Supreme Court New South Wales Medium Neutral Citation: Fairhurst (bht NSW Trustee and Guardian) v Fairhurst [2012] NSWSC 388 Hearing dates: 20 April 2012 Decision date: 20 April 2012 Jurisdiction: Equity Division Before: Hallen AsJ Decision: Order that: (a) Pursuant to s 76 of the Civil Procedure Act 2005, the agreement between the parties set out in a Deed of Settlement between them, a copy of which is Annexure "A" to the affidavit of Christopher Matthew Zucker sworn 15 April 2012, be approved. (b) Pursuant to s 77 of the Civil Procedure Act 2005, the amount payable by the Defendant to the Plaintiff be paid to the NSW Trustee and Guardian. (c) The proceedings be adjourned to the Registrar's List at 9:00 a.m. on 28 May 2012 but if the amount to be paid is paid by the Defendant to the NSW Trustee and Guardian as required, there may be filed in the Registry Short Minutes an order dismissing the proceedings with no order as to costs and vacating the date to which the matter has been adjourned. Catchwords: Approval of proposed settlement of proceedings commenced by the Plaintiff, by his tutor, the NSW Trustee and Guardian - The Defendant, and a party to the proposed settlement, is the son of the Plaintiff Legislation Cited: Civil Procedure Act 2005 Felons (Civil Proceedings) Act 1981 NSW Trustee and Guardian Act 2009 Protected Estates Act 1983 Uniform Civil Procedure Rules 2005 Cases Cited: Darwalla Milling Co Pty Ltd v F Hoffman La Roche Ltd (No 2)) [2006] FCA 1388; (2006) 236 ALR 322 Elderfield (by her litigation guardian Visentin) v Transport Accident Commission (TAC) [2010] VSC 116 Fisher (by her tutor) Fisher v Marin [2008] NSWSC 1357 Ge, Yu v River Island Clothing Pty Ltd [2002] NSWSC 28; 2002) Aust Torts Reports 81-638 Permanent Trustee Co Ltd v Mills [2007] NSWSC 336; (2007) 71 NSWLR 1 Stephens-Sidebottom v State of Victoria (Department of Education and Early Childhood Development) [2011] FCA 893 Category: Principal judgment Parties: Ronald Fairhurst (by his tutor NSW Trustee and Guardian) (Plaintiff) Allan Fairhurst (Defendant) Representation: Solicitors: Zucker Legal (Plaintiff) Paladin Law (Defendant) File Number(s): 2011/220073 Judgment 1HIS HONOUR: In this matter, in the Friday duty list, I was asked to approve a proposed settlement of proceedings commenced by the Plaintiff, Ronald Fairhurst, by his tutor, the NSW Trustee and Guardian ("NSWT&G"). The Defendant in those proceedings, and a party to the proposed settlement, is Allan Fairhurst, the son of the Plaintiff. 2At the hearing of the application, there was no appearance by the Defendant as the Plaintiff's solicitor was authorized, in writing, by the Defendant's solicitors, to mention the Defendant's appearance. 3The reason that it was considered to be necessary to provide some short reasons is that the daughter of the Plaintiff (and sister of the Defendant), Lynn Vanderdonk, who is not a party to the proceedings, but who has been consulted by the NSWT&G, as a result of it having determined that the action in proposing to settle the proceedings is of such a nature that she should be consulted (see, s 72 NSW Trustee and Guardian Act 2009), had expressed the view that she did not wish the proceedings to be settled, but wished to take the case "all the way". 4I made orders approving the settlement and indicated that I would publish reasons. These are those reasons. Background 5The estate of the Plaintiff was made subject to management under the NSW Trustee and Guardian Act 2009, pursuant to an order of the Guardianship Tribunal on 30 November 2009. The management of the Plaintiff's estate was committed to the NSWT&G. 6The Plaintiff commenced the proceedings against the Defendant by Statement of Claim filed on 7 July 2011. In that Statement of Claim, the Plaintiff seeks a declaration that the Defendant holds $157,670.44 on trust for him and a judgment for that sum, plus interest calculated from 25 July 2008 (about $39,500 to 20 April 2012). 7The claim appears to be based upon the receipt by the Defendant of the whole, or part of, the proceeds of sale of a property in Colo Heights, which was then owned by the Plaintiff, in, or about, July 2008. 8The Defendant, in a Defence filed on 31 October 2011, acknowledges that he received $120,000, in about August 2008, out of the proceeds of sale, but says that "it was agreed between the plaintiff and the defendant prior to the sale of the Colo Heights property taking place that a sum of approximately $120,000 should be drawn from the proceeds of sale and gifted to the defendant, predominantly to legitimately maximise the plaintiff's potential pension and social security benefits but also out of love and affection from a father to a son". 9The Plaintiff, who is 85 years of age, resides in an aged care facility near Goonellabah in the Northern Rivers region. By reason of advanced dementia, he has no knowledge, or understanding, of the proceedings. He will not be able to participate in the proceedings if the settlement is not approved and if the proceedings continue. 