Judgment date: 9 September 2011

Keryn Mayer as litigation guardian for Ben David McKinlay v Mahoney and Anor [2011] QSC 279

Supreme Court of Queensland1

In Brief

  • The court will sanction the settlement of a legally disabled plaintiff's claim if, in all the circumstances of the case, acceptance of the offer is for the benefit of the person legally disabled.
  • If the court is required to appoint an administrator to manage settlement funds, the considerations under ss 12-15 of the Guardian and Administration Act (GAA) must be applied.

Background

The plaintiff sustained a severe head injury as a result of a motor vehicle accident that occurred on 18 April 2006. Liability was disputed and the matter eventually settled for $640,000 plus costs together with a further component for funds management. The issues for determination by the court were:

When a court should sanction a settlement concerning a person with a legal disability (as defined by the Public Trustee Act 1978 (PTA));

  1. When it is appropriate to appoint a guardian or administrator under the GAA; and
  2. The criteria necessary in appointing a guardian or administrator.

Court Sanction

Section 59 of the PTA provides:

"(1) In any case or matter in any court in which money or damages is or are claimed by or on behalf of a person under a legal disability suing either alone or in conjunction with other parties, no settlement or compromise or acceptance of money paid into court, whether before, at or after the trial, shall, as regards the claim of such person under a legal disability, be valid without the sanction of a court or the Public Trustee. ..."

Justice Lyons confirmed that "the test for the approval of compromise is whether in all of the circumstances, acceptance of the offer is for the benefit of the person under a disability. In other words, whether it would or would not be in the interests of the plaintiff to reject the offer, to continue the action in the hope of obtaining a larger amount".

Noting the liability considerations involved, Justice Lyons considered that acceptance of the offer was in the best interests of the plaintiff. Accordingly, the court sanctioned the compromise.

When to Appoint a Guardian or Administrator

Section 245 of the GAA provides:

''1. This section applies if, in a civil proceeding –

(a) the court sanctions a settlement between another person and an adult or orders an amount to be paid by another person to an adult; and

(b) the court considers the adult is a person with impaired capacity for a matter."

Capacity is further defined in the GAA as follows:

''Capacity: for a person for a matter, means the person is capable of –

(a) understanding the nature and effect of decisions about the matter; and

(b) freely and voluntarily making decisions about the matter; and

(c) communicating the decisions in some way."

With reference to the above, her Honour reviewed the expert evidence, which contained opinions from a neurosurgeon, a clinical neuropsychologist, and a psychiatrist, all of which emphasised the plaintiff's extensive injuries.

Her Honour concluded that the evidence established the plaintiff remained with an ongoing incapacity in the sense that he remained unable to understand the nature and effect of his decisions in relation to the management of a large settlement amount. Having decided the above, her Honour turned to the critical question in relation to who should be appointed as administrator.

Criteria for Appointment as a Guardian or Administrator

Sections 12-15 of the GAA establish the criteria necessary in appointing an appropriate guardian or administrator to manage a personal or financial matter on behalf of an incapacitated person. A guardian and/or administrator must be "appropriate" for the position, bearing in mind the criteria in s 15.

Some considerations which are relevant include:

  • Whether the guardian's/administrator's interests are likely to conflict with the incapacitated person.
  • Whether the guardian/administrator and the incapacitated person are "compatible".
  • Whether the guardian/administrator is a relative of the incapacitated person.
  • Whether the guardian/administrator has a criminal history, or has become a bankrupt.

In relation to any potential "conflict" when appointing a family member, her Honour referred to the New South Wales Court of Appeal decision of Holt v Protective Commissioner2 where President Kirby discussed the relevant criteria required when appointing a family member to manage a settlement fund. Importantly, his Honour recognised that whilst there may be a conflict when appointing a family member, the conflict may be 'more apparent than real'.

As such, a conflict in itself will not necessarily present as an absolute bar to the appointment of that person as a manager.3 After noting the above, Justice Lyons granted the application to appoint the plaintiff's mother as the plaintiff's administrator. The plaintiff's mother held various qualifications and certificates and was employed as a business development manager. Further, she had never been declared a bankrupt nor been charged or convicted with any criminal offence. In addition, the plaintiff's mother gave evidence that she had met with IPAC Securities Pty Ltd (IPAC) (a financial advisory and investment management firm), and discussed the financial and other considerations involved in managing the plaintiff's settlement funds.

Affidavit evidence was tendered by both the plaintiff's mother and a member of IPAC in support of the Application and the way in which the settlement funds would be managed.

Implications

The case is important in that it shows the factors necessary when a court is required to sanction a settlement for persons with a legal disability. Further, the case highlights the attributes considered when appointing an administrator to manage an incapacitated plaintiff's settlement funds.

Claims Officers who hold portfolios in New South Wales and Queensland should note that the New South Wales position is not significantly dissimilar to Queensland. The same general factors apply when appointing a "manager" in New South Wales.4

1 Ann Lyons J

2 (1993) 31 NSWLR 227 at 242-243

3 The situation is readily identifiable when one considers the position of a son or daughter, who is appointed as an administrator but is also a beneficiary under the incapacitated person's Will. Whilst there may be a conflict of interest, in the sense that an inheritance will be directly borne out of the incapacitated person's estate, this does not necessarily mean that the son/daughter will act inconsistently with the best interests of the incapacitated person.

4 See for instance Re; Collis [2009] NSWSC 852 and PY v RJS [1982] 2 NSWLR 700.

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