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[2012] NSWSC 1543
Supreme Court of NSW
2012-11-27
White J, Powell J, Ex P
Original judgment source is linked above.
Judgment 1HIS HONOUR: This is an application for a declaration that the defendant, EKR, is incapable of managing her affairs and an order that her estate be subject to management pursuant to the NSW Trustee and Guardian Act 2009 (NSW). I am satisfied that in due course that declaration and order should be made. 2EKR sustained injuries in a road traffic accident on 29 March 1999 when she was a young child. She commenced proceedings in the District Court in relation to the injuries she suffered. Those proceedings were resolved by way of a settlement that was approved by the District Court. EKR is entitled to settlement moneys in excess of $2 million. I am satisfied on the medical evidence that she is not capable of managing her affairs, nor capable of managing the ordinary routine affairs of man or woman. 3The plaintiff is EKR's father. He also seeks an order that management of her estate be committed to Ability One Financial Management Pty Ltd ("Ability One Financial Management"). The issue on the application is whether that company should be appointed as financial manager. I have made an interim order appointing the NSW Trustee and Guardian as receiver and manager of the defendant's estate. 4Ability One Financial Management is not a trustee company. It is a wholly owned subsidiary of Ability One Pty Limited ("Ability One"). Mr Grant White is the chief executive officer of Ability One. He deposed that that company was incorporated in 1998 and provides financial and life planning services on behalf of persons who receive a significant settlement sum as the result of a catastrophic personal injury. He deposed that it acts under licence from Charter Financial Planning Limited ("Charter"), a subsidiary of AXA. Charter audits the activities of Ability One every six months and independently approves all financial plans prepared by Ability One's financial planners. The fee payable to Charter is paid from fees charged by Ability One and is not an additional fee. Ability One acts as a corporate authorised representative of Charter. Charter holds a financial services licence. In November 2009 Ability One Financial Management was incorporated as a wholly owned subsidiary of Ability One. The sole activity of Ability One Financial Management is to undertake tasks of a financial manager pursuant to an appointment by a court or the Guardianship Tribunal. 5I had reservations concerning the application. I gave an interim judgment stating as follows: "2 On the materials filed I am not presently satisfied that an order ought to be made appointing Ability One Financial Management Pty Ltd to be manager of the defendant's estate. 3 There is no evidence as to whether Ability One Financial Management Pty Ltd holds a financial services licence. Prima facie, and subject to any submission that might be made to the contrary, I would have thought that such a licence would be required. 4 Secondly, it appears that if appointed financial manager, Ability One Financial Management Pty Ltd would propose to charge an establishment fee and an ongoing management fee. The NSW Trustee and Guardian and trustee companies have a statutory entitlement to charge fees (NSW Trustee and Guardian Regulation 2008; Corporations Act 2001 (Cth), s 601TBA). Ability One Financial Management Pty Ltd is not a licensed trustee company. Subject to any submissions that may be made, I should have thought that a private manager is not entitled to payment of remuneration (as distinct from reimbursement of expenses) out of the estate of a protected person unless the Court (or in limited circumstances, the NSW Trustee and Guardian) so orders (NSW Trustee and Guardian Act, s 115; The Lady Mary Cope's Case (1677) 2 Ch Cas 239; 22 ER 926; Ex P Femor; In the matter of Errington (1821) Jac 404; 37 ER 903; Re Westbrook (1848) 2 Phil 631; JJK v APK (1986) Aust Torts Reports 80-042 at 67,881; G v B (Supreme Court of New South Wales, Powell J, 27 May 1992, unreported)). 5 In the last case, Powell J said that 'It is contrary to long established practice ... to appoint a private manager with remuneration, and such a manager will be appointed only where absolutely necessary.' 6 I note that in 2010 an associate judge appointed Ability One Financial Management Pty Ltd as financial manager of a protected estate. It does not appear that any reasons were given for the appointment. I am also informed that the company has been appointed as financial manager by the Guardianship Tribunal on ten occasions between 8 March 2010 and 23 May 2011. I do not know on what basis those appointments were made. 7 It is not clear from the information provided as to whether Ability One Pty Ltd would charge for the service of investing the defendant's assets, or otherwise providing services to Ability One Financial Management Pty Ltd on behalf of the defendant. I infer from paragraph 20 of Mr White's affidavit that Ability One Pty Ltd does charge fees for its services. It is not clear whether this is in addition to the fees Ability One Financial Management Pty Ltd would seek to charge as deposed to in paragraph 58 of his affidavit. 