Smith bht Magnusson v NRMA Insurance Australia Ltd

District Court of NSW|2008-10-24

These proceedings have come before me for approval of a settlement. I should indicate two things. The first is that the manner in which the settlement is proposed contains an important and significantly different request from the usual request that the moneys be paid into court, pending the appointment of either the Protective Commissioner or an order made by the Guardianship Tribunal. The plaintiff's tutor asks that the moneys be paid to the plaintiff's two daughters who hold a power of attorney under the Powers of Attorney Act 2003 (NSW), and also an enduring guardians appointment under Part 2 of the Guardianship Act 1987 (NSW).

As our society changes and grows older, there will be an increasing number of persons who find themselves in the position of the plaintiff and her family. It is no doubt for this reason that it is likely that more and more aged members of the community, will enter into arrangements which will amount to the appointment of enduring guardians, the appointment of persons pursuant to the powers of attorney provision of the Powers of Attorney Act and living wills. The availability of such steps is a matter of the utmost importance for the organisation of people's affairs in our society. It is not restricted to the question of who is to receive money after an award of damages. It touches upon fundamental and important questions about how our society is organised.

So important are these questions, to my mind, that I propose to immediately give an ex tempore judgment in which I will set out the legislative regime in some detail so that not only the plaintiff, but others who will no doubt be considering whether or not they can seek similar orders, can consider their position and take such steps as are necessary. Those who have drafted the statutory regime can also consider whether the provisions of the Civil Procedure Act 2005 (NSW), the Powers of Attorney Act and Guardianship Act are adequately drafted or are in need of amendment, updating or both.

In handing down this ex tempore judgment, I am aware that the constraints of time are such that there may be informalities and oversights in this judgment; I will do the best I can in the circumstances in which I find myself.

I should formally note there have been no submissions made by the defendant, whom I assume neither supports nor opposes the application, and regards this as being a matter appropriate for the court.

I have, however, received, in response to some orders I made on the last occasion, a fax from the Guardianship Tribunal in which the Registrar has most helpfully set out what the Registrar sees as being some of the consequences of applications of this nature, and I will refer to that in due course.

The plaintiff in this application relies upon two affidavits. The first is an affidavit of Christine Magnusson, which attaches copies of the relevant appointments as enduring guardian, made on 29 September 2005, for non-financial matters, and a general power of attorney of the same date, for financial matters. The second affidavit is the affidavit of 25 June 2008 of Ms Axford. Ms Axford has stated that she has assisted her sister with respect to the management of the plaintiff's financial circumstances and that her occupation is that of financial manager within a large private hospital.

I note that the power of attorney which is annexure to the affidavit of Ms Magnusson is a mirror of the provisions of the Act. I note that there is recognition that the power of attorney is an important legal document, that the plaintiff was advised to obtain independent legal advice, and she did so, and I have the benefit of a statement from the solicitor indicating he considered she was capable of giving instructions. I note that the power of attorney gives the power to the holders of the power of attorney to deal with matters such as buying and selling real estate and managing bank accounts and the exercise of other powers. The power of attorney for financial matters cannot, of course, be used for "lifestyle" decisions, and this is why it has been necessary for an enduring guardian appointment to be made, and this has been made in similar careful circumstances.

It is not in dispute in this litigation that the plaintiff has an incapacity of the kind which would normally result in an application made to the Supreme Court or the Guardianship Tribunal. There is no contest that, subsequent to the plaintiff signing the power of attorney, she deteriorated, is now not a capable person, and fits within the definition of a person who is incapacitated for the purposes of s 76 of the Civil Procedure Act. However, it is submitted she is not yet a protected person because no orders have been made under the Protected Estates Act 1983 (NSW) or by the Guardianship Tribunal.

