This is the prime reason why there is an appeal as of right.
25 Just what is in the category of a question of law is sometimes hard to decide. However, generally speaking the matter is quite clear. If there is a question as to the meaning of an Act in the circumstances, if there are other questions of construction of the law or vital agreements, if there is a finding of fact made of which there is no evidence to support it or perhaps if so much irrelevant material enters into the decision making process that it is a nullity, then one has a question of law. Outside that field, normally one has a question of fact. This is so even if there is a finding of fact which is against the evidence and the weight of the evidence: Haines v Leves (1987) 8 NSWLR 442, 469 and 470. This is an oversimplification, but, generally speaking, is the way in which the distinction operates.
26 The first ground of appeal is phrased in such a way as to indicate that the Tribunal did not have power or jurisdiction to deal with the matter. One must always be careful of such submissions, as has been noted on many occasions. As good a reference as any is Ex Parte Hulin; Re Gillespie (1965) 65 SR (NSW) 31, a decision of the New South Wales Full Court. In that case, Sugerman J said at page 33 that:
"The questions upon which a court of limited jurisdiction may find it necessary to adjudicate in the course of an inquiry before it may be classified for present purposes into two broad categories. Some relate to matters which are extrinsic to the subject matter of the inquiry itself but, by the terms of the conferment of jurisdiction, are essential to the competence of the court to undertake the inquiry and to carry it to a valid conclusion. Others, although related to the validity of the court's conclusion, are related to validity in a different sense...
Objections founded on the personal incompetency of the Judge, or on the nature of the subject-matter, or on the absence of some essential preliminary, must obviously, in most cases, depend upon matters which, whether apparent on the face of the proceedings or brought before the superior Court by affidavit, are extrinsic to the adjudication impeached. But an objection that the Judge has erroneously found a fact which, though essential to the validity of his order, he was competent to try, assumes that, having general jurisdiction over the subject-matter, he properly entered upon the inquiry, but miscarried in the course of it."
27 To my mind the first ground of appeal is in the second category. There is no doubt that the Tribunal was properly constituted and had general jurisdiction to consider guardianship orders. If there was any failure by the Tribunal then the failure was a mistake of law or fact in carrying out its statutory function, and those are not matters which go to jurisdiction or statutory authority.
28 The second ground of appeal as phrased is on a question of fact because it merely deals with the weight of the evidence. Even if it is construed as being an appeal over a finding allegedly against the evidence and the weight of the evidence, it would raise only a question of fact. This is immaterial as, in any event, I do not consider that that ground has been made out. Most of the facts are beyond dispute, the only point that is a matter of contention and indeed was the one on which the appeal really focused on was the way in which the Tribunal dealt with what it called "conflict of interest".
29 It is quite clear, both from the way the Tribunal approached the matter and from the way in which the appeal was argued, that to make an order the Tribunal had to follow section 25G of the Guardianship Act 1987. That section is as follows:
"The Tribunal may make a financial management order in respect of a person only if the Tribunal has considered the person's capability to manage his or her own affairs and is satisfied that:
(a) the person is not capable of managing those affairs, and
(b) there is a need for another person to manage those affairs on the person's behalf, and
(c) it is in the person's best interests that the order be made."
30 There is no contest about (a), but there is a contest as to the meaning of the word "need" in (b) and the words "best interests" in (c).
31 So far as "need" is concerned, Ms Winters for the plaintiff put that if the existing informal arrangement between the incapable person and somebody else is satisfactory then it cannot be said that there "is a need" for another person to manage those affairs. I have some doubt about that proposition. Indeed the way in which matters are often approached in the Protective List is that a person usually has a need for someone else to manage their affairs if he or she himself or herself cannot do it. This triggers the jurisdiction to make an order, though the personal arrangement may mean the Court in its discretion does not make the order.
