"Remuneration" as an Allowance in favour of an Accounting Party
67The expression "remuneration" here refers to an allowance, in the nature of profit, in excess of an amount for reimbursement of expenses.
68One should hesitate before equating the concept of "remuneration" here examined with a right arising, at common law, under a contract between parties possessed of contractual capacity: Brockwell v Bullock (1889) 22 QBD 567 at 571 and 572; cf, 573.
69An illustration of the need to tread carefully may be found in cases dealing with an entitlement, under the general law, to recover a reasonable price for "necessaries" supplied to a mentally incompetent person, by way of the provision of goods or services, for his or her maintenance.
70Any such entitlement is probably grounded in the law of restitution rather than contract: McLaughlin v Freehill (1908) 5 CLR 858 at 862 and 863 citing, inter alia, In Re Rhodes (1890) 44 Ch D 94 at 103, 104; In Re Brooks (1904) 21 WN (NSW) 4 at 5-6; Re D [2012] NSWSC 1006 at [69]-[70], citing Powell J in Re M and the Protected Estates Act 1983 (Supreme Court of NSW, 17 February 1988), at p 45, in a passage not included in the report at (1988) 12 NSWLR 96; HS Theobold, The Law Relating to Lunacy (1924), pp 219-221. Cf, K Mason, JW Carter and GJ Tolhurst (ed), Mason and Carter's Restitution Law in Australia (Lexis Nexis Butterworths, Australia, 2nd ed, 2008), paras [819]-[820], [831], [1030] and [1040].
71Although an entitlement may be asserted against an incompetent person personally it is, having regard to that person's disability, generally aimed at a recovery from his or her estate.
72Where property available to a protected person is necessary for his or her maintenance, the Court (acting in the best interests, and for the benefit, of the protected person) may decline to apply, to the satisfaction of a "debt" of the protected person, such property as is within its control (subject to such, if any, operation as must be afforded to legislation such as the Bankruptcy Act 1966 Cth): In Re Farnham (a lunatic) [1895] 2 Ch 799; cf, In Re Farnham (a lunatic) (No 2) [1896] 1 Ch 836. Conversely, even in the absence of a legally enforceable entitlement, the Court may authorise, or direct, that an ex gratia payment be made out of a protected estate in the interests, and for the benefit, of the protected person: Griffin v Union Trustee Company of Australia Limited (1947) 48 SR (NSW) 360 at 363, 364 and 365; Protective Commissioner v D (2004) 60 NSWLR 513 at [12], [149]-[157] and [164]-[169].
73Subject to such (if any) legislation as may govern a case, the Court's protective jurisdiction includes a discretionary power to determine (by reference, inter alia, to a protected person's welfare) when, how and on what terms a protected estate is to be applied in satisfaction of "debts": cf, RL v NSW Trustee and Guardian (2012) 84 NSWLR 263 at 285 [96] and 310 [212].
74The availability of property held by or on behalf of a protected person is critical to such, if any, entitlement his or her committee, or manager, of his estate might have to "remuneration". When the Court approves an arrangement for remuneration of a manager, its approval ultimately takes the form of an allowance out of the protected person's estate. Use of that terminology reflects the liability of a manager to account for his, her or its dealings with the protected estate. Technically, "remuneration" (including "expenses") is "allowed" in favour of the manager on, or subject to, the passing (that is, approval) of the manager's accounts.
75In the protective jurisdiction, the form and frequency of accounts being submitted to a regulatory authority for review (whatever label may attach to the process of review, and whether or not it is described as accounts being taken, vouched or passed or is described as a process of inquiry in lieu of a formal accounting) depends on the circumstances of the particular protected estate. The object of such an accounting exercise (by whatever name known) is to ensure that the estate is being duly managed and that the protected person is being properly maintained: HS Theobold, The Law Relating to Lunacy (1924), pp 51-53 and 468-471.
76Subject to any applicable legislation, a manager has no legal right to remuneration, but, in the ordinary course, may, at most, have a reasonable expectation that, upon a due exercise of protective jurisdiction, a discretionary concession (allowance) will be made in his, her or its favour as an accounting party. The fact that the Court can, in an appropriate case, allow a manager remuneration provides no justification for a manager to presume an entitlement to take, or keep, remuneration or to self-assess an allowance for remuneration without authority conferred by the Court or, subject to supervision by the Court, another competent authority: Crout v Beissel [1909] VLR 207 at 213-214.
