AEW v BW

ANALYSIS OF THIS CASE

On an application of these principles, and despite their perceptions of infelicities in the drafting of clauses 1.6.27 and 8.11.3 of the Claims Assessment Guidelines, the lawyers representing the defendant in the making of her claim for compensation should have recognised that, prima facie, she was, as she presently is, a "person under a legal incapacity". She was apparently no more able to manage the conduct of a claim resulting in a $1.2 million compensation settlement than she is capable of managing that sum without a protected estate manager.
The fact that she was not an "incommunicate person" does not mean that she was not a person under legal incapacity. Nor does the fact that no person had applied for, or obtained, a protected estate management order under the NSW Trustee and Guardian Act, or a financial management order under the Guardianship Act 1987 NSW, so as to make her a "protected person" within the meaning of the NSW Trustee and Guardian Act, section 38.
There was no justification for the defendant's Compensation Solicitors (or the insurer with whom they negotiated a settlement) to take upon themselves (with the defendant's family's acquiescence, but without clear authority on behalf of the defendant herself) settlement of her claim for compensation or, more particularly, appropriation of her assets in payment of their own remuneration and expenses.
If it be the case (as I anticipate enquiries by the NSW Trustee might confirm) that the amount of compensation paid by the insurer, on the defendant's account, under the settlement agreement can be justified as appropriate, three problems nevertheless come to the fore. First, by acquiescing in a settlement "inclusive of costs" the defendant's lawyers unacceptably placed their personal interests in conflict with their professional and fiduciary duties to the defendant. Secondly, they did this at a time when, on a construction of Dr L's opinion most favourable to them, the defendant was incapable of managing her affairs. Thirdly, they failed to appreciate the need for regulatory approval before appropriating any part of the defendant's compensation money to the payment of their costs. They evidently did not realise that, in management of the defendant's affairs, she might be in as much need of protection vis-à-vis them as she is vis-à-vis others.
Equitable principles governing fiduciaries, with a need to be conscious of conflicts between duty and interest, generally apply to lawyers in both the formation and performance of agreements for remuneration as part of a professional retainer: Law Society of New South Wales v Foreman (1994) 34 NSWLR 408 at 435-437.
By effecting an "inclusive of costs" form of settlement, and in appropriating settlement monies towards payment of their remuneration without the regulatory oversight of a court or, at least, the NSW Trustee, the lawyers exposed themselves, as fiduciaries, to an order that they account for moneys received.
Belated realisation of this led, commendably, to the Compensation Solicitors indicating a preparedness to submit to such procedures as the Court might specify for an assessment, or other form of review, of their costs and disbursements.
In the first instance, the appropriate authority to review those costs and disbursements is the NSW Trustee in the course of its supervision of management of the defendant's protected estate under the NSW Trustee and Guardian Act.
In the circumstances of this case, having regard to the course of events, the Court should retain oversight of management of the defendant's estate until such time as it can be satisfied that any irregularities attending management of the defendant's affairs to date have been addressed. For that purpose, the NSW Trustee, having conducted such enquiries as it deems necessary or appropriate, should report to the Court on the reasonableness or otherwise of the purported settlement of the defendant's claim for compensation and related questions, particularly quantification of legal costs and disbursements reasonably and fairly chargeable to her account.
Although I apprehend that the settlement and ancillary transactions will be found to have been reasonable (approved as they have been by the defendant's close-knit family) this needs, in the defendant's interests, to be confirmed by a formal process. It is not, and should not be seen, as mere formality. It is important, not only as means of ensuring that the defendant's interests have been protected, but as a means of demonstrating that the interests of all persons in her position must be protected.
I do not exclude the possibility that the defendant's lawyers may apply for an order (as sought in Ability One Financial Management Pty Ltd and another v JB by his tutor AB [2014] NSWSC 245, and considered in greater detail in C v W (No 2) [2016] NSWSC 945 at [9]-[12] and [45]-[47]) that they be excused for any breach of fiduciary obligations in taking remuneration to which they were not entitled. However, that may not prove necessary.
