Management fees of the administrator – personal injuries

Sinnamon v Maher & Anor [2016] QSC 51

Flanagan J

The plaintiff suffered severe traumatic brain injury as a result of a pedestrian road traffic incident. As litigation guardian, the plaintiff’s father brought a proceeding for a claim in damages. The plaintiff’s claim was settled with $1,651,500 being awarded in damages. Pursuant to the Guardianship and Administration Act 2000 (Qld) an administrator was appointed to receive and manage the sum including powers to invest. Assessment of further damages for management fees was adjourned until a later date.

The administrator provided an estimate of the management fees totalling $635,714. The second defendant agreed to pay $557,257, but claimed that the outstanding $78,457 involved in investing in a superannuation platform should not be permitted because it allowed the plaintiff to gain a higher return as it reduced the likely tax payable. The quantum of the Super Platform Costs was not in dispute.

In giving judgment for the plaintiff, Flanagan J referred to the general principles governing the assessment of damages in Todorovic v Waller (1981) 150 CLR 402:

  1. The plaintiff should be awarded damages that will put him or her in the position they were had the injuries not been sustained;
  2. Recovery of damages must be paid in one lump sum;
  3. The plaintiff may use the lump sum as he or she wishes; and
  4. The plaintiff must prove the injury for which he or she seeks damages

His Honour referred to Willet v Futcher (2005) 221 CLR 627, 642 where the High Court clarified the third principle and held that damages for the defendant’s negligence includes the remuneration and expenditure properly charged or incurred by the administrator in managing the plaintiff’s lump sum.

Further, Flanagan J accepted Dutney J’s analysis in Bell v Pfeffer [2009] QSC 209 of whether the management fees for an investment in a superannuation fund should be allowed as part of the plaintiff’s damages:

[40] … they represent a direct cost of earning an investment return. In either case, where the actual investment of the fund is contracted out by the administrator to the Select Fund, these amounts should be treated as monies expended by the administrator on behalf of the plaintiff and chargeable against the estate since the estate ultimately bears that cost. The total of both the Select Fund fees and the MER’s are a known fixed cost at the time the money is placed with the Select Fund. I am thus satisfied that both of the amounts charged by the Select Fund for its own use and the amounts which it pays to its underlying investment managers can properly be claimed by the administrator as expenses in addition to the commission payable under s 41 of the Act. This seems to me to represent the real cost difference between an injured plaintiff with a lump sum to provide a regular fixed income over a defined term and another person receiving a periodic income with no lump sum to invest.

His Honour stated that it was irrelevant that a particular investment may have taxation advantages and therefore expenses incurred in the proper investment chosen by the administrator form part of the assessment of damages for the plaintiff.

Judgment was entered for the plaintiff; the second defendant was ordered to pay in full the management fees totalling $635,714 including the Super Platform Cost of $78,457.

David Cormack – Brisbane Barrister & Mediator

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