Mao v BT Funds Management Limited [2021] NSWSC 644 | Case summary

Mao v BT Funds Management Limited [2021] NSWSC 644 | Case summary | Zoe

Procedural background

The proceedings were commenced on behalf of Ms Mao in August 2013. They were begun approximately two weeks after another claim was made by Ms Mao of a similar nature on a life insurance policy issued through another superannuation fund of which Ms Mao was a beneficiary. The trustee of that fund was AMP Superannuation Limited and the underwriter was AMP Life Limited. They were the first and second defendants in those proceedings, to which I will refer as the "AMP proceedings". At all relevant times the two proceedings were conducted together, as they gave rise to similar issues.
When the proceedings were commenced, Ms Mao was represented by solicitors, Maurice Blackburn ("MB"). But in April 2014 MB filed notices of ceasing to act for Ms Mao, both in these proceedings and in the AMP proceedings. This is said to have been because of a decline in Ms Mao's mental health, which made it impossible for MB to obtain instructions.
After the withdrawal of MB, the proceedings continued with Ms Mao representing herself. But owing to her mental state, issues were raised by the defendants about whether the proceedings needed to be conducted on her behalf by a tutor.
The issue came before Hallen J who, in December 2014, made an order in the AMP proceedings that a tutor be appointed for Ms Mao. The order did not specify the identity of the tutor because the defendants had been unable, at that point, to obtain the consent of a tutor to act. That remained the position after the order was made.
Ms Mao successfully challenged the order on the ground that it had not been open to Hallen J to make an order appointing a tutor for Ms Mao without specifying the identity of the tutor. There was no challenge, or at least no successful challenge, to his Honour's finding that Ms Mao lacked the capacity to conduct the proceedings on her own behalf.
The Court of Appeal decision was given in August 2015. Thereafter the proceedings appear to have languished.
Then, in July 2017, an application was made by the defendants in the AMP proceedings, supported by the defendants in these proceedings, to have the Trustee appointed as the manager, in effect, of the litigation. The application was made under the NSW Trustee and Guardian Act 2009 (NSW), s 41, which relevantly provides: Orders by Supreme Court for management of affairs (1) If the Supreme Court is satisfied that a person is incapable of managing his or her affairs, the Court may - (a) declare that the person is incapable of managing his or her affairs and order that the estate of the person be subject to management under this Act, and (b) by order appoint a suitable person as manager of the estate of the person or commit the management of the estate of the person to the NSW Trustee. (2) The Supreme Court may make an order on its own motion or on the application of any person having a sufficient interest in the matter.
By s 40 it is possible to make an order appointing the Trustee as manager of part of an incapable person's estate. The defendants' application sought an order appointing the Trustee as manager of Ms Mao's estate to the extent that the estate consisted of her claims or causes of action against the defendants in the two proceedings. The application was heard by Ward CJ in Eq, and it succeeded. Her Honour made the management order as sought on 26 July.
Following the making of the order, officers of the Trustee moved to take over the conduct of the two proceedings. The officer principally responsible within the Trustee organisation was one of its solicitors, Jarrad McCarthy. He approached MB with a view to having MB resume acting for Ms Mao on the Trustee's instructions. This was acceptable to MB and on 6 October a costs agreement was signed between the Trustee as Ms Mao's manager and Maurice Blackburn Pty Limited, the company which conducts the practice of MB.
The solicitor principally responsible for the matter at MB was Josh Mennen. On 9 October Mr Mennen filed notice of his appointment as Ms Mao's solicitor. On the following day, at the request of MB and with the consent of the defendants, an order was made by the Registrar appointing the Trustee as the tutor for Ms Mao in these proceedings (I assume that a similar order was made in the AMP proceedings.) Shortly afterwards, a formal consent to act as tutor was signed on the Trustee's behalf and filed with the Court.
Meanwhile, Ms Mao had challenged the management orders made by the Chief Judge. She filed an application for leave to appeal against her Honour's orders, but in April 2018 the Court of Appeal dismissed that application. There was a further unsuccessful application for special leave to appeal, which was refused by the High Court on the papers.
Once the Trustee's position as manager had been confirmed, settlement negotiations took place between MB, acting on the Trustee's instructions, and representatives of the defendants in both these proceedings and the AMP proceedings. Eventually, a settlement sum of $416,000 was agreed. The figure to be contributed by the defendants in these proceedings was $278,000.
