Trustee Seeks Court Guidance on Protecting Brain-Damaged Minor's Estate

The Court provided advice to a trustee regarding the protection of the estate of a brain-damaged minor under the Protected Estates Act 1983. The trustee sought guidance on applying for the appointment of a manager to manage the estate due to the minor's incapacity.

New South Wales Supreme Court

CITATION : [COMPANY] [2006] NSWSC 842

HEARING DATE(S) : 08/08/06, 17/08/06 JUDGMENT OF : Gzell J

EX TEMPORE JUDGMENT DATE : 08/17/2006

DECISION : Advice that would be justified in applying for the appointment of a manager of the [NAME]'s estate under the Protected Estates Act 1983 and seeking authority from the [NAME] to take the steps - Advice that trustee would be justified in funding the manager

CATCHWORDS : PROCEDURE - Supreme Court Procedure - Court advice to Trustees - Trustee of trust for brain damaged [NAME] seeking advice from Court under the Trustee Act 1925, s 63 - Mother of [NAME] bare trustee of house property - Series of mortgages for personal interests of [NAME]'s grandmother - Weather trustee justified in applying to remove and replace mother and seek to unemcumber house property

Trustee Act 1925 LEGISLATION CITED : Real Property Act 1900 Conveyancing Act 1919 Protected Estates Act 1983

PARTIES : [COMPANY] In its capacity as trustee of [COMPANY](S) : SC 3938/06

COUNSEL : [redacted]

SOLICITORS : [redacted]

