HASTEAD V MACKAY & ANOR.  QSC 58
This was an application for the Court to sanction a plaintiff’s claim for personal injury damages pursuant to section 59 of the Public Trustee Act 1978 (Qld). The parties agreed that the defendants would pay administration fees for the management of the settlement sum to be agreed or failing agreement as ordered by the Court.
WHAT WAS IN DISPUTE?
The only issue in dispute was to whether the basis on which management fees are calculated be to the total settlement sum payable (less statutory refunds) or the amount the plaintiff actually gets “in the hand”.
The Defendants submitted that the basis on which management fees are calculated should reflect actual moneys to be invested and not an artificial figure (being the total settlement sum after deduction for statutory refunds), which is also impacted by other deductions which would result in a lesser sum. This goes to the difference between standard costs payable by the defendants versus the higher indemnity costs payable to the plaintiff’s solicitors and to be deducted from the settlement sum thereby decreasing the actual in hand amount. That it would not be reasonable for the defendants to pay management funds based on the actual damages amount in such circumstances because to do so would mean the defendants paying excessive fees of a trustee and not the amount of actual fees that would be incurred by the administrator managing a lower sum. Subsequently, it was proposed that the plaintiff obtain a quote from the administrator based on the actual in hand amount to be invested. Further, given the submission was in relation to the amount of management fees to be paid, the plaintiff would not be at any loss or disadvantage because it is not an amount that the plaintiff would receive in their hand in any event. The defendants said that they did not need to know what the indemnity costs estimate was noting the non-disclosure requirements of the affidavit by the plaintiff’s solicitors to same - merely that what the administrator’s management fee quoted was on the net sum in hand.
WHY DID THE PLAINTIFF OBJECT?
The plaintiff essentially rejected the approach by the defendants on the basis that the administrator still has work to undertake in relation to the assessment and payment of costs and the difference between indemnity and standard costs payable will not be determined until the settlement sum is paid to the administrator and it is not reflected in the requirements of the relevant Practice Direction.
WHAT DID THE COURT FIND?
The Court considered the decisions in Richards v Gray  NSWCA 402 and Government Insurance Office of NSW v Rosniak (1992) 27 NSWLR 665. In the decision of Richards, there were competing arguments in relation to the matter in dispute in the current application for sanction. The majority held that additional indemnity costs should not be deducted from the settlement sum before calculating fund management fees. This was on the basis that they were likely to be paid out early in the life of the fund and thus unlikely to attract ongoing management fees. Quoting from the matter of Richards, Her Honour in this application noted “The method of calculation of these costs does not necessarily reflect what would occur over the future …”. The dissenting view in Richards was that the calculation of management fees should include reference to existing legal liabilities which includes an amount of costs already incurred and payable.
Her Honour, in this matter, noted a distinguishing issue from Richards so far as there did not appear to be expected a delay of a year or two to pay or calculate costs. The draft order in this matter (as in Richards) requires the whole of the settlement sum less any statutory refunds being paid to the administrator from the outset. The estimate of indemnity costs differential to that of standard costs is an estimate only and the actual figure would not be determined until after an assessment has been undertaken. This would be supervised by the administrator and the timing and the amount of the costs are not certain.
A plaintiff injured by another person’s negligence should be put in the same position or as near to there as possible. That it would be inappropriate to deduct estimated indemnity versus standard costs differential on the basis that it is initially an estimate only, subject to further determination and may risk a shortfall in the amount of fund management fees which would cause loss to the plaintiff. Part of the administrator’s role is to oversee the assessment and later payment of costs, plus that from the date of the payment of the settlement sum to the administrator, the administrator is responsible for investing such amount. This is notwithstanding that the payment of costs out of the fund may well be fairly soon after the orders are made, there were still uncertain factors and the other issues as described above.
The decision confirms that when obtaining quotes for management fees it is to be based on the total damages payable (less statutory refunds) and nothing else. Otherwise, it may have the result in leaving the plaintiff in a worse off position, which is not appropriate.