10Although the Statement of Claim alleges that the Colo Heights property was sold by the Defendant, as Attorney for the Plaintiff, the NSWT&G is satisfied that there was a firm of solicitors acting on the sale and that it was the Plaintiff, himself, and not the Defendant, who signed the Contract, the Transfer and other documents relating to the sale. 11In view of the investigations carried out so far, the NSWT&G believes that the Statement of Claim will require amendment and that the principal issue, at any hearing, will be whether the amount of $120,000 was, in fact, a gift by the Plaintiff to the Defendant. An additional issue will be whether the Defendant received any of the balance of the net proceeds of sale (estimated to be about $37,670). (The commission on sale has been estimated to be $12,320.) 12It follows, if the Plaintiff was able to establish that the Defendant received all of the net proceeds of sale, and if the court was satisfied that the Plaintiff did not make a gift of any part of the proceeds of sale to the Defendant (or otherwise that the Defendant was entitled to retain what had been received), that the amount that could potentially be recoverable from the Defendant is in the order of $200,000, including interest, plus costs. 13If the Plaintiff's claim is successful only as to $120,000 plus interest, the amount that would potentially be recoverable from the Defendant would be in the order of $150,000, including interest, plus costs. 14Of course, it is possible that the Defendant would be able to establish that the Plaintiff did make a gift to him of "approximately $120,000" in which case, there might be an order for costs in the Defendant's favour against the Plaintiff. In that circumstance, the Plaintiff would recover nothing. The Proposed Settlement 15A mediation was held by the parties on 12 March 2012. At the mediation, an agreement was reached and a deed of settlement was prepared, which, in broad summary, provides that the Defendant will pay $100,000, inclusive of costs, to the Plaintiff on, or before, 14 May 2012. If the amount is not paid, the proceedings will continue, but if the amount is paid, the proceedings will be dismissed with no order as to costs. 16In addition, the deed of settlement contains a clause relevantly releasing the Plaintiff "from all forms of liability of any nature arising out of the proceedings and out of any matter concerning the sale of the property formerly owned by the Plaintiff at ... Colo Heights". 17The solicitor for the NSWT&G has estimated that the Plaintiff's costs of the proceedings, to date, will be about $14,000, with the effect that the net proceeds of the settlement sum to be received on behalf of the Plaintiff will be $86,000. The Basis on which approval of the proposed settlement is sought 18In the event the Plaintiff is successful, on one or other of the scenarios postulated, there is a substantial compromise in the proposed settlement. 19However, the solicitor for the NSWT&G, Mr Christopher Zucker, has sworn an affidavit in the proceedings, in which he states: "There are a number of reasons for the compromise which are supported by NSW Trustee including the following: i. Settlement puts to an end difficult, lengthy and potentially expensive litigation. If as appears to be the case the claim is contested then every aspect of the claim, in order to establish the presumption of undue influence and a prima facie case that the gift of $120,000 should be set aside, must be provide in by admissible evidence. All of that evidence will be in documentary form the assembly of which legally involves substantial costs. ii. On my present assessment the litigation is not risky. The litigation could become risky the problem for the Plaintiff being that the nature and extent of such risk would not be known until the credit of the Defendant is tested in cross examination towards the end of the hearing. iii. The settlement provides for immediate payment. If the matter proceeded to conclusion at hearing then any subsequent judgment must be enforced. The Defendant is known to own real property at Tuncurry (and there is an indication that he purchased it with the aid of the disputed gift of $120,000) but it has been subject to a mortgage since the Defendant acquired it. If there is a judgment then the Defendant has no objection to re-finance the property. The process of an enforced sale is lengthy and the mortgagee, in this case Citigroup, has priority. iv. The Plaintiff is now 85 years of age and is comfortable. As I will shortly note there are sufficient funds for his management for life. There is the risk that he might die before the litigation is complete or even, after judgment, before enforcement is complete. v. The Plaintiff would be primarily responsible for