The Trustee then moved the Court to approve the settlement. The application came before me on 1 February 2019 and I acceded to it. The orders which I made provided for the proceedings to be re-listed in March, but also contemplated (presumably in accordance with the terms of settlement which had been agreed) that the proceedings could be dismissed beforehand.
I assume that a deed of settlement for each claim was entered into between the Trustee and the defendants so as to reflect the settlements which had been approved. The payment from the defendants in these proceedings was made on 4 March. On 11 March a notice of discontinuance of the proceedings was filed. Why the proceedings were discontinued rather than being dismissed is not clear from the evidence.
It is the 11 March notice of discontinuance which is the focus of Ms Mao's notice of motion as filed. The representative of MB who signed it on Ms Mao's behalf was Craig Anthony Parrish. Mr Parrish is an employed solicitor at MB who had conduct of the proceedings from November 2018 onwards.
On 12 March, the following day, an order was made by the Registrar noting the filing of the notice of discontinuance. Although in her notice of motion Ms Mao sought an order setting aside the Registrar's order, that order was not necessary, as the effect of the notice of discontinuance was to bring the proceedings to an end without the need for any further order of the Court.
The AMP proceedings were brought to an end, in accordance with the settlement, slightly beforehand. Those proceedings were dismissed.
Notwithstanding the dismissal of the AMP proceedings, those proceedings were listed in the Protective List before Lindsay J, apparently for the purpose of supervising the administration of that part of Ms Mao's estate which was subject to the management order. I assume this was done at the instigation of the Trustee. The first listing took place on 7 March.
On 25 March, on the recommendation of the Trustee, his Honour granted liberty to the Trustee to pay out all of the moneys held under the two settlements to Ms Mao, except for a sum of $50,000 to be retained, presumably for expenses. But Ms Mao declined to provide the Trustee with the information which it needed to make the payment to her. It seems that she was refusing to accept the money.
Eventually, on 27 May Lindsay J made orders authorising the payment of MB's fees and other expenses, and ordered that the balance of the moneys held by the Trustee from both settlements be paid into Court. His Honour directed that for administrative purposes, the AMP proceedings file should be treated as closed, pending an application to pay out the moneys held in Court.
On 30 June his Honour made an order revoking the management order made by the Chief Judge. Presumably his Honour assumed that the proceedings were at an end and the only remaining issue was the payment out of the moneys held in Court.
The present motion was filed on 17 March this year. In addition to the first and second defendants, the notice of motion cover page identified Maurice Blackburn Pty Ltd as the first respondent to the motion. The motion was entered in the Applications List and on 27 April the Chief Judge fixed it for hearing before me today. The usual orders were made for the preparation of the application for hearing.
Then, on 18 May, Ms Mao filed another notice of motion. The cover page named not only the first and second defendants, but three other "defendants" who are not in fact parties to the proceedings. The third-named "defendant" was the Commonwealth of Australia, the fourth AMP Limited, and the fifth Westpac Banking Corporation.
The principal purpose of the notice of motion appears to have been to obtain funding for the conduct of the proceedings (which at that stage consisted of the notice of motion filed on 17 March). Prayer 1 of the notice of motion sought the following: URGENT RELIEF - Order that the Third Defendant pay the First Plaintiff's ongoing costs being incurred for the proceedings from the date on which this Notice of Motion is served by the First Plaintiff on the Third Defendant.
Prayer 2 sought an order purporting to allow Ms Mao to prosecute a notice of a constitutional matter in this Court, which she had earlier filed in the High Court, pursuant to the Uniform Civil Procedure Rules 2005 (NSW) ("UCPR"). I will refer further to that notice of constitutional matter below. For present purposes it is enough to say that the notice included a challenge to the Commonwealth superannuation legislation, namely, the Superannuation Guarantee (Administration) Act 1992 (Cth) and the Superannuation Industry (Supervision) Act 1993 (Cth).
Prayer 3 sought directions for the exchange of documents and submissions in connection with the challenge. Prayer 4 is set out below: (1) A declaration of The Land of Peace Charter: The law must be an instrument, not of domination and control, but of justice; The law should exist, not to deny individuals' right, but to secure it; The law must provide a language to legitimize the freedom of occupations, the freedom of estate rights, and the ability of individuals to use their skills freely, to conduct their affairs freely, and to manage their estate freely; A system of law and rights that allow people to live together in communities in an equal and dignified way is essential to their wellbeing, to society in general, and to the rule of law; A list of rights TO BE ADVISED.
