Court of Appeal (WA)|1999-06-23|Before: Parker J, White J

Perpetual Trustees (WA) Limited v Naso [1999] WASCA 80 (23 June 1999)

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA

CITATION : PERPETUAL TRUSTEES (WA) LIMITED -v- NASO [1999] WASCA 80

MATTER : Application for leave to appeal from Master

Procedure - Supreme Court - Order for medical examination - Meaning of examination

Trusts - Constituted by Court until further order - Whether adult sole beneficiary might extinguish - Rule in Saunders v Vautier not applicable

Respondent (Plaintiff) : Butler, Brickhill & Banaszak

Cocchi v Cocchi [1989] 1 Qd R 266

Lanitis v Lanitis [1970] 1 WLR 503

Ping v Van der Kroft [1982] 2 NSWLR 731

Pollock v Wellington (1996) 15 WAR 1

Pownall v Conlan Management Pty Ltd (1995) 12 WAR 370

R v Gyngall [1893] 2 QB 232

Re K (KJS)(an infant) [1966] 1 WLR 1241

Trade Practices Commission v Arnotts Ltd (1990) 21 FCR 324

Wood v Public Trustee (1995) 16 WAR 58

1 WHITE J: I agree with the reasons of Parker J and have nothing further to add.

2 PARKER J: The applicant seeks leave to appeal from the decision of a Master who on 19 February 1999 dismissed that part of a chamber summons by which the applicant (defendant) had sought an order pursuant to RSC O 28 r 1 that it should have leave to require the respondent (plaintiff) to submit himself for medical examination including a psychiatric assessment.

3 The respondent was born on 10 August 1978. On 27 March 1987 he was severely injured when he was hit by a motor vehicle. Proceedings instituted by the respondent in the District Court in respect of his personal injuries were concluded by a decision of a Judge of the District Court on 29 March 1996 to approve a compromise of the action. At that time the respondent was just a few months short of attaining his majority.

4 By the terms of the compromise so approved, judgment was entered for the respondent in the sum of $5,750,000. Order 5 of the judgment was in the following terms:

"The defendants do forthwith pay the balance of $5,750,000 after deduction of any amount due to the Department of Social Security pursuant to the provisions of para 3 and deduction of the sum referred to in para 4 of this Order, to Perpetual Trustees (WA) Limited ('the trustee') to be held by it on trust for the first plaintiff until further order with the trustee to have all the powers of investment and otherwise conferred by the Trustee's Act (1962 as amended) including the power to make advances out of income or capital for the welfare, education or advancement of the first plaintiff."

5 In support of the application to approve the compromise reliance was placed on an opinion of counsel which opinion was acted on by the learned District Court Judge. Pursuant to that opinion provision was made in the damages awarded for the costs of expert management during his lifetime of the sum awarded the respondent, it being in the opinion of counsel necessary for the fund to be managed. While the judgment sum of $5,750,000 was reached after a limited amount of rounding down, a sum of approximately $250,000 was allowed in respect of the future management of the judgment sum.

6 It appears that on 16 September 1998 the respondent wrote to the appellant purporting to terminate the trust and directing that the trust assets vest in him and be paid at his direction. It is submitted that it was open to the respondent to do this relying on the so-called "rule" in Saunders v Vautier [1841] EngR 629; (1841) 4 Beav 115, 49 ER 282. By 16 September 1998 the respondent had well and truly attained his majority. He had reached his 20th birthday. Until then the trust fund had been administered by the applicant pursuant to the order of the District Court. The applicant declined to comply with the respondent's request, questioning whether or not it was open to the respondent to terminate the trust. As a consequence the plaintiff commenced these proceedings by way of originating summons in this Court on 27 October 1998 which, in essence, sought a declaration that the trust constituted by the order of the learned District Court Judge was at an end.

7 It was in these proceedings that the learned Master came to consider the application for an order that the respondent undergo medical assessment including psychiatric assessment. By his decision on 19 February 1999 the learned Master dismissed the application. The learned Master reasoned that the materials placed before him in support of the application contained no suggestion that the respondent lacked mental capacity, and that in the absence of evidence of an impairment of cognitive function there was no basis for ordering that the respondent undergo psychiatric examination. He further reasoned that to require a party to undergo psychiatric examination would be to allow an invasion of the person which could only be countenanced in the most extreme case; he considered the present was not such a case. In the course of his reasons the learned Master also refused to admit into evidence a further report of Mr J Ker, the principal consultant surgeon who, at least at the time of the District Court hearing in 1996, had been responsible for the medical supervision of the respondent. He refused to receive the further report because it was tendered late and without notice and because of the "nature" of the report, which it seems was intended as a reference to comments in the report on factual matters which were not directly related to the respondent's medical condition.