8 There is no evidence as to the investment strategy Ability One Financial Management Pty Ltd or Ability One Pty Ltd proposes. 9 Rule 57.5(1)(c) of the Uniform Civil Procedure Rules requires affidavits of at least two persons as to the fitness of the proposed manager. The affidavits of Messrs Meyers and White, who are officers of the proposed manager, do not satisfy this requirement. The affidavits of fitness of the proposed manager must be by persons who are not the manager's agents. 10 I will receive any further evidence or submissions that either the plaintiff or Ability One Financial Management Pty Ltd may wish to make as to whether I should appoint that company as financial manager. If it is not appointed financial manager, the plaintiff should consider whether he would wish a trustee company or the NSW Trustee and Guardian to be appointed, and if the former, to obtain the necessary consent." 6I have since received further evidence and submissions. I have received submissions not only from the plaintiff, but from Ability One Financial Management. The plaintiff's submission is that the express preference of the family members significantly favours the appointment of Ability One Financial Management. The plaintiff's solicitor, Mr Levenson, recommended Ability One to the plaintiff. The plaintiff has met with Mr White of Ability One. The plaintiff is impressed by the proposals made on behalf of Ability One and considers that they offer a practical, sensible and personalised approach to management. Ability One has agreed to cap its fees to the amount which was allowed in the settlement of the defendant's claim for damages as a sum for financial management. Mr Levenson and another solicitor, Mr Tanner, have provided testimonials as to the integrity and expertise of Ability One and Ability One Financial Management and their directors. 7The further evidence provided addressed the issues raised in the first interim judgment. I received the proposed investment plan, which raised a further issue as to conflicts of interest and duty. 8In the course of its submissions in response to my first interim judgment, Ability One Financial management proposed the following orders: "2. Pursuant to section 41(1)(a) of the Act, that the estate of the protected person to be subject to management under the NSW Trustee and Guardianship Act 2009 ('the managed estate'). 3. The plaintiff's costs be paid from the estate of the protected person. 4. Pursuant to section 41(1)(b) of the Act, that Ability One Financial Management Pty Ltd ACN 113553 852 ('Ability') be appointed as manager of the estate of the Defendant ('the management'). 5. That the Registrar of the District Court of New South Wales pay to Ability (subject to paragraph 8 below) all funds held on behalf of the protected person, being the net proceeds of the settlement funds together with any interest accrued in proceedings No 2010/227750. 6. Pursuant to section 68 of the Act, that Ability give such security to the NSW Trustee and Guardian in respect of the management of the managed estate as the NSW Trustee and Guardian determines appropriate ('the security'). 7. Pursuant to sections 64 and 65 of the Act, that: (a) the managed estate be held on trust by Ability for the Defendant; (b) any funds held on trust by Ability pursuant to Order 7(a) above, be held in a separate designated account in the name of 'Ability One Pty Ltd ATF Ebony Ritchie'. 8. Pursuant to section 64(1) of the Act, that Ability be authorised to exercise the functions set out in section 16(1)(a) to (y) (inclusive) of the NSW Trustee and Guardian Act 2009 when acting in its trust capacity with respect the managed estate. Supervision Orders 9. Pursuant to section 64(3) of the Act, that: (a) Ability submit to the NSW Trustee and Guardian annual accounts in a form prescribed or approved by the NSW Trustee and Guardian; (b) Subject to any further direction or authority issued to Ability by the NSW Trustee and Guardian, that Ability not make expenditures from the managed estate of greater than $10,000 without the prior approval of the NSW Trustee and Guardian; (c) the management otherwise be subject to such supervision by (and reporting to) the NSW Trustee and Guardian in relation to the affairs of the managed estate, as the NSW Trustee and Guardian directs in writing to Ability. (d) That any commission paid by to any advisor of the managed person as the result of an investment in any financial product is to be rebated to the managed estate. 10. That Ability provide a copy of these orders to the NSW Trustee and Guardian. Remuneration Orders 11. Pursuant to section 115(1)(b) of the Act, that Ability be entitled to remuneration from the managed estate in respect of: (i) an establishment fee in relation to the managed estate; and (ii) a management fee in relation to the managed estate, calculated and paid in accordance with the schedule of fees annexed and marked 'A', subject to: (iii) prior authorization and approval by NSW Trustee and Guardian of that establishment fee and the schedule comprising Annexure 'A'; (iv) order 12(b). 12. Pursuant to section 115(1)(b) of the Act, that: (a). Ability be entitled to reimbursement of any expense and establishment fee to be charged to Ability by Ability One Pty Ltd for services it provides to Ability, subject to prior approval by the NSW Trustee and Guardian; (b). Ability's total entitlement to remuneration under order 11 and reimbursement under order 12(a) above, is capped at (and must not exceed) $396,000 over the lifetime of the protected person. 13. Liberty to restore the proceedings to the Protective list of the Court for any orders necessary to give effect to these directions." 9After I raised further issues about the need for a financial services licence and the existence of a potential conflict between Ability One Financial Management's duty and interest, it proposed a modification of those orders. I deal with that below.
