The decision of the New South Wales Court of Appeal in Pel-Air Aviation Pty Ltd v Casey [2017] NSWCA 32 dealt with the question of a plaintiff’s entitlement to recover the costs of a private funds manager.

This question is critical in cases involving a person under legal incapacity where the appointed tutor decides the funds should be managed by a private trustee and funds manager as opposed to the lower costs charged by the public equivilant, which in NSW is the NSW Trustee & Guardian.

When considering the difference in costs between a public and private trustee the public option will invariably appear at face value the less expensive option. However, in order for a plaintiff’s lump sum compensation to continue to support them for the rest of their life intelligent choices must be made about how the funds should be invested to obtain the greatest rate of return. A tutor should make appropriate inquiries with both public and private trustees to determine who is better placed to look after the incapacitated person’s interests. The particular circumstances of the incapacitated person may also be relevant to the decision. Depending on the nature and extent of their disability the trustee may require particular resources and skills to be able to communicate to ensure the incapacitated person’s interests are properly served.

It has always been open to the tutor of a legally incapacitated person to nominate a trustee and funds manager of their choice be they public or private. The issue is whether the defendant is obligated to pay the actual cost of the trustee appointed by the tutor or the lowest available market rate.

In the case of Pel-Air Aviation Pty Ltd v Casey the Judge at first instance awarded costs of funds management of $515,173.00 calculated by reference to NSW Trustee & Guardian rates. Ms Casey challenged this finding on cross appeal claiming she should be able to recover the amount of $872,000, calculated by reference to the rates of National Australia Trustee Limited, which she had appointed as manager.

The question consider by the Court was whether the costs of the private trustee nominated by the plaintiff as funds manager were so unreasonable that it could not be regarded as a consequence of the injury.

The Court found that Ms Casey established a prima facie case for the reasonableness of the expense for the following reasons:
1. The appointment of NAT had been approved by the Court.
2. The appointment had been authorized by the NSW Trustee.
3. Ms Casey’s tutor had held a number of discussions with a certified financial planner before deciding to make the appointment.
4. There was no evidence to show that NAT’s rates were inconsistent with the market rates.

Having established a prima facie case the onus was then on Pel-Air to prove that Ms Casey had failed to mitigate her loss by appointing NAT rather than a cheaper alternative.

The court found it was insufficient for Pel-Air to show in isolation that a cheaper alternative was available. The Court noted that the appointment of a manager would create a long term relationship in which that manager’s expertise would be critical to ensuring the longevity of the fund.

Pel-Air did not cross-examine Ms Casey’s tutor’s reasons for appointing NAT nor did it adduce evidence to show that NAT’s fees were outside the market rate.

In the absence of any evidence from Pel Air to show that the costs of the private trustee and funds manager were unreasonable, the court found in favour of Ms Casey awarding her the full amount claimed for the cost of NAT.

Written by Alexander Morrison.

Alexander Morrison is an Associate and Solicitor in Victoria Roy’s Practice Group.  Alex has a varied practice including motor vehicle claims and public liability claims that occur both within Australia and overseas.