8 This application for leave was made in respect of the decision of the learned Master. The full merits of the appeal were argued on the application for leave. In summary it was contended for the applicant that the learned Master erred in fact in forming the view that there was nothing in the material before him suggesting that the respondent lacked mental capacity, and that he erred in law insofar as he held that there was no basis demonstrated for ordering that the respondent undergo medical, including or especially psychiatric, assessment. In the applicant's submission the mental condition and legal capacity of the respondent were shown to be live issues in the proceedings. It was also submitted that the learned Master erred in law in declining to accept into evidence the affidavit containing the further report of Mr J Ker.

9 It is common ground that in deciding whether leave to appeal should be granted it is necessary for the applicant to demonstrate that:

(a) in all the circumstances the decision at first instance is attended with sufficient doubt to warrant it being reconsidered in Full Court, and

(b) substantial injustice would result if leave were refused supposing the decision was wrong; Wilson v Metaxas [1989] WAR 285, 294, State of Western Australia v Bond Corporation (1991) 5 WAR 40, 53-57.

10 As was accepted by the learned Master, it is apparent that the applicant is acting responsibly and not with any lack of good faith in this matter. It was appointed trustee pursuant to the order of the District Court and, as will appear, there was reason for it to question that it was open to the respondent to terminate on his own volition the trust constituted by the order of the District Court. As will also appear there was reason for the applicant to take the view that the mental capacity of the respondent is a live issue in these proceedings.

11 A trial had been commenced and stood adjourned, part heard, when in March 1996 the parties sought from the learned trial Judge an order for leave to compromise. The evidence which had been given to that point in the trial, together with the papers in support of the application for leave to compromise, reveal that the respondent had suffered a permanent irreparable spinal cord injury resulting in a total loss of movement and sensation below his neck. That loss of physical capacity involved his respiratory function which, as a consequence, had to be managed by artificial respiratory mechanisms and phrenic nerve pacers. The combination of problems associated with his quadriplegia and loss of normal breathing function, associated with the high level of his spinal lesion and autonomic dyreflexia created a constant life threatening situation which, then and now, requires 24 hour a day skilled care. This will be the position for the whole of the respondent's life. The medical evidence tended to indicate that the respondent could become fully ventilator dependent within some five to ten years of the trial after which he would require 24 hour a day care with the skill level of a registered nurse. The respondent has a tracheotomy tube permanently in situ. He is permanently confined to either a wheelchair or bed and is dependent on various forms of mechanical equipment to sustain his life. He lacks effective voluntary movements and suffers awkward and painful involuntary muscle spasms. He is paralysed in both bladder and bowel. He suffers from what is now advanced spinal coliosis, the degree and progress of which was the subject of some difference of medical opinion, but which some medical opinion considered was progressing; a concomitant effect of progress of this condition is to reduce his respiratory function even further. He had, as a consequence of these briefly described injuries, a total and full-time dependence on other people for virtually every aspect of his daily life.

12 There was a significant reduction in the life expectancy of the respondent as a consequence of the injuries. The evidence also indicated that there could be anticipated some progressive deterioration in the condition of the respondent over time.

13 While this description of the respondent's injuries and situation concentrates on the physical effects the medical evidence revealed that in the accident the respondent also sustained a closed head injury. The injuries to his head required the fitting of an intra-ventricular shunt which remains in position. The medical evidence also indicated that the respondent would remain prone to fatigue as a consequence of the nature and severity of his injuries, which fatigue will impair his ability to concentrate for any length of time. He is limited by this physiological fatigue. It was Mr Ker's view expressed at the time of trial that because of the extent of his disabilities, the respondent would require someone to manage the actual ordering, arrangement and coordination of his various needs in terms of nursing, therapeutic and prophylactic aids, as well as home assistance, domestic assistance and related matters. Because of his physical disabilities he is not able to arrange these matters or attend to his care needs in that respect. Mr Ker went on to express the view that the respondent was so severely disabled that he had a need for a manager in respect of the money and also the control and coordination of his extensive care and services.

