell said that before making any decision he would need to see the Tribunal's original reasons and the medical reports which had been obtained. As I have said, these were subsequently given to him. 14 The report of Professor Watson dated 26 August 2005 addressed to the Tribunal and of Ms Roberts of 25 August 2005 are in evidence. It is sufficient to say that neither agreed with Dr Beveridge about BH having dementia. Ms Roberts thought that she would be able to live independently and that she had returned to a level of functioning similar to what she had prior to her illness, which had led her to hospitalisation. Professor Watson's opinion was that BH did not have dementia, she was capable with minimal assistance of managing her financial affairs and that she had the capacity to understand what was involved with her revocation application. For the purpose of the consideration in this case, it is important to understand that neither the defendant nor his solicitor was given copies of the two reports to which I have referred, and they did not obtain them until the Tribunal sent reports to them on 9 November 2005, which was only a few weeks before the hearing. At the same time, the Tribunal sent a further report of Dr Beveridge. This was a report which it seems the solicitors for the defendant had had on their file since August 2005, but according to the evidence of Ms Tancred, the solicitor in charge, she had forgotten about it. Perhaps she had, but in a letter to Curwoods on 23 September 2005 she referred to it and said a copy had been sent to the Tribunal. Curwoods asked for a copy of the report the next day, but it was not sent to them. They received it with the other documents from the Tribunal. Dr Beveridge confirmed his earlier opinion, and gave clear reasons for this. 15 After Mr Mitchell was given copies of the Tribunal's reasons of 3 February 2005 and other relevant documents, including the first medical report of Dr Beveridge, to which I have referred, and the other two medical reports, he considered there was a proper basis to seek revocation and that he would need to see BH to decide whether he should accept instructions. He indicated that he thought costs would be paid out of BH's funds. He decided it was proper to act after meeting BH and after consulting a partner at Curwoods about this. BH told him at his first meeting with her, after she had been introduced by the neighbours, of her complaints about title deeds and other documents disappearing, not having mail sent to her and not having sufficient funds on which to live. On 20 September Mr Mitchell saw BH again and explained a costs agreement form to her and left it with her. BH told him on that occasion that she had no money to pay costs. He said if she won she was good for the money, and if she lost, he would be paid from her property under the control of the manager. There was no basis for that statement. 16 In October Mr Mitchell engaged in rather aggressive correspondence with the Office of the Protective Commissioner about their duties towards BH and about costs, and he spoke to people in that office about the costs. He was told that as the estate of BH was subject to private management, it was a matter for the manager to determine the question of costs as BH had no capacity to do so. The manager always asserted that BH could not retain solicitors to act for her. 17 Counsel for the plaintiff submitted that the question for decision was whether it was appropriate in the circumstances of Curwoods having acted for BH that the costs of the solicitors should be paid. He said that capacity, by which I think he meant legal capacity to instruct, was not the relevant consideration. He said that the fact that the Tribunal gave leave for representation was an important matter to be taken into account. I should add that a veiled suggestion of the defendant that the claim for revocation was not being brought for a bona fide purpose, but for some collateral advantage for some other persons, was not pursued. 18 I move to the question of retainer. A person subject to a management order has no capacity to perform any act which affects his or her estate or affairs, which includes entering into a contract of retainer: JNRD and the Protected Estates Act (1992) 28 NSWLR 728 and generally speaking they also have no authority to bring legal proceedings without a tutor. Thus whatever reliance was placed on the costs agreement, or, as it was not signed, the costs notification, was misplaced. However, the strict position must be looked at in light of the obvious necessity for a person whose estate is subject to management to be able to apply for revocation while an order is in place. Section 35 of the Protected Estates Act provides that a person whose estate is subject to management may make an application for revocation. The same position must be regarded as applying to application to the Guardianship Tribunal although strictly speaking, such a person might be thought to be prevented from making an application because the estate of that person was subject to management, and the power to act in relation to the estate is vested in the manager. 