Need for a financial services licence 10The first question is whether Ability One Financial Management requires a financial services licence. It is clear that it carries on a business of financial management of the estates of protected persons. 11Section 911A of the Corporations Act 2001 (Cth) relevantly provides: "911A Need for an Australian financial services licence (1) Subject to this section, a person who carries on a financial services business in this jurisdiction must hold an Australian financial services licence covering the provision of the financial services. Note 1: Also, a person must not provide a financial service contrary to a banning order or disqualification order under Division 8. Note 2: Failure to comply with this subsection is an offence (see subsection 1311(1)). (2) However, a person is exempt from the requirement to hold an Australian financial services licence for a financial service they provide in any of the following circumstances: (a) the person provides the service as representative of a second person who carries on a financial services business and who: (i) holds an Australian financial services licence that covers the provision of the service; or (ii) is exempt under this subsection from the requirement to hold an Australian financial services licence that covers the provision of the service; Note: However, representatives must still comply with section 911B even if they are exempted from this section by this paragraph. ... (4) A person is not exempt under any paragraph of subsection (2) for a financial service they provide if the service is: (a) the operation of a registered scheme; or (b) a traditional trustee company service." A "financial services business" is a business of providing financial services (s 761A). 12Section 911B relevantly provides: "911B Providing financial services on behalf of a person who carries on a financial services business (1) A person (the provider) must only provide a financial service in this jurisdiction on behalf of another person (the principal) who carries on a financial services business if one or more of the following paragraphs apply: (a) these conditions are satisfied: (i) the principal holds an Australian financial services licence covering the provision of the service; and (ii) the provider is an employee or director of the principal or of a related body corporate of the principal; and (iii) the provider is not an employee or director, or authorised representative, of any other person who carries on a financial services business and who is not a related body corporate of the principal; and (iv) the provider is not an employee or director, or authorised representative, of a related body corporate of a person of the kind mentioned in subparagraph (iii); (b) these conditions are satisfied: (i) the principal holds an Australian financial services licence covering the provision of the service; and (ii) the provider is an authorised representative of the principal; and (iii) the authorisation covers the provision of the service by the provider; and (iv) in the case of a provider who is an employee or director of any other person (the second principal) who carries on a financial services business, or of a related body corporate of such a second principal-if the provider provides any financial services in this jurisdiction on behalf of the second principal, the provider does so as an authorised representative of the second principal; (c) these conditions are satisfied: (i) the principal holds an Australian financial services licence covering the provision of the service; and (ii) the provider is an employee of an authorised representative of the principal; and (iii) the authorisation covers the provision of the service by the authorised representative; and (iv) the service is the provision of a basic deposit product or of a facility for making non cash payments (see section 763D) that is related to a basic deposit product, or is the provision of a financial product of a kind prescribed by regulations made for the purposes of this subparagraph; (d) the provider holds their own Australian financial services licence covering the provision of the service; Note: However, in general a financial services licensee cannot be the authorised representative of another financial services licensee: see sections 916D and 916E. (e) if the principal (rather than the provider) provided the service, the principal would not need an Australian financial services licence because the provision of the service would be exempt under subsection 911A(2). Note 1: Also, a person must not provide a financial service on behalf of another person contrary to a banning order or disqualification order under Division 8. Note 2: Failure to comply with this subsection is an offence (see subsection 1311(1))." 