I will set out in some detail the submissions of Mr Campbell SC for the plaintiff. He submits that Parliament has made it clear, with the passing of appropriate legislation, that people should be able to make such plans as has occurred here and that "absent special circumstances", to use his words, these wishes should be adhered to. The plaintiff here has indicated as clearly as she can to the court that she wants her daughters to look after her affairs, including her financial affairs, and not to be subject to the strictures imposed upon an incapacitated person who has not made this voluntary choice.

The jurisdiction that I exercise in this application is pursuant to s 76 Civil Procedure Act. Section 76 provides as follows: " 76 Settlement of proceedings commenced by or on behalf of, or against, person under legal incapacity

(1) This section applies to proceedings commenced by or on behalf of, or against, any of the following persons:

(a) a person under legal incapacity, (b) a person who, during the course of the proceedings, becomes a person under legal incapacity, (c) a person whom the court finds, during the course of the proceedings, to be incapable of managing his or her own affairs.

(2) The court may make a finding referred to in subsection (1) (c) only on the basis of evidence given in the proceedings in which it is made, and such a finding has effect for the purpose only of those proceedings.

(3) Except with the approval of the court, there may not be:

(a) any compromise or settlement of any proceedings to which this section applies, or (b) any acceptance of money paid into court in any such proceedings,

as regards a claim made by or on behalf of, or against, a person referred to in subsection (1).

(4) If an agreement for the compromise or settlement of any matter in dispute in any such proceedings is made by or on behalf of a person referred to in subsection (1), the court may approve or disapprove the agreement.

(5) An agreement disapproved by the court does not bind the person by whom or on whose behalf it was made.

(6) An agreement approved by the court binds the person by whom or on whose behalf it was made as if he or she were of full capacity and (if it was made by some other person on his or her behalf) as if that other person had made the agreement as his or her agent."

Section 77 provides as follows: " 77 Payment of money recovered on behalf of person under legal incapacity

(1) This section applies to money recovered in any proceedings on behalf of any of the following persons:

(a) a person under legal incapacity, (b) a person who, during the course of the proceedings, becomes a person under legal incapacity, (c) a person whom the court has found, under section 76 (1) (c), to be incapable of managing his or her own affairs,

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 Public Trustee, or (b) if the person is a protected person, to the manager of the protected person's estate.

(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 Public Trustee, or (b) if the person is a protected person, to the manager of the protected person's estate." 16. Section 77 is the key. It is submitted that it is in much broader form than the predecessor to the Civil Procedure Act legislation, the Damages (Infants and Persons of Unsound Mind) Act 1929 (NSW), which I will hereafter refer to as the "1929 Act".

What is submitted is that the provisions of s 77 provide in fact for a specific alternative to the moneys being paid to the manager of the protected person's estate. The reason for that is that in ss 77(3) and 77(4), the words "including" relate to paragraph (b) in each of these subsections.

The drafting of s 77(3) is arguably to assist the court in avoiding something that courts have, as a matter of practice, done for a number of years, namely to direct the parties not to pay the moneys into court other than in circumstances where an application is being made to the Supreme Court or the Guardianship Tribunal. Mr Campbell SC has pointed out to me that the same proviso appears in s 77(4), which says that where money has been paid into court, it is to be paid "to such person as the court may direct, including". It then states, in relation to whether a person is a protected person, "to the manager of the protected person's estate". Great emphasis is placed by Mr Campbell SC on the word "including".

The Ritchie's Uniform Civil Procedure notes to ss 76 and 77 set out the procedure, but do not deal with any issues that are of assistance to me. That is not to criticise the authors of the Ritchie's Uniform Civil Procedure, who have most comprehensively set out all that is involved. The difficulty is that this application - with an exception to which I will come shortly - is completely without precedent and, therefore, is one which has not been the subject of any authority. That being said, there are some cases in the Supreme Court, both before and after the introduction of the Civil Procedure Act provisions, which I regard as being very helpful in enabling me to understand the structure of the previous and present legislation and how it is to be approached.

