BGG v NSW Trustee and Guardian

BACKGROUND TO THE DECISION THE SUBJECT OF REVIEW

1. On 8 August 2011, an interim financial management order had been made for BVC, committing the management of her estate to the NSW Trustee and Guardian. In this decision, it was stated that BVC has mild dementia and cognitive impairment and was incapable of managing her affairs. On 7 November 2011, a final financial management order was made for BVC placing her estate under the management of NSW Trustee and Guardian.
2. On the death of her husband in 1998, BVC had been, according to the financial management order, the owner of three unencumbered properties and a substantial amount of cash. On 30 November 2009, BVC had been placed in a nursing home facility, which required the payment of a substantial bond. By 2011, however, when a final management order was sought for her, BVC's cash had disappeared and a mortgage had apparently been secured against one of the properties.
3. In light of BVC's subsequent cash flow issues and the fact that her trust account was in arrears, the NSW Trustee and Guardian decided to offer her son, BGG, the chance to enter into a formal commercial lease on the commercial premises that he had, until then, been occupying on a rent-free basis. Failing such an agreement, the NSW Trustee and Guardian would sell the premises which, a title search confirms, are owned by BVC. At this time, BVC's former family residence had been placed on the market and has now been sold. Despite this, estimates provided by the Assets division of the NSW Trustee and Guardian state that BVC's money is insufficient to cover her life expectancy of eight years.
4. In relation to the leasing of the commercial premises, the following recommendation was received by the Assets division of the NSW Trustee and Guardian in 2012: It is not recommended that we seek a new tenant as involvement from council and a development application (DA) would be required and it would be very costly to bring the property up to current council regulations to have the DA approved.
5. An agent's report prepared on 1 November 2012 noted that 'prospective lessees for this type and size of premises are not prevalent in this economic climate.' The report further noted: Given the current state of the yard and the huge amount of equipment in and around the property it could take many months to prepare to re let. Commercial cleaning would have to be attended to and cost is unknown at this present stage.. If the property were to become vacant and a DA was required we believe that the cost to bring the property up to current regulations and requirements will be significant cost to the owners.

Statement of BGG

1. In a statement tendered before the Tribunal, BGG stated that he was born in 1962 and started working for his father's engineering company on a part-time basis when he was thirteen or fourteen years old. When he was fifteen, he began full-time work with his father as an apprentice welder. The business was conducted from the premises that are the subject of this review. Following his father's death in 1998, BGG stated that he took over the running of the business. He continued to work in the commercial premises and was never asked by his mother to pay rent.
2. According to BGG, shortly after his father's death, he and his mother attended a lawyer 'to transfer the land and property…for $1.00.' On the basis of the lawyer's advice that such a transfer would result in a significant capital gains tax to pay, BGG and his mother 'made the decision to leave the land and building in my mother's name.'
3. Until 2006, BGG paid the expenses for the business. From 2006, because of a decline in income due to a severe drought, his mother then paid for the business expenses. She also gave BGG $85 000.00 for use in the business and expenses.
4. In 2007, and in BGG's presence, BGG stated that his mother had declared that she didn't 'want any property sold until after I die.' By 2008, both BGG's businesses had gone into voluntary receivership. In August 2009, BGG commenced operating a further business.
5. According to BGG Since my father passed away I have had not had to pay rent for the use of [the commercial premises]. The fact that my mother wanted to transfer the property to me after his death and the conversation I had with the solicitor made me believe that I would be able to continue using the property rent free and after my mother's passing I would inherit the premises in her Will….I will meet all the expense of [the commercial premises], provided they are listed as a debt on my mother's estate.

Responses to BGG's statement

1. BVE, BVD and BHI each provided a response to BGG's statement.
2. Relevantly, they each dispute BGG's claim that their mother had intended to transfer the commercial premises to BGG.
3. BVD disputes BGG's claim that whilst working for his father, he was paid a modest wage, stating that 'under instruction from my father, BGG was always paid a substantial wage, over and above wages paid to other employees.'
4. BVD states that from 2002, she has been denied access to the commercial premises.