13Mr Grant White, the chief executive officer of Ability One and Ability One Financial Management, deposed that Charter holds an Australian financial services licence. Mr White advised that Charter currently manages over $54 billion of client funds with more than 1,300 financial advisers as authorised representatives pursuant to agreements with Charter. 14Charter's current financial services licence states that the licence authorises it to carry on a financial services business to: a) provide financial product advice for 12 classes of financial products; and b) to deal in a financial product by: i) issuing, applying for, acquiring, varying or disposing of a financial product in respect of certain classes of financial products; and ii) applying for, acquiring, varying or disposing of a financial product on behalf of another person in respect of certain classes of products to retail and wholesale clients. 15Mr White deposed that Ability One Financial Management has entered into a Representative Services Agreement with Charter under which it is appointed as a corporate authorised representative of Charter. Pursuant to that agreement, Ability One Financial Management makes available a representative, namely a Mr Christopher Holloway, to be the authorised representative of Charter pursuant to a deed of appointment between Mr Holloway and Charter. 16Counsel for Ability One Financial Management submitted that Ability One Financial Management is exempt from itself being required to hold an Australian financial services licence because it provides its services as a representative of Charter and Charter carries on a financial services business and holds a financial services licence for the provision of that service. Counsel submitted that paragraph (b) of s 911B(1) of the Corporations Act was satisfied because: "(i) The principal Charter, holds an Australian Financial Services Licence covering the provision of the service; (ii) Both AOFM and Mr. Holloway are authorised representatives of Charter; (iii) The authorisation covers the provision of the service; and (iv) Mr. Holloway is an employee of AOFM and an authorised representative of [Charter]." 17The Representative Services Agreement between Charter and Ability One Financial Management dated 10 July 2012 relevantly provides that Ability One Financial Management agrees to supply the services of the Representative to act as Charter's Authorised Representative. Clause 1.4 of that agreement provides: "We appoint you to act as our Corporate Authorised Representative to provide, through a Representative, those financial services the Representative provides in accordance with the Deed of Appointment." 18The agreement does not otherwise provide for Ability One Financial Management to provide a financial service as representative of Charter. 19The deed of appointment of Mr Holloway is also dated 10 July 2012. By that deed Charter appointed Mr Holloway as an Authorised Representative. Clause 1.1(b) provided that Mr Holloway was appointed "for the purpose of giving financial planning advice as well as recommending financial products as defined under the Corporations Act 2001, as contained in our Authorised Product List, at the level of authority and accreditation we may determine (subject to you [sic] later qualifying for a higher level of authority and accreditation)". The deed of appointment did not provide for Mr Holloway to provide any other financial service as representative of Charter. 20It is implicit in the submissions for Ability One Financial Management that it acknowledges that, in acting as financial manager of the defendant's estate, it will be providing a financial service. That acknowledgment is correct. It is necessary to examine why it is correct. Section 766A of the Corporations Act relevantly provides: "766A When does a person provide a financial service? General (1) For the purposes of this Chapter, subject to paragraph (2)(b), a person provides a financial service if they: (a) provide financial product advice (see section 766B); or (b) deal in a financial product (see section 766C); or (c) make a market for a financial product (see section 766D); or (d) operate a registered scheme; or (e) provide a custodial or depository service (see section 766E); or (f) engage in conduct of a kind prescribed by regulations made for the purposes of this paragraph. Provision of traditional trustee company services by trustee company (1A) Subject to paragraph (2)(b), the provision by a trustee company of a traditional trustee company service constitutes the provision, by the company, of a financial service. Note: Trustee companies may also provide other kinds of financial service mentioned in subsection (1)." 