Re K, an incapable person in receipt of interim damages awards [2014] NSWSC 1286

Supreme Court of NSW|2014-09-19|Before: Lindsay J

INTRODUCTION 1In law and practice close, constant attention must be given to the intersection between: (a) litigation for the recovery, at common law, of damages for personal injuries that rendered a person incapable of managing his or her own affairs; and (b) the protective jurisdiction of the Court (and the analogous jurisdiction exercised by the Civil and Administrative Tribunal of NSW, "NCAT", pursuant to the Guardianship Act 1987 NSW) for the protection of the incapable person. 2These proceedings illustrate that point in a case in which, in proceedings for damages at common law, the present defendant, a "person under legal incapacity" (within the meaning of the Uniform Civil Procedure Rules 2005 NSW, r 7.13) - represented by his mother acting as his tutor (pursuant to UCPR r 7.15) - as a plaintiff recovered several awards of interim damages (under the Civil Procedure Act 2005 NSW, s 82), only the first of which was the subject of orders (made in Protective List proceedings under the NSW Trustee and Guardian Act 2009 NSW, s 41(1)) for protected estate management before the final determination of the Common Law proceedings required: (a)adjustments to be made (pursuant to CPA s 83) to bring the interim payments into account on a final award of damages; and (b)the balance of the damages awarded to the incapable person to be paid into court (pursuant to CPA s 77(2)) pending consideration of an application for further, ongoing management orders. 3Shortly after the first award of interim damages was made in favour of the defendant (the plaintiff in the proceedings numbered 2010/245809 then being contested in the Common Law Division of the Court), the then Protective List Judge (in separate proceedings numbered 2010/413125, related to the current proceedings numbered 2014/215600, in the Equity Division) made notations and orders (with emphasis added) to the following effect: (1) NOTE that the Court is satisfied that the defendant (the plaintiff in the Common Law proceedings) is incapable of managing the sum of $X to be paid to him as an interim payment, in the Common Law proceedings, pursuant to orders made under CPA s 82. (2) DECLARE that the defendant is incapable of managing that sum of $X. (3) ORDER that the said sum of $X be subject to management pursuant to s 40 and s 41(1) of the NSW Trustee and Guardian Act. (4) ORDER that a nominated licensed trustee company be appointed without security as manager of the said sum of $X, on behalf of the defendant, under the order and direction of the NSW Trustee and Guardian. (5) ORDER that the agreed costs of the plaintiff (the father of the subject person) of and incidental to those proceedings be paid out of the estate of the defendant. (6) ORDER that all parties are at liberty to apply as they may be advised on three days' notice. (7) NOTE that it is in order for the Registrar of the Supreme Court to pay to the nominated trustee company the said sum of $X held on behalf of the defendant, the plaintiff in the Common Law proceedings. (8) ORDER that the summons (in the Protective List proceedings) be stood over with liberty to restore on three days' notice. 4For convenience, I refer to these orders as "the foundational management orders", and to the manager appointed by them as "the interim (protected estate) manager". 5The expression "interim manager" is intended, only, to associate the manager with the character of the property under management: an "interim payment" or "interim payments" of damages made under, and governed by, Part 6 Division 5 (ss 81-84) of the Civil Procedure Act. 6Since the interim manager's appointment as a protected estate manager vis á vis the defendant, the only property it has received in that character for the purpose of management has been property bearing the nature of an "interim payment" pursuant to CPA s 82(1). 7What is asked of the Court, now, is a new set of management orders appointing the interim manager to management of the whole of the defendant's estate, including (but not limited to) the balance of the damages awarded to the defendant, on a final basis, in the Common Law proceedings. 