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

GZELL J

THURSDAY 17 AUGUST 2006

3938/06 [COMPANY] V EX TEMPORE

JUDGMENT 1 There is before the Court an application under the Trustee Act 1925, s 63 for an opinion, advice or direction of the Court. 2 [NAME] is an [NAME] currently aged 11. He is in the care and custody of his mother, [NAME]. 3 [COMPANY] was constituted on 14 December 2001 by the approval of the Court of a trust deed appointing [COMPANY] and [NAME]'s grandmother, as co-trustees to administer a fund of approximately $5.5 million, part of the proceeds of a settlement of proceedings brought on [NAME]'s behalf to recover damages for medical negligence involving birth trauma which caused him brain damage. 4 Prior to the establishment of [COMPANY], the Court ordered the defendant in the medical negligence proceedings to pay $750,000 into Court for the purpose of [NAME] purchasing, in her name, a home to be held on a [COMPANY] for [NAME]. [NAME] purchased a property at Castlereagh in New South Wales, in which she presently resides with her children, including [NAME]. Perpetual is not, and never has been, a trustee of that [COMPANY]. 5 In the period April 2003 to August 2005, apparently under the influence of her mother, [NAME] entered into a succession of mortgages over the [COMPANY] property to secure advances made for the purposes of a Central Coast property development in which her mother was involved. [NAME] nor [NAME] have any interest in that development so far as Perpetual is aware. 6 On 15 September 2005, [NAME] resigned as a trustee of [COMPANY]. 7 There are presently two claims concerning the [COMPANY] property arising out of the succession of mortgages and related dealings. The first is a claim made by [NAME] [COMPANY]. The mortgage in its favour was registered against the [COMPANY] property on 18 August 2005 to secure funds advanced to [NAME] but used for the purpose of the development in which her mother was interested or other purposes related only to her mother. 8 On 2 May 2006, [NAME], which had instructed [NAME] to act on its behalf, issued notices to [NAME] pursuant to the Real Property Act 1900, s 57(2)(b) and the Conveyancing Act 1919, s111(b). The loan secured by mortgage was in arrears in the amount of $21,124.44 as at 23 June 2006. 9 The second claim was made by [COMPANY], which apparently advanced funds used by [NAME]'s grandmother to purchase her former partner's interest in the development and other property. Crown and Gleeson has commenced proceedings in the District Court of New South Wales against both [NAME] and [NAME] personally, seeking to recover the moneys owing under the Crown and Gleeson loan. 10 Crown and Gleeson have lodged a caveat on the title of the [COMPANY] property that asserts an interest arising from a mortgage that had been discharged. It has asserted in correspondence an entitlement pursuant to an alleged oral agreement to have a second mortgage registered over the [COMPANY] property. 11 [NAME], on behalf of [NAME], has recently corresponded with Perpetual's solicitors by letter dated 17 July 2006. [NAME] have indicated that [NAME] wishes to meet with Perpetual to determine whether [COMPANY] is amenable either to paying out in full the moneys owed to [NAME] or bringing that loan into order by paying all arrears and continuing to service the loan pending a permanent resolution of the matter. 12 [NAME] is not protected by a manager. The Protected Estates Act 1983 provides for the appointment of a manager under s 22 consequent upon a declaration under s 13. The latter section provides that where the Court is satisfied that a person is incapable of managing his or her affairs it may make a declaration to that effect and order that the estate of the person be subject to management under the Act. The former section provides that the Court may, by order, appoint a suitable person as manager of the estate of a person in respect of whom it has made an order under s 13 or may, by such an order, commit the management of the estate of such a person to the [NAME]. If a manager is appointed, s 30 provides that the [NAME] may, by order, authorise the manager to have all, or any specified, functions necessary and incidental to the management and care of the estate and, such other functions as the [NAME] may direct or authorise the manager to have or exercise. [ADDRESS] is asked whether Perpetual is justified in continuing to act as trustee of [COMPANY]. The fact that it had no capacity to remedy the situation that arose with respect to the [COMPANY] does not debar it from carrying out its functions. It is a stranger to the [COMPANY] and had no right to interfere in its processes. It is, therefore, in my view, appropriate that Perpetual continue to act as trustee of [COMPANY]. [ADDRESS] is asked whether Perpetual is justified in applying to the Court for orders removing [NAME] and appointing Perpetual as trustee of the [COMPANY]. In my view that is not an appropriate course for Perpetual to take in its capacity as trustee of [COMPANY]. As I have said, it is a stranger to the [COMPANY] and is not the appropriate party to move to have the current trustee removed. A manager appointed under the Protected Estates Act 1983 is the appropriate person to take that action for it is [NAME] who is the sole beneficiary and interested person under that trust. [ADDRESS] is asked whether Perpetual is justified in expending funds from [COMPANY] in investigating and, if appropriate, taking steps to attempt to unencumber the [COMPANY] property. In my view, the funds of [COMPANY] must be used in the interests of [NAME] himself, and since he is the only party interested in the [COMPANY] it seems to me to be appropriate that Perpetual expend funds in appropriate proceedings to protect that interest. In other words, it is appropriate for Perpetual to support a manager appointed under the Protected Estates Act 1983 in its endeavours to protect [NAME] under the [COMPANY]. The actions are appropriate to a manager and since the only funds available to enable the manager to act are the assets of [COMPANY], I am of the view that it is appropriate for Perpetual to make funds available to the manager in appropriate circumstances. [ADDRESS] is asked whether Perpetual is justified in adopting one or other of the courses proposed by [NAME] in their letter of 17 July 2006 to [NAME]. In my view it is not. That is an appropriate matter for a manager once appointed. 17 Finally, the Court is asked whether there are any additional steps that Perpetual is justified in taking to protect [NAME]'s interests in the [COMPANY] property. At this stage the answer to that question is no. It is appropriate that steps be taken by a manager appointed under the Protected Estates Act 1983. 18 I therefore make the following orders. In answer to the questions raised for the Court's opinion, advice or direction under the Trustee Act 1925 s 63 the Court orders that: (a) [COMPANY] (Perpetual) would be justified in continuing to act as trustee of [COMPANY] ([NAME]). (b) Perpetual would not be justified in applying to the Court for orders removing [NAME] as trustee of the [COMPANY] for [NAME] of the house property at Castlereagh, New South Wales ([COMPANY]). Perpetual would be justified in taking steps to have a declaration made under the Protected Estates Act 1983, s 13 and either the [NAME] or some other person, including itself, appointed as manager of the estate of [NAME] under s 22. If it is appointed manager, Perpetual would be justified in seeking specific authorisation under s 30 to take appropriate steps. Those steps might include an application to remove and replace [NAME] as trustee of the [COMPANY], authorization to compromise the claim of [NAME] Company Home Loans Pty Limited and authorization to apply to remove the caveat of [COMPANY] from the property at Castlereagh. (c) Perpetual would be justified in expending funds from the [NAME] to support the appointment of a manager and to support appropriate steps taken by the manager. (d) Perpetual is not justified in adopting one or other of the courses proposed in Deacon's letter of 17 July 2006 to [NAME]. That is a matter for a manager. (e) At this stage Perpetual is not justified in taking any additional steps to protect [NAME]'s interest in the [COMPANY]. [ADDRESS] orders that the costs of and incidental to the summons, including the costs of and incidental to obtaining the advice of Senior Counsel on the questions the subject of the application be paid out of the [NAME]. **********

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