his own costs which, whilst modest to date, will increase dramatically as the pleadings and evidence are refined and after Counsel is retained. vi. NSW Trustee is conscious of the personal issues. This is father v son litigation. That of itself is not a ground to settle the case with compromise but is in my view something to be taken into account." Other Matters to which reference ought be made 20There are some additional matters to be noted. These may be stated in a summary way: (a) So far as is known, the current last will of the deceased is one dated 15 July 2005, in which he appoints the Defendant and Ms Vanderdonk as executors and trustees and divides the whole of his estate, both real and personal, between "my said children as tenants in common in equal shares" provided that he or she survives for a period of at least three months; (b) Ms Vanderdonk has previously expressed concerns about the contract for the sale of the Colo Heights property, but the NSWT&G has satisfied itself that the sale price noted in that Contract was $170,000; that on completion of the sale, $157,670.44 was deposited into the Plaintiff's bank account on 31 July 2008; that $120,000 was withdrawn by cheque presented on 20 August 2008; and that as at 31 August 2008, the closing balance in the Plaintiff's account was $26,779.28; (c) The Defendant has, apparently made a number of conflicting statements as to the events that occurred which resulted in the receipt by him of part of the proceeds of sale; (d) Ms Vanderdonk has raised some issues about the Defendant's character and conduct that may not be admissible in the proceedings; (e) Ms Vanderdonk, although not a party to the proceedings, was given written notice that she may attend the hearing of the application for approval and that she was free to make a statement to the court concerning the proposed settlement if she wished to do so either in writing or orally. Since then, however, she has indicated to Mr Zucker that she does not wish to appear and that he has advanced all of the matters that she would wish to advance if she were present; (f) Ms Vanderdonk has not offered to indemnify the Plaintiff for the costs that might be incurred if the matter proceeds and if he is not successful. I was informed by Mr Zucker, from the bar table, that there had been discussion with Ms Vanderdonk in relation to her, or others indemnifying the Plaintiff in relation to the future costs that would be incurred in continuing the proceedings and satisfying any order for costs in the event that the Plaintiff were successful and was ordered to pay costs. Ms Vanderdonk has stated that she is not prepared to do so. The Statutory Framework 21The NSW Trustee and Guardian Act came into force on 1 July 2009. It replaced the Protected Estates Act 1983. Among other things, the NSW Trustee and Guardian Act abolished the office of Protective Commissioner and replaced it with the office of NSW Trustee and Guardian, which is referred to in that Act as the "NSW Trustee". 22Section 16 of the NSW Trustee and Guardian Act relevantly provides: "(1) The NSW Trustee may exercise the following functions when acting in a trust capacity or protective capacity: (a) receive money,..., ... (j) settle, adjust and compromise a demand made by or against the estate..." 23Section 56 of the NSW Trustee and Guardian Act provides: "The NSW Trustee has, and may exercise, in respect of the estate of a managed person, the following functions: (a) all functions necessary and incidental to its management and care, ..." 24In the circumstances, I am satisfied that the NSWT&G has power to settle and compromise the proceedings and to receive the settlement sum if the court so orders. 25Section 76 of the Civil Procedure Act 2005 relevantly provides: "(1) This section applies to proceedings commenced by or on behalf of, or against, any of the following persons: (a) a person under legal incapacity... ... (3) Except with the approval of the court, there may not be: (a) any compromise or settlement of any proceedings to which this section applies, or (b) any acceptance of money paid into court in any such proceedings, as regards a claim made by or on behalf of, or against, a person referred to in subsection (1). (4) If an agreement for the compromise or settlement of any matter in dispute in any such proceedings is made by or on behalf of a person referred to in subsection (1), the court may approve or disapprove the agreement. (5) An agreement disapproved by the court does not bind the person by whom or on whose behalf it was made. (6) An agreement approved by the court binds the person by whom or on whose behalf it was made as if he or she were of full capacity and (if it was made by some other person on his or her behalf) as if that other person had made the agreement as his or her agent." 