8Use of the expression "interim manager" is convenient because it reflects a timeline associated with the course of the Common Law proceedings. In those proceedings there has been need of an interim manager to accommodate interlocutory orders and, now that those proceedings have been finalised, there is need of a "permanent" manager to manage the damages payable, or paid, under the Court's final judgment. 9This terminology is not apt, without explanation, in the context of an exercise of protective jurisdiction. 10In the realm of the protective jurisdiction, no protected estate manager has a legal entitlement to be, or to remain, manager of a particular estate: Holt v Protective Commissioner (1993) 31 NSWLR 227 at 237F-238F; M v M [2013] NSWSC 1495 at [50] (k)-(l). No manager has, in law, a vested interest in continuation of his, her or its management role: Ability One Financial Management Pty Limited and Anor v JB by his tutor AB [2014] NSWSC 245 at [151]-[153]. In that sense, if none other, every protected estate manager holds an office (in the interests of a protected person, inherently revokable) liable to be described as held only for the time being, in the "interim" so to speak. Language which is both convenient and functional in the context of Common Law proceedings cannot necessarily be carried over, without explanation, in protective proceedings. 11The form of the foundational management orders has had an importance (for the conduct of both the Common Law proceedings and the Protective List proceedings) not fully appreciated by all participants in the process leading to the final determination of the defendant's claim for personal injury compensation, and the consequential need for establishment of a protective regime for management of his estate to permit him to enjoy the benefits of that compensation. 12The primary object of this judgment is to review the regime for management of the defendant's estate, with his welfare and interests given paramount consideration in accordance with the general principles required (by both the NSW Trustee and Guardian Act, s 39 and principles governing an exercise of the Court's inherent jurisdiction) to be applied. 13An incidental, but nevertheless important, object of the judgment is to offer to the public (including families of those incapable of managing their own affairs, the profession and those involved in the management of protected estates) an explanation of how disparate legislative provisions (including rules of court) are designed to operate, with flexibility, in a manner calculated to provide protection for an incapable person and, at the same time, freedom for him or her to make decisions, with the benefit of assistance from family, in pursuit of a common law entitlement to damages. 14The necessity for such an explanation arises, in part, from a failure in some quarters to notice, and to appreciate the significance of: (a) the limitation, by reference to s 40 of the NSW Trustee and Guardian Act, of the foundational management orders affecting the incapable person to management of part only of his estate (namely, the initial award of damages of $X) ; and (b) the interplay between s 40 of the NSW Trustee and Guardian Act and ss 77 and 79 of the Civil Procedure Act, governing payment to the manager of the protected estate interim awards of damages after the first. 15Before turning to consideration of particular legislative provisions at play in the present proceedings, the point should be made that the processes of the Court (informed by the purpose served by the Court's protective jurisdiction) are amenable to adaptation to meet the needs of the particular case. 16An exercise of protective jurisdiction is designed to protect a person who, because of an inability to manage his or her affairs, is in need of protection. A primary criterion for decision in exercise of the jurisdiction is whether what is proposed to be done (or not done) affecting the welfare of the incapable person is for the benefit, and in the interests, of the incapable person: NSW Trustee and Guardian Act, s 39; RL v NSW Trustee and Guardian (2012) 84 NSWLR 263 at 285 [96]; Holt v Protective Commissioner (1993) 31 NSWLR 227 at 238B-D and 241G-242A; HS Theobald, The Law Relating to Lunacy (Stevens & Sons, London, 1924), pp 380 and 382. 17In each case, an analysis of what is required to be done (or not done), in the light of what has or may have been done, affecting the welfare of an incapable person requires attention to be given to the facts of the case, including material, antecedent court orders.

