Kingsman v NSW Trustee & Guardian

The plaintiff, Joshua Kingsman, brought proceedings in June 2012 against the New South Wales Trustee and Guardian, as well as his former solicitors and his mother and stepfather.

By amended notice of motion filed in Court at the hearing, the Trustee sought orders summarily dismissing the proceedings against it pursuant to Rule 13.4 of the Uniform Civil Procedure Rules 2005 and in the alternative, orders striking out that part of the statement of claim pursuant to Rule 14.28.

The motion was supported by an affidavit sworn by Ms Gillian Fuller, a solicitor employed in the Crown Solicitor's office, with carriage of the matter. Mr Kingsman relied on affidavits sworn by his solicitor, Ms Kellie Wells.

The test which the Trustee must meet if its application is to succeed is that discussed by Barrett JA in Shaw v State of New South Wales [2012] NSWCA 102; (2012) 219 IR 87 at [30] - [32]: Triable quality "30 I have said that the "triable quality" of the three matters just mentioned is in issue. There is no dispute that the central inquiry is that indicated by Dey v Victorian Railways Commissioners [1949] HCA 1; (1949) 78 CLR 62, General Steel Industries Inc v Commissioner for Railways [1964] HCA 69; (1964) 112 CLR 125 and, more recently, Agar v Hyde [2000] HCA 41; (2000) 201 CLR 552 where Gaudron, McHugh, Gummow and Hayne JJ said at [57]: "Ordinarily, a party is not to be denied the opportunity to place his or her case before the court in the ordinary way, and after taking advantage of the usual interlocutory processes. The test to be applied has been expressed in various ways, but all of the verbal formulae which have been used are intended to describe a high degree of certainty about the ultimate outcome of the proceeding if it were allowed to go to trial in the ordinary way." 31 That formulation has since been re-affirmed: see Batistatos v Roads and Traffic Authority (NSW) [2006] HCA 27; (2006) 226 CLR 256 at [46]; Spencer v The Commonwealth [2010] HCA 28; (2010) 241 CLR 118 at [24]; and, while it was said in Batistatos that the General Steel formulation should not be given "canonical force", it is convenient, for present purposes, to refer to the criteria laid down by the case law I have mentioned as the "General Steel test". 32 The question is therefore whether the claims in question are so obviously untenable or groundless that there is "a high degree of certainty" that they will fail if allowed to go to trial; and whether this is one of the "clearest of cases" in which the court may accordingly intervene to prevent the claims being litigated."

In 1996, when Mr Kingsman was aged eight years, he was struck by a car, suffering various physical injuries, including paraplegia and a significant head injury. His mother, then acting as his tutor, brought proceedings in respect of those injuries in this Court in 2000. In November 2003, when Mr Kingsman was aged 15 years, those proceedings were settled for $1,250,000, plus costs. Adams J approved the settlement, under which the judgment monies were paid to the Trustee, then known as the Public Trustee of NSW, to be invested on behalf of Mr Kingsman in accordance with the provisions of the Damages (Infants and Persons of Unsound Mind) Act 1929 ('the Act').

Mr Kingsman turned 18 on 1 May 2006. In June 2006 the Trustee transferred title to a property at Figtree and a sum of money it then held to Mr Kingsman. By his statement of claim Mr Kingsman claims that by the conduct of his mother and stepfather, assisted by other defendants, the property was soon transferred to his mother and stepfather for no consideration and his mother withdrew monies from his bank account.

