Willett v Futcher[2003] QSC 36

SUPREME COURT OF QUEENSLAND

[1] On 24 December 2002 Byrne J sanctioned a compromise of the second plaintiff’s action against the defendant.  She had sustained severe brain and other physical injuries as a result of a motor vehicle collision on 31 July 1979 when she was about 9 weeks old.  She is now aged 23.  Her parents are her litigation guardians and care for her in their home.

[2] His Honour sanctioned the compromise of the second plaintiff’s claim by ordering that:

“The defendant pay to the second plaintiff … the sum of $3,850,000 (Three Million Eight Hundred and Fifty Thousand Dollars), together with the sum by way of damages in respect of reasonable management fees in respect of so much of the lastmentioned sum as shall be lodged as directed by the court with the Public Trustee of Queensland or a private trustee pursuant to an administration or protection order made by the Court, in a reasonable sum to be agreed, and if not agreed, as determined by the Court.”

[3] His Honour ordered that Perpetual Trustees Queensland Limited (“Perpetual”) be appointed administrator in relation to all financial matters concerning the amount of the compromise pursuant to ss 12 and 245 of the Guardianship and Administration Act 2000.  The defendant was ordered to pay the compromise sum inter alia as to $500,000 to the litigation guardians in partial reimbursement for past care and out of pocket expenses given to their daughter, other minor amounts to other providers and the balance to the administrator.

[4] His Honour adjourned the assessment of the amount “by way of damages in respect of reasonable management fees” of the administrator to the civil list, gave directions and ordered that the Public Trustee (who appeared on the sanction) be a party to that determination and that the Public Advocate have leave to intervene.  Both have appeared and made submissions.

[5] In the various reports obtained relevant to this determination, the affidavits and in submissions, the second plaintiff has been referred to informally as “Belinda” and it is not inappropriate to continue to do so in these reasons.

[6] Although not appointed administrator of the trust sum for Belinda, the Public Trustee has been made a party to this determination and has an active interest in the underlying principle to be determined and has provided detailed material about the fees which are charged by the Public Trustee for the range of services which are under consideration.  Perpetual has provided material through Mr Damien Gallagher, senior financial consultant with Perpetual about the range of services and fees which it proposes for Belinda.  The defendant (the insurer for the litigation is the Nominal Defendant due to the insolvency of FAI the original third party insurer) has provided the court with two reports from Mr Peter Marles, an accountant and certified financial planner, who has given his opinion about the reasonableness of the fees to be charged for various services proposed to be offered to Belinda by the administrator and compared them to the Public Trustee’s fees and charges.  Mr Gallagher and Mr Marles gave oral evidence.  After elaboration and explanation of what was comprised in the services offered there was very little in dispute about the figures and all parties agreed with the final calculations done by Mr Anthony Day, senior fund manager with Queensland Investment Corporation and with his attempted correlation between the services offered by the two organisations.

[7] The determination raises an important matter of principle, namely, whether the cost to Belinda of obtaining suitable investment advice and other ancillary charges in respect of that part of the trust fund available for investment ought be borne by the defendant as an aspect of the damages ordered to be paid “in respect of reasonable management fees”.  Those representing Belinda and Mr Rangiah for the Public Advocate submit that the defendant ought to do so on the ground that it is a need which has been created as a direct consequence of the defendant’s wrong.  The defendant and the Public Trustee argue that that cost to the plaintiff is not compensatory in nature being rather a means of maximising the compromise sum.

[8] Belinda, it seems, engages in a variety of activities but requires 24 hour assistance and supervision in most of her daily routine.  It is common ground that Belinda is and will remain unable to make any decisions about the appropriate management of her fund which will be made by the administrator as trustee in consultation with Belinda’s parents, no doubt, while they are able.  This comes at a price so far as the administrator is concerned and, again, it is common ground that since this need for management arises from the injuries to Belinda for which the defendant is responsible, the defendant must compensate Belinda for this expense.

General principles

[9] Before turning to the particular facts relating to the various services and charges for them it is necessary to discuss the principles which guide all assessments of damages for tortious conduct.  Gibbs CJ and Wilson J in their joint judgment in Todorovic v Waller (1981) 150 CLR 402 expressed these fundamental principles at 412:

“Certain fundamental principles are so well established that it is unnecessary to cite authorities in support of them.  In the first place, a plaintiff who has been injured by the negligence of the defendant should be awarded such a sum of money as will, as nearly as possible, put him in the same position as if he had not sustained the injuries.  Secondly, damages for one cause of action must be recovered once and forever, and (in the absence of any statutory exception) must be awarded as a lump sum; the court cannot order a defendant to make periodic payments to the plaintiff.  Thirdly, the court has no concern with the manner in which the plaintiff uses the sum awarded to him; the plaintiff is free to do what he likes with it.  Fourthly, the burden lies on the plaintiff to prove the injury or loss for which he seeks damages.”