THE LEGISLATIVE FRAMEWORK 18Under legislation governing the conduct of adversarial proceedings in the Court (including the defendant's claim for personal injury damages in the Common Law proceedings): (a)a "person under legal incapacity" is defined as including: (i)a person who is incapable of managing his or her affairs (UCPR r 7.13); and (ii)a "protected person" within the meaning of the NSW Trustee and Guardian Act (CPA s 3(1)); namely (by virtue of s 38 of the NSW Trustee and Guardian Act), a person in respect of whom an order is in force under the NSW Trustee and Guardian Act or the Guardianship Act 1987 that the whole or any part of the person's estate be subject to management under the NSW Trustee and Guardian Act. (b)a person under legal incapacity is not permitted to commence or carry on proceedings except by a tutor: UCPR r 7.14(1); PLG Brereton, "Acting for the Incapable - A Delicate Balance" (2012) 35 Australian Bar Review 244 at 245. (c)a person may become the tutor of a person under legal incapacity without the need for an order of the Court: UCPR r 7.15(1). (d)ordinarily, in the case of proceedings with respect to the estate of a protected person, the tutor of that person is to be the person who has the management of the person's estate (as a protected estate manager) under the NSW Trustee and Guardian Act. (e)anything that the UCPR authorise or require a party to do in relation to the conduct of proceedings may, if the party is a person under legal incapacity, be done on his or her behalf by his or her tutor: UCPR r 7.15(6). (f)the Court may appoint and remove a tutor, control the appointment process, and make ancillary orders: eg, UCPR rr 7.15(4), 7.15(5) and 7.18. (g)where money is recovered in proceedings on behalf of a person under legal incapacity, it is to be paid into court unless the Court otherwise orders: CPA ss 77(2)-77(3). (h)such money, paid into court, is to be paid out to such person as the Court may direct, including (if the person is a protected person) to the manager of the protected person's estate: CPA s 77(4)(b). (i)the Court may order that the whole or any part of money recovered on behalf of a person under legal incapacity not be paid into court, but be paid instead to such person as the Court may direct, including (if the person is a protected person) to the manager of the protected person's estate: CPA s 77(3)(b). (j)subject to any order of the Court, money paid under CPA s 77(3) or s 77(4) to the manager of a protected person's estate is to be held and applied by the manager as part of that estate: CPA s 79. 19Under the NSW Trustee and Guardian Act: (a)chapter 4 of the Act (ss 38-100), entitled "Management functions relating to persons incapable of managing their affairs", governs orders for the appointment of protected estate managers, and the effect of such orders. (b)section 39 of the Act (entitled "General principles applicable to Chapter [4]") provides that it is the duty of everyone exercising functions under Chapter 4 with respect, inter alia, to a protected person to observe the following principles: (i)the welfare and interests of the protected person should be given paramount consideration. (ii)the freedom of decision and freedom of action of the protected person should be restricted as little as possible. (iii)the protected person should be encouraged, as far as possible, to live a normal life in the community. (iv)the views of the protected person in relation to the exercise of the functions to be exercised under Chapter 4 should be taken into consideration. (v)the importance of preserving the family relationships and the cultural and linguistic environments of the protected person should be recognised. (vi)the protected person should be encouraged, as far as possible, to be self-reliant in matters relating to his or her personal, domestic and financial affairs. (vii)the protected person should be protected from neglect, abuse and exploitation. (c)an order may be made under Chapter 4 for the management of the whole or part of the estate of a person: s 40. (d)if the Court is satisfied that a person is incapable of managing his or her affairs, it may: (i)declare that the person is incapable of managing his or her affairs and order that his or her estate be subject to management under the Act: s 41(1)(a). (ii)by order, appoint a suitable person as manager of the estate of the incapable person or commit management of the estate to the NSW Trustee: s 41(1)(b). (e)by s 64, the Court and the NSW Trustee, severally, may make such orders as they think fit in relation to the administration and management of a protected estate, and the Court may also make such orders as it thinks fit in connection with supervising the exercise of the functions of a protected estate manager. (f)the power of a protected person to deal with his or her estate is suspended in respect of so much of that estate as is subject to management under the Act: s 71(1); David by her tutor the Protective Commissioner v David (1993) 30 NSWLR 417; In re Walker (A Lunatic So found) [1905] 1 Ch 160 at 170-174. (g)however the manager may, by instrument in writing, authorise the protected person to deal with so much of the protected estate as the manager considers appropriate and specifies in the instrument: s 71(2). (h)an authorisation must not be given or withdrawn by a manager who is not the NSW Trustee without the approval of the NSW Trustee: s 71(5). 20In proceedings for the recovery of damages to which Part 6 Division 5 (ss 81-84) of the Civil Procedure Act applies: (a)the Court may order a defendant in the proceedings to make one or more payments to the plaintiff of part of the damages sought to be recovered in the proceedings: CPA s 82(1). (b)the Court may make such an order against a defendant on the application of the plaintiff at any stage of the proceedings: CPA s 82(2). (c)the Court may order a defendant to make one or more payments of such amounts as it thinks just, but not exceeding a reasonable proportion of the damages that, in the Court's opinion, are likely to be recovered by the plaintiff: CPA s 82(5). (d)the making of, or refusal to make, an order for an interim payment of damages is not a finding as to liability in respect of the proceedings, and the fact that a defendant makes one or more interim payments is not of itself an admission of liability by the defendant: CPA s 83. (e)where a defendant makes one or more interim payments, the Court may make such orders with respect to those payments as may be just and may, inter alia, when making a final judgment, order the repayment by the plaintiff of all or any part of any interim payment, with or without interest: CPA s 84.

