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[2012] NSWSC 365
Supreme Court of NSW
2012-03-29
Davies J
Original judgment source is linked above.
Judgment 1The Plaintiff, who is now aged twelve years, brought proceedings against South-East Sydney and Illawarra Area Health Service alleging delay in diagnosis of meningococcal disease leading to significant brain injury. Those proceedings were settled for $600,000 plus costs. After deductions, an amount remained of $423,362 which was paid into Court. There has been a small increase in the amount in Court as a result of interest earned, with the present amount being a little under $450,000. 2The Plaintiff applies by her mother, as her tutor, that rather than these funds being paid to the NSW Trustee and Guardian, they should be paid out into the Plaintiff's mother and/or another person to invest on the Plaintiff's behalf. The principal reason for the order being sought is to minimise the amounts which are taken for fees and charges by the NSW Trustee and Guardian. 3The power to order what is sought is found in s 16 Infants' Custody and Settlements Act 1899 which provides: (1)Whenever a verdict is recovered or a judgment entered for any amount as damages in any action or other proceedings for tort brought by or on behalf of a minor, the Court may order that a settlement of the same shall be made for the benefit of the minor, and may appoint a trustee or trustees for such settlement. (2)The terms of such settlement shall be fixed by the Court, or subject to its approval by some officer of the Court appointed so to do. (3)This power shall extend to the District Court as well as the Supreme Court. 4The position with regard to awards or settlements in favour of minors is now governed by Part 6, Division 4 of the Civil Procedure Act 2005. Section 77 relevantly provides: (1) This section applies to money recovered in any proceedings on behalf of any of the following persons: (a)a person under legal incapacity, ... pursuant to a compromise, settlement, judgment or order in any proceedings. (2)All money recovered on behalf of a person referred to in subsection (1) is to be paid into court. (3)Despite subsection (2), the court may 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: (a)if the person is a minor, to the NSW Trustee and Guardian, ... (4)Money paid into court under subsection (2) is to be paid to such person as the court may direct, including: (a)if the person is a minor, to the NSW Trustee and Guardian, ... 5Section 74(3) makes clear that Division 4 does not limit the operation of s 16 Infants' Custody and Settlements Act 1899. Nevertheless, it may be accepted that in the ordinary course moneys recovered in proceedings on behalf of a minor will ordinarily be paid to the NSW Trustee and Guardian. 6A number of medical reports were annexed to the Affidavit of the Plaintiff's mother Connie Yuen. These reports detailed the course of events leading to the Plaintiff's disabilities and provided some indication of her prognosis. 7A report from Professor Robert Ouvrier of 15 August 2009 says this: Currently, Vanessa's most significant deficit is her moderate intellectual disability. This is permanent and will greatly restrict her educational and social opportunities. In my opinion, she will not be employable on the open market. It is possible that she could perform some jobs in a sheltered situation. It is highly unlikely that she will have the capacity to manage her own affairs or to live independently and it would be difficult for her to find a marriage partner. Her motor deficits interfere with her capacity to play sport, to write and to carry out the normal activities of daily living which require good hand function. This deficit is also due to the effects of the meningitis and cumulative with her intellectual disability. Although Vanessa's epilepsy appears to be in remission there is a small chance, probably about 5-10%, that a recurrence could occur. She requires regular evaluation by a neurosurgeon for supervision of her shunt. She will require a Case Manager indefinitely, special assistance at school and in her supervision as a young woman. Vanessa's neurological problems are permanent and, as noted, will substantially impact on her long term outcome. The full extent of her problems may not be evident until the late teens when frontal lobe functions would be expected to have fully matured. 