14 The evidence before the learned trial Judge was also before the Master on the application which is the subject of this appeal. There was, however, additional evidence placed before the Master which included a 1995 report of a consultant psychiatrist which noted a post-injury diagnosis in 1987 of an acute brain syndrome (delirium) of uncertain cause but which otherwise indicated that until 1991 the respondent's mental state was appropriate to his circumstances. There was also a November 1998 report of another psychiatrist which noted that a paediatric neurologist had commented on the possibility of damage to the frontal lobes of the brain and mentioned that drainage of hydrocephalus was necessary in the early stages of the respondent's treatment. It also noted that computerised tomography had revealed some loss of brain substance in the front of the brain. This report also referred to occurrences of epileptic seizures which required hospitalisation of the respondent in more recent years. The opinion was expressed, having regard to these matters, that it was possible there had been some brain damage of a subtle nature which would cause the applicant difficulty in managing his affairs and that any frontal lobe damage may have progressed with time. It was the psychiatrist's view that at least computerised tomography and probably magnetic resonance imaging should be utilised to check that possibility at an imaging level and that neuro-psychological testing would be a good idea.

15 Despite reservations expressed by the learned Master and in decisions such as Pucci v Humes (1970) 92 WN (NSW) 326, 328, the purpose of the rule provides reason to prefer a wider view of the scope of "examination" in the context of O 28 r 1, as is supported by decisions such as Prescott v Bulldog Tools Ltd [1981] 3 All ER 869, 875 and Stace v The Commonwealth (1989) 51 SASR 391, 393, 399, namely that "examination" is to be understood in the light of normal medical practice and may involve tests and injections. The procedures contemplated by the psychiatrist prima facie appear to be within such an understanding of examination.

16 There was also the further report of 10 December 1998 from Mr J Ker. This concentrates more on the factual situation in which the respondent is placed and his family situation rather than the respondent's present clinical condition as Mr Ker had not been responsible for the respondent's management in more recent times. The effect of Mr Ker's report is to draw attention particularly to the circumstances that the respondent's whole development since the age of eight has occurred in a profoundly physically dependant state and to the extreme physical and emotional vulnerability of the respondent. He raises the effects of these dramatic circumstances on the respondent's capacity to manage his affairs, including his lack of experience and judgment, and questions his capacity to exercise his wishes in matters of substance and to make and implement his own decisions in conflict with the views of members of his family. Given the lateness of the attempt to tender this letter without notice I am not persuaded that its rejection at the hearing could justify the allowing of this appeal or the reversal of the decision of the learned Master. As will appear, however, the nature of the contents of the report may be proved to be of some relevance to another issue.

17 For the purposes of this appeal it is sufficient to indicate my view that the nature of the materials that were before the learned District Court Judge in 1996 provided at least some medical foundation upon which the learned trial Judge may have seen reason to enquire further, had the issue become material, as to the capacity of the respondent to manage his affairs, including his financial affairs, on the respondent reaching his maturity (ie some four months after leave was given to compromise the action).

18 That position is somewhat reinforced by the additional material, which has been briefly outlined, and which was before the learned Master. The totality of the material before the learned Master could not be said to be comprehensive or clear in its effect and would hardly, without more, have justified a finding that there was a lack of mental capacity or that the respondent had an intellectual disability. Nevertheless, the material provided a basis upon which the mental capacity of the respondent, especially when considered in light of his physical and family circumstances, could be seen to be an issue in the proceedings.

19 Before the learned Master in the present proceedings in this Court the issue arises in a context different from that relevant to this trial Judge. The respondent seeks a declaration that he has terminated the trust. He relies on the rule in Saunders v Vautier (supra). His case necessarily involves the proposition that he has the capacity necessary for him to terminate a trust pursuant to the rule in Saunders v Vautier. A presumption assists him in this respect. Nevertheless, for the purposes of the application before the Master, in my respectful view the question was not, as the Master appears to have understood it, whether the evidence showed that the respondent lacked mental capacity, but whether there was a live issue in the proceedings as to his mental capacity. There being no formal pleadings in the originating summons procedure, that question must be informed by the affidavit material.

20 In Saunders v Vautier at 282 the relevant capacity is identified as being "competent to give a valid discharge". In Jacobs' Law of Trusts in Australia (6th ed) at [2308] it is said that the beneficiary must be sui juris, ie of full age and full legal capacity, or a person who can validly contract and bind himself by legal obligation uncontrolled by any other person. By invoking the rule in Saunders v Vautier the applicant necessarily asserted he had that capacity. In my respectful view one must question that it could properly be concluded that there was no foundation in the evidence sufficient to give rise to a live question as to the mental capacity of the applicant in this respect. The total state of the evidence before the learned Master, while obviously not compelling or determinative, provided in my view a sufficient foundation to reveal that there was a live question in the proceedings that the applicant had the capacity necessary for him to terminate the trust.