Although subject to criticism on a variety of socio-economic and other grounds (see Lunz Assessment of Damages for Personal Injuries and Death, 4th ed (2002) at 8 and following) those basic principles are consistently and faithfully applied in the courts.  A corollary of the compensatory principle is the rule that a plaintiff must not recover more than the loss sustained, MBP (SA) Pty Ltd v Gogic (1991) 171 CLR 657 at 664;  Manser v Spry (1994) 181 CLR 428 and Harris v Commercial MineralsLimited (1996) 186 CLR 1 at 18.

[10] The application of those principles is at the heart of this determination.  It is also necessary, as the submissions of Mr McMurdo QC for the Public Trustee emphasised, to keep steadily in mind that the court is determining a component of Belinda’s damages claim against the defendant according to these principles and not exercising its protective jurisdiction by determining what is in Belinda’s best interests.  In selecting the administrator of Belinda’s trust fund Byrne J, no doubt, had regard to the material presented by the respective proposed administrators concerning the investments to be made, the likely rates of return and the expenses involved.  Whilst material from Perpetual and the Public Trustee relating to those matters will be considered in determining the question what is a reasonable management fee in respect of the administration of the fund to be awarded as a component of Belinda’s damages, that process will occur as an exercise in assessing that aspect of her damages only.

[11] Carter J concluded in Mullins v Duck [1988] 2 Qd R 674 that in assessing damages for personal injuries payable to a person under a disability an allowance should be made for a sum representing the cost of having the Public Trustee manage the fund comprising the award of damages.  Prior to Mullinsv Duck there was a diversity of judicial opinion in Queensland as to whether such an item of damage was properly allowable.  Carter J was persuaded by the reasoning of Zelling J, the trial judge, and by King CJ on appeal, in CampbellvNangle (1985-1986) 40 SASR 161 that such an item of damage was recoverable from the defendant and that has been the position in Queensland since.

[12] The issue here is not whether damages comprising a management fee are payable by the defendant but what services, for which fees are payable, flow directly from needs generated by the wrong.  A useful starting point is Campbell v Nangle.  Zelling J, the trial judge, discussed at 178 a claim for a sum to be included in the damages awarded for the management fees of the fund in respect of a plaintiff who had sustained brain damage in the subject accident,

“If you injure a plaintiff so badly that he has permanent brain damage and he can neither manage the resulting fund for himself nor make any decision with regard to its management, then it is foreseeable that there is going to have to be a manager to do that for him and, with a large fund of this kind, a skilled manager whose fees must be paid for.”

Zelling J was provided with the costs of management of the fund by the Public Trustee and by a private accountant.  The accountant, whose figures his Honour accepted, divided his charges into “work done on investments” and what he called “domestic or housekeeping functions”.  His Honour concluded at 179:

“As far as the administration of the investment portfolio is concerned, namely the first of the two figures, I do not think that the plaintiff should be given an allowance in damages for this purpose.  Every plaintiff with an award as large as this would need to take constant advice as to investment.  The second, however, in my opinion, is recoverable as damages.  A plaintiff who did not have brain damage would be able to make his own decisions assisted by the advice of an expert adviser.  This plaintiff cannot.”

[13] On appeal in a passage cited with approval by Gummow J in The Nominal Defendant v Gardikiotis (1995-1996) 186 CLR 49, King CJ said at 192:

“It seems to me that the principles of the law relating to damages for tort require the inclusion in an incapacitated plaintiff’s damages of the amount which he will be required to pay to a manager by reason of his incapacity.  A plaintiff is entitled to recover the loss caused by the tort.  The fundamental principle upon which damages are assessed is the principle of compensation that the plaintiff is to be placed, so far as possible, in the same position financially as he would have been if he had not sustained the wrong for which he receives the damages.  The capital sum awarded to him is computed upon the basis of an assumed real return from its investment.  If the plaintiff has been rendered by the wrong for which he recovers damages incapable of managing his affairs so that the fund resulting from the damages must be managed for him, the fees payable to the manager will reduce the real return from its investment.  Unless an amount is included in the damages to compensate for those fees, the plaintiff will not receive the full restitution to which the law entitles him.  It seems to me that the liability for the fees is a loss flowing directly from the wrong and is recoverable as damages caused by the wrong.”

[14] As to the amount of the charges his Honour said at 192-3:

“I can see no justification for requiring a defendant to pay an amount in excess of the Public Trustee’s charges to enable a plaintiff to have a private manager presumably in the hope of producing a better investment yield than would be obtained by the Public Trustee.  Damages are assessed upon the basis of a discount rate which assumes investment in secure investments.  A highly skilled investment manager is not required to make and manage such investments …  There was evidence in the form of a letter from the Public Trustee that he would be likely to engage an investment adviser whose fees would be additional to the Public Trustee’s charges, but, as indicated earlier, those additional fees are not recoverable.”

Jacobs and O'Loughlin JJ agreed.