Testamentary documents for BVC

1. In her will executed in 2005, BVC bequeathed to BGG her shares in two family companies. In the same will, she made the following bequests: I GIVE AND DEVISE my interest in the [commercial premises] to my son BGG subject to and charged with the payment by my said son to my other four children…in equal shares of the sum of…$200 000.00 I GIVE AND DEVISE any moneys which are owing to me on loan by the [family trust] to my son the said BGG. I FORGIVE any loans which may be owing to me by any of my said children.
2. BVC's subsequent will, executed in 2009, is more simple. Relevantly, it provides for the balance of her estate (after her debts, expenses and duties have been paid) to be divided equally amongst her children.

Evidence by BGG

1. In cross-examination before the Tribunal, BGG agreed that another commercial property owned by his mother had been sold in 2009 because his mother needed the money.
2. He agreed that his mother had been the guarantor for him in relation to a $180 000 loan. BGG agreed that he had never repaid the loan because the company had gone into liquidation as a result of a tax liability. He agreed that his mother's other commercial property had been sold in order to discharge this loan. He agreed that had the property not been sold, legal action would have been taken against his mother.
3. In relation to the money left over from the sale of that property once the loan amount had been repaid, BGG told the Tribunal that it had gone 'to pay bills and to pay the liquidator.' He told the Tribunal that he and his mother had agreed that she would pay these extra amounts.
4. He told the Tribunal that his company had made a profit of $42 000 in the previous financial year. He confirmed his belief that his father had intended him to take over the business. He told the Tribunal that 'I assumed that being the first born son, [my father] would have wanted me to have the business.'
5. He confirmed that he and his mother had attended their lawyer so that his mother could transfer the commercial premises to him for $1. He confirmed that they had not proceeded with the transfer once the capital gains tax implications had been made known to them.
6. He agreed that he had seen his mother's 2009 will and agreed that it 'doesn't leave the property to me.' He didn't accept this as proof that his mother had changed her mind about it. Instead he said that 'I think she was coerced. She said she made a mistake and should never have done it.'
7. He agreed that his mother's 2005 will, revoked by the 2009 will, gave him the commercial premises but only on the condition that he gave $200 000 to his siblings.
8. He agreed that in 2009, his mother had given him $85 000 for the business, with the plant equipment to be used as collateral, even though he was unsure who owned the equipment. He agreed that he had not repaid the money because the company had gone into liquidation. He agreed that he had sold some of the plant equipment and conceded that 'I guess it wasn't mine to sell.'
9. He agreed that he would be willing to pay some rent for the commercial premises but wasn't willing to say how much. He agreed that he would pay land tax and council rates for the property.
10. He agreed that his father had suffered a stroke in1998 but told the Tribunal that he had been able to hold a conversation until a few weeks before his death.
11. He described the equipment needed to run his business, which employs three other people. He was unaware of any other buildings in the local area that would be suitable to accommodate the business, saying that 'I'm at an advantage. That's why my dad set it up so I wouldn't have to pay rent.'

Evidence of BVD

1. BVD confirmed that she had been employed in the family business from 1977 to 1989, when her father had been in charge, and from 1998 to 2002, when her brother BGG had been the manager. During the years her father ran the business, BVD told the Tribunal it had been profitable but had become non-profitable under her brother's management.
2. Following her father's stroke in 1996, BVD told the Tribunal that he had a very limited ability to communicate and that his ability to communicate has declined prior to his death in 1998. According to BVD, her father couldn't form words or speak in sentences and instead had communicated by pointing or grunting. In BVD's view, he wouldn't have been able to have been brought into the business premises nor would he have been able to express his wishes in relation to the continuation of the business.

Evidence of BHI

1. BHI denied that he had used a power of attorney to sell his mother's other commercial property. This was because the power of attorney was never signed by BGG and so was unable to be activated. This is confirmed in documentation contained on file.
2. BHI told the Tribunal that in 2009, the Sheriff had attempted to serve a summons on his mother due to the default on the loan of $180 000 taken out by a finance company which the company then sought to recover from her.
3. He told the Tribunal that following the stroke, his father had been unable to communicate. He told the Tribunal that he had travelled to visit his father every month and found that his father was unable to form sentences or hold a conversation. He told the Tribunal that his father's condition had declined and that in BHI's view, he would not have been able to communicate in relation to matters pertaining to the family business or have been able to be brought to the business premises themselves.
4. In 2009, although BHI was unable to get access to the commercial premises that are the subject of the judgment, he observed that the premises were unkempt, untended and unpainted.