32 When exercising this discretion the Court bears in mind that ordinarily members of the community consider that guardianship or an outside manager is a measure of last resort; see Re M (1988) 2 VAR 213. I merely note this in case I be later misquoted. In the present case, as the Tribunal, to my mind, actually applied the test that Ms Winters contends for and which nobody else has contradicted, she cannot complain of any error of law. The Tribunal accepted the proposition that one takes into account the current circumstances and asks in those circumstances whether there is a need for someone else to manage the affairs. If the informal arrangements are appropriate then there is no such need. Ms Winters says that the Tribunal did not approach the matter that way, but, with great respect, that is the only explanation as to why it did not make an order in November but did in December. In November the Tribunal seemed to be content that the existing arrangements and statements made to the Tribunal by members of the family were sufficient protection.
33 Once one gets to the stage that the Tribunal actually applied the right test then everything else seems to me to be within the realm of a question of fact.
34 One then turns to the words "best interests". Here there was quite a debate as to what the words meant. I have looked through judicial dictionaries and the most helpful case I have found is one of my own decided in 1986 in which I said that "It is hard to find a good definition of the words 'best interests' "; see Pioneer Concrete Services Ltd v Yelnah Pty Ltd (1986) 5 NSWLR 254, 260. The last fourteen years have not produced any further clarification.
35 I would agree, however, with the Victorian AAT that the "best interests" must include the welfare, health and well-being of the person in a wider sense than is suggested by protection from neglect, abuse or exploitation (Re Mc (1989) 3 VAR 87).
36 I think that one needs to look at the cases decided in courts of protection over the last couple of hundred years to see the way in which the question as to what is in the interests of the incapable person has been approached. One of the basic authorities in that area is Oxenden v Compton (1793) of which there are two reports in different forms, one in 4 Bro CC 232; 29 ER 868 and the other in 2 Ves 69; 30 ER 527. That case involved the question as to whether various transactions involving the family of a lunatic were for the benefit of the heir at law of the lunatic or for the personal representative of the lunatic, that being a time, of course, when one's land descended to one's heir at law and one's personal property descended to one's executor. It is quite clear that the Lord Chancellor, Lord Loughborough, thought that all of that was quite irrelevant. He said in 30 ER at 532:
"In all these cases the Court makes an election for the lunatic, as he would have done, if in his senses. What merits have the next of kin? What equity have they? Only that the lunatic would not have applied it so."
37 In the report in Brown at 29 ER 869, again the reporter stresses that what is important is what is for the benefit of the lunatic, and what may be for the benefit of his heir or his personal representative is not a matter that comes into account. These views are picked up in other leading cases such as Re Sefton [1898] 2 Ch 378. What is in the interests of the incapable person under the general cases has been taken to mean what is for the benefit of the lunatic personally and not for his family or his friends or his estate.
38 The traditional way of treating this sort of problem is to assume that any arrangement that the incapable person has made before he became incapable to benefit a relative is not to continue. Thus, the Court appoints an administrator or a manager so that the Court can, in a proper case, give to members of the family of the incapable person a benefaction that the incapable person may well have given had incapacity not supervened. There are many cases referred to in Collinson on Lunacy (1812 edition) pp 242-5 which I noted in Re B [2000] NSWSC 44.
39 This approach is also echoed in the recent English case of Re W [2000] 1 All ER 175. In that case a power of attorney was given to Mrs X. Mrs X took advice and she found that it would be very tax effective if the estate of the donor of the power of attorney (her mother) was reduced below a certain figure. She then gave gifts to each of her brothers and sisters and herself of 20,000 pounds. The English Chancery Division said that although Mrs X did not portray a picture of greed or sought to do anything that was not within the best interests of the family, she acted misguidedly and not in the interests of her mother; see page 181. So, there is a case right in point where a person with the best will in the world, who shares things equally between herself and her brothers and sisters, and acts in what she thinks are the interests of her mother, yet the Court says she is not acting in the best interests of her mother. Indeed, cases like Re W show that there is a good argument that a person who is given a power of attorney cannot give money away, and in particular cannot give money to themselves. In Re W the solution was for the court to sanction the gifts under the usual practice of the Protective Court.