[15] The New South Wales Court of Appeal has considered this issue in a number of decisions.  I shall refer only to two – Treonne Wholesale Meats Pty Ltd v Shaheen (1988) 12 NSWLR 522 and Government Insurance office of New South Wales v Rosniak (1992) 27 NSWLR 665.  In Treonne, Clarke JA who gave the judgment of the court, after quoting the passage from Zelling J’s judgment in Campbell v Nangle set out above at [12] said that King CJ took the view that it was proper to make an allowance based on the expenses of management of the Public Trustee “and did not deal with Zelling J’s division of expenses”.  With respect to his Honour, it seems clear from the passages at 192-3 that he did so.  Clarke JA said at 528-9:

“I accept that it is appropriate in principle to take account of the fact that injured plaintiffs who have retained sufficient intelligence to administer their financial affairs would undoubtedly require, or seek, some expert financial assistance in the management of sums of money as large as the sum involved in this case.  Indeed this was recognised in Todorovic.  This would occur even where the expenditure was not a direct result of the accident and would reflect a plaintiff’s desire to ensure that the moneys were soundly invested.

But this does not mean that there should not be an allowance included within the damages for moneys which a plaintiff, who has suffered intellectual impairment as a result of the tort, has to expend as a result of his inability to manage his financial affairs which might include capital payments.  Nor does it mean that the amount allowed should necessarily exclude the management of investments because that is, after all, an integral part of the fund management.  Indeed it occurs to me that in a case involving the Protective Commissioner it may be almost impossible to divide the amounts payable by a plaintiff between investment expenses and the so-called domestic or housekeeping functions.

In my opinion the proper approach is to include within the damages an allowance for fund management which reflects the probable difference between the expenditure likely to be incurred by a person who is unable to manage his affairs as a consequence of the accident in question and the expenses which as a matter of probability, would be incurred by a plaintiff whose intelligence is unimpaired and who seeks expert aid in the investment of the damages fund.”

Mahoney and McHugh JJA agreed with his Honour’s reasons for judgment.

[16] However, in Rosniak, to a large extent, or, perhaps, entirely, hampered by the evidence which did not separate the management services of a “domestic kind” to use Zelling J’s expression, and the “investment services” of the Protective Commissioner in the establishment fee paid on the receipt of the fund, Meagher JA said that Treonne was wrongly decided on this point in seeking to deduct an amount which might represent what a non-brain injured person might have to pay for management advice.  Mahoney JA, based on the impracticability of separating management services from “what else the [Protective] Commissioner is to do” agreed that there should be no deduction of the kind referred to by Clarke JA in Treonne.

[17] The third member of the court, Kirby P, said at 675-6:

“But it is plain, and the unanimous view of this Court, that the establishment fee had to be included in its entirety in the allowance made in the respondent’s damages for the management fee payable to the Protective Commissioner.  By definition and by the trial judge’s findings, she was incompetent to manage her own affairs.  She therefore did not have the luxury of choosing to secure, or to dispense with, an investment adviser and fund manager.  Her fund was not equivalent to a windfall legacy.  It was the quantification by law of the financial loss which she suffered by reason of the torts for which the appellant is liable.  Without paying the establishment fee in its entirety she could not secure the management services which, it was conceded, were necessary.”

[18] I now turn to Gardikiotis, a decision relied on by all parties.  The plaintiff suffered from multiple sclerosis which was exacerbated in a motor vehicle collision to such an extent that she was confined to a wheel chair for the rest of her life.  She also suffered a permanent impairment of her ability to write.  She was of sound mind and suffered no mental injury as a result of the accident.  The trial judge made no allowance for the management of her award.  He said, as quoted by Gummow J at 63, 

“The [respondent] claims fees for [a] financial management fund on the basis [that] she will need assistance managing a large sum of money.  It is necessary for her to invest it to allow her to obtain the full benefit of these verdict moneys.  The [respondent] is not brain damaged …”

The New South Wales Court of Appeal allowed the plaintiff’s cross-appeal and included an amount for the management of the damages sum. 

[19] The analysis of Gummow J commended itself “substantially” to Brennan CJ, Dawson, Toohey and Gaudron JJ.  McHugh J, whilst agreeing with the order proposed by Gummow J appears to go further in including the cost of investment advice as a recoverable item of damage.

[20] In the Court of Appeal Meagher JA had allowed an amount to represent the cost of assistance which the plaintiff proposed to obtain from a branch of a bank, holding that:

“In principle, I cannot see why if a defendant’s tort has generated a reasonable need in a plaintiff for fund management, and that need is reasonably foreseeable, the plaintiff is not entitled to recover a sum representing that need by way of damages …”.

Gummow J noted at 64:

“The basic question is whether an allowance of the type made by the Court of Appeal is requisite to put the respondent in the position in which she would have been if the tort had not been committed.  If such an allowance was so requisite, then it would be necessary to consider, in the light of the evidence, the particular form it should take.  In the view I take of this appeal, that stage is not reached.”