The statement of claim alleges against the Trustee: "29 The Public Trustee owed the plaintiff duties of, or akin to that of, a trustee (Public Trustee's Statutory Duty) pursuant to: (a) the Damages (Infants and Persons of Unsound Mind) Act 1929 (NSW): (b) the Public Trustee Act 1913 (NSW). 30 Further, or in the alternative, the Public Trustee owed the plaintiff a duty of care in tort (Public Trustee's Duty of Care) to exercise reasonable care and skill in the performance of its duties under: (a) the Damages (Infants and Persons of Unsound Mind) Act 1929 (NSW): (b) the Public Trustee Act 1913 (NSW). 31 Further, or in the alternative, the Public Trustee owed the plaintiff a fiduciary duty (Public Trustee's Fiduciary Duty) in respect of the performance of its duties under: (a) the Damages (Infants and Persons of Unsound Mind) Act 1929 (NSW): (b) the Public Trustee Act 1913 (NSW). 32. The Public Trustee acted in breach of the Public Trustee's Statutory Duty and/or the Public Trustee's Duty of Care and/or the Pubic(sic) Trustees Fiduciary Duty. Particulars The Public Trustee: (i) caused itself to be discharged from its position as trustee, or manager, of the financial affairs of the plaintiff in circumstances where it should not have done so; (iii) transferred to the plaintiff the property it held on his behalf by Transfer registered 17 June 2006, and pay the balance of the monies then held on behalf of the plaintiff to an account at the Illawarra Credit Union (the assets). (iii) failed to make any, or any adequate enquiry, whether the plaintiff would able to, adequately or at all, manage his financial affairs without assistance; (iv) failed to make any, or any adequate, enquiry, or investigation, of the relationship between the plaintiff, the sixth defendant and the seventh defendant, before the transfer of the assets to the plaintiff; (v) failed to arrange any, or any adequate, medical or other appropriate examination, to ascertain whether, and to what extent, the plaintiff would be able to, adequately or at all, manage his financial affairs without assistance; (vi) failed to approach the Court for a determination whether the plaintiff's financial affairs should remain under the management of the Public Trustee; (vii) failed to effect the transfer the assets in such a manner, whether pursuant to the creation of a trust for the benefit of the plaintiff, or otherwise, to prevent the dissipation or loss, of the assets; (viii) failed to arrange for the plaintiff to obtain any, or any adequate financial advice with respect to the management of his financial affairs, and investment of the assets for his long term welfare, in a manner which protected the plaintiff from the undue influence of others, including the sixth defendant and the seventh defendant. 33. By the breach of Public Trustees Statutory Duty and/or Public Trustee's Duty of Care and/or Public Trustees Fiduciary Duty of the Public Trustee, the plaintiff has suffered loss and damages. Particulars Loss of the assets."

The Trustee submitted that the proceedings should be summarily dismissed, the claims pleaded being so obviously untenable or groundless that there is a high degree of certainty that they will fail, if they go to trial. It accepted that while the Court was not confined to a consideration of the pleadings and could consider evidence, it was inappropriate to seek to litigate contested questions of fact at an interlocutory stage such as this. On the facts which were not in contest, it submitted that it was apparent that, given the provisions of the applicable statutory scheme, Mr Kingsman's case would fail if brought to trial.

On the evidence which the parties led and the submissions which they advanced it appears that while it is clear that the Trustee came to administer Mr Kingsman's estate when he was a minor and that it transferred his estate to him when he was aged 18, it was then obliged to consider whether he was under any incapacity.

There are, nevertheless, a range of factual questions in issue between the parties, including for example, whether, when Mr Kingsman was aged 18, he was under any under any incapacity; and whether or not the Trustee then followed its own policy, which guided the decision making process as to whether the assets should be transferred to a person such as Mr Kingsman on attaining 18 years. The parties also joined issue over a range of other questions. They include various questions of statutory construction; the scope of the Trustee's powers and duties under the applicable statutory scheme and at common law; whether the Trustee was acting as a trustee or a guardian under the applicable statutory scheme; whether the statutory powers granted to the Trustee gave rise to a duty of care which was actionable in negligence; whether its actions could or did involve breach of its duties to Mr Kingsman, including its accepted fiduciary duties, and whether it had failed to take other steps which it should have taken in the circumstances given the duties it then owed to Mr Kingsman.

Notwithstanding that any breach of duties, if it occurred, must be assessed as at 2006, that does not alter the range of issues lying between the parties, which cannot be resolved at this stage of the proceedings.