This motion had not been foreshadowed at the hearing on 27 April, so far as I can see. It was not formally listed before me and is not returnable until later this month before the Registrar.
Then, yesterday, Ms Mao sent to the Court a further, unfiled notice of motion which she foreshadowed she would seek leave to file. That notice of motion sought an adjournment of the hearing date. I will refer further to it below.
These three motions gave rise to a procedural conundrum which was referred to in the Court of Appeal decision in Mao v AMP Superannuation Ltd [2015] NSWCA 252. UCPR, r 7.14(1) provides that a person under legal incapacity may not commence or carry on proceedings, except by his or her tutor. It appears from the analysis of the rule by the Court of Appeal (at [5]) that the rule operates as "an effective bar to the proceedings, albeit that the word 'stay' is not used".
As I have already noted, Hallen J found that in 2014 Ms Mao lacked capacity to conduct the proceedings and required a tutor for the purposes of UCPR, r 7.14. Similarly, the Chief Judge found in July 2017 that Ms Mao lacked capacity to conduct these proceedings and the AMP proceedings.
I appreciate that capacity must be determined afresh on each occasion that the issue arises. But Ms Mao's conduct of these applications strongly suggests that there has been no relevant improvement in her capacity to conduct litigation. It is apparent that she has formed fixed and irrational views about the subject matter of these proceedings. Most of her evidence was completely irrelevant to the matters at hand, and she demonstrated herself as impervious to questions from the Court designed to elicit the legal and procedural difficulties which her arguments faced.
If in fact Ms Mao continues to lack capacity to conduct legal proceedings, then the effect of r 7.14(1), on the Court of Appeal's analysis, is that she is unable to prosecute any of the motions which she has brought before the Court. However, none of the respondent parties to the motions raised this point or sought to have the conduct of the motions stayed. In the circumstances, I considered that the practical course, which was also the course followed by the Chief Judge in the application before her, was to treat the requirement of r 7.14(1) as having been dispensed with.
I return to Ms Mao's adjournment application. At the beginning of the hearing I granted leave to her to file the notice of motion in Court and I received her evidence in support of the motion.
The thrust of Ms Mao's argument was that she wished to have an adjournment to obtain funding and then pursue the notice of constitutional matter referred to in her notice of motion of 18 May. It seems that Ms Mao has an objection to the entire compulsory superannuation system. The grounds for this objection were referred to at times during the argument, but never became completely clear to me. On any view, however, such a challenge faces formidable difficulties.
There has already been a challenge to the constitutionality of the superannuation legislation, which was rejected unanimously by the High Court in 2011: Roy Morgan Research Pty Ltd v Commissioner of Taxation (2011) 244 CLR 97. Furthermore, Ms Mao's notice of constitutional matter was the subject of detailed analysis by the Chief Judge in her judgment in July 2017. Her Honour concluded that the alleged constitutional matter identified in that notice had no substance.
As if this was not enough, there are procedural problems with the course which Ms Mao proposed. As I have pointed out, the three other defendants who Ms Mao apparently wishes to engage in the challenge are not parties to these proceedings, and, so far as appears from the evidence, have not been notified of the motion. If they have, they were not notified of the adjournment application and have not appeared today. These include the Commonwealth, which on any view would be the principal defendant to any challenge.
In passing, I find it hard to see how either of the defendants (or any of the AMP defendants) would properly be a party to Ms Mao's challenge. The compulsion in the system operates at the level of the employer. That is presumably why the earlier challenge was brought by an employer, Roy Morgan.
It is also difficult to see how a challenge, even if successful, could overturn or defeat the rights which employees receive by way of superannuation as a result of contributions which are made in respect of their employment. It is still harder to see how any contravention of the Constitution would affect the legal validity of insurance contracts entered into by trustees of superannuation funds on their beneficiaries' behalf.
It will be apparent from this brief exposition that the constitutional challenge has nothing to do with the issues on the motion of 17 March which concerns the validity of the discontinuance of these proceedings. Furthermore, the challenge is beset with difficulties, both substantive and procedural. I could not be satisfied that if I were to grant any adjournment, it would be at all likely to result ultimately in a more focused or efficient argument on the original motion which had been allocated to me for hearing. For these reasons I decided to refuse the adjournment application.