26In s 3 of the Civil Procedure Act, a "person under a legal incapacity", is defined to mean any person who is under a legal incapacity in relation to the conduct of legal proceedings (other than an incapacity arising under section 4 of the Felons (Civil Proceedings) Act 1981) and, in particular, includes a protected person within the meaning of the NSW Trustee and Guardian Act. 27In the Uniform Civil Procedure Rules 2005, rule 7.13, the phrase includes a person who is incapable of managing his, or her, affairs. 28Accordingly, it is clear that the court's approval of the proposed settlement is required. 29The section applies to all proceedings by, or against, a person under a legal incapacity and irrespective of the nature of the claims made by, or against, that person. 30The jurisdiction of the court and its procedure is protective in nature. It is akin to the inherent parens patriae jurisdiction of the court under the common law. Relevantly, the Court must act so as to protect the interests of infants: Yu Ge v River Island Clothing Pty Ltd [2002] NSWSC 28; (2002) Aust Torts Reports 81-638 at [28]. 31In Permanent Trustee Co Ltd v Mills [2007] NSWSC 336; (2007) 71 NSWLR 1, Hammerschlag J said, in relation to such approval: "[29] The principle is that for the Court to grant approval for a compromise to be entered into by the disable person it must form the view that it is beneficial to his or her interests. The compromise should be assented to by the tutor and there should be opinions from his or her legal advisers that they consider it to be so: Re Birchall. The Court will consider for itself whether the compromise will be beneficial to the disable person: Re Ley's Trusts [1964] 1 WLR 640." 32In Fisher (by her tutor) Fisher v Marin [2008] NSWSC 1357, Rothman J said: "[29] The jurisdiction of the Court is protective in nature and the overriding principle is that the Court will base the approval or disapproval upon the formation of an opinion that the agreement is or is not beneficial to the interests of the person under the incapacity. It is for the Court, not the parties, to determine whether the compromise will be beneficial to the person under an incapacity: Re Ley's Trusts [1964] 1 WLR 640;Permanent Trustee v Mills [2007] NSWSC 336. ... [41] Ultimately, the principle that I apply is whether the settlement that has currently been reached (and the amount thereof) is in the interests of the plaintiff. In that regard, bearing in mind the risk that, liability being in issue, the plaintiff would receive nothing from any hearing that may occur, the test may be described as whether the risk to the plaintiff, of losing that which is already agreed, is outweighed by the possibility of receiving more if the matter were to go to hearing." 33In Elderfield (by her litigation guardian Visentin) v Transport Accident Commission (TAC) [2010] VSC 116; (2010) 55 MVR 206, Robson J referred to these two NSW decisions, and accepted the test laid down by Rothman J in Fisher quoted above. At [20], Robson J went on to say: "In my view that question is relevantly answered by deciding whether or not, in my opinion, the certainty of obtaining the compromise sum is significantly outweighed by the uncertain prospect of obtaining more by rejecting the compromise after taking into account the risk of obtaining less." 34In Stephens-Sidebottom v State of Victoria (Department of Education and Early Childhood Development) [2011] FCA 893, Tracey J said: "[12] In determining whether to sanction a compromise under O 43 r 9 the court is concerned only with the benefit of the disabled person: see Gillespie v Alperstein [1964] VR 749. In forming the necessary judgment significant weight will be given to the opinions of the applicant's legal advisers and, in some cases at least, the views of the applicant's tutor. In Re Barbour's Settlement [1974] 1 All ER 1188 at 1191, Megarry J, speaking of an application made on behalf of a minor, said that: Second, there is the important matter of the minor's benefit. When the court is asked to give its approval on behalf of minors to a compromise of a dispute, the court has long been accustomed to rely heavily on those advising the minors for assistance in deciding whether the compromise is for the benefit of the minors. Counsel, solicitors, and guardians ad litem or next friends have opportunities which the court lacks for prolonged and detailed consideration of the proposals and possible variations of them in relation to the attitudes of the other parties and the apparent strength and weakness of their respective claims. When the matter comes before the court, the terms of settlement are in final form and the time for consideration is of necessity less ample. The court accordingly must rely to a considerable extent on the views of those whose opportunities of weighing the matter have been so much greater. Expressing a view on whether the terms of a proposed compromise are in the interests of a minor is a matter of great responsibility for all concerned." 