Gummow J at 66 did not find a number of  Canadian decisions to which the court had been referred of assistance and, with McHugh J, concluded that recourse to the maxim that a tortfeasor takes the victim as found relied on by the Canadian Supreme Court in Insurance Corporation of BritishColumbia v Mandzuk [1988] 2 SCR 650 at 650-651; (1988) 53 DLR (4th) 606 at 606-607 to explain the award of a sum for the cost of managing a plaintiff’s award where the plaintiff, for whatever reason, was not intellectually able to manage his or her own affairs, was inapt for this part of the law of damages.  Gummow J cited with approval the passages in the judgments of Zelling J and King CJ in Campbell v Nangle set out above at [12] and [13] and concluded that the plaintiff fell outside their reach.

[21] McHugh J at first reading appears to have gone further in allowing “investment” advice as an item of damage than Gummow J at 54-5:

“Damages may therefore be awarded for the expense of managing a plaintiff’s verdict moneys when the plaintiff’s disabilities prevent him or her from managing those moneys and the disabilities are the foreseeable consequence of the defendant’s negligence.  Damages may also be awarded for the expense of investment advice where, as the result of the defendant’s negligence, the plaintiff is no longer able to make adequate decisions concerning his or her own financial affairs.  In both cases, damages are payable by the defendant because the expense is the necessary product of the defendant’s negligence and is not the result of the free, informed and voluntary act of the plaintiff.  The expenses have been brought about by the loss of the plaintiff’s ability to do what that person was capable of doing before the occurrence of the tort which gives rise to the claim for compensation.”

But it may be that his Honour was doing no more than referring to a component in what is generally described as the “establishment fee”, that is, the fee which is charged on the initial receipt of a plaintiff’s fund by a trustee in order to work out an overall plan with respect to the plaintiff’s needs including whether any and in what amount of the fund will be invested.  That supposition is supported by his Honour’s reference to Campbell v Nangle  at  58:

“Neither the trial judge nor the Full Court, however, allowed any damages for the fees payable to an investment advisor because those expenses could be incurred by any injured plaintiff.”

At 59, his Honour said that (with other mentioned cases) Campbell v Nangle was correctly decided “in accordance with the principles which I have set out in this judgment.”

[22] Because it was unnecessary to do so, the threshold not having been crossed, in Gardikiotis the judgments do not clearly advocate the inclusion or exclusion of an investment advice fee and other associated fees additional to a complete management fee which might include aspects of advice of that kind in it, for example, the establishment fee.  The acceptance of passages in Campbell v Nangle by both McHugh J and Gummow J where the distinction had been made at trial and on appeal and did not allow recovery of a fee for investment advice strictly, suggests that such fees, if able to be isolated, are not recoverable.  Support for this conclusion comes from Todorovic v Waller and the application of the general principles of damages for torts.  McHugh J said at 61-2:

“The courts make assumptions about long term interest rates and use those assumptions to determine the discount rate.  The courts also make assumptions about the investment behaviour of rational investors in order to determine what present sum invested at the discount rate will fairly compensate a plaintiff for anticipated economic loss or expense.  But there is no duty on a court to ensure that a plaintiff achieves a rate of interest corresponding to the discount rate or to ensure that the plaintiff invests his or her moneys in a manner that will result in the sum awarded being periodically reduced and finally exhausted at the end of the discount period.  Use is made of a discount rate to assess the present value of future economic loss and expense because it is perceived to be the conceptual tool best suited to determine what is fair and reasonable compensation for that loss or expense.  The discounting exercise is a hypothetical construct and does not attempt to reflect, anticipate or govern the future actions or intentions of the plaintiff.  It simply attempts to determine what sum represents the present value of the anticipated losses or expenses of the plaintiff.  When that sum is determined, then, subject to any allowance for the contingencies of life, the law will equate it with fair compensation for those losses or expenses, irrespective of what the plaintiff intends to do with that sum.  If the plaintiff incurs expense in investing the moneys, that is the result of the plaintiff’s choice.  But that expense is incurred after the plaintiff has received the sum which represents fair compensation for his or her damage.  The expense is therefore not a factor which must be taken into account if the plaintiff is to receive a full indemnity.”

[23] It was the deprivation of the capacity to make choices about the judgment monies which led McHugh J to say 54-5:

“[D]amages may also be awarded for the expense of investment advice where, as the result of the defendant’s negligence, the plaintiff is no longer able to make adequate decisions concerning his or her own financial affairs”.

If his Honour is saying that the full cost of investment advice is recoverable by a brain-damaged plaintiff from the defendant, this is further than the rest of the court was prepared to go but for the reasons I have given above it is arguable that he is not.