21Section 766C relevantly provides: "766C Meaning of dealing (1) For the purposes of this Chapter, the following conduct (whether engaged in as principal or agent) constitutes dealing in a financial product: (a) applying for or acquiring a financial product; (b) issuing a financial product; (c) in relation to securities or managed investment interests-underwriting the securities or interests; (d) varying a financial product; (e) disposing of a financial product. ... (3) A person is taken not to deal in a financial product if the person deals in the product on their own behalf (whether directly or through an agent or other representative), unless: (a) the person is an issuer of financial products; and (b) the dealing is in relation to one or more of those products. (3A) For the purposes of subsection (3), a person (the agent) who deals in a product as an agent or representative of another person (the principal) is not taken to deal in the product on the agent's own behalf, even if that dealing, when considered as a dealing by the principal, is a dealing by the principal on the principal's own behalf." 22In acting as financial manager Ability One Financial Management would provide a financial service because it would deal in a financial product. 23A "traditional trustee company service" includes the performance of "estate management functions", which in turn includes not only managing a deceased estate, but also acting as manager or administrator of the estate of an individual (s 761A (definition of "traditional trustee company services"), ss 601RAA and 601RAC(1)(a) and (2)(e)). Although Ability One Financial Management would perform traditional trustee company services when acting as the defendant's financial manager, it is not a "trustee company" within the meaning of s 766A(1A). It would therefore not be taken to be providing a financial service merely because it provides traditional trustee company services. A "trustee company" within the meaning of s 766A(1A) has the same meaning as in Chapter 5D of the Corporations Act (s 761A). In Chapter 5D a "trustee company" is defined in s 601RAB and extends only to those companies that are prescribed by the regulations as a trustee company for the purposes of the Corporations Act. Ability One Financial Management is not so prescribed. 24In acting as financial manager for the defendant, Ability One Financial Management would deal in a financial product by applying for or acquiring a financial product on the defendant's behalf. That amounts to a dealing in a financial product pursuant to s 766C(1)(a). It is not excluded as a dealing in a financial product by s 766C(3) because the dealing would not be by the defendant herself, but by Ability One Financial Management as agent for her (s 766C(3A)). In investing the defendant's damages award, Ability One Financial Management would apply for and acquire financial products on the defendant's behalf. Ability One Financial Management would be thereby dealing in financial products and would not be entitled to the benefit of the exclusion in s 766C(3). 25If Ability One Financial Management were appointed as manager of the defendant's estate, it would provide a financial service by dealing in a financial product by applying for or acquiring financial products as agent on the defendant's behalf (ss 766A(1)(b) and 766C(1)(a) and (3) and (3A)). Unless exempted, it is required to hold an Australian financial services licence for the provision of the financial services pursuant to s 911A(1) because the service it provides would be in the course of carrying on a financial services business. The submission made for Ability One Financial Management is that, pursuant to s 911A(2)(a), it is exempted from the requirement to hold a licence because it provides the financial service as a representative of Charter who carries on a financial services business and holds an Australian financial services licence. 26But s 911A(4) precludes Ability One Financial Management from relying on an exemption under s 911A(2)(a), as the service which it would provide is a traditional trustee company service. That is so even though it is not a trustee company as defined. 27Moreover, the only services Ability One Financial Management provides as a representative of Charter is to provide financial services through Mr Holloway acting under the deed of appointment. The only services Mr Holloway provides under that deed are the giving of financial planning advice and the recommendation of financial products as contained in Charter's Authorised Product Lists. Those are not the services Ability One Financial management would provide as manager of the defendant's estate. 28It follows that Ability One Financial Management is not exempt from the requirement to hold an Australian financial services licence in respect of the services it would provide if it were appointed as manager of the defendant's estate. 29Mr White deposes that Ability One Financial Management has "commenced a formal application with ASIC for an Australian financial services licence in its own right". Its counsel sought an order for its appointment as financial manager conditionally on its obtaining such a licence. Whether or not there is power to make such a conditional order, there is no good reason to do so. Nor would a conditional order serve any useful purpose. On 14 November 2012, I appointed the NSW Trustee and Guardian as interim receiver and manager of the defendant's estate. If and when Ability One Financial Management obtains a financial services licence, the plaintiff can renew his application for its appointment as financial manager.