I will firstly consider the question of the structure of the Guardianship Act. The Guardianship Act is an important tool because it preserves the jurisdiction of the court in respect to the guardianship of persons. There is a careful analysis of this Act in MAW v Western Sydney Area Health Service (2000) 49 NSWLR 231 at 238. What is important about this Act is that the interests of the person with the disability are given paramount consideration.

Section 6 of the Act sets out that there can be the appointment of enduring guardians but goes onto explain that this is for lifestyle issues. However, this is still important because, as Mr Campbell SC pointed out, if a Guardianship Tribunal or Protective Commission order is made, then what will happen is that this will take away this choice and it will be suspended. In other words, such a power will be suspended if an order has to be made by the Guardianship Tribunal.

Mr Campbell SC submits that the court would not likely intrude into the arena of forcing the plaintiff to have her matters in what he calls "the hands of the bureaucracy" as opposed to the care of her family (I have put these words in quotations because they are Mr Campbell SC's words, not because there is any evidence in this case (or indeed in any case) to support the contention that the Guardianship Tribunal and Protective Commission deserve this appellation). Mr Campbell SC submitted that while the Guardianship Tribunal and the Protective Commission and other officers do their best and consult with the family, they are still a "public person" and it is not the same as "the family".

Section 6J provides that the Tribunal may, of its own motion, investigate and indeed remove a person who is holding this position and it is submitted that if information is received, that the power has been abused, the Tribunal can act. It is submitted that unless I make a direction consistent with these powers of attorney, the plaintiff is deprived of her lifestyle choice, which is given to "the bureaucracy" instead.

The Powers of Attorney Act sets out in s 8 the circumstances in which a power of attorney can be taken out and Schedule 2 sets out what those powers are. These powers are the same as the holders of the power of attorney for the plaintiff in this case, although it has been pointed out to me that additional powers in sections concerning gifts have been removed and that this is therefore a useful safeguard. I note also the notes on p 47 of Schedule 2 giving a warning to anyone entering into such a power that this is an important document.

The plaintiff submits that this is a lifestyle choice; it is effective from the time of appointment because what is said by the plaintiff is that she wants her daughters to be her attorney and for this to continue. She not only wants her daughters to be in charge of where she lives but also of all of her assets, including the damages in question in this settlement. She does not want those decisions to be made for her by what Mr Campbell SC calls "the bureaucracy" unless some event happens such as misappropriation or a family feud.

It is submitted that the court should be slow to impose on the plaintiff a consequence she does not wish, and that on the evidence and the statutory interpretation of the financial best interests of the plaintiff, I should make the directions contemplated by sub-ss 77(3) or (4) that the payment to the persons that the court so directs, namely the two persons who hold the power of attorney and have put on affidavits in these proceedings. It is submitted it is clear from the plaintiff's daughters' affidavits that they know their obligations and how to discharge them. Mr Campbell SC added that if they do not do their job, they will be back in another jurisdiction of this court and "the bureaucracy", as he calls it, can then step in and takes over.

It is submitted that it must have been the intention of Parliament, when introducing these three Acts in 1987, 2003 and 2005, that, in this more modern and enlightened day, a more flexible structure would be available for persons who become incapacitated whereby processes they have undertaken beforehand enable them to set up a more flexible structure than what Mr Campbell SC calls the "old, more draconian methodology". He draws an analogy from mental health legislation which seeks to avoid court orders for the mentally ill, and submits that the Civil Procedure Act should have the same impact, namely that we should all be entitled to have lifestyle issues taken into account.

In particular, he draws to my attention an occasion in May 2007 when the Chief Judge of the District Court did make such an order in a matter where the plaintiff was a Mr Gong, who lived in an overseas country. The Chief Judge of this court made an order that the settlement moneys be paid out to the son of the disabled plaintiff, upon his undertaking to the court that he would apply it in the best interests of the plaintiff. The plaintiff in that case was an overseas resident and I gather the son was an Australian citizen, although it is not clear whether he is looking after the money here or in Australia. Unfortunately, Mr Campbell SC could not remember anything more about this case except that the order was made in May 2007 and I gather it reasonably likely that there was not any judgment in relation to that order.