21 Further, the 1998 psychiatrist report, in particular, provided clear support for the applicant's contention that an examination might properly be ordered in this case. It is to be remembered that there has been no relevant examination of the respondent since before the trial, or at least none that is presently revealed to the Court in these proceedings, and that the respondent has not placed any medical evidence before the Court. A current assessment of the effects of the identified injuries on his mental capacity, and of the nature of that capacity, could be of considerable significance, perhaps even determinative, of the question of the respondent's capacity for the purposes of the rule in Saunders v Vautier. Without such an examination the Court might well proceed on an entirely unsatisfactory or misleading evidentiary basis to deal with an issue which could well be of enormous significance to the future financial wellbeing of the respondent.

22 While the submissions for the parties tended to focus on the particular issues relevant to this application for leave to appeal, in the course of argument the Court was impressed with the significance in this case of the terms of the order of the District Court that the trust should subsist until further order. The Court raised with the parties whether the rule in Saunders v Vautier can be relied on by a beneficiary in circumstances where the trust is established pursuant to an order of the Court and where that order is expressed to be until further order. If not, there seemed to be no point in this present proceeding on originating summons being continued as it would be necessary, in any event, for the respondent to go back to the District Court to seek the discharge or variation of the order by that Court. The Court received oral submissions in the course of argument on this issue, which were supplemented by written submissions after the conclusion of the hearing on 12 April 1999. In particular those submissions were directed to the question whether it would be appropriate that there should be an order staying this proceeding. The Court raised this issue and invited the parties to present further submissions because it is very much in the respondent's interests that the present issues in dispute be resolved quickly and in the most cost effective manner and that ineffective or unnecessary proceedings be avoided.

23 Having now had an opportunity to consider the further written submissions that have been received I would make the following observations.

24 Saunders v Vautier concerned a legacy of stock which was directed under the terms of the will to accumulate until the sole beneficiary attained the age of 25 years. The principal, together with the accrued dividends and interest, were then directed to be paid to the beneficiary absolutely. On the beneficiary attaining the age of 21 years he petitioned the court to have the fund transferred to him. The case was decided by applying a principle which was stated by Lord Langdale MR in these terms (at 282):

"... where a legacy is directed to accumulate for a certain period, or where the payment is postponed, the legatee, if he has an absolute indefeasible interest in the legacy, is not bound to wait until the expiration of that period, but may require payment the moment he is competent to give a valid discharge."

That principle, which has become known as the rule in Saunders v Vautier, has been applied not only to legacies to individuals, but also to gifts to a charity, both corporate and unincorporate; Wharton v Masterman [1895] AC 186, Thomas v Perpetual Trustee Co (Ltd) [1955] HCA 74; (1955) 94 CLR 537, 549. It is also been applied where there is more than one beneficiary, provided they are unanimous; Polairet v Carew [1863] EngR 300; (1863) 32 Beav 564, 55 ER 222.

25 No case has been referred to the Court, however, in which the rule has been applied to a trust constituted pursuant to an order of a court. The cases appear to deal only with trusts in respect of legacies and gifts. While the basis of the rule has been said to be that any restriction on the enjoyment by a beneficiary, who is sui juris, of a vested interest is inconsistent with the nature of that interest and must be disregarded, cf Weatherall v Thornbugh (1878) 8 Ch D 261, 271, Jacobs' (supra) [2314], there does not appear to be any basis on which the rule, even if so understood, can be extended to allow a beneficiary of a trust such as the present to terminate the trust by calling for the fund from the trustee notwithstanding the order of the court. It may prove to be the case that, on an application to the court to terminate the trust, in the absence of any other relevant consideration, the principle underlying the rule in Saunders v Vautier might guide the decision of the court, but that is an entirely different issue from that presently postulated for the respondent.

26 It is contended for the respondent that the order of the District Court constituting the trust can only have been made in the exercise of the inherent parens patriae jurisdiction in respect of children (the respondent then being some four months short of attaining his majority) and cannot have been intended to be binding beyond the respondent's 18th birthday. There are no reasons of the learned Judge which deal with this particular issue and which could offer support for such a submission. The language of the order indicates the contrary. If that had been the intention it would have been easily stipulated. The submissions for the respondent seemed to involve the notion, also, that if this was an order made in the parens patriae jurisdiction with respect to children, somehow or other it would cease to have effect despite it's terms on the respondent achieving his majority. Decisions such as Thomasset v Thomasset [1894] P 295 and Crouch v Hudson (1968) 89 WN (Pt 1) (NSW) 35, 40 to which reference was made were not concerned with an order in terms such as that presently under consideration. In Payne v Egan (1967) 86 WN (Pt 1) (NSW) 64 the award to the infant was to be held on trust by the Public Trustee during the infancy of the plaintiff. That was the statutory scheme. Moffitt J was concerned that steps should be taken at about the time the plaintiff turned 21 to keep the funds under supervision. In this case the order is an order of a Court of Record and has effect according to its terms until it is revoked or varied. There has been no appeal against the order and no application to the District Court to discharge or vary it.