BGG

1. Counsel for BGG, Mr Hadley, referred to the unexecuted Power of Attorney for BVC which includes the following condition: 'I declare that my attorneys may not sell my [commercial premises].' This, Mr Hadley submitted, together with the fact that she had never charged rent for the use of the premises and had financially supported the business, was proof of BVC's wish that the commercial premises be retained.
2. Accepting BVC's current financial circumstances, Mr Hadley submitted that the sale of the commercial premises was not the only available option. Alternative options would be for BGG to meet BVC's medical expenses and to pay a specified rent. This would need to be less than commercial rent, which would put the company out of business. Such an agreement could then be set up as a licence to be terminated upon default, in which case the NSW Trustee and Guardian could then sell the premises.

BHI

1. It is BHI's submission that the key consideration in this case is the interest of BVC. He referred to the detriment incurred to BVC's financial well-being when she had to sell her other commercial property to cover the loan to BGG, upon which he had defaulted. He also noted that a $85000 loan to BGG by his mother remains unpaid. In light of BGG's poor financial history and the uncertain viability of his business, BHI submits that BGG could not be relied upon to cover his mother's expenses. In BHI's submission the only way to give some certainty to BVC's financial well-being is to sell the commercial premises.
2. In regard to BVC's intentions, BHI submitted that, as an unexecuted document, the draft power of attorney should hold no weight. Instead, BVC's intention should be evidenced by her will, which provides for the dividing up of her estate between the children, a division that would require the sale of the commercial property.

NSW Trustee and Guardian

1. Ms Stormont, for the NSW Trustee and Guardian, agrees that the Tribunal's consideration should be to determine the matter in the best interests of BVC. Working on the basis of a life expectation of eight years, Ms Stormont submitted that her funds will be depleted within five to six years. This is agreed by each of the parties before the Tribunal.
2. Ms Stormont told the Tribunal that the NSW Trustee and Guardian had attempted to work with BGG but that by 'placing his own needs ahead of those of his mother', BGG had refused the opportunity given to him to pay rent for his business premises, has not maintained the premises and appears to have sold equipment belonging not to him personally but to the business itself. In the opinion of the NSW Trustee and Guardian, the sale of the commercial property is the only way to provide certainty to BVC given that it is unlikely that BGG would be in a position to meet any rental amount stipulated.