For many years, the legislation under which settlements were approved, including approvals by me, were under the Damages (Infants and Persons of Unsound Mind) Act 1929 (NSW). The manner in which the 1929 Act, which has not in fact been repealed, has been replaced by the Civil Procedure Act has been explained by Hamilton J in Saul v Lin [2007] NSWSC 782 at [3].

There have been some criticisms about the limitations of the new Civil Procedure Act; for example, it appeared that there was a lacuna about whether it applied to defendants as well as plaintiffs, and I note that this issue was dealt with in Permanent Trustee Co Ltd v Mills [2007] NSWSC 336. A number of powers that the judge had under the 1929 Act, including powers under ss 4 and 7, for example, to require a plaintiff to have costs (especially solicitor and client costs) assessed as part of or even as a prerequisite to the approval process, have not been included in the 2005 Act.

I am guided very much by what Mr Justice Hamilton has said in Saul v Lin, particularly at [5], about the nature and extent of the new statutory regime. While the Civil Procedure Act may have fewer provisions, and may even have gaps, it was never intended to interfere with the long-established supervisory jurisdiction of the courts concerning the approval of settlements and the investment of funds in accordance with long-established rules. Harrison AJ made this clear in Davis bht Simon v Mid North Coast Area Health Service [2007] NSWSC 1044, when rejecting an argument concerning a compromise of liability that there was no present requirement to approve a partial settlement of liability in the litigation. In other words, the court maintains the same close supervisory watch of settlements because these plaintiffs are seen (rightly or wrongly) by the legislature as being vulnerable.

It would be fair to say that any injured plaintiff in litigation is particularly vulnerable at the time of settlement, and it is a matter of the utmost public interest that they be protected. In relation to persons who have suffered from personal injury who have suffered the additional disadvantage of being minors or under a disability, that is the more so. That is why the jurisdiction conferred on the District Court and the Supreme Court by the Civil Procedure Act, and its procedure, is protective in nature. It is akin to the inherent parens patriae jurisdiction of the court under the common law, as O'Keefe J has pointed out in several decisions, notably Yu Ge v River Island Clothing Pty Ltd [2002] NSWSC 28. Under that jurisdiction, the court must act to protect the interests of infants and disabled persons. Although the jurisdiction is broad, it is to be exercised cautiously. I note similar statements in MAW v Western Sydney Area Health Service at 238 and also in Northridge v Central Sydney Area Health Service (2000) 50 NSWLR 549 at 553.

As O'Keefe J explains in Yu Ge at [29]-[32] concerning the provisions of the 1929 Act under which settlements were approved, the practice involved in relation to settlements and the principles to apply in relation to the approval of infants' settlements in action for damages are well established. In exercising this jurisdiction, the court must act cautiously, and if in doubt, his Honour has stressed (at [32]) that the court must decline to approve the settlement.

These decisions predate the current legislation. However, the intention of the current legislation, as I see it, was to maintain the status quo. It was to replace what was there with a similar regime, but imported into the Civil Procedure Act.

This brings me to a consideration of the role of the Guardianship Tribunal in particular. What the Guardianship Tribunal cannot do is, for example, to register a power of attorney and supervise that power. The Guardianship Tribunal, in response to being advised of order five of my orders on 10 October 2008, has provided a fax both to the parties and to the court.

This matter was listed before me today following order 5 of my previous orders (concerning notification to the Guardianship Tribunal) to determine whether the orders sought would be sufficient, or whether it was necessary for application to be made for appointment of a manager by the Guardianship Tribunal. The Guardianship Tribunal has provided a most helpful letter which says: "I refer to the Orders made in the above matter on 10 October 2008, a copy of which is enclosed.