[3]

Application to set aside discontinuance

Prayer 1 of the original notice of motion filed on 17 March sought a declaration that the notice of discontinuance "was and is void and of no effect". At the hearing before me I granted Ms Mao leave to amend the notice of motion so as to add additional prayers for relief. Apart from granting leave to amend the notice of motion by joining the Trustee as the second respondent, which was not opposed, the additional orders sought were for declarations that the notice of appointment of solicitor filed in October 2017 and the costs agreement were similarly void and of no effect.
In support of the application Ms Mao read a number of affidavits. In response, counsel for MB read affidavits from Mr Parish and from Mr McCarthy.
Ms Mao wished to cross-examine Mr Parish. He is based in Melbourne, which was under lockdown. Ms Mao, however, submitted that he should be required to come to Sydney so as he could be cross‑examined in person. That would obviously have resulted in an adjournment; however a preliminary question arose as to whether Ms Mao had any entitlement to cross-examine Mr Parish at all.
As I have already noted, I am dealing with a notice of motion which has been filed by Ms Mao. That is the appropriate process for interlocutory orders: see UCPR, r 18.1. In an email circulated to the parties before the hearing, I raised a question as to whether the applications were interlocutory in nature. No party made any submission on this question. I therefore considered it appropriate to proceed on the basis that the applications are interlocutory.
On this basis leave to cross-examine would have been required and there was no reason to grant leave. I was not satisfied that any cross-examination would be relevant to any of the issues which I needed to determine. Accordingly I declined to permit cross-examination of Mr Parish and I dealt with the application on the written evidence and submissions which had been lodged.
Ms Mao's principal contention was that all of the steps taken purportedly on her behalf by MB were of no effect, and so were the steps purportedly taken on her behalf by the Trustee. Her submissions started with two propositions. The first was that self-representation is a right. The second is that legal representation cannot be forced on a litigant against the litigant's will, it must be consensual.
Both of these propositions are correct as general statements. However they are subject to long-standing exceptions in the case of litigants who lack capacity to conduct litigation in their own interests. The tutor procedure is centuries old and has long been recognised as an exception to the general rule that a person may represent himself or herself in litigation. Similarly, the provisions for management of estates in the application for litigation reflect the protective jurisdiction of the Court, which derives from the powers of the Chancery Court in England, which likewise goes back centuries. It has always been recognised that where a person is unable to conduct proceedings himself or herself, the Court may appoint a tutor or otherwise appoint a manager to that person's estate, who can then conduct the proceedings on behalf of and in the interests of that person, subject of course to the overall supervision of the Court.
Ms Mao said to me in the course of her argument that she does not contest, or she does not now contest, the management orders which were made by the Chief Judge or the order of the Court of Appeal refusing leave to appeal from those orders. In making this concession Ms Mao was doing no more than recognising the legal reality that those orders stand, and they must therefore be accepted in subsequent litigation in the Court as being proper and effective.
It should be remembered that the order made by the Chief Judge was an order appointing the Trustee as manager. The actual order appointing the Trustee as the tutor came later, although it was evidently based on, or was intended to reflect, the making of that order. No point was taken about the use of the tutor procedure and it was not suggested that some other way of constituting the proceedings (for instance by making the Trustee party to the proceedings in its own name as manager) would have been more appropriate. Even if such a point had been taken, it would have made no difference to the outcome of this application.