35It is clear from s 76 that the jurisdiction to sanction a compromise or settlement is broad and general. It is not confined in any way, and the Court is not given any guidance about how to exercise the power. Not unnaturally, the section does not provide any criteria by reference to which the court should approve, or should decline to approve, the compromise or settlement. 36Nor is it useful to purport to lay down an exhaustive list of the criteria by reference to which an application for the approval of a settlement ought to be determined. Whether or not to approve the settlement will be fact specific and determined on its own merits. 37It is not the role of the court asked to approve a settlement or compromise to decide whether the outcome of the settlement or compromise is the one that it would have made, but, rather, whether it (as a settlement or compromise) ought to be approved. The court is requested by the parties to exercise its independent judgment on the question whether or not to approve the proposed compromise or settlement. The purpose of court approval is, principally, to protect the person under legal incapacity. 38Yet, the power given to the court should also been seen as a facultative one, since except with the approval of the court, there may not be any compromise or settlement of any proceedings to which the section applies and only when the settlement or compromise is approved does it bind the person by whom, or on whose behalf it was made, as if he, or she, were of full capacity and (if it was made by some other person on his, or her, behalf) as if that other person had made the agreement as his, or her, agent. 39Where someone opposes the approval of the settlement, her, or his, reasons for opposition may provide "a convenient focus" (see, Jessup J in Darwalla Milling Co Pty Ltd v F Hoffman La Roche Ltd (No 2)) [2006] FCA 1388; (2006) 236 ALR 322, at [39]) by reference to which the court will consider whether to approve the settlement. Similarly, that no one opposes the settlement, in the interests of the person under the legal incapacity, may, in some circumstances, also be relevant. 40Section 77(2) of the Civil Procedure Act 2005 provides that money recovered in any proceedings on behalf of any of a person under legal incapacity, is to be paid into court. However, s 77(3) empowers the court to order that the whole, or any part of, such money not be paid into court, but be paid instead to such person as the court may direct, including, if the person is a protected person, to the manager of the protected person's estate. Determination 41I have given careful consideration to the objections that have been raised by Ms Vanderdonk. Despite her opposition, I am satisfied that it is in the best interests of the Plaintiff to resolve the proceedings on the terms proposed. Relevant matters leading to that conclusion, in the present case, include the cost and complexity of the investigations still to be undertaken if the matter is to proceed; the time involved in getting the matter ready for trial and the date of the trial, which is likely to be some months away; the time that might be taken for the delivery and enforcement of any judgment against the Defendant if the Plaintiff is successful; the possibility of an appeal by the unsuccessful party; and the additional costs to be incurred (even limited to the difference between ordinary costs that might be recovered from the Defendant if the Plaintiff is successful and the indemnity costs that the Plaintiff would have to pay to his own solicitors) and the recommendation of the Plaintiff's solicitor who is extremely experienced. 42To the extent that they have not been mentioned, the reasons advanced by Mr Zucker, in his affidavit, also lead to the conclusion that the proposed settlement should be approved. 43Accordingly, I approve the agreement between the parties set out in the deed of settlement, a copy of which is annexed to the affidavit of Christopher Matthew Zucker sworn 15 April 2012. 44I order that: (a) The agreement between the parties set out in a Deed of Settlement between them, a copy of which is Annexure "A" to the affidavit of Christopher Matthew Zucker sworn 15 April 2012, be approved pursuant to s 76 of the Civil Procedure Act 2005. (b) Pursuant to s 77 of the Civil Procedure Act 2005, the amount payable by the Defendant to the Plaintiff be paid to the NSW Trustee and Guardian. (c) The proceedings be adjourned to the Registrar's List at 9:00 a.m. on 28 May 2012 but if the amount to be paid is paid by the Defendant to the NSW Trustee and Guardian as required, there may be filed in the Registry Short Minutes an order dismissing the proceedings with no order as to costs and vacating the date to which the matter has been adjourned. ********** 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. Decision last updated: 26 April 2012