Hasted v Mackay & Anor

This case involved an application for sanction by the court of a settlement of a personal injuries claim. The issue before the Court was how the administration fees of Perpetual Trustees should be calculated. The second defendant contended that the estimated indemnity costs differential should be deducted from the settlement sum before calculating the fund management fees. However, Bowskill J rejected that argument – including because the amount of the legal fees was currently uncertain, and because Perpetual would be required to administer and manage the full amount of the fund prior to paying out the legal fees.

Bowskill J

3 April 2020

Background

This judgment arose out of an agreed compromise of the plaintiff’s claim for damages for personal injuries. [1]. The plaintiff was “under a legal disability”, and so her litigation guardian applied on her behalf for the court’s sanction of the compromise under s 59 Public Trustee Act 1978. [1]. In addition to the settlement sum, the defendants had agreed to pay the reasonable administration fees of Perpetual Trustee Company Ltd to manage a fund for the plaintiff (the “fund management damages”). [2]. The parties remained at odds over how the fund management damages should be calculated. [5].

The plaintiff argued that the fund management damages should be calculated by reference to the whole of the amounts that would be paid to Perpetual. However, the second defendant (an insurer) contended that the amount should be calculated only after first excluding the likely fees that would be paid out of the fund to the plaintiff’s solicitor sometime after the sanction application (the “legal fees”). Deducting that amount, it suggested, “more truly reflects the fund to be managed [for the plaintiff’s] benefit in the future”. [7]–[8].

How the fund management damages should be calculated

Justice Bowskill considered that the “question has been considered before” in Richard v Gray [2013] NSWCA 402, in which the NSW Court of Appeal upheld a decision of the primary judge, who had refused to deduct certain amounts before calculating fund management damages. [21]. In that case, Bathurst CJ had emphasised that the amounts the appellants said should have been deducted were speculative (in the sense that it was not known when, or whether, they would actually be paid out from the fund). [27]. In dissent, Basten JA had considered that amounts for which there was “an existing legal liability” and which “would not be paid to the administrator”, should be deducted before calculation of the fund management damages. [28], [30].

Justice Bowskill considered that a distinguishing feature, in this case, was that the payment of the legal fees out of the fund administered by Perpetual was not speculative (although their precise amount and timing was). [29]. However, her Honour did not consider that this warranted a different approach from that taken by the majority in Richard v Gray. [31]. Further, Basten JA’s dissenting approach would not have been applicable here in any event, because in this case “the whole of the fund will be paid to the administrator in the first instance; and only later, following an assessment, will the [legal fees] be paid to the plaintiff’s solicitor” (Basten JA had only endorsed a deduction for amounts which were the subject of an existing legal liability, and which “would not be paid to the administrator”). [30].

In concluding that the fund management fees should be calculated without first deducting the legal fees to be paid out of it, her Honour said that to do otherwise would: assume too much certainty in the estimate of legal fees currently available; run the risk of a shortfall in the amount of the fund management damages, which “ought not fall at the plaintiff’s feet”; fail to take account of the fact that Perpetual would be required to oversee the assessment and payment of the legal fees; and fail to take account of the fact that Perpetual was responsible from the management of the fund from the date of payment of the compromise sum (which was prior to paying out the legal fees). [37].

In the result, Bowskill J sanctioned the compromise of the proceeding, and indicated that orders would be made in terms proposed by the plaintiff (which included the fund management damages calculated without the prior deduction sought by the defendants). [41].

W Isdale