CONSIDERATION

1. In reviewing the subject decision the Tribunal 'stands in the shoes' of the Trustee and is required to make the 'correct and preferable decision' having regard to any relevant factual material and any applicable written or unwritten law (Administrative Decisions Review Act 1997, s 63). This includes any material that postdates that decision (YG & GG v Minister for Community Services [2002] NSWCA 247 at [25]).
2. The review is to be conducted 'without any presumption as to the correctness of the decision': McDonald v Guardianship Administration Board [1993] 1 VR 521 at 530. On review the Tribunal may exercise all of the functions that are vested in the Trustee.
3. Chapter 4 of the NSW Trustee and Guardian Act 2009 (the Act) is concerned with 'management functions relating to persons incapable of managing their affairs.'
4. By s.56(a) of the Act, the Trustee may exercise all the functions necessary and incidental to management and care of the estate of the managed person.
5. In force is an order from the Guardianship Tribunal committing the management of the protected person's estate to the Trustee. In managing that estate the Trustee may exercise any of the powers vested in it by s.16 of the Act. Relevantly, these include - b) grant lease of property for a term not exceeding 10 years and give to a lessee an option of renewal if the aggregate duration of the lease and nay such renewal does not exceed 10 years, …. d) surrender a lease and accept a new lease, e) accept a surrender of a lease and grant a new lease, f) execute a power of leasing vested in a person having a limited estate only in the property over which the power extends, g) buy, sell, realise and mortgage (with or without a power of sale) real and personal property, i) postpone the sale, calling in and conversion of any property that the NSW Trustee has a duty to sell, other than property that is of a wasting, speculative or reversionary nature
6. It is not in issue that in exercising its functions under Chapter 4 of the Act, the NSW Trustee and Guardian, and the Tribunal in exercising its power on review, must give paramount consideration to the interests of the mother. Section 39 of the Act provides that it is the duty of everyone exercising functions under Chapter 4 of the Act (management functions relating to persons incapable of managing their affairs) to observe the following principles: (a) the welfare and interests of such persons should be given paramount consideration, (b) the freedom of decision and freedom of action of such persons should be restricted as little as possible, (c) such persons should be encouraged, as far as possible, to live a normal life in the community, (d) the views of such persons in relation to the exercise of those functions should be taken into consideration, (e) the importance of preserving the family relationships and the cultural and linguistic environments of such persons should be recognised, (f) such persons should be encouraged, as far as possible, to be self-reliant in matters relating to their personal, domestic and financial affairs, (g) such persons should be protected from neglect, abuse and exploitation.'
7. In accordance with its decision dated 2 October 2014, the NSW Trustee and Guardian has decided that the commercial premises should be sold without BGG being given the opportunity to enter into a lease agreement. The question for the Tribunal is whether this is the correct and preferable decision.
8. There have been allegations put forward in relation to the management of the business by BGG and loan monies that remain outstanding by him to his mother. The Tribunal is not in a position to make any findings about these allegations. In light of the other evidence before it, the Tribunal is of the view that these issues do not need to be finally determined in this judgment.
9. On the evidence before it, the Tribunal accepts that BVC's estate has been subject to management by NSW Trustee and Guardian since 2011. There has been no challenge to the NSW Trustee and Guardian's advice that, in light of her cognitive impairment, BVC is unable to provide a view.
10. It is accepted by all parties that in light of her cognitive impairment, BVC is not capable of determining her wishes in relation to her financial situation.
11. There is no dispute between the parties that the funds of BVC, who has a life expectancy of eight years, will be depleted within five to six years. Simply put, BVC does not have enough money to sustain herself for the rest of her life. At the moment, she is not receiving rent for the commercial premises. When offered the opportunity to pay commercial rent in order to retain the use of the property, BGG told the Tribunal that he was willing to pay some rent for the premise but unwilling to say how much. He agreed to pay the land tax and council rates. He relied on an unexecuted power of attorney as evidence of his mother's intention not to sell the commercial premises although he conceded that his mother's current will does not leave the property to him. Her wish that her estate be equally between her five children would necessitate the sale of the commercial premises.
12. BVC's family home has now been sold and whilst this has improved her previously very difficult financial circumstances, it is agreed between the parties that even with the proceeds from this sale, her assets will dissipate prior to her eight-year life expectancy. Clearly, then, further monies are required to ensure her financial well-being for the remainder of her life. As the commercial premises are her sole remaining property, monies need to be generated from the property, either by leasing it or by selling it.
13. Whilst BGG has agreed to pay some rent, he has previously made it clear that he is unable to pay commercial rent of approximately $87 000 pa. His evidence in relation to his business profits of $42 000 for the previous financial year confirms this to be the position. BGG has declined to nominate a rental amount he would be able to pay and prepared to pay. In light of his evidence in this regard, the Tribunal cannot be assured that any rental payments would be forthcoming and so cannot be assured that BVC's financial situation would be improved by a decision requesting rent from BGG.
14. A second option would be to lease the commercial premises to a third party. The current unkempt state of the property would pose difficulties in renting it out. Further problems inherent in leasing the property to a third party are set out in the advice from the Assets division of the NSW Trustee and Guardian that It is not recommended that we seek a new tenant as involvement from council and a development application (DA) would be required and it would be very costly to bring the property up to current council regulations to have the DA approved. Also, there is only a window of 6 months left to relet the property to the current tenant before it would require a DA.
15. In light of this advice, the state of the property and the corresponding possible difficulties in finding a tenant for the property, it is the Tribunal's view that leasing the property to a third party is not an appropriate option.
16. The third, and remaining, option is to sell the property. This would generate sufficient assets to enable BVC to enjoy a high standard of living for the rest of her life.
17. On this basis and on the evidence before it, it is the view of the Tribunal that the correct and preferable decision is for the commercial premises to be sold. In reaching this decision, the Tribunal has considered all aspects of s39 of the NSW Trustee and Guardian Act 2009, with paramount consideration being given to the welfare and interests of BVC.

ORDER 1. That the decision under review, namely that of the NSW Trustee and Guardian dated 2 October 2014, is affirmed. I hereby certify that this is a true and accurate record of the reasons for decision of the Civil and Administrative Tribunal of New South Wales. Registrar DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 01 April 2015