These proceedings first came into the Equity Duty List on 28 June 2017. That day, the Court granted leave to the plaintiff, Gerard Malouf and Partners Pty Ltd ("Gerard Malouf") to file a Summons seeking payment into Court of $193,453.08, then held by the first defendant, the NSW Trustee and Guardian ("the NSW Trustee"). The sum is the net proceeds of a judgment for the second defendant in his personal injury litigation in NSW District Court proceedings ("the MVA proceedings").
The Court abridged the time for service of the Summons and required the plaintiff to serve a sealed copy of the Summons and the Court's orders upon the defendants that evening. Gerard Malouf was also ordered to put on any affidavit evidence to support the relief sought by 12 noon the following day. The hearing of the Summons was adjourned until that time.
The plaintiff complied with these orders. Mr A.D. Campbell appeared for Gerard Malouf, in the Equity Duty List on 29 June and Ms J. Brouwer appeared on behalf of the NSW Trustee and Guardian. The second defendant appeared in person.
The Court granted leave to Gerard Malouf to file in Court two affidavits dated 29 June 2017 sworn by solicitors employed with Gerard Malouf, Mr David Cossalter and Ms Lisa Tutty. Mr Cossalter's affidavit recounted that the second defendant had suffered head injuries and brain trauma in a May 2011 motor vehicle accident. The affidavit establishes that in October 2011 the second defendant signed a costs agreement with Gerard Malouf for the firm to provide legal services in relation to his claim in the MVA proceedings. I accept Mr Cossalter's evidence that the second defendant's legal capacity to enter this agreement did not appear to him to be in doubt at the time he signed the costs agreement.
But in the course of Gerard Malouf's conduct of settlement discussions in the MVA proceedings, Mr Cossalter became concerned that the second defendant might be under a legal incapacity and be unable to provide instructions, especially concerning the potentially complex decision as to whether or not to settle the MVA proceedings.
Gerard Malouf and Partners Pty Ltd v NSW Trustee and Guardian & Anor [2017] NSWSC 899 | Case summary | Zoe
Acting on this concern, on 15 August 2015, following an application made by Mr Cossalter, the NSW Civil and Administrative Tribunal ("the Tribunal") made orders under Guardianship Act 1987 for the financial management of the second defendant's estate pursuant to the NSW Trustee and Guardian Act 2009 by the NSW Trustee and Guardian, for a period of 18 months ("the 15 August 2015 orders").
The MVA proceedings were subsequently resolved and the settlement in the sum of $400,000 was approved by Judge Gibson in the District Court of NSW on 17 February 2017. Her Honour made orders under Civil Procedure Act 2005, Part 6, Division 4, including orders that the amount of the second defendant's consent judgment (less deductions) be paid directly to the first defendant, the NSW Trustee and Guardian as his financial manager, as is required by Civil Procedure Act 2005, s 77(3) in respect of settlement monies for persons under legal incapacity.
But the negotiations as to costs between Gerard Malouf and Curwoods Lawyers, the solicitors for the second defendant in the MVA proceedings, were ongoing.
On 5 June 2017, on the second defendant's application, the Tribunal revoked the 15 August 2015 orders ("5 June 2017 orders").
The payment in the order of $351,913 (being $400,000 less deductions on account of the plaintiff's expenses paid by the defendant in the MVA proceedings) was actually received from the defendant in the MVA proceedings by the NSW Trustee and Guardian on 9 June 2017, only a few days after the 5 June orders were made.
Gerard Malouf had apparently only become aware of the Tribunal's 5 June 2017 orders the week before it brought this matter before the Duty List. Gerard Malouf had not been made a party to the Tribunal proceedings.
The Tribunal's reasons for the 5 June 2017 orders had not been published at the time of the Court's 29 June hearing in the Duty List. The Court was reluctant to make the proposed orders, notwithstanding the parties' consent. The Court required a sufficient explanation as to why in the 5 June orders the Tribunal revoked the financial management orders in relation to the second defendant's estate, particularly where there had at an earlier time been doubt as to the second defendant's capacity to give instructions.