INTERIM DAMAGES AWARDED AT COMMON LAW 21Each of the second and subsequent awards of interim damages made in the Common Law proceedings currently under consideration was accompanied by orders to the following effect: (a)Order, pursuant to CPA s 77(3), that the interim payment is to be paid to the interim manager. (b)Order that the interim payment is to be used for the benefit of the incapable person (the plaintiff in the Common Law proceedings, the defendant in the current proceedings) in the form of accommodation, care and treatment expenses. 22The effect of those orders (by operation of CPA s 79) was that the second and subsequent payments of interim damages (ordered in the Common Law proceedings to be paid) have been held by the interim manager as an aggregation of that part of the defendant's estate managed by the manager pursuant to the foundational management orders.

FINAL ORDERS MADE IN THE COMMON LAW PROCEEDINGS 23On 2 April 2014 the Common Law proceedings were finally determined on terms that included orders to the following effect: (a)Judgment for the plaintiff (the defendant in the current, Protective List proceedings) in the sum of $11 million less the interim payments made pursuant to CPA s 82 totalling $1,810.000 (leaving a net sum of $9,190,000 to be paid) subject to other adjustments; and (b)Order that the resultant balance "be paid into court pending further orders in relation to the appointment of a permanent trustee/financial manager".

A CONSEQUENTIAL APPLICATION FOR FRESH MANAGEMENT ORDERS 24A sum of approximately $9 million having been paid into court, on the account of the incapable person, pursuant to the orders made in the Common Law proceedings made on 2 April 2014, the solicitor acting for him and his parents applied informally (by an email dated 18 July 2014 addressed to the Equity Registry, without the filing of any notice of motion or other form of application, but with formal supporting affidavits) for "final orders... in respect of appointment of [the interim manager as financial manager for]" the incapable person, the current defendant. 25In the absence of any formal notice of motion seeking such relief, and in circumstances in which the court file relating to the Protective List proceedings in which the foundational management orders affecting the defendant had been administratively "closed", the Court Registry opened a new file, giving rise to a second, albeit related, set of Protective List proceedings. 26The parties appear to have proceeded on the erroneous assumption that "the appointment of a permanent trustee/financial manager" (to quote the final orders made in the Common Law proceedings) is a mere formality, in which the foundational management orders are to be extended to the whole of the protected person's estate, with the interim manager confirmed in office, without any substantive inquiry by the Court about: (a)whether the estate presently under management has been duly managed; and (b)whether the interim manager is a suitable person for appointment as a manager of the whole estate. 27Not sharing that view, when the proceedings came to my attention in chambers, I gave directions (on 25 August 2014) designed to formalise the application for fresh management orders (by the filing of a notice of motion and for the service of it, and affidavits filed in support of the informal application subsequently embodied in the motion, on the NSW Trustee) and for the provision to the Court, by the NSW Trustee, of a report: (a)summarising, so far as may be known to the NSW Trustee, the steps taken in management of the estate of the defendant since the date the foundational management orders were made; (b)identifying such, if any, orders as may be recommended by the NSW Trustee as necessary or expedient to regularise arrangements for management of the estate of the defendant as a protected person; and (c)indicating whether there is known to the NSW Trustee any (and, if so, what) fact or circumstance which might reasonably ground an objection to appointment of the interim manager, or any related company, as manager of the whole estate of the defendant as a protected person. 28Procedurally, I have treated the second Protective List proceedings (numbered 2014/00215600) as a continuation of the First Protective List proceedings (numbered 2010/413125) so that nothing of consequence turns on the administrative description of court file numbers. 29In administration of the Protective List it is generally convenient to maintain continuity (or, at least, an interconnectedness of references) in the file, or files, pertaining to an individual subject in respect of whom protective orders are sought, made or revoked. That is because of a practical need to have access to the personal history of each subject, and the evidence from time to time adduced relating to him or her. 30Ordinarily, an application for variation of management orders (as presently before the Court) should be made by notice of motion filed in the proceedings in which the orders sought to be varied were made. 31That said, having regard to the public interest character of the protective jurisdiction, procedural irregularities are not uncommonly passed over in pursuit of substantive outcomes. The Court is aided in that pursuit by the assistance it receives from the Office of the NSW Trustee. 