The parties addressed extensive submissions to the operation of the Act, the Public Trustee Act 1913, the Trustee Act 1925, and the Minors (Property and Contracts) Act 1970, as well as to various relevant common law principles. It is common ground that under s 34 of the Public Trustee Act, the Trustee was obliged, upon Mr Kingsman turning 18 years of age, to transfer the assets it held on his behalf to him, unless he was "in the opinion of the public trustee unable to give good discharge". The section provides: "34 Maintenance etc of minor or incapable person (1) Where a minor, or a person (in this section hereinafter referred to as incapable person) who, in the opinion of the Public Trustee, is unable to give a good discharge, is entitled to moneys in the hands of the Public Trustee, then, with respect to such minor or incapable person, the Public Trustee may, notwithstanding any law to the contrary, from time to time pay such moneys to such person as the Public Trustee thinks fit, to be applied by such person for the maintenance, education, advancement or benefit of such minor or incapable person or the Public Trustee may so apply such moneys. The Public Trustee shall not be bound to see to the application of the moneys so paid to such person. The Public Trustee may at any time and from time to time apply to the Court for directions as to the administration of such moneys or to vary directions which may already have been given in regard thereto, or to determine any matter relating thereto, and any direction or determination of the Court shall, if given effect to by the Public Trustee, exonerate the Public Trustee from any claim or demand by any person whomsoever. (2) A reference in subsection (1) to a minor being entitled to moneys in the hands of the Public Trustee includes a reference to a minor who is entitled to those moneys contingently on attaining an age specified in the instrument creating the entitlement."

It was also common ground that the legal test for establishing whether a person had the necessary capacity, was that discussed in PY v RJS [1982] 2 NSWLR 700, where Powell J observed at 702: "5. It is my view that a person requires care, treatment or control for his own good if (inter alia): (a) it appears that there is a reasonable prospect that, by reason of care, treatment or control, the further progress of his or her mental illness can be halted; or (b) it appears that there is a reasonable prospect that, by reason of care, treatment and control, the symptoms of his or her illness can be removed or the severity or impact on the person of those symptoms may be relieved and controlled;" 6. It is my view that a person is incapable of managing himself or herself if it appears that there is a real risk of: (a) his or her inflicting upon himself of herself serious injury; (b) his or her sustaining serious injury by reason of his or her being unable adequately to protect himself or herself against such risk; or (c) serious deterioration in his or her general health or well-being by reason of his or her being unable to take reasonably adequate steps to prevent such deterioration occurring; 7. It is my view that a person is not shown to be incapable of managing his or her own affairs unless, at the least, it appears: (a) that he or she appears incapable of dealing, in a reasonably competent fashion, with the ordinary routine affairs of man; and (b) that, by reason of that lack of competence there is shown to be a real risk that either: (i) he or she may be disadvantaged in the conduct of such affairs; or (ii) that such moneys or property which he or she may possess may be dissipated or lost (see Re an Alleged Incapable Person); it is not sufficient, in my view, merely to demonstrate that the person lacks the high level of ability needed to deal with complicated transactions or that he or she does not deal with even simple or routine transactions in the most efficient manner: see In the Matter of Case (1915) 214 NY 199, at p 203, per Cardozo J:"

What is here in contest, amongst other things, is whether the Trustee took the steps necessary to provide it with a proper basis for forming an opinion as to whether or not Mr Kingsman was able to give good discharge, having regard to those criteria, in the circumstances which prevailed at the time that he turned 18.

A question also arose as to Mr Kingsman's capacity to give instructions in these proceedings. At the hearing it was revealed that advice has been given as to the appointment of a tutor and that steps to identify a person willing to act as a tutor for him, are now being pursued.

In the result, it seems to me, it must be concluded that the Trustee has not met the General Steel test. In my view, it has not been shown that the claims here in question are so obviously untenable or groundless that it can be concluded at this stage that there is "a high degree of certainty" that they will fail, if allowed to go to trial. To the contrary, it seems to me that it is apparent that this is not one of those "clearest of cases" in which the Court may intervene at this stage, in order to prevent Mr Kingsman's claims being litigated. What here lies in issue between the parties can only be resolved by a hearing of the case on its merits.

I am satisfied on the evidence that it is not apparent that Mr Kingsman's case will fail and accordingly, the orders sought in the Trustee's motion may not be made.

From what has been submitted both in the written submissions and at the hearing, it is, however, apparent that there are deficiencies in the statement of claim as presently pleaded. As the Trustee accepted, those deficiencies do not provide a basis for dismissing the proceedings or striking out the statement of claim. In the circumstances, Mr Kingsman should have the opportunity he sought to re-plead.

In the result, the motion must be dismissed with the usual order as to costs as agreed or assessed, in favour of Mr Kingsman. I order accordingly.

Mr Kingsman seeks two weeks to amend his statement of claim. That leave must be granted. Costs of the amendments are to be reserved.