Robinson v Beatty[2006] QSC 11

SUPREME COURT OF QUEENSLAND 

[1] Reasons for decision in this matter were delivered on 5 September 2005 and the matter was adjourned to allow the parties to formulate orders consistent with the reasons.  The plaintiff, who sues by her litigation guardian (her father) sustained personal injury in a motor vehicle accident on 24 October 2000.  She is a person who, as the expert evidence revealed at the trial, needs to have her damages fund managed for her because of injuries sustained in the accident. 

[2] The parties agreed about the order which was entered on 7 November 2005.  The amount of damages to be paid by the second defendant is $851,303.  By the terms of the order certain sums are to be paid directly to various entities and persons and the balance is to be paid to the Public Trustee of Queensland who, pursuant to ss 12 and 245 of the Guardianship and Administration Act 2000 was appointed as the plaintiff’s administrator in respect of the damages fund.

[3] Paragraph 3(b) of the order provides that in addition

“The management fees properly charged by the Public Trustee of Queensland in an amount to be agreed (subject to sanction) or failing agreement and sanction to be determined by the Court shall be paid within 21 days of the sanction or determination thereof by the Court by the Second Defendant to the Public Trustee of Queensland, whose receipt therefore shall be a sufficient discharge.”

[4] By paragraph 6 the proceedings were adjourned to allow for the value of the management fees to be ascertained and agreed and sanctioned or, failing agreement, to be determined by the court.  The parties notified the court that they seemed unlikely to reach agreement subject to sanction and the matter was set down for hearing and determination for 2 days on 2 and 3 February 2006.  That, however, has proved unnecessary.  The parties have reached agreement and delivered their submissions to the court together with an affidavit of Jason Clark McAulay, solicitor for the plaintiff, and the affidavit of Peter James Haley, chartered accountant and partner of Vincent’s Chartered Accountants, (filed 11 November 2005).  He was retained by the second defendant’s solicitors to prepare an expert report on the management fees proposed by the Public Trustee.

[5] On 19 October 2005 the second defendant’s solicitors made an offer to pay the Public Trustee’s administration and investment fees in the amount of $160,000 in settlement of this aspect of the plaintiff’s claim. 

[6] By letter dated 28 October 2005 the Public Trustee estimated its administration fees on 3 bases – low, medium and high, depending on the amount of work involved, being respectively $71,880, $97,622 and $131,213.  In addition, the Public Trustee notified that it would charge an investment management fee on damages of $786,914 in the amount of $233,514.41 irrespective of whether the administration was characterised as low, medium or high.  The Public Trustee noted that on advice from Senior Counsel he would not endeavour to calculate the plaintiff’s entitlement to claim these fees as a deduction under the Income Tax Assessment Act 1936. 

[7] The second defendant retained Vincent’s Chartered Accountants to consider the mathematical accuracy of the calculations undertaken by the Public Trustee in relation to the costs of providing administrative and investment management services to the plaintiff;  to determine the relevant taxation benefit that would apply to those services;  and to determine the cost of administrative and management services together with the offsetting taxation benefit had those services been provided by Perpetual Trustees or National Australia Trustees. 

[8] Mr Haley’s report is dated 8 November 2005.  He concluded that the Public Trustee had not made allowance for an income tax deduction for the fees which would be incurred on behalf of the plaintiff in the management of her portfolio.  The ability to claim such a deduction would reduce the plaintiff’s net cost of management of the portfolio considerably and on his calculations would be $200,721, $224,780 or $255,388 depending on which level of service was applied and the administration fee.

[9] Mr Haley applied the same presumptions and methodology to the three trustees.  He had sought relevant information from each of the Perpetual Trustees and National Australia Trustees.  Their fees after the calculation of and deduction of income tax were $158,434 and $94,456 respectively. 

[10] Clearly the fees proposed to be charged by the Public Trustee of Queensland were higher than those calculated for Perpetual Trustees and National Australia Trustees.  Mr Haley noted that the Public Trustee has calculated the fees due to him for the administration of the fund together with the investment of the fund which constitutes a possible additional layer of fees not charged by the other trustees.  National Australia Trustees and Perpetual Trustees advised that they charge only a single ongoing management fee based on the total value of the plaintiff’s portfolio.     