32Materially, the report of the NSW Trustee (filed on 12 September 2014) did several things towards a substantive outcome in this case. 33First, it confirmed that the interim manager had responsibly applied, and accounted to the NSW Trustee, for all the interim damages awards entrusted to its care. 34Secondly, it recorded that the NSW Trustee, the interim manager and the family of the protected person appear (at least to some extent) to have operated on an incorrect assumption that the interim manager had been appointed as manager of the whole estate of the protected person, not just the initial interim payment of $X. 35Thirdly, it invited the Court to make such (if any) orders as may be necessary or desirable to ratify steps taken in management of the protected estate to the extent that authority conferred on the interim manager by the foundational management orders might be thought to have been exceeded. 36Fourthly, it recorded that the NSW Trustee holds no concerns regarding the ability of the interim manager to be a "suitable person" (within the meaning of the NSW Trustee and Guardian Act s 41(1)(b)) for appointment as manager of the whole estate of the defendant. 37Fifthly, it recorded that the NSW Trustee is not aware of any fact or circumstance which might reasonably ground an objection to appointment of the interim manager as manager of the whole estate of the protected person.

ANALYSIS 38Notwithstanding that there appears to have been a general assumption (at least in some quarters or at some times) that the foundational management orders extended to the whole estate of the defendant, rather than merely a part of it, it is not necessary to make any orders ratifying or rectifying steps that have been taken in administration of the protected person's affairs. 39That is because: (a)the effect of CPA s 79 is that the foundational management orders were augmented by the orders for the payment of the second and subsequent interim damages payments to the manager; (b)with the benefit of the NSW Trustee's report, the Court can be satisfied that there has been substantial compliance with both the terms upon which interim damages were awarded and the management regime envisaged by the Court (in both the Common Law and the Protective List proceedings) and monitored by the NSW Trustee; and (c)the Common Law proceedings appear to have been conducted, in practice, on the practical assumption (correct, as it happens) that responsibility for the conduct of the Common Law proceedings on behalf of the defendant resided in his tutor, not the interim manager. 40Had the foundational management orders extended to the whole of the estate of the defendant, rather than merely the amount of the first interim award of damages, the tutor's authority to continue conduct of the proceedings on behalf of the protected person could have been called into question, and would have required confirmation by an order of the Court: Re W and L (Parameters of Protected Estate Management Orders) [2014] NSWSC 1106 at [36]-[41]. 41Generally, for that reason, a form of management orders limited (by reference to the NSW Trustee and Guardian Act, s 40) to the amount of an interim award of damages is appropriate where: (a) the only property of the incapable person in need of formal management is the interim payment; (b) the ongoing proceedings for damages are being carried on effectively by a tutor acting on behalf of the incapable person; and (c) there are no special circumstances that tell in favour of subjection of the Common Law proceedings to the estate management regime (including the administrative oversight of the NSW Trustee) for which the Court's specialist protective jurisdiction provides. 42On the whole, in the ordinary case, the preferable course is to leave the conduct of proceedings for damages that might, in due course, require comprehensive protected estate management orders to a tutor and the case management procedures applicable to the Common Law proceedings, maintaining the independence of an interim manager from the pressures inherent in the conduct of those adversarial proceedings. A protected estate manager, free of the burdens of the Common Law proceedings, can focus on the protective function delegated to such a manager (and supervised by the Court and the NSW Trustee in exercise of protective jurisdiction) with a greater assurance of independence than a tutor required to make strategic and tactical decisions about the conduct of Common Law proceedings in which he or she carries a risk as to costs. 43Where a protected estate manager is appointed to manage only part of the estate of a person incapable of managing his or her affairs, it is important that the nature and limits of the appointment be recognised, as well as the nature and limits of authority reserved to the incapable person or (as in the present context) his or her tutor in pending proceedings. 