[24] Todorovic v Waller, where the basis for the application of a discount rate was analysed by all members of the court, supports the view that investment advice and costs associated with investments such as brokerage fees and the like provide damages beyond the compensatory principle.  Gibbs CJ and Wilson J at 415 spoke of the yield obtainable by reasonably safe investments that are completely free of risk “such as electricity commissions and water boards, or debentures issued by large well-established industrial companies”.  Aickin J at 459-460 referred to “safe” governmental and semi-governmental fixed interest securities which produce a yield in excess of the inflation rate.  Brennan J at 466 spoke of “the yield which might be obtained by prudently investing a sum …”.  Recognising the impossibility of making allowance for the peculiar features of each case including allowances for the incidence of income tax or for the variety of yields upon the investment or mix of investments from time to time, Brennan J concluded at 474 that it was appropriate to take the longest term bond rate for comparative purposes although noting some upwards adjustment would be needed.

[25] Mason J at 448 in setting a discount rate thought it appropriate to take account of the prevailing financial conditions noting that long term government bonds with a maturity of 20-25 years were then yielding a high 15 per cent per annum and that semi-government securities gave an even higher yield.  He noted that a plaintiff with a large sum was likely to invest in a range of investments with the assistance of professional advice with the likely consequence that the real return would be higher than bonds even after allowing for the cost of professional advice.  His Honour regarded as important in setting the discount rate the financial independence which a large award gives a plaintiff.  He said at 449-50:

“[The plaintiff] is no longer dependent on borrowed money or credit facilities for the acquisition of his home, car and other necessities and luxuries.  Although it is impossible to quantify the worth of this advantage it is not inconsiderable.  The larger the verdict the greater the advantage.  In this respect it is a balancing factor, offsetting to some degree the heavier inroad which tax makes on the larger verdict by reason of the graduated scale of tax rates.  Likewise it may be said that the larger the verdict the greater the opportunity the plaintiff has to invest his verdict in a way that will be less likely to attract heavy tax, ie by acquiring assets yielding a low income return but offering a strong prospect of tax-free capital gains.”

Mr Gallagher under cross-examination by Mr D Fraser QC said that at the present time 10 year Commonwealth government bonds produce a yield of 5.215 per cent.  The proposed Perpetual investment strategy for Belinda would yield 8.2 per cent before fees and expenses.  Mr Gallagher suggested that “overall” the fees and expenses would be less than 1.65 per cent.  He did not disagree with Mr Fraser’s contention that the fees that might be paid investing in Commonwealth bonds would be no more than .1 per cent.  This evidence demonstrates not only that the wealth creating expectation is real but that the potential for incomplete compensation with returns reduced significantly since Todorovic v Waller would appear a real possibility.  Any  adjustment must come legislatively or from the High Court and, is not, in any event, an issue for this determination.

[26] With all of its flaws, recognised in Todovoric v Waller, the award of a sum discounted as to the receipt of future notional benefits takes into account the investment of the fund and the cost of professional advice in doing so, it being recognised that the average person is ill-equipped to make such decisions.  The purpose of investment advice and decision making about investments which concerns the present determination is to maximise the return over and above the amount of compensation awarded which already has an investment strategy inherent in it.  The underlying principle in making a defendant responsible for the cost of management services to a plaintiff under a disability is to place her in the position she would have been in but for the injury so far as money can do so.  The trustee who administers the fund does for the plaintiff what she cannot do for herself, that is, make choices and decisions, inter alia, about investments.  Detailed research and analysis about investments may occur in part “in-house” and in part by retained third parties.  Difficulties arise in isolating the costs for those services provided “in-house” which are outside the range of unassisted decision-making which an able adult of no particular skill, training or interest in the subject would make.  But if they can be, it is at that point that the compensatory principle ends.  An amount to reflect that “extra” investment assistance and cost ought not to be part of the compensation which a defendant must make to an injured plaintiff even if the injury gives rise to the need for assistance in the management of the fund.

[27] It is necessary to say something about Wills v Bell [2002] QCA 419.  A cross-appeal was made, inter alia, against the refusal by Mullins J in a decision of 14 December 2001 (no. 715 of 1995) to include in the assessment of damages the cost of selecting and managing investments in respect of the damages fund awarded to the plaintiff.  The plaintiff sustained brain injury in the motor vehicle accident the subject of the litigation such that he was incapable of looking after his own financial affairs.  Her Honour heard evidence of the fees charged by the Public Trustee and Perpetual Trustees Queensland Limited for undertaking administration and investment management.  Her Honour concluded:

“… whether it is the Public Trustee’s management fees or the advisory and investments management fees of Perpetual Trustees, they are fees that are incurred as a result of investing the funds.  They can be contrasted with Perpetual Trustees’ establishment and discretionary fees and the Public Trustee’s administration fees, which are charged in respect of the function of administrator and incurred because of the incapacity which necessitates the appointment of an administrator for financial affairs.  It is only the latter charge which can be a head of damage in this case.”

In my judgment in the Court of Appeal at [111] and following, I concluded that her Honour erred in not considering the management of the fund as a compensable head of damage relying (as her Honour did) on Gardikiotis.  Mackenzie J agreed without elaboration on this issue.  The President allowed an amount for the cost of investment advice without detailed discussion.  After the analysis which I have been able to do for this determination I have concluded that I was wrong in Wills v Bell on this issue.