40 However, Ms Winters submits that when one has a power of attorney in the terms of the present one, the terms of the power of attorney and section 163B(2)(b) of the Conveyancing Act overcome that general principle.
41 The fallacy of that argument is that one has to distinguish carefully between two questions; (a) is the donee of the power of attorney authorised so that as between the donee and a third party the donor will be bound by a transaction? and (b) as between the donor and the donee, is the donee accountable for what he or she has done?
42 They are two completely separate questions. I do think, with respect, that the Tribunal did not clearly distinguish between the two. I also think that it is probably correct to say that the statements of law about powers of attorney made in the Tribunal's judgment were infelicitously expressed. That in part came about by relying on a Green Paper which was published by the Land Titles Office for the purpose of considering whether there were discrete problems with the law regarding powers of attorney that the Parliament should rectify, rather than looking at some more learned general tome.
43 Be that as it may, I cannot really see how the effect of any error in that department had any real relevance to the actual decision that was made, because, despite any such error, the Tribunal did turn its mind to the key question, which was the question that I have stated as (b) in my above analysis. It was not at all relevant that the plaintiff had power under the power of attorney to make gifts to himself. He may have had that power, he may not have had that power, it does not matter. The question was whether it was in the best interests of the incapable person that that situation be permitted to continue.
44 The distinction that I have mentioned is well made by the English Court of Appeal in the case referred to by the Tribunal, Reckitt v Barnett, Pembroke and Slater Limited [1928] 2 KB 244, 255 where the English Court of Appeal points out that a power of attorney may give a person authority to rob the donor, but that does not make robbing the donor something that he should not be accountable for. As Scrutton LJ said, "It is a fraud if the attorney uses his power to rob his principal, but if he does rob him by doing the very thing he is empowered to do, it is immaterial". See also the decision of the Privy Council in Bank of Bengal v Fagan (1849) 5 Moore Indian Appeals 27; 18 ER 804.
45 Ms Winters however says that the whole of the material shows that the first defendant was content to leave his estate in the hands of the plaintiff, that he signed the document dated 5 April 1998 in front of his neighbours that I have mentioned before, he gave a full power of attorney to the plaintiff, and he took advice from his accountant as to what was a tax effective way of doing what he wanted to do. Ms Winter further says that the Tribunal did not seem to think, because of the wrong view it took on the law of powers of attorney generally, that such consent of the first defendant was of any real moment, and accordingly, it directed its mind to the problem of conflict and not to the real question.
46 I do not think that that is a correct analysis of what the Tribunal did, but even if it were, it would seem to me that it was in the realm of a question of fact. I was referred to the decision of the Privy Council in Hordern v Hordern [1910] AC 465 which relies to a great extent on the previous decision of the House of Lords in Vyse v Foster (1874) LR 7 HL 318. Those cases deal with a situation where A and B are in partnership and A dies and appoints B his executor. In such a situation, the Court takes the view that the fiduciary duty owed by B must be measured taking into account that A made the deliberate decision to appoint his partner executor, and so must have anticipated that there would have been some conflict of duty and interest. Accordingly A's heirs cannot complain if, in fact, there is some conflict. The principle is clear. It is a principle which actually modifies the fiduciary duty rather than merely go to breach as was contendd, I think, in Mr Sexton SC's submissions for the Protective Commissioner. However, one must, when reading cases such as Hordern's case, pay particular attention to what is on page 475 which is a quote from Vyse v Foster at 332 that:
"…there might, from the peculiar position of the executor as a surviving partner, be reasons for watching narrowly the course which he would take with regard to the fulfilment of the contract".
47 Thus, even if one does take full recognition of the way in which the first defendant went about things before his supervening incapacity, to allow a person with conflicts of interest to continue is something that still has to be watched carefully. If it has to be watched carefully then it seems to me that it is just a question of fact and degree as to whether in all the circumstances it is in the best interests of the incapable person that that situation continue.
