Personal Injuries & Compensation

Rules for good management of injured person’s money

It takes trust to place your money with someone else. Even allowing a small sum of money to be given to a family member involves a strong understanding between the 2 people. Then, giving a large amount of money to someone else, such as allowing your money to be placed with a Financial Manager will only be possible when you can feel comfortable that the other person or company will act responsibly.

Under law, the concept of a trust is the legal arrangement where a third party, referred to as the Trustee, holds and manages money for the benefit of another person, known in legal speak as the “beneficiary”. The Trustee has the very serious legal obligation to act in the best interests of the beneficiary.

Trusts are used for various purposes, including in estate planning, tax optimisation and for managing assets for the benefit of family members.

One niche area involving trust is in the situation where an injured person receives compensation payout from an insurance company with that compensation money being placed with a separate organisation called the “Administrator”.

What happens if I lose confidence in the Administrator company responsible for managing my compensation money (or money for a family member) after tragic accident?

The answer often involves a combination of checking if the confidence can be re-built (maybe through clarification of technical points following communication break down) or arranging for the appointment of a new Administration company.

Background

What do you mean by “Administration company”?

Firstly, for explanation, for the majority of compensation cases in Australia, the injured person will receive the compensation moneys directly. Meaning, that the person for whom the money is supporting will receive the funds on the conclusion of the case with the insurance company. It is standard in Australia that the insurance company will pay the compensation money to the lawyer representing the injured person. This approach is designed to recognise the official recording of the payment of the money. The lawyer is then placed in the position of a trustee, since the money received by the lawyer is on behalf of the client (so that the money always belongs to the injured person, not to the lawyer). And, the lawyer must then act on the instructions of the individual client, typically following the direction of the client to pay the money into the client’s nominated bank account. This is the outcome even if the payment is a sizeable sum of money, such as in cases involving a client who encounters interference to employability due to injuries sustained in an accident.

There are certain situations however where it is appropriate that the handling of the compensation money be given to an organisation separate to the injured person. This special arrangement is made for the benefit of the injured person such as in situations where the injured person is under 18 years of age. In that situation the money is typically left to be professionally managed by a private corporation (with expertise in financial management) until the then infant injured person reaches maturity, typically on turning 18 years of age (although in some cases it can be to a later age such as to age 21).

Then, there are the tragic situations in which the injury is so severe that the injured person, although an adult at the time of the accident, is left with inability to look after themselves and including loses the ability to effectively budget and manage their own finances. In such situations it is then for the benefit of the injured person that a third party organisation be involved to safeguard the money for the longer term.

Doesn’t such arrangement involve extra cost such as the fees of the Administrator company?

Yes, such arrangement has associated extra expense and can be large extra expense of over $300,000.00 because the fees of the Administrator company cover the work to perform the important role over the lifetime of the injured person. Typically, this extra expense will be paid by the insurance company (so the injured person is not out of pocket).

Are there protective measures?

Yes, the organisations that offer to perform the role of the Administrator are accepting a huge responsibility. Those organisations are subject to scrutiny and including with obligation to provide periodic financial reports explaining the progress of the management of the injured person’s money.

Do I have options for the selection of the company to perform the Administrator role?

Yes, there are several private corporations in Australia who provide this specialised service. There is also the option of engaging the Office of the Public Trustee, which is a department of the Government, which also offers to provide such service for a fee.
h2>Guiding Principals

The paramount consideration in the conducting of the management of the funds is the welfare and interests of the injured person. And, it’s a consideration both for the individual client’s present financial requirements as well as coverage of the costs for future prospective expenses. In this way, there is often a type of “tension” between applying a portion of the compensation fund (which under law is money belonging to the injured person) for immediate support of the injured person (such as to cover costs for operation or engagement of regular attendance of an external nurse to the injured person’s home) weighed against the future (so prudently saving a large portion of the compensation fund over the expected lifetime of injured person, which can often involve a span of 20 – 30 years or more).

Recent Decision in the Supreme Court in New South Wales on this specialised topic

In the Supreme Court of New South Wales, Justice Lindsay delivered a Judgment on 04 April, 2025 in a case involving review of the activities of the existing Administrator. (Re KT and JC, Protected Persons [2025] NSWSC 306).

In this recent case, the Judge was asked to decide whether it was suitable for making of a change of the Administrator. In that case, the family of the injured person had lost confidence in the existing Administrator’s continuance as the company responsible for the management of the compensation money.

In that case the Judge adjudicated that it was appropriate for a new company to be appointed as the Administrator, following demonstration of the breakdown by the existing company. The Judge specifically referred to the existing company having privileged its organizational imperatives over the interests of its client. He considered that the decision-making process by the existing company does not appear to have been expressly informed by reference to the legal principles of fund management and including the way those principles place the primary focus on the individual client.

Final word of wisdom

Trust is like a bank account; you can’t withdraw what you didn’t deposit.