[28] I turn then to the material provided by the Public Trustee and by Perpetual Trustee about the services which are provided and the charges which are made for them.

The fees and services

[29] By s 245 of the Guardianship and Administration Act 2000 where the court sanctions a settlement in civil proceedings in respect of an adult with impaired capacity the court may exercise all the powers of the Guardianship Tribunal under ch 3 of the Act concerning the appointment of a guardian or administrator.  By s 12(1) (in ch 3) the Tribunal may appoint an administrator for a financial matter to an adult with impaired capacity in relation to that person’s property.  In deciding whether a person is appropriate for appointment as an administrator the Tribunal is required to consider a number of matters, described in s 15(1) as “appropriateness considerations”.  Relevantly these include:

• The general principles and whether the person is likely to apply them;

• Whether the incapacitated adult and person proposed are compatible including whether the person has appropriate communication skills;

• Whether the person would be available and accessible to the incapacitated adult;

• The proposed appointee’s appropriateness and competence to perform functions and exercise powers under the appointment order.

The general principles which are set out in Sch 1 to the Act include respect for the disabled person’s human rights, worth and dignity as an individual and a valued member of society; encouraging and supporting performance of social roles; participating in community life by taking part in activities enjoyed by the general community; encouraging the disabled person to achieve maximum physical, social, emotional and intellectual potential and become as self reliant as practicable; preserving to the greatest extent practicable the disabled person’s right to make his or her own decisions.

[30] Schedule 2 sets out what might be included in the financial matters which an administrator is appointed to do for a disabled person.

“1.  A “financial matter”, for an adult, is a matter relating to the adult’s financial or property matters, including, for example, a matter relating to 1 or more of the following-

(a)paying maintenance and accommodation expenses for the adult and the adult’s dependants, including, for example, purchasing an interest in, or making another contribution to, an establishment that will maintain or accommodate the adult or a dependant of the adult;

(b)paying the adult’s debts, including any fees and expenses to which an administrator is entitled under a document made by the adult or under a law;

(c)receiving and recovering money payable to the adult;

(d)carrying on a trade or business of the adult;

(e)performing contracts entered into by the adult;

(f)discharging a mortgage over the adult’s property;

(g)paying rates, taxes, insurance premiums or other outgoings for the adult’s property;

(h)insuring the adult or the adult’s property;

(i)otherwise preserving or improving the adult’s estate;

(j)investing for the adult in authorised investments;

(l)[sic]continuing investments of the adult, including taking up rights to issues of new shares, or options for new shares, to which the adult becomes entitled by the adult’s existing shareholding;

(m)undertaking an authorised real estate transaction for the adult;

(n)with the tribunal’s approval, undertaking a real estate transaction for the adult that is not an authorised real estate transaction;

(o)undertaking an authorised security transaction for the adult;

(p)with the tribunal’s approval, undertaking a security transaction for the adult that is not an authorised security transaction;

(q)a legal matter relating to the adult’s financial or property matters.”

An administrator is entitled to reimbursement of reasonable expenses and remuneration, ss 47 and 48.

[31] A person who agrees to a proposed appointment as an administrator must give a management plan to the Tribunal for its approval, s 20.  The financial management plan prepared for Belinda by Perpetual is exhibit B to the affidavit of Mr Gallagher filed 13 December 2002.  Some of the activities in Schedule 1 are beyond the compensatory principle, for example, (d) and (l), but broadly they express the kinds of needs generated by the injury which are particularised in exhibit B.

[32] In accordance with the order of Byrne J further and better particulars of “reasonable management fees” were provided by Belinda’s legal advisers and reflect Perpetual’s proposal.

“It is necessary to calculate the present value of the total management fees that the Second Plaintiff will pay over the remainder of her life.  This allows an assessment to be made of the impact management fees will have on the settlement.

In making that calculation the following assumptions were made:

• The amount available for investment is approximately $3,250,000.

• The Second Plaintiff is 23 and has a normal life expectancy of approximately 59 years according to the 1995/97 Life Expectancy Tables.

• Where fees are ongoing through the life of the portfolio it is assumed a portfolio diminishing to zero over the life expectancy.

• A discount rate of 5%.

• An investment earning rate of 5% where fees are based on the value of assets under management.

Perpetual’s total management fees and third party expenses are set out in the table below:

Details of Perpetual’s Fees are:

Establishment Fee

This fee is calculated as a percentage of the initial investment asset to be managed.

It is a once only fee that is charged when the account has been established and the funds have been received.

The establishment fee covers all costs associated with establishing the Second Plaintiff’s account, including:

1.The preparation of a financial management plan encompassing:-

• Analysis of the Second Plaintiff’s present income and expenditure, including her present asset and liability position.

• Analysis of the Second Plaintiff’s anticipated needs following the settlement of her personal injury claim.

• Consideration of the ownership structures that are accessible and most appropriate for the Second Plaintiff’s needs.

