Adamson v Enever & Anor

The Supreme Court considered whether a woman had impaired capacity to receive and manage a settlement sum for damages for personal injuries. Applegarth J held that the applicant did not have impaired capacity regarding a financial or legal matter relevant to receiving, investing and managing the settlement sum. Of particular note are his Honour’s concerns about the substantial costs differential between the standard costs she could recover and the costs she must pay her solicitor. His Honour was of the view that, given what appeared to be a “substantial, indeed excessive, costs differential”, it was an appropriate matter to refer to the Legal Services Commissioner.

Applegarth J

31 August 2021

Facts

Mrs Adamson suffered numerous injuries when she was struck by a negligently driven vehicle that failed to give way to her as she was walking across a pedestrian crossing. [1]−[2].

A settlement sum was agreed between the parties subject to Mrs Adamson applying to the Supreme Court to determine:

1. Whether Mrs Adamson was a “person under a legal disability” within the meaning of s 59(1A) Public Trustee Act 1978, so as to require a sanction of the settlement. A “person under a legal disability” is defined as a person with “impaired capacity” under the Guardianship and Administration Act 2000.
2. Whether Mrs Adamson had impaired capacity regarding a financial or legal matter relevant to receiving, investing and managing the settlement sum. [4]−[5], [20].

Decision

The Supreme Court (Applegarth J) held that Mrs Adamson did not have impaired capacity in relation to managing the settlement sum provided she had adequate and appropriate support to make decisions. [30].

Applegarth J considered the legal principles relating to capacity and observed that “capacity” means the person can understand the nature and effect of decisions about the matter, and can freely and voluntarily make decisions about the matter and communicate the decisions in some way. [36]–[50].

The key issue was whether Mrs Adamson had the capacity to make decisions with “adequate and appropriate support”. [21].

As Mrs Adamson had an existing family support network, had stable accommodation and was open to obtaining legal or financial advice on managing her financial affairs, his Honour adjourned the matter so that Mrs Adamson could obtain financial advice. [31]−[32].

Mrs Adamson’s solicitors provided evidence that Mrs Adamson had obtained a “fixed fee quote from a reputable financial planner about what to do with her settlement funds and had taken steps to get fee for service advice from an independent solicitor … about estate planning. She made a will and executed an Enduring Power of Attorney with that local solicitor’s assistance”. [75]. On that basis, Applegarth J was satisfied that Mrs Adamson had the professional support needed to make decisions about investment of the settlement sum. [72]−[77]. His Honour also considered the available expert evidence and was impressed by the evidence given by Mrs Adamson as a witness. [64]−[70], [87].

Further, Mrs Adamson had capacity to make decisions about those financial and legal matters associated with the legal costs of her solicitors. [84].

In the circumstances of this case, Applegarth J observed that the estimated legal costs seemed “extremely high”. His Honour made wide-ranging observations about the problems associated with legal costs in accident compensation cases and made a direction in the exercise of the Court’s inherent jurisdiction over legal practitioners that Mrs Adamson had the support needed to ensure her legal costs were not excessive. [83], [97]−[123], [133]−[140]. His Honour also made observations about the high costs of management fees for managing settlement sums in accident compensation cases. [124]−[132].

His Honour directed that a copy of the reasons be provided to the Legal Services Commissioner to support Mrs Adamson’s capacity to “make decisions about what appears to a substantial, indeed excessive, costs differential”. [141].

S Spottiswood of Counsel