44The importance attaching to this derives from: (a)a need for legal clarity in definition of the functions, authority, powers and duties of people (including the protected person) responsible for the management of a protected estate. (b)a need to ensure that proceedings in the Court affecting a protected estate remain in the control of the Court, with clear lines of communication between the Court and the person or persons responsible for management of the estate. (c)a need to avoid, so far as possible, conflicts of duty and interest, or of duty and duty, in management of a protected estate, including management of litigation affecting such an estate. (d)a need for steps taken, in either or both of Common Law damages proceedings and Protective List proceedings, to be documented in a manner sufficient to permit the protected estate management process to be conveniently audited. 45Although, upon finalisation of Common Law proceedings for personal injury damages, an interim manager is not uncommonly appointed to manage the whole of a protected person's estate, there is no room for any presumption, of law or practice, that an interim manager is entitled to be, or should be, appointed to manage the whole of a protected person's estate. 46Still less is there room, in law or practice, for a presumption that an interim manager is entitled, or should, be appointed to the larger, ongoing role without being called upon (either directly or through a report to the Court by the NSW Trustee) to demonstrate to the Court, affirmatively, the due performance of his, her or its managerial functions to date. 47It matters not that the interim manager may be reputable or have a proven track record in management of other protected estates. In the interests, and for the benefit, of the particular protected person, and to ensure that the Court's orders have been duly given effect, an application for the appointment of an interim manager as a "permanent" manager (to borrow the Common Law expression) provides an occasion upon which those earlier involved in management of an incapable person's estate (including both a protected estate manager and a tutor, if need be) can be called upon to account for their stewardship of the estate. 48This can be done (and, hopefully, will be done) with a minimum of fuss; but, in any event, ordinarily, it should be done. 49Before that time: if, in a particular case, there is any doubt about the nature or scope of an award of interim damages in Common Law proceedings, the nature or scope of management orders made in protective proceedings, or the interplay between the two types of proceedings, the protected estate manager should endeavour to resolve that doubt, if need be by an application to the NSW Trustee or the Court for directions.

ORDERS 50With the benefit of the NSW Trustee's report on the course of the "interim" management of the defendant's estate, I propose, as asked by the defendant's parents (his father, the plaintiff in the Protective List proceedings, and his mother, his tutor in the Common Law proceedings), to make fresh management orders to the following effect: (1)DECLARE, pursuant to s 41(1)(a) of the NSW Trustee and Guardian Act, that the defendant is incapable of managing his affairs. (2)ORDER that the estate of the defendant be subject to management under the NSW Trustee and Guardian Act. (3)ORDER that the interim manager be appointed manager of the whole of the estate of the defendant subject to the orders and direction of the NSW Trustee. (4)ORDER that the interim manager may not do anything in reliance on its appointment as manager of the whole of the estate of the defendant until the NSW Trustee has authorised it to assume management of the defendant's estate pursuant to these orders. (5)ORDER, pursuant to s 68 of the NSW Trustee and Guardian Act, that the interim manager (now properly described as "the manager") give such, if any, security in respect of its management of the defendant's estate as the NSW Trustee may determine to be appropriate. (6)ORDER that, subject to any further order of the Court or any order or direction of the NSW Trustee, funds presently held in the Court on behalf of the defendant (in the Common Law proceedings) be paid out to the manager, as manager, of the estate of the defendant. (7)ORDER that the foundational management orders be varied to such, if any, extent necessary to give effect to these orders. (8)ORDER that the costs of the plaintiff and the defendant (on the application for these orders) be paid out of the estate of the defendant on the indemnity basis. (9)ORDER that all parties be at liberty to apply as they may be advised. (10)ORDER that the plaintiff provide a copy of these orders to: (a)the manager; (b)the mother of the defendant (his tutor in the Common Law proceedings); and (c)the NSW Trustee.

Amendments 22 September 2014 - Addition of "Defendant K (protected person) Amended paragraphs: Coversheet 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: 22 September 2014

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