77The position of a manager of a protected estate is, in this respect, not unlike that of an executor or administrator who makes a claim for "commission" out of a deceased estate: Nissen v Grunden (1912) 14 CLR 297; In the Will of Sheldon [1972] 1 NSWLR 196 at 199F, 199G-200A, 200E-F; Probate and Administration Act 1898 NSW, s 86 (read with ss 85 and 86A); Re Estate Gowing; Application for Executor's Commission [2014] NSWSC 247. "Executor's commission" is allowed out of estate assets on the passing of accounts.
78Different considerations may apply to a liquidator who asserts an equitable claim to remuneration from trust assets for work done in administering them (Re French Caledonia Travel Service Pty Limited (In Liq); [2003] NSWSC 1008; 48 ACSR 97 at [198], [207] and [211]-[212]) but such differences are a function of legislation, the nature of a liquidator's office, the purposes served by a liquidator's appointment and the nature of assets administered by a liquidator.
79Much the same can be said of a trustee in bankruptcy: Mayne v Jaques (1960) 101 CLR 169, especially at 179-183 (including the reference to In Re Allison Johnson & Foster Limited; ex parte Birkenshaw [1904] 2 KB 327 at 330-331); Adsett v Berlouis (1992) 37 FCR 201 at 208-212.
80Neither a liquidator nor a trustee in bankruptcy is, by the nature of his or her office, administering the estate of a person who, by reason of death or incapacity, is unable to protect his or her interests. The scope of a fiduciary duty (including the duty of a guardian in the broad sense of that term as discussed by Dixon J in Countess of Bective v Federal Commissioner of Taxation (1932) 47 CLR 417 at 420-423) depends on the nature of the underlying fiduciary relationship and the facts of the case: Clay v Clay (2001) 202 CLR 410 at 432 [46] - 433 [48].
81This analysis of a manager's "entitlement" to remuneration from a protected estate is consistent with the general law governing fiduciaries. It also accommodates the need, arising out of the nature of the protective jurisdiction, to accommodate standards of accounting to the personal circumstances of a protected person: Countess of Bective v Federal Commissioner of Taxation, ibid; Clay v Clay (2001) 202 CLR 410 at 428 [37] - 430 [40] and 432 [46] - 433 [49]; W v B [2001] NSWSC 503 at [15]; Crossingham v Crossingham [2012] NSWSC 95 at [2], [17] - [28], [55] and [64]-[65]; HS Theobold, The Law Relating to Lunacy (1924), pp 51-53.
82This may be seen in the following observations of Dixon J in Countess of Bective v Federal Commissioner of Taxation at 47 CLR 420-423:
"[420]... an obligation to apply moneys in the maintenance of children or others does not involve the liability which arises from an ordinary trust. It is a general rule that guardians of infants, committees of the person of lunatics, and others who are entrusted with funds to be expended in the maintenance and support of persons under their care are not liable to account as trustees. They need not vouch the items of their expenditure, and, if they fulfil the obligation of maintenance in a manner commensurate with the [421] income available to them for the purpose, an account will not be taken. Often the person to be maintained is a member of a family enjoying the advantages of a common establishment; always the end in view is to supply the daily wants of an individual, to provide for his comfort, edification and amusement, and to promote his happiness. It would defeat the very purpose for which the fund is provided, if its administration were hampered by the necessity of identifying, distinguishing, apportioning and recording every item of expenditure and vindicating its propriety. Although these considerations furnish an independent foundation for the general rule, yet, after all, it is a doctrine regulating the application of moneys payable under an instrument, whether a will, a settlement or an order of a Court of equity, and the operation of the doctrine must depend upon the provisions contained in the instrument, both express and implied. But the effect of the instrument will often be governed by the circumstances to which it was intended to apply, and, in particular, by a consideration of the nature of the actual abode, the condition of the household and the state of the family of the infant or other person to be maintained. Courts of equity have not disguised the fact that the general rule gives to a parent or guardian dispensing the fund an opportunity of gaining incidental benefits, but the nature and extent of the advantages permitted must depend peculiarly upon the intention ascribed to the instrument... Statements to be found in some authorities that any surplus remaining after adequate maintenance has been provided belongs to the person having the care of the infant or of the lunatic cannot be safely used unless careful attention is given to the scope and purpose of the instrument under which the moneys arise and the conditions to which its operation is directed. A confusion appears to have arisen out of the decision in Grosvenor v Drax, a lunacy appeal to the Privy Council in which no reasons were given ... [422] But the difficulty relates to the application rather than to the nature of the rule, and in any case it is evident that to reach the conclusion that savings belong to the guardian is much easier if the allowance is meant to include some inducement to the recipient to undertake the care of the person to be maintained, or if the intention is that the guardian should be associated with a child in a mode of life, or standard of living or in the enjoyment of pursuits which, otherwise, he would not adopt. The conclusion is less easy when the fund is meant simply to provide the proper charges of the infant.