Private manager for remuneration 30The second matter upon which I sought further evidence or submissions was whether it was appropriate to appoint Ability One Financial Management, which proposed to charge an establishment fee and an ongoing management fee. To the cases referred to at paragraph [4] of my previous reasons (quoted at para [5] above) can be added Gell v Gell [2005] NSWSC 566; (2005) 63 NSWLR 547 at [21]. 31Counsel for Ability One Financial Management submitted that the statement of Powell J in G v B (Supreme Court of New South Wales, Powell J, 27 May 1992, unreported) referred to at paragraph [5] of my previous reasons was rejected by the Court of Appeal in Holt v Protective Commissioner (1993) 31 NSWLR 227 at 238. 32In my view there is no inconsistency between these authorities. No question arose in Holt v Protective Commissioner concerning the appointment of a private manager for remuneration. There, the private managers proposed were the brothers of the protected person. There was no suggestion that the private managers might seek remuneration for their work as financial managers. Nor, in G v B, did Powell J suggest that the governing principle was anything other than that the appointment of a suitable person to be manager was to be determined solely by reference to the interests of the protected person so that his or her estate is managed to serve that person's best interests (e.g. JJK v APK (1986) Aust Tort Reports 80-042 per Powell J at 67,880). It has been long established that a private manager is not entitled to payment of remuneration out of the protected person's estate, although the Court may authorise payment of remuneration where it is in the protected person's interest so to do. The position concerning remuneration of financial managers (apart from the NSW Trustee and Guardian and trustee companies that have a statutory right to remuneration) is analogous to that of trustees. Unless the trust deed otherwise provides, a trustee is required to act gratuitously, but the Court has inherent jurisdiction to allow remuneration where it is advantageous to the trust estate to allow such remuneration (Anson v Anson [2004] NSWSC 766 at [76]; (2004) 12 BPR 22,303 at 22,316). Powell J's observation in G v B as to the practice of the Court in appointing a private manager for remuneration is not to be understood as precluding such an appointment if the appointment is in the best interests of the protected person, but recognising that, generally, a private manager is not to expect remuneration. 33Section 115 of the NSW Trustee and Guardian Act provides: "115 Supreme Court or NSW Trustee may order certain costs to be paid out of managed estate (cf PE Act, s 77) (1) The Supreme Court or the NSW Trustee may order that the following costs be paid, in accordance with the order, from the estate of a managed person: (a) costs with respect to actions taken for the purposes of complying with any order or direction under this Act, or any transfer or conveyance under Chapter 4, (b) remuneration, of a specified amount, to the manager of the estate. (2) The NSW Trustee may make an order under this section only in relation to costs arising from an order or direction given by the NSW Trustee under Chapter 4 or work carried out by the manager of an estate of a managed person in connection with any such order or direction." 34In the present case the plaintiff and Ability One Financial Management seek an order pursuant to s 115(1)(b) that Ability One Financial Management be entitled to remuneration from the managed estate in respect of an establishment and a management fee calculated and paid in accordance with a schedule. The attached schedule provides for payment of one-off establishment fees to Ability One Financial Management and to Ability One Pty Limited and ongoing annual management fees of specified amounts. I accept that s 115 authorises the Court to make an order for the payment of remuneration of a specified amount in advance of the work being done as well as retrospectively. Such orders authorising remuneration in advance were made from time to time in the exercise of the Court's inherent jurisdiction (e.g. Ex P Femor; In the matter of Errington (1821) Jac 404 at 406; 37 ER 903; Re Walker (1848) 2 Phil 630). If it is otherwise fitting to appoint Ability One Financial Management as financial manager of the defendant's estate, I shall exercise the power under s 115 to make the orders sought for remuneration. 35As previously noted, Ability One Financial Management has been appointed as financial manager of protected persons' estates on 11 occasions between 8 March 2010 and 23 May 2011. It is clear that the NSW Trustee and Guardian has approved payment of remuneration to Ability One Financial Management in respect of other protected estates. No doubt Ability One Financial Management and the NSW Trustee and Guardian have proceeded on the assumption that the former was entitled to remuneration. But in the absence of an order under s 115 that is not so.