The second defendant signed an authority for Gerard Malouf to negotiate on his behalf with Curwoods Lawyers in relation to the costs of the MVA proceedings. But without the Tribunal's reasons, a residual doubt as to the second defendant's capacity remained, and it was unclear whether the authority to Gerard Malouf could be used.
With this background the Court asked the parties to furnish it with the Tribunal's reasons for the 5 June 2017 orders. Ms Brouwer emailed them to the Court on the evening of 29 June. Ms Brouwer informed the Court that those reasons had been published to the NSW Trustee only that afternoon.
The Tribunal's reasons outlined that the second defendant had made an earlier application to the Tribunal on 17 October 2016 to revoke the 15 August 2015 orders. That application had been dismissed in January 2017. The second defendant lodged a further application on 19 February 2017. The hearing of that second application took place on 1 May 2017.
In the reasons in respect of the 5 June 2017 orders, the Tribunal considered whether the second defendant had regained the capability to manage his affairs, and whether it was now in his best interests to revoke the 15 August 2015 orders.
In a hearing on 27 January 2017, before a differently constituted Tribunal hearing the second defendant's previous application to revoke the 15 August 2015 orders, the Tribunal then found that the second defendant was unable to manage his affairs, due to cognitive impairment and a lack of any new medical evidence before the Tribunal to support a finding that he had regained that capacity. At the 27 January 2017 hearing, the Tribunal was not provided with evidence by the second defendant to show how he would manage his own affairs, including his finances.
On the second defendant's second application heard on 5 June 2017, the Tribunal found (at [25]) the second defendant had presented complete and concise evidence including medical evidence, character references, bank statements, tax returns and receipts and other relevant documentation to demonstrate his mental competence.
The evidence on the second application included a March 2017 report of a clinical psychologist, Mr Tom Jones, in addition to the second defendant's evidence. The Tribunal noted from the quality of the evidence that the second defendant had organised and presented himself to the 5 June 2017 hearing that the second defendant appeared to be organised and methodical in the documentation and management of his financial affairs (at [32]). He had obtained regular work as a builder, and had been operating efficiently but almost entirely outside the banking system, so as to avoid the restrictions on his freedom of action implicit in the NSW Trustee's management.
While the second defendant had developed a sense of resentment at the management of his affairs by the NSW Trustee, the Tribunal found that he had also demonstrated rational and prudent behaviour in the management of his affairs. At [36] - [37] the Tribunal stated:
"Mr Jones considered that, apart from the resentment [the second defendant] feels as a person whose financial affairs by an external body, [the second defendant] presented as rational, logical and well organised with a clear grasp of his financial affairs as they relate to his building work, taxation, insurance, motor vehicle, materials, invoicing, the complexities of cash flow and the need to invest money prudently. Mr Jones was impressed at the organised nature of [the second defendant's] financial documentation.
Mr Jones said that although he did not have the opportunity to assess [the second defendant] at the time he would have been at his greatest degree of impairment after the 2011 head injury, it appears that he has essentially returned to a normal level of functioning as reflected by his ability to earn a living, manage his financial affairs and his ability to organise his own behaviour in a prudent and rational manner. Mr Jones concluded that [the second defendant] has now recovered to a sufficient degree, since the motor vehicle accident that he is now competent to regain full control of his own finances and will be able of responsibly managing the compensation money which has been awarded."
The Tribunal concluded (at [40]) that it was satisfied that the second defendant is able to manage his financial affairs. It revoked the 15 August 2015 orders on that basis.
Notwithstanding that the NSW Trustee holds the settlement sum on the second defendant's behalf at present the Court is now dealing with the issue of how that sum should be dealt with after the revocation of the financial management orders relating to the second defendant.
But the issue of the second defendant's costs of $193,453.08 incurred for services performed by Gerard Malouf in relation to the MVA proceedings remains unresolved. So Gerard Malouf sought the payment into Court of the sum specified in the Summons, so that this amount may be set aside for the payment of the second defendant's outstanding legal fees.