19 It is difficult and probably not desirable to attempt to lay down some general rule, but one thing is certain, and that is that the fact the protected person has very substantial assets, so that the costs might have little significance to that person, is not a fact which would justify the order sought. 20 In matters such as this when an estate is committed to the Protective Commissioner for management, while it is not a regular occurrence, it is not unusual for solicitors to produce some evidence to the Protective Commissioner, such as a report from a general practitioner, indicating that a person whose estate is under management might be able to manage his or her affairs. The Commissioner might then authorise payment up to a particular sum to enable those solicitors, or the protected person, to obtain a report, or perhaps two reports of specialist medical practitioners or qualified professionals, as to their opinion of capacity to manage affairs. If reports supporting capacity are obtained and sent to the Protective Commissioner, then the Protective Commissioner, with the advantage of those reports and the advantage of the information and knowledge in the office of the Protective Commission as to the affairs of the protected person and as to that person in general, might accept that it is a proper case for revocation and not oppose an application, leaving it to the court to decide. That seems to me to be an entirely proper course of conduct, and it would be a proper course of conduct to be undertaken by a financial manager, perhaps pursuant to a direction of the Protective Commissioner. But where the position is not so clear and a matter proceeds as a contested matter, although not truly adversarial, and the application for revocation fails, then very careful consideration is required before the Protective Commissioner, or for that matter a private manager, would, or should, agree to the costs coming out of the estate. The Protective Commissioner pointed this out to Mr Mitchell in a letter dated 17 November 2005, but by that time the hearing was about to start. It may well be appropriate to allow the costs of the manager out of the estate, as such matters are not necessarily to be dealt with in the same manner as is the case of costs in adversarial proceedings, or in the same manner as is the case of costs orders against solicitors whose retainer is successfully challenged. That, however, does not necessarily mean that costs of the solicitors themselves, who appear for the applicant, should necessarily be ordered or directed to be paid out of the estate of the protected person. 21 There are some other facts relevant to this matter. The first is that the challenge to the guardianship order did bring about a change of both guardian and powers. This was of some importance as the power to decide accommodation was removed and BH wanted to remain in her home and make decisions about that. To some extent, it could be stated that it was at least of advantage to her to have the order varied, although it is fair to say that is not what she sought. The next matter of significance is that Mr Mitchell did not seek to put before Professor Watson when he became aware of them facts which might have borne upon his opinion. Those facts were the income tax failures, the land tax problems, the deregistration of company problems, the termination of the retainer of Messrs Bartier Perry, and the fact that BH had felt that she had no need for an accountant and had dismissed her accountant, which I think clearly enough brought her tax affairs into disarray. These facts are not set out in the report even though I have been told Professor Watson had material which disclosed them. He needed to be asked their significance. It is not to the point that most people with capacity, with assets of $30 million or thereabouts, require some professional help in their management: the point is that people with capacity understand and accept the requirement for such assistance, are willing to accept it, and are likely to remain willing to accept it into the future. The fact that Mr Mitchell introduced an accountant who was prepared to assist BH was of little relevance. It is my view that the solicitors needed to go into the matter much more deeply, rather than just rely on two reports which, on their face, relied to some extent on statements of neighbours and which were written without knowledge of very relevant facts. It is, I think, also of considerable importance to this matter that Mr Mitchell did not furnish to Messrs Piggott Stinson, the solicitors for the manager, copies of the Watson and Roberts reports. As they were the main basis upon which the solicitor decided that BH had capacity to instruct him and upon which it was reasonable to say that an application for revocation could be granted, it was quite unreasonable not to forward them to the other side. Having said that, it was, as I have said, probably unreasonable for Ms Tancred not to have forwarded to Curwoods the second report of Dr Beveridge, even if she had no real basis to know that there was anything else to be put before the Tribunal other than the evidence which it had already had. I accept that Mr Mitchell said he assumed the Tribunal had sent copies to Piggott Stinson, but the fact is he took no steps to see if that assumption was a fact. He could have asked. 