In effect the orders made by the Chief Judge gave the Trustee full power over the legal causes of action which gave rise to Ms Mao's claims. That carried with it the power to conduct the proceedings and to settle them. It is impossible now to dispute the validity of the settlement or the steps taken under it. Even if I were satisfied that there was something technically wrong with the notice of discontinuance, l would not be justified in taking any action, as it is apparent that the claims in the proceedings have been compromised and merged under the settlement deed into a legal entitlement to the payment of a sum of money, which has now been satisfied.
I return briefly to the question of whether the application made by Ms Mao was interlocutory or substantive in nature. As I have already indicated, a notice of motion is the appropriate form of process for an interlocutory application. Ms Mao's notice of motion sought declarations, which are usually substantive in nature. But even if the relief claimed by Ms Mao was ultimately substantive, I think it is quite clear that the claim is baseless. If it had been brought by way of separate proceedings in substantive form, it would have been open to being struck out as an abuse of process. I am therefore able to deal with the notice of motion summarily at an interlocutory level without making any final decision on whether it should be characterised as seeking substantive or interlocutory relief.
In passing, I note that Ms Mao, in her affidavits and submissions, made personal attacks on those involved, both at MB and in the office of the Trustee, in conducting the litigation. She characterised the documents filed on her behalf which she challenged as being lies. She also accused the Trustee of having engaged in a conspiracy to remove her from control over the litigation.
It hardly needs to be said that these allegations are completely baseless. It is clear that those at MB and the Trustee were acting in good faith, on the assumption that the orders made by the Chief Judge gave them power to act on Ms Mao's behalf. As I have explained, that view was correct. But even if it had been incorrect, that would not have made their conduct mendacious or dishonest. Ms Mao should not have made these allegations and I reject them entirely.
In the result, Ms Mao's motion fails. So too does her motion for an adjournment. Both motions will be dismissed. (Parties addressed on costs)
Both MB and the Trustee sought orders for costs in their favour. This was opposed by Ms Mao. She noted that in my judgment I have raised a question as to whether she has capacity to conduct litigation in her best interests, and she suggested that there was no power to make a costs order against a party in those circumstances.
The first difficulty with this submission is that I have not actually made any finding on the question. That is because, as I explained in my judgment, the issue was not raised by any party.
Secondly, I do not accept that a lack of capacity deprives the Court of the power to make an award of costs. It might in some circumstances be a relevant factor. I do not, however, think it is a factor in this case.
The purpose of a costs order is to compensate a party who has had to come to court unnecessarily. The focus is on the successful party, not on the unsuccessful one. The fact is that, whether she lacks capacity or not, Ms Mao's conduct in filing these applications and bringing them to hearing (and I interpolate that it is now 5.30pm) has imposed costs on the respondent parties. In my view the ordinary principle that costs follow the event should apply.
The point made by Ms Mao does underline an unsatisfactory procedural aspect of this application. UCPR, r 7.14(1) is a very important rule. It provides an important protection for the Court and for all parties to the litigation, not least, as this case shows in retrospect, for the incapable party. However, as I have said, in the present case the issue was not raised and it is not easy to see how it could have been raised without cooperation (in the form of consent to psychiatric evaluations) from Ms Mao, which I suspect would have been refused.
Dispensing with the requirement so as to allow the applications to be heard can hardly be seen as a satisfactory solution, but it is not easy to see what other step could have been taken. It may be that consideration should be given to amending the rule to allow for issues of capacity to be dealt with at an early stage and perhaps to give the Court power to act on its own motion.

Mao v BT Funds Management Limited

At a glance

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Judgment (5 paragraphs)

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Legislation Cited (4)

Cases Cited (2)

Cited By (1)