Protected person's property not to be held on trust 36The orders proposed by the plaintiff and Ability One Financial Management included an order that the managed estate be held on trust by Ability One Financial Management for the defendant. Section 64(1) of the NSW Trustee and Guardian Act empowers the Court or the NSW Trustee and Guardian to make such orders as it thinks fit in relation to the administration and management of the estates of protected persons. Section 65(1) confers power on the Supreme Court or the NSW Trustee and Guardian to make such orders as appear necessary for rendering the property and income of a managed person available for the payment of debts, the maintenance and benefit of the family of the person or otherwise as necessary or desirable for the care and management of the person's estate. It is unnecessary to decide whether these powers would extend to ordering that the protected person's estate be settled on a trustee for his or her benefit. Assuming, without deciding, that there is such power, I see no reason for the power to be exercised. The scheme of the Act is that a protected person retains title to his or her property, but that property is managed on his or her behalf by the person appointed as manager. The relationship between the protected person and the manager is that of principal and agent, not trustee and beneficiary. There is no evidence to explain why it would be advantageous to the defendant that legal title to her assets be transferred to Ability One Financial Management to be held on trust for her.
Conflict of interest and duty 37Following my first interim judgment, I was provided with the financial plan for the defendant proposed by Ability One Pty Ltd. It recommends that the defendant's assets be invested using a moderately defensive investment strategy where the long-term target asset allocation would be 50 per cent in cash and Australian and overseas fixed interest investments, 40 per cent in Australian and overseas equities and 10 per cent in property. The proposed investment would be in products described as "Summit Personal Super" and "Summit Money Master". It appears from the Financial Services Guide of Ability One containing this proposal that Summit is an investment manager associated with NM Superannuation Pty Ltd, which is an issuer of financial products in the AMP Group. Charter is also a member of the AMP Group. The Financial Services Guide discloses that AXA pays Ability One a reward of up to 0.25 per cent of total funds under management in AXA and AMP wealth management products and up to three per cent of total premiums on some AXA and AMP insurance products. The Financial Services Guide also discloses that commission is payable by life companies when Ability One recommends insurance and annuity products. 38In taking an appointment as financial manager of the defendant's estate, Ability One Financial Management would owe fiduciary obligations to the defendant. A fundamental obligation of such fiduciaries is that the fiduciary must avoid a conflict, or sensible possibility of conflict, between his or her personal interest and his or her duty to the principal. The financial plan discloses what might otherwise be inferred from the apparent relationship between Ability One and Ability One Financial Management and Charter that Ability One Financial Management and Ability One would have a personal interest in investing the defendant's assets in financial products issued by members of the AMP Group. The defendant has no capacity to give her fully informed consent to such a conflict. It would be no answer to say that the proposed investments might be the best that could be obtained for the defendant (Aberdeen Railway Co v Blaikie Bros (1854) 2 Eq Rep 1281; [1843-60] All ER Rep 249 at 252-253). 39I afforded the plaintiff and Ability One Financial Management the opportunity to make submissions on this matter. In response, Mr White deposes that: "With respect to paragraph 2.2 of His Honour's judgment, I note the prima facie potential conflict of interest between Ability One Pty Ltd ('AO') developing a financial plan for the defendant, and receiving a benefit from investments in the AMP Group arising from that financial plan or any other product that provides for a commission or like payment. In that regard, AO is prepared to submit to an Order of the Court to rebate to the defendant's estate any product commissions or remunerations it receives from the AMP Group." 