22 It is, I think, fair to say that accepting some of the statements claimed to have been made by officers of Protective Commission were made, those statements did nothing to help the situation, and the attitude of the solicitor for the defendant remaining adamant that BH could not give instructions to bring the application for revocation was not of assistance either. 23 The final thing to say is that although I accept that Mr Mitchell considered that BH had capacity to give instructions and that there was, he thought, a proper basis for applying for revocation, the notes of the conversations which he had with BH, either on the telephone or at her home, would, I think, upon reflection, have cast considerable doubt about her ability to manage her own affairs. 24 The problems in this matter seem to me to have been brought about by a great suspicion and complete lack of trust between the neighbours and the relatives, too strict a line on capacity being taken by the solicitors for the manager, and a lack of proper practice on the part of Messrs Curwoods in failing to furnish to the other side relevant information, and in failing to give relevant information to the doctors whose reports they relied upon, which might have brought about a change of view. 25 I return to the main question. Contrary to the submissions of counsel for the plaintiffs, it is not the usual order for costs to be paid out of the estate. Re GHI (2005) 221 ALR 589 did provide an order to that effect, but there was nothing to say this was the usual order. The question as to costs in protective matters is what order is proper to be made: In re an Incapable Person D [1983] 2 NSWLR 590 at 595. 26 The proceedings and communications were from the start conducted in far too belligerent a way on both sides. Mr Mitchell would not accept advice from the Protective Commissioner or from Messrs Piggott Stinson about his having any problems with standing; he did not serve - if that is the appropriate word - material he ought to have served; and I think it clear from the Curwoods bill of costs that he placed far too much attention on what was told to him by the neighbours. The solicitors for the manager, and perhaps the manager himself, placed too much reliance on the claimed inability of Curwoods to act for BH and they did not serve a vital medical report. By the time everyone had the material needed, the hearing was so close that nobody considered stopping the wheels, as I think they should have been stopped. 27 On no basis should an order for indemnity costs be made. On a quick perusal of the bill of costs and accepting that I am much out of date in these matters, there are some very extravagant items and claims for time spent on matters, such as car registrations, of little relevance to the issues. On one view it would be reasonable to say that had Curwoods served the medical reports and then been given the second report of Dr Beveridge, then they took the risk as to costs after that, particularly as they failed to tell their medical experts facts relevant to their opinion evidence. Against that, the manager and his solicitors did adopt an unnecessarily unhelpful attitude, probably because the manager distrusted the neighbours. There were reasons for that distrust, which need not be set out here, as I am making no finding as to whether or not the reasons were soundly based. 28 I have come to the conclusion that, considering the interests of BH, the plaintiffs should not get all of their costs. They brought about a lot of the problems. In the special circumstances of protective work, they did not act as competently as they should have. Had it not been for the attitude of the manager and his solicitors, I would not have directed any costs be paid after a reasonable number of interviews with BH, consideration of the medical reports and of what further material should be placed before the experts. In the particular circumstances of this case, to which I have endeavoured to refer, I consider that the plaintiffs should be entitled to 50 per cent of their assessed costs up to 23 February 2006, and I will direct accordingly. There is no criticism whatsoever of the Tribunal in its decision not to order costs, which was quite appropriate. 29 The manager has undertaken to pay the fees of Professor Watson and Ms Roberts from the managed estate. It is proper that he do so. In case a direction is required, I so direct. Orders. 30 Direct the defendant, as manager of the estate of BH, to pay from her estate 50 per cent of the assessed costs of the plaintiffs up to 23 February 2006 in connection with the application of BH to revoke the guardianship and financial management orders made by the Guardianship Tribunal on 3 February 2005. 31 Direct the manager to pay the fees of Professor Watson and Ms Roberts. 32 Note for the purposes of an assessment, that I do not consider that the fees of senior counsel for the plaintiffs should be charged against the estate. I give leave to the defendant to apply today for the costs order to be varied. All the exhibits should be returned. ********** 14/08/2007 - mistake of fact - Paragraph(s) 12 and 21 14/08/2007 - remove extraneous coversheet - Paragraph(s) second coversheet 14/08/2007 - correct typing error - Paragraph(s) 21 DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.