8A report from Dr Sandra Johnson, a consultant developmental paediatrician, of 19 October 2009 says this: Vanessa has delay in all areas of her development. Her speech and language, self help, fine rotor, gross motor and social skills are all delayed for her age. She has weakness on examination of her right arm, particularly her right hand. She has oro-motor dysfunction, which affects her tongue movements and her articulation of sounds. She is unsteady hi terms of balance and there is lack of precision of her fine motor movements, especially that of her right hand. There are scars on her chest and abdomen related to previous surgical procedures. Her learning skills such as reading, spelling and writing skills are significantly delayed on this clinical assessment. The findings are keeping with significant intellectual and developmental disability. ... Vanessa has shown improvement over the years and her mother agrees with this observation. Her doctor's follow up reports also indicate that she has improved in many areas of skill. I expect that Vanessa will continue to show improvement in her development and learning over time, particularly if she is given the necessary intervention, such as speech and language therapy, physio/occupational therapy and special educational support. I note that she has received such support in her previous special school environment. It is important to ensure that she continues to receive therapy intervention in her current IO class placement at Warrawee Public School. Vanessa is unlikely to attain full recovery with respect to her cognitive development and I expect that although she will make steady progress in many areas, she is likely to remain "developmentally delayed" throughout her school years. This means that she will continue to require special education support at school. It is not possible to make definite predictions about her abilities as an adult at this stage, but one would be able to give a clearer long term prognosis if she were reviewed in her mid to late adolescent years. 9In her affidavit, the Plaintiff's mother says that Vanessa is now able to attend mainstream school but is in a special needs support class. In 2013 she will attend a special needs high school. The closest such school to her home is St Edmond's School, Warringah. The school fees will be approximately $5,000 plus incidental expenses. 10She says also that based on a report of Total Care Costing, a report of WHK Harvey and a report of Deloittes, the cost of Vanessa's future care will range from $621,859 to $3,573,429. It is because of likely expenses of this nature that the Plaintiff's mother is anxious to have available for Vanessa as much of the settlement moneys as is possible undiminished by ongoing fees and charges that would be payable if the funds were invested with the NSW Trustee and Guardian or some other private company concerned with funds management. The Proposed Trustees 11The Plaintiff's mother is aged 50 years. She was employed by the Commonwealth Bank for a period of approximately 20 years before taking maternity leave for Vanessa's birth in March 2000. 12She commenced employment with the bank as a teller. She then worked as a customer services manager and thereafter in the business migration section of the bank managing high net worth business migration customers who have a prerequisite net worth of between $500,000 and approximately $20 million, and who were from Hong Kong, China and Taiwan. In that position she was involved in investing those customers' funds in commercial bills, term deposits, the purchase of investment properties, the purchase of principal residences and day to day interest-bearing bank deposit accounts. 13The Plaintiff's mother began investing in real property for herself in about 1988 and started buying shares in about 1990. In about 2000 she set up a share portfolio for her other daughter Stephanie and in about 2001 she set up a share portfolio for Vanessa. She said that when she first established a share portfolio for Stephanie the value of the shares was approximately $30,000. Its current value is now approximately $58,000. When she first established a share portfolio for Vanessa the shares were worth $30,000 whereas the current value is approximately $150,000. She has identified the companies in which she has purchased shares and these are largely blue chip or substantial companies such as the major banks, Woolworths, BHP, Coca-Cola and Qantas. 14She herself has noted assets of approximately $1.62 million which includes her home at Hornsby which is mortgage-free. She also has a 50% share in an investment unit with her husband. 15Out of the gross settlement figure, the Plaintiff's mother was paid some $81,681.60 as Griffiths v Kerkemeyer damages but she has invested those moneys for Vanessa partly in purchasing CBA and Westpac shares and partly by putting the money on an interest-bearing deposit with the Commonwealth Bank. 16The proposed Second Trustee (if the Court so requires) is Chit Ying Ng (who is also known as Sanny Lok). She first came to know the Plaintiff's mother in 1979 and they have been close friends for over 20 years. She is also aged 50 years and is employed with Norton Rose Solicitors as a financial accountant. She has been employed by that firm since 1988. 17She and her husband have been married for 25 years. They have one daughter who is aged 19 and is in second year commerce/law at UNSW. Her husband is a taxi driver. 18Her work at Norton Rose includes being responsible for approval of the firm's daily outgoing transactions, coordinating commercial bills and borrowing facilities and leasing arrangements. 19She and her husband own their own home said to be worth $510,000 with a mortgage of a little under $40,000. She has, either in her own name or jointly with her husband, bank savings and shares totalling more than $110,000. In addition, she has substantial superannuation.