27 Further, if consideration is given to the material that was before the learned District Court Judge when he made the order, it is not apparent that the order must have been made in exercise of the parens patriae jurisdiction in respect of children. Having regard to the evidence which I have already discussed, in my view it may not readily be concluded that the learned Judge would not have seen reason, had the parties not been in agreement on such a provision, to give consideration to some provision in the order to operate beyond the respondent's 18th birthday with respect to the management of the award. The terms proposed by the parties may well have been accepted by the learned District Court Judge as relieving him of the need to give particular consideration to that issue, at that time, as by those terms an independent trustee had the management of the fund until further order. Without limiting the issues or the courses which might otherwise have been considered by the learned District Court Judge, one obvious possibility was that the Judge might have invited or required steps to activate consideration by the responsible authorities of the appropriateness of either a guardianship order or an administration order under part 5 or 6 respectively of the Guardianship and Administration Act 1990.

28 These observations are made with an appreciation that the action before the learned District Court Judge was maintained on behalf of the respondent by his father as next friend. At the time the order was made the respondent was, as is still the case, living with his father. From the course of the part heard trial, and from the opinion of counsel supporting the application for leave to compromise, it would have been apparent to the learned District Court Judge that significant issues had arisen in the trial which called in question the next friend's credibility, if not honesty, in relation to the expenditure by him of funds apparently advanced to him by insurers for the provision of equipment, paramedical supplies and nursing care for the respondent during the years leading to the trial. It appears that the next friend refused or was unable to provide documentary verification of his claimed expenditure so much so that, at the time of the order for compromise, he was in disobedience of an order of the Court and facing the possibility of sanctions. Indeed the adjourned trial did not resume as scheduled by virtue of his disobedience. It was a clear possibility that the next friend would be removed by order of the Court had the action not been compromised. These circumstances could only have added to the likelihood that, had it not been for the agreed terms that the judgment sum be managed until further order by a trustee which was independent of the respondent and his next friend, the learned District Court Judge could well have been concerned that more specific attention was needed to this issue before leave to compromise was granted. Indeed the circumstances would indicate that his Honour may well have been persuaded to appoint another guardian ad litem, perhaps the Public Trustee, to pursue questions such as those relating to the appropriateness of orders under the Guardianship and Administration Act.

29 The respondent's contentions in these respects are not ones that can be accepted having regard to the record and the materials before the learned District Court Judge.

30 In these circumstances, the issue having been raised by the Court during the application for leave, and the parties having made their submissions with respect to it, in my view it is appropriate that there should be a stay of the proceedings on the originating summons in this Court, with a view to the respondent applying to the District Court for an order varying or discharging order 5 of the orders made in that Court on 29 March 1996. At the same time it may well be that the applicant would consider it appropriate to seek directions from the District Court; one possible direction would be for the applicant to initiate steps itself, or through the Public Advocate (Guardianship and Administration Act s 97) to make application for a guardianship order or an administration order under the Guardianship and Administration Act. Of course, other possibilities exist. The views of Mr J Ker, which were not admitted before the Master, may well prove of some relevance to any such steps.

31 Concern was expressed in submissions that this course might involve unnecessary costs and delay. That appears to be misconceived. As the position presently stands an application to the District Court is necessary. The sooner it occurs the better. Further pursuit of the present proceedings in this Court will involve delay and expense and will not avoid an application to the District Court. Because of the concern of this Court to avoid unnecessary costs this appeal has been decided before staying the proceedings.

32 For the reasons given I would grant leave to appeal, allow the appeal, vary the order of the learned Master by setting aside para 3 and in its place ordering that the applicant (defendant) have leave to require the respondent (plaintiff) to undergo medical examination (including psychiatric assessment as proposed) pursuant to RSC O 28 r 1. I would further order that proceedings in respect of the originating summons be stayed until further order.

Administration Act 1990

Perpetual Trustees (WA) Limited v Naso [1999] WASCA 80

At a glance

Court

Decision date

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Judgment (56 paragraphs)

Perpetual Trustees (WA) Limited v Naso [1999] WASCA 80 (23 June 1999)

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Legislation Cited (1)

Cases Cited (7)