My expectation is that any problems associated with the informal procedures hitherto followed having been made manifest, the plaintiff and the defendant's lawyers will work constructively with the NSW Trustee in regularising management of the defendant's estate so that no action will need to be taken beyond a formal notation of the NSW Trustee's report.
Nevertheless, I draw to attention, not only the Court's protective jurisdiction, but also its general supervisory jurisdiction over lawyers as officers of the Court, extending as it does to the regulation of charges made for work done and to prevention of overcharging: Woolf v Snipe (1933) 48 CLR 677 at 678-679; Re Felicity; FM v Secretary, Department of Family and Community Services (No 4) [2015] NSWCA 19 at [18]-[20] and [52].
I do not intend, by this reference, to do more than notice the nature of jurisdiction available to the Court. I have not undertaken any exercise designed to assess the reasonableness, or otherwise, of the "settlement" or costs and disbursements charged to the account of the defendant. In the first instance at least, that is a question for the NSW Trustee's consideration in its supervision of management of the defendant's estate.
Noting that all members of the defendant's family are agreed that the plaintiff is a suitable person to manage the defendant's protected estate, and having had an opportunity to assess his suitability in his personal appearance before the Court, I am content (consistently with Holt v Protective Commissioner (1993) 31 NSWLR 227) to appoint him manager of the defendant's estate under the administrative regime for which the NSW Trustee and Guardian Act provides. He is young; but, having now been appraised of how the work of the Court and the NSW Trustee is conducted, he can, I trust, be relied upon to perform the functions of a protected estate manager.
Accordingly, I make orders and notations to the following effect: 1. NOTE the orders and notations made on 11 and 16 May 2016; the payments into Court made on 18 May 2016; and the appearances on 25 May 2016. 2. NOTE the summons and affidavits filed in support of the summons. 3. ORDER, pursuant to s 41(1)(b) of the NSW Trustee and Guardian Act 2009 NSW, that the plaintiff be appointed manager of the estate of the defendant subject to the orders and direction of the NSW Trustee. 4. ORDER that, subject to any further of the Court or any order or direction of the NSW Trustee, all moneys standing to the credit of the defendant in these proceedings, including accrued interest, be paid out to the NSW Trustee pending approval by the NSW Trustee of a plan of management for management of the protected estate of the defendant by the plaintiff as manager. 5. ORDER that the plaintiff may not do anything in reliance on his appointment as manager of the estate of the defendant until the NSW Trustee has authorised him to assume management of the defendant's estate in that capacity. 6. ORDER that the plaintiff's appointment as receiver and manager of the estate of the defendant (pursuant to Orders made on 11 May 2016) be discharged on the grant to him by the NSW Trustee (pursuant to these Orders) of authority to assume management of the defendant's estate in capacity of manager. 7. ORDER, pursuant to section 68 of the NSW Trustee and Guardian Act, that the plaintiff give such, if any, security in respect of his management of the defendant's estate as the NSW Trustee may determine to be appropriate. 8. ORDER, subject to further order, that the NSW Trustee report to the Court on the following questions 1. whether or not the agreement purportedly made for settlement of the defendant's claim for compensation under the Motor Accidents Compensation Act should be approved by the Court as an agreement made in the interests, and for the benefit, of the defendant. 2. whether the costs and disbursements appropriated by the Compensation Solicitors, from moneys paid to them pursuant to that settlement agreement, should be approved as fair and reasonable. 3. whether any (and, if so, what) steps should be taken on behalf of the defendant consequentially upon the answers to these questions. 1. RESERVE all questions relating to the costs of these proceedings pending consideration of the NSW Trustee's report. 2. ORDER that the plaintiff provide a copy of these orders to: 1. (a) the defendant; 2. (b) the husband of the defendant; 3. (c) the daughter of the defendant; and 4. (d) the NSW Trustee. 1. ORDER that at the time of providing a copy of these orders to the NSW Trustee, the plaintiff also provide to the NSW Trustee, so far as not already provided, copies of the summons and all affidavits read in support of the summons. 2. ORDER that all interested persons (including the NSW Trustee and the Compensation Solicitors) have liberty to apply as they may be advised.

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Cases Cited (27)

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