In light of the 5 June orders, the NSW Trustee and Guardian now intends to pay all monies it holds in respect of the second defendant to him directly. But Gerard Malouf seeks to enforce a "fruits of litigation" lien over the fees held by the NSW Trustee and Guardian on behalf of the second defendant from the compensation payment made in favour of him.
Where the legal capacity of a party is in question, the Court needs to satisfy itself that the relevant party has capacity before the proceedings can continue. If the party is a "person under legal incapacity", as defined in Civil Procedure Act, s 3, they are only able to commence or carry on proceedings with a tutor: Uniform Civil Procedure Rules 2005, rule 7.14. This rule operates in order to do justice as between the parties concerned, and to protect the court process: Rappard v Williams [2013] NSWSC 1279 at [93] per Hallen J. See also Stokes v McCourt [2014] NSWSC 61 at [22] to [31] per McDougall J, applying paragraphs [62] to [81] of Hallen J's judgment in Rappard v Williams [2013] NSWSC 1279.
The Court has considered the reasons of the Tribunal for the 5 June orders since the proceedings were last in the Duty List. The Court considers that those reasons satisfactorily explain why the Tribunal revoked the 15 August 2015 orders.
Accordingly, under its inherent jurisdiction found inter alia in Supreme Court Act 1970, s 23, the Court finds that the reasons are sufficient to demonstrate the second defendant has the capacity to provide his consent in these proceedings. The Court is therefore prepared to accept the consent of the second defendant and deal with the consent orders.
Given the second defendant's capacity to manage his affairs has been effectively reinstated by the Tribunal, the Court sees no reason at present not to allow the NSW Trustee and Guardian to provide to him directly the monies to which he is entitled, less the liabilities owing to Gerard Malouf. A mechanism to determine the liabilities owing to Gerard Malouf is provided in these orders.
Accordingly, the Court makes the following orders and directions:
1. Order that within seven days the NSW Trustee, the first defendant, pay into Court the sum of $90,000 (net proceeds), out of the proceeds which the first defendant presently holds on behalf of the second defendant in respect of the approved settlement of District Court proceedings no. 2013/021173, ("the settlement monies").
2. The first defendant, the NSW Trustee, is now authorised to pay the balance of the settlement monies to the second defendant.
3. The amount of $90,000 in Order 1 above is held in Court pending the plaintiff, Gerard Malouf and Partners Pty Ltd, establishing its entitlement to have those monies held in Court on account of the difference between its recoverable part-party costs and its solicitor-client costs of the District Court proceedings (no. 2013/021173), an issue which still requires resolution, and the Court notes that the second defendant seeks the payment of that sum out to him in addition to the sum paid out in Order 2.
4. The Court directs the plaintiff, Gerard Malouf and Partners Pty Ltd, to put on such evidence as it is minded to do to justify the retention in Court of the $90,000 referred to in Order 1, by Friday, 21 July 2017.
5. Direct the second defendant to put on any evidence by Friday, 4 August 2017, as to why the $90,000 should now be paid out to him before completion of a costs assessment.
6. Direct the first defendant to put on by 21 July 2017 a brief outline of the facts concerning any communications between these parties and/or the Court in respect of any proposed retention on account of costs that might come out of the settlement sum at the time the settlement was approved by Judge Gibson.
7. Direct the parties to lodge with my Associate by 4pm on 7 August 2017 any written submissions for the hearing on 8 August 2017.
8. Adjourn the proceedings for hearing before me at 9.30am on 8 August 2017.
9. The Court notes that the NSW Civil and Administrative Tribunal-Guardianship Division's 5 June 2017 reasons for decision in respect of the second defendant are tendered and marked Exhibit A in these proceedings.
10. The Court further notes that although the Court will provide reasons for decision when these proceedings are concluded, this decision is made on the basis of the NSW Trustee and Guardianship Tribunal's decision of 5 June 2017, there being no continuing issue as to whether the second defendant is under any legal incapacity and the Court is prepared to make these orders on that basis.
11. These orders may be taken out forthwith.
[2]
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Decision last updated: 17 November 2020