Fees and Charges 20There was evidence that if the funds were managed by the NSW Trustee and Guardian the annual fees for management of a sum of $440,000 would be $11,440. The earnings of the fund at 4% per annum, the sum guaranteed by the NSW Trustee and Guardian, would be approximately $17,600. The net return in the first year would therefore be approximately $6160, representing an earning rate of 1.4%. 21The initial proposal put to the Court suggested that the funds, if released to the Plaintiff's mother, should be invested in shares and/or term deposits with banks. I expressed some concern about the risk of investing in shares because of the uncertainty of the share market quite unrelated to the skill of the particular investor or any adviser. 22Subsequently, the Plaintiff proposes now that the funds should be invested only in interest-bearing deposits with one or more of the major Australian banks. Figures have been provided about the interest payable on term deposits for varying periods. The Plaintiff proposes that the initial term of the deposits should be for five years. The rates provided suggest that this is likely to provide the maximum return to the Plaintiff. The rates for the various banks are these:
Decision 25Given the longevity of s 16 it is surprising that there appears to be no decisions on that section or its counterparts in other States regarding of the considerations for the Court where such an application is made. Nor do there appear to be any relevant decisions on s 4 Damages (Infants and Persons of Unsound Mind) Act 1929 (the predecessor of s 77 Civil Procedure Act). 26The starting point must be that the Court in its parens patriae jurisdiction should act in the best interests of the child to protect and preserve the settlement moneys the child has been awarded: AMS v AIF [1999] HCA 26; (1999) 199 CLR 160 at [86]. It should also not necessarily be assumed that parents of children receiving awards of damages will always act in the best interests of the child if access is granted to the money. There have been, sadly, a sufficient number of cases where there has been dissipation of assets by parents other than in the best interests of the child, whether such dissipation has been effected by fraudulent or careless means, or as a result of incompetence. 27Matters to which the Court at least should have regard include a sufficient reason that the usual order for payment to the NSW Trustee and Guardian should not be made, the relationship of the proposed trustee to the minor, the financial standing of the proposed trustee, the business or financial acumen of the proposed trustee, and the proposed investment. 28In the present case, and bearing in mind those considerations, the following matters persuade me that it is appropriate to make the orders sought: (a)The estimated return on funds from the proposed investment when compared with the likely return if the funds are administered by the NSW Trustee and Guardian; (b)The safe nature of the investment proposed; (c)The period and nature of the employment of both the Plaintiff's mother and the other proposed trustee; (d)The ability of the Plaintiff's mother to manage and increase funds at her disposal; (e)The financial position of both the Plaintiff's mother and the other proposed trustee. 29I consider that it is appropriate that the trustees should be the Plaintiff's mother and Chit Ying Ng with a requirement that both should be necessary to authorise any decision with regard to dealing with the trust funds. 30Accordingly, I make the following orders: (1)Connie Yuen and Chit Ying Ng (known as Sanny Lok) jointly are appointed as trustees ("the Trustees") of a trust which shall be established for the benefit of Vanessa Liang born on 30 March 2000. (2)The Trust shall be known as the Vanessa Liang Trust and its sole purpose shall be for the sole benefit, maintenance, advancement and education of Vanessa Liang born on 30 March 2000. (3)The Trustees shall be appointed until the earlier of until 30 April 2018 or further Court Order ("the Termination Date"). (4)The balance of the Judgement Sum paid into Court in Proceedings No. 2004/00176986 (being $432,362.90) together with any earned thereon shall be paid into the Vanessa Liang Trust. (5)The Vanessa Liang Trust shall comprise the balance of the Judgement Sum paid into Court in Proceedings No. 2004/00176986 together with any interest earned thereon and from time to time thereafter ("Vanessa's funds"). (6)The Trustees shall only have the power to invest, vary and re-invest Vanessa's Funds in interest bearing terms deposits with an Australian trading bank (i.e. the Commonwealth Bank, the ANZ Bank, the National Australia Bank, Westpac Banking Corporation and St George Bank) and any entity which may replace or be created as a result of a merger of the above named banks ("the Banks"). (7)Vanessa's Funds shall be invested in the Commonwealth Bank as a term deposit for five years (currently subject to negotiation paying 5.6% p.a.) on a compounding interest basis and in any variation and reinvestment of Vanessa's Funds, the Trustees shall act in good faith. (8)The power to vary the Trustees shall require an Order of the Supreme Court of New South Wales or any other Court having competent jurisdiction. (9)The power to vary the Vanessa Liang Trust shall require an Order of the Supreme Court of New South Wales or any other Court having competent jurisdiction. (10)The Trustees shall establish and maintain proper accounts in book or computer from which accurately record all transactions in respect of the Vanessa Liang Trust and in each financial year. The Trustees must prepare or cause to be prepared financial statements including a Balance Sheet, Profit and Loss account and Tax Return (if a Tax Return is required by law). (11)On or prior to the Termination Date, the Trustee shall cause to be paid into Court the income and capital of the Vanessa Liang Trust pursuant to s 77(2) of the Civil Procedure Act 2005 or in the case of a further Order, as directed by the Court.
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: 24 April 2012