48 There are some real problems in this area that cannot be denied. The authorities show that if one can have members of the family manage an incapable person's estate then that is often the preferred course, see eg Holt v Protective Commissioner (1993) 31 NSWLR 227. It is also true that there are some cost ramifications if an independent person has to manage the affairs. I evaluated this problem together with the countervailing problem of the expertise of private managers in Re L [2000] NSWSC 721. One does need to evaluate the cost on the one hand and the independence on the other hand of a private manager and come to a decision, but that is a matter of fact and degree.
49 As I pointed out in Re L, when private managers are to be appointed, especially when there is a large amount of money concerned, the Court or the Tribunal has to be satisfied that: (a) any so called financial expert has, in fact, expertise to allow him or her to assist the incapable person in the circumstances of the particular case; and (b) any relative has either no conflicts of interest or, alternatively, the conflicts of interest are able to be handled by appropriate guidelines from the Deputy Registrar in the Protective Division.
50 There will always be some conflict. Re W shows some of the benign conflicts that can happen. There will be problems for people working out whether small donations should be made to charities, whether gifts should be made to relatives for Christmas and things of that nature. Most of those can be dealt with sensibly by an informal arrangement under a power of attorney or under the direction of the Protective Division. However, in the instant case the real question was whether it was in the best interests of the first defendant to continue with the existing arrangement or to have an independent manager.
51 One of the key points that was made by Powell J in PY v RJS [1982] 2 NSWLR 700 when laying down the classic test regarding when a manager is to be appointed was that people who are incapable of managing their affairs are in danger of exploitation and they must be protected against the danger of exploitation.
52 It seems to me, even forgetting about what was said about the law of powers of attorney, that the Tribunal directed itself to the key question. This was whether there was going to be a danger of exploitation in the existing arrangement. Would there be a danger that even though he might be authorised to do so, the plaintiff might breach his fiduciary duties, perhaps taking the view that he was not breaching his fiduciary duties if he managed the estate in such a way that he would eventually inherit more than he had at the moment? It seems to me that the Tribunal did assess those sorts of matters when working out whether it would be in the best interests of the incapable person that a manager be appointed, and that if the Tribunal did make any error, and I do not think it did, it would be an error of fact.
53 All this leads to my view that there is no error of law in what the Tribunal did and, accordingly, the appeal should be dismissed with costs.
54 The cross-claim raises different issues, some of which are now otiose, others I do not think there was very much evidence on and I think at the moment I will merely stand the cross-claim over until at least later in the day.
55 Ms Winters has made an application for a stay. I do not know what I will do on that but I will stand that over until 12 noon today. Ms Winters has also submitted that costs should only be the costs of the Protective Commissioner as it was unnecessary for the fourth defendant to be separately represented. I will deal with that in due course and what I have already said about costs is not to preclude that argument. I also meant to say I am very grateful to Ms Winters. Although she did not succeed in the long run, she stood up extremely well to the cross-fire and I am greatly indebted to her for the assistance that she gave.
56 The plaintiff should pay 25 percent of the fourth defendant's costs and the other 75 percent should be paid out of the estate.
57 I formally affirm the decision of the Tribunal.
58 The notice of motion for a stay can be filed in Court.
59 I have now considered the question of a stay. Prima facie my decision is correct. The only "prejudice" will be that fees might be incurred and chargeable to the estate and the Protective Commissioner's actions pending the possible appeal. I regret that there might be some cost, but on balance I think it better that that be incurred than not be incurred so I decline to grant a stay.
60 I stand over the cross-claim part heard before me for mention on
10 October 2000 at 9.30 am.
61 The Certificate of Title and original mortgage being Exhibit FX03 are handed out to the solicitor for the third defendant; the other exhibits should remain with the papers for the time being.
62 I dismiss matter 5169/99 in the Equity Division as being unnecessary.
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