For the purposes of assisting the Court, the Tribunal makes the following comments:

There is no requirement or provision under NSW law for a power of attorney to be lodged or registered with the Guardianship Tribunal. + The Guardianship Tribunal has no role in supervising the actions of an attorney appointed under a power of attorney. + The Protective Commissioner has no role in supervising the actions of an attorney appointed under a power of attorney.

Both the Guardianship Tribunal and the Supreme Court can make financial management orders. Any power of attorney is suspended while a financial management order is in force.

If a private financial manager is appointed, the Office of the Protective Commissioner assists them in their role and monitors whether the needs of the protected person are being met.

I hope this information is of assistance to the Court.

Yours faithfully Esther Cho Registrar 23 October 2008"

I propose to have the Registrar's letter placed in the file. I do not need to mark it as an exhibit since it is effectively a letter from another court.

What the Registrar is saying is that a person who is holding a power of attorney or, for that matter, an enduring guardianship order, is not the subject of control or scrutiny of the Guardianship Tribunal, notwithstanding the fact that there is power under s 6J. There is no requirement, for example, that they provide annual accounts, or that they consult from time to time for advice, or anything of that nature. It would only be if a person put evidence before the Guardianship Tribunal that the kind of enquiry of the kind set out in s 6J of the Act would take place.

When exercising my supervisory jurisdiction I must also bear this in mind that this court does not have the power to make orders for the appointment of a financial management nature. As the Guardianship Tribunal Registrar has pointed out, the Guardianship Tribunal and the Supreme Court have those powers. This court is a statutory court of record and I have only the powers that are set out in s 77.

Looking at the interpretations of s 77 given by Hamilton J and the Guardianship Tribunal Registrar, it seems to me that, notwithstanding what appears to be a degree of ambiguity in the wording in s 77, there is no reference there to a person who has been appointed either an enduring guardian, or a power of attorney, or both. In circumstances where it seems to me that the procedure for applying for approval of a settlement, which I note is set out in paragraph 76.20 and 77.5, there is no suggestion that there is any alternative to the procedure which is currently in place.

It may be that that is, to use the description given by Hammerschlag J in Permanent Trustee Co Ltd v Mills and by Hamilton J in Saul v Lin, that there is a "lacuna", and it may be that it is time that there is such a provision. However, as I read these Acts, there is currently no such provision, and this is in circumstances where the court exercises this supervisory power because these persons are vulnerable. I have said before that it is in the public interest that moneys awarded to disabled and minor persons should be protected because of the very great public concern that persons who are vulnerable and who fall within the supervisory jurisdiction of the courts should be protected in accordance with existing, understood and longstanding principles.

There is no doubt in the present case that the persons seeking to exercise the power of attorney have anything other than the highest of motives, and they are upright members of the community. However, the court's supervisory powers in relation to settlement of this kind require, in my view, absent clear statutory provision to the contrary, that orders must be sought from either the Supreme Court or the Guardianship Tribunal. The settlement monies in this matter may, if the parties chose to go ahead with the approval, be paid into court for investment pending the obtaining of such orders.

I am therefore not prepared to approve that part of the settlement proposal which provides for moneys to be paid to the persons who have been appointed.

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.

Damages (Infants and Persons of Unsound Mind) Act 1929(NSW)

Protected Estates Act 1983(NSW)

CITATION: Smith bht Magnusson v NRMA Insurance Australia Ltd [2008] NSWDC 261

Davis bht Simon v Mid North Coast Area Health Service [2007] NSWSC 1044 MAW v Western Sydney Area Health Service (2000) 49 NSWLR 231 CASES CITED: Northridge v Central Sydney Area Health Service (2000) 50 NSWLR 549 Permanent Trustee Co Ltd v Mills [2007] NSWSC 336 Saul v Lin [2007] NSWSC 782 Yu Ge v River Island Clothing Pty Ltd [2002] NSWSC 28

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