• Analysis of the Second Plaintiff’s tax position.

• Investment recommendations that meet the Second Plaintiff’s need for income in the immediate future and capital growth over the longer term and that are structured to manage the risk associated with making investments.

2.Establishment of an account including the drafting of any documentation that might be required for any of the ownership structures that have been recommended.

3.Review and implementation of the strategic and investment recommendations made in the financial management plan when the settlement funds are received.

Discretionary Portfolio Management Fee

This is an ongoing fee that is calculated as a percentage of the assets under management.

The fee is calculated on daily account balances, which are recorded and then charged on a quarterly basis in arrears.

The discretionary portfolio management fee includes the following specific services:

• The decision making and fiduciary obligations undertaken by Perpetual to act as Administrator as defined by the Guardianship and Administration Act 2000.

• The elevated duty of care of a professional Trustee including the implementation of all ongoing strategic and investment advice and day to day investment decisions made on behalf of the Second Plaintiff.

Advisory Portfolio Management Fee

This is an ongoing fee that is calculated as a percentage of the assets under our management.

The fee is calculated on daily account balances, which are recorded and then charges on a quarterly basis in arrears.

This advisory portfolio management fee includes the following specific services:

Strategic & investment advice

• Research and advice on appropriate ownership vehicles for the efficient management and ongoing protection of the portfolio’s investments.
• Six monthly investment reviews of asset allocation and all portfolio investments.

• Annual review of strategic and investment advice including a full review of clients present and past circumstances.
• Strategic advice on corporate actions for all investments within the portfolio.
• Initial and ongoing independent company and fund manager research with Perpetual investment analysis overlay.

Professional advice provided by in-house specialists:

• Senior Financial Consultants
• Investment Consultants
• Accountant
• Trusts and Estates solicitor

Administrative/Custodial services

• Trades, redemptions, maturities
• Daily portfolio valuation
• Daily cash flow management
• GGT reporting
• Collection of interest, dividend and other income from investments
• Payments made to and on behalf of the Second Plaintiff

Reporting

• Online access to portfolio and individual investment values, transactions.
• Quarterly investment and transaction statement that incorporates and consolidates all portfolio investments.
• Annual tax statement consolidated for all investments within the portfolio, including capital gains tax movements and tax credits.

Client Relationship Manager

• A personal and central point of contact for the Second Plaintiff, her family and care providers for all portfolio and financial matters.

Underlying investment manager fees – Fund Manager Fee (Third Party)

Underlying investment manager fees – initial brokerage fee (Third Party)

Underlying investment managers fees – ongoing brokerage fee (Third Party)

The Second Plaintiff’s damages award will be diversified across the various asset classes amongst a variety of fund managers and direct investments.  Fund Managers charge fees.  These fees will vary between investment managers and each asset class.  This fee is reflected in the unit prices of the underlying investments of the fund.

Costs associated with direct investments are limited to the brokerage charged for making the initial investment in the recommended securities.  This service is provided to Pepertual’s [sic] clients through its broker at 0.385%.  No ongoing underlying fund manager fees apply to direct investments.”

[33] The fees and charges applicable to the Public Trustee’s services as a trustee are set out in the Public Trustee (Fees and Charges Notice) (No 2) 2002 (“the Notice”) published in the Queensland Government Gazette on 8 November 2002.  Part 3 concerning disability services applies by s 12(d) where the Public Trustee is appointed as administrator under the Guardianship and Administration Act for a financial matter limited to an award or settlement in favour of an adult under a disability.  By s 14 of the Notice the fees payable under s 12(d) are:

• An initial establishment fee of $3,765; and

• Annual fees payable of

• a personal financial administration fee stated in schedule 5
• an asset management fee stated in schedule 6; and

• a fee for each real property and other place of residence stated in schedule 6.

It is common ground between the parties that fees of the kind which are governed by schedules 5 and/or 6 of the Notice are recoverable.  Mr McMurdo QC mentioned schedule 4 but that is confined to appointment under s 12(a), (b) or (c) while here appointment would be under s 12(d).

[34] Having concluded that investment advice and associated charges as a separate item of charge are, in principle, not recoverable, two difficulties remain for this determination.  They are, comprehending what service is provided under each item for which charges are made and the difficulties inherent in attempting a comparison of the charges of Perpetual and the Public Trustee arriving at calculating a “reasonable” fee when they are not immediately comparable.  Mr Anthony Day, senior fund manager with Queensland Investment Corporation, was asked by the Public Trustee to consider the calculation of the Public Trustee’s estimated fees and charges and those of Perpetual for the management and investment of Belinda’s funds over her estimated life expectancy.  Mr Day recalculated the estimated fees and charges using an explicit calculation of each of the fee schedules and charges as specified for each year and then discounted each fee or charge in an exact manner.  He used the following assumptions:

• The value of the portfolio is $3,250,000 reduced to zero in a straight line over the estimated life expectancy of Belinda of 59 years;

• Projected earnings at 5 per cent per annum;

• Discounting at 5 per cent per annum;

• Inflation disregarded;

• The expense factor to reduce the portfolio value in a straight line is deducted annually at the beginning of each year;

• The fees and charges were assumed to be correctly stated;

• Ongoing fees continuing throughout the year.