40Ability One Financial Management proposes that an order be made under s 64(3) of the NSW Trustee and Guardian Act that "any commission paid to any advisor of the managed person as the result of an investment in any financial product is to be rebated to the managed estate." 41Section 64(3) provides that the Supreme Court can make such orders as it thinks fit in connection with the supervising of the exercise of the functions of managers under the Act. 42I think such an order would go beyond supervising the functions of Ability One Financial Management. However, the conflict can be avoided by Ability One and Ability One Financial Management offering an undertaking to the Court that, except for the remuneration authorised by an order under s 115 of the Act, any commission or reward paid as the result of an investment in any financial product on behalf of the defendant will be paid to the defendant to form part of her managed estate.
Suitability of Ability One Financial Management to be appointed
43The plaintiff urges that Ability One and Ability One Financial Management offer the best available service and, in particular, that they offer a personalised service which would be in the interests of the defendant. This is supported by testimonials. If Ability One and Ability One Financial Management offer the undertaking to the Court referred to above which would avoid any conflict of interest between their duty to the defendant and their personal interest, and if Ability One Financial Management is successful in obtaining a financial services licence, I would be satisfied that it is in the best interests of the defendant to appoint Ability One Financial Management as her financial manager. The fact that the companies have the confidence of the defendant's father is an important consideration. Ability One Financial Management and Ability One also agree that their remuneration over the lifetime of the defendant will be capped at the amount which was the component of the defendant's damages award for funds management. 44I have considered whether the fact that Ability One Financial Management has accepted appointments as a financial manager without a financial services licence, and even without having been appointed as a corporate authorised representative of Charter (which was the basis upon which it contended it did not require such a licence), is a reason for declining the appointment. I have concluded that this is a matter that should be left to ASIC. If ASIC considers that Ability One Financial Management is a fit and proper person to hold a financial services licence notwithstanding its having acted as financial manager for protected persons without such a licence, then I see no reason why it ought not be appointed as the defendant's financial manager. Without any way pre-empting ASIC's consideration of this question, the labyrinthine provisions in Chapter 7 of the Corporations Act might make it understandable that a person could innocently infringe those provisions. It is also perhaps relevant that neither the Guardianship Tribunal, nor, on an earlier occasion, an Associate Judge of this Court, saw any difficulty in appointing Ability One Financial Management as the financial manager of the estate of a protected person. 45A copy of these reasons should be provided to ASIC for the purposes of its considering the application for a financial services licence. 46I have made orders for the appointment of the NSW Trustee and Guardian as interim receiver and manager of the defendant's estate and for the payment to the NSW Trustee and Guardian of the settlement moneys arising from the District Court litigation. I have given the parties liberty to restore and to apply. That liberty should be exercised when the result of Ability One Financial Management's application for a financial services licence is known. If the application is successful, and assuming the plaintiff still wishes Ability One Financial Management to be the defendant's financial manager, I anticipate making orders as set out below, subject to anything said by ASIC or any conditions imposed. 47I will need evidence of the grant of the licence and that a copy of these reasons was provided to ASIC. If the application is unsuccessful, the plaintiff will need to consider whether he wishes to apply for the NSW Trustee and Guardian or for some other person, such as a trustee company, to be appointed as the defendant's financial manager. 48The declaration and orders I anticipate making if Ability One Financial Management is successful in its application for a financial services licence are as follows:
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