[11] Mr Haley pointed out that many of the fees imposed by all trustees are calculated with reference to the value of the funds under management.  Accordingly the assumed value of the fund is critical to the calculation of the applicable fees – the higher the value of the fund under management the higher the fees.  He noted that the Public Trustee has determined the value of the funds under management by adding the assumed earnings and deducting the annual draw-downs (fees were assumed by him to be included in the annual draw-down amount).  Mr Haley prepared his calculations determining the value of the fund by adding the assumed earnings and deducting the annual draw-downs, fees and taxation, that is, he assumed that the fees and taxation are excluded from the annual draw-down amounts and are paid separately by the trustees. 

[12] Having received Mr Haley’s report the solicitors for the plaintiff discussed the fees payable to the Public Trustee with her litigation guardian.  Mr Robinson instructed the solicitors to accept the second defendant’s offer on the condition that the Public Trustee agreed to accept that sum in full payment of his administration and investment fees.

[13] By letter dated 13 January 2006 the Official Solicitor to the Public Trustee wrote

“The Public Trustee agrees to set his fee for the administration and management of the sanctioned amount at $160,000 [“the management and administration fee”] on the basis set out below. 

The management and administration fee has been set by the Public Trustee on the basis that it represents a reasonable estimate of the cost of fund management of the portion of the whole award of damages due to the fact that the plaintiff has been rendered unable to manage her own affairs by the defendant’s tort....

In considering this matter the plaintiff’s litigation guardian should appreciate that the management and administration fee’s [sic] paid by the defendant are only an estimate of future fees the full extent of which cannot be known until the determination of the trust of management of the award of damages.”

The Public Trustee does not intend to appear at the sanction of the settlement of the management fee unless required to do so.

[14] The fees proposed by the Public Trustee in its original letter are significantly reduced by the application of the provisions of the Income Tax Assessment Act 1936.  There is, too, the issue of the double layer of fees, that is, financial administration fees on top of investment fees.  It is not possible to discern if this involves any potential “doubling-up” from the material provided.  I do note that the administration fee proposed by the Public Trustee expressly excludes fees associated with the acquisition and management of real property for the plaintiff although that is something which she is likely to need.  It may be the case that her litigation guardian can do much of this administration for the plaintiff in an informal way which will reduce the Public Trustee’s fee.

[15] In light of the Public Trustee’s agreement to set his fee for the administration and management of the plaintiff’s damages award in the amount of $160,000 subject to the conditions mentioned in the Official Solicitor’s letter, and that the actual sum to be held by the Public Trustee is almost $40,000 less than the original estimate on which the calculations were made (thus reducing the fees) it is appropriate to sanction that part of the plaintiff’s damages award. 

[16] It has been agreed between the litigation guardian and the second defendant that the costs concerning the determination of the Public Trustee of Queensland’s fees should be limited to the date upon which an offer of compromise was made by the second defendant and which has, in effect, been accepted by the plaintiff’s litigation guardian and that is a reasonable settlement of that issue.

[17] The orders are:

1. Pursuant to s 59(1) of the Public Trustee Act 1978 and r 98(1) of the Uniform Civil Procedure Rules 1999, the settlement of the amount to be paid by the Second Defendant towards the Plaintiff’s administration fees be sanctioned.

2. The settlement sum of $160,000.00 be paid by the Second Defendant to the Plaintiff’s administrator, the Public Trustee of Queensland, within 21 days of sanction by the court, such sum to form part of the trust sum subject to the Order in these proceedings made 7 November 2005.

3. Liberty to all parties and the Public Trustee of Queensland to apply.

4. The Plaintiff’s entitlement to recover indemnity costs on the determination of the management fees payable pursuant to paragraph 6 of the Order of 7 November 2005 be limited to include up until 19 October 2005 and thereafter no entitlement.  The costs of the sanction to be paid pursuant to paragraph 5 of that Order.