[35] In order to compare the categories of fees Mr Day “converted” the Public Trustee’s fees and charges into Perpetual’s categories as set out in Mr Gallagher’s affidavits.  Although the categorisations are not precise the parties accept that they offer a reasonable comparison. 

Mr Day noted that the Public Trustee does not appear to distinguish between advisory charges and fund manager charges so that categories C and D for Perpetual need to be compared with category C for the Public Trustee. 

[36] An initial establishment fee is charged by the Public Trustee when appointed as administrator under the Guardianship and Administration Act in respect of a financial matter linked to an award or settlement in favour of the adult under disability.  The services are:

• Review of the scope of the order and peruse any relevant medical records;

• Attend to the payment of indemnity costs and liaison with the Office of the Official Solicitor;

• Meet with the client, family members and care providers to negotiate regular payments and establish a budget;

• In consultation with the Public Trustee’s Occupational Therapist, negotiate and entered into if appropriate agreement with the care provider;

• Make initial capital purchases suitable to the needs of the client.

Perpetual’s establishment fee is described by Mr Gallagher in the Financial Management Plan prepared for Belinda as covering the costs associated with establishing Belinda’s account, preparing and finalising initial investment and strategic recommendations to meet her present and future needs and is calculated as a percentage of the value of the initial portfolio as well as any assets added to the portfolio management service.  The need for this service arises directly as a result of Belinda’s disability and although higher than that of the Public Trustee appears to include some services which the Public Trustee includes in its category “B” and the further and better particulars tend to confirm this.

[37] The second category of fees identified as “B” in Mr Day’s table is that part of the ongoing management fee charged by Perpetual for the cost of discretionary decision making on behalf of Belinda described as the discretionary portfolio management service, see p 41 of exhibit B to the affidavit of Mr Gallagher filed 13 December 2002 and the further and better particulars.  It is assessed at .275 per cent of the total value of the portfolio and is not, according to Mr Gallagher, a service which would be selected by a person without disability.  Mr Marles thought the fee involved some overlap of the fees charged for the operation of and attention to the investment portfolio for an able bodied investor.  It is not possible to disentangle those items, if that be the case, and Mr Gallagher’s evidence might suggest that it is not. 

[38] The Public Trustee charges a Personal Financial Administration fee as set out in schedule 5 to the Notice and is transaction based over a 12 month period.  These are decisions made for a person under a disability and in Belinda’s case have been estimated at 51 to 80 annually.  Category “C” – advisory portfolio management fee for Perpetual and fund management fees for the Public Trustee concern the receipt of investment advice, liasing with investment departments and undertaking investment research in the case of Perpetual.  In the case of the Public Trustee it relates to ongoing management fees of the portfolio as set out in the two affidavits of Mr Francesco Prostano, deputy director of investment at the Public Trust Office.  When discussing the financial planning services which the Public Trustee would seek from ABN AMRO Morgans Ltd (or other similar groups) Mr Postrano deposed in para (12) of his affidavit filed 20 December 2002:

“Belinda’s needs are, of necessity, different to those of an equivalently aged healthy person.  As a result of her injuries, her care needs are higher.  In these circumstances, an investment portfolio needs to generate adequate net [?] and the need to secure the capital value of the portfolio.”

Mr Matthews submitted that this indicated a need for these services based on Belinda’s disability and would, therefore, on any view be recoverable.  It appears to do no more than recognise that the fund will have to last Belinda for her lifetime and provide for her high care needs which will dictate an appropriate investment strategy.

[39] The balance of the fees which are described at “D”, “E”, “F” relate to fund manager fees and brokerage fees and lie outside the realm of compensatory damages. 

[40] Mr Day presented calculations for the present value of the various fees and charges the accuracy of which is not challenged by the parties and is found set out in par 4 of his affidavit filed on 7 February 2003.

[41] The fee types which I have concluded relate to the management of Belinda’s fund necessitated by her injuries are described in Mr Day’s tables as “A” and “B”.  There is little to choose between them as to amount.  The observations of Mr Marles are noted but he admitted to little or no experience as a trustee for a person under a disability.  I thought the estimated transaction based approach of the Public Trustee more attractive conceptually than as a percentage of funds invested which is Perpetual’s approach but there is little to distinguish the final figures.  This is not an arithmetical exercise of great precision.  Since the settlement sum has, it may be presumed, been discounted for contingencies there should be no further discounting.  I determine that the amount of $180,000 is a reasonable management fee in respect of the compromise sum paid to the administrator on Belinda’s behalf which must be paid by the defendant.  The receipt of the administrator for that sum shall be sufficient discharge for the payment by the defendant.