A guardian is not permitted to receive moneys for maintenance without liability to account except upon the condition that he discharges his duty adequately to maintain and not otherwise. Upon his default the Court will administer the fund or intercept the payments and has jurisdiction to order an account or an inquiry... Where, however, the condition is performed the Court does not inquire whether the money has been completely expended or whether the recipient has spent small sums for his personal benefit, but, nevertheless, it [423] remains an allowance to a person in a fiduciary capacity and for a definite purpose [Emphasis added]."
83Cases cited in support of these observations include In Re French (1868) LR 3 Ch App 317, Brown v Smith (1878) 10 Ch D 377, In Re Weld (a person of unsound mind) (1882) 20 Ch D 451 and Strangwayes v Read [1898] 2 Ch 419.
84Dixon J expressly spoke of a committee (of the person) of a lunatic as one of the subjects of his observations (420), and described such officers as dealing with funds in a fiduciary capacity (423) and for a definite purpose associated with maintenance of a protected person (421 and 423). His entire discussion was structured around "allowances" and a liability to account. He noted that, in this context, a fiduciary might be permitted, in aid of the protective purpose of the law, to enjoy "incidental benefits" associated with an "allowance ... meant to include some inducement to the recipient to undertake the care of the person to be maintained..." (421 and 422). Any enjoyment of such benefits, or inducements, is conditional upon the fiduciary discharging his, her or its duty to the protected person (422-423).
85Conceptually, this analysis is able to accommodate analysis of remuneration allowed to a manager of a protected estate under the legislative regime governed by the NSW Trustee and Guardian Act and the Guardianship Act. A prospect of remuneration may serve as an inducement to act as a manager, and to encourage the due discharge of managerial functions as a fiduciary.
86Characterisation of a claim of remuneration or expenses as a "commission" or "percentage" does not alter the nature of inquiries that must be made about the reasonableness, or otherwise, of the claim.
87An allowance for remuneration may take the form of a "commission or percentage" or a lump sum without altering its character as remuneration. Remuneration in the form of a commission or percentage may be allowed as a means of facilitating an objective assessment of an entitlement, in a relatively summary way, without a need for an application of a rate of remuneration to an itemised statement of work done or services supplied: Re Estate Gowing; Application for Executor's Commission [2014] NSWSC 247. In any event it may be appropriate, in light of the nature or amount of work done or services supplied, to moderate a figure based on a commission or percentage calculation in order to ensure that the bounds of reasonableness are not exceeded. In each case, an element of judgment is required to ensure that there is a just reconciliation of the competing interests of a manager and the protected estate under management.
88This is not a call for a wholesale departure from agreed rates of remuneration, or market forces, in the assessment of remuneration allowed to managers of protected estates, but a reminder: first, that there is a divergence of interests in the realm of remuneration allowed to a manager out of a protected estate under management; and, secondly, an exercise of protective jurisdiction must consult the welfare and interests of the protected person.
89Mindful, particularly, of the protective nature of the jurisdiction exercised on an inquiry into the reasonableness, or otherwise, of a claim for remuneration, the Court (or, in exercise of their legislative powers, the NSW Trustee and, on an appeal from an administrative decision of the NSW Trustee, NCAT), must look to the substance of the claim, whatever its form. Where (as commonly now occurs) a manager routinely, or ostensibly, outsources a financial advice function to an entity with which it has a corporate, or commercial, connection an inquiry about the reasonableness of a claim for remuneration and expenses must have regard to their global claim on the protected estate under management.