CTS v NSW Trustee and Guardian

Issues

1. The questions to be determined and my answers to those questions are: 1. Does the NSWTG have power to make the security decision? No. 2. Does the Tribunal have jurisdiction to review the security decision? Yes. 3. If so, what is the correct decision? To set aside the security decision because it was made without power.

The special power

1. Section 68(1) of the NSWTG Act gives the Supreme Court and NCAT the following discretionary power to require a manager to give security to the NSWTG: The Supreme Court or the Civil and Administrative Tribunal may require a manager it appoints to give security (including security comprising the assets of the managed estate) to the NSW Trustee in respect of the management.
2. I will refer to this power as the "special power". The supervisory powers of the NSWTG in relation to the special power are set out in s 68(2)-(4): (2) A manager is not taken to have complied with a requirement under subsection (1) unless the security given has been approved by the NSW Trustee. (3) The NSW Trustee is to ensure that the conditions of any security provided under this section, or before the commencement of this section, in respect of the management of the estate of a managed person are complied with. (4) The NSW Trustee must report any failure to comply with any such condition to the Supreme Court or the Civil and Administrative Tribunal (as the case requires) immediately on becoming aware of the failure.
3. Section 68(5) relates to the forfeiture of any security: (5) The provisions of Schedule 2 to the Bail Act 2013 and Part 7 of the Fines Act 1996 apply to the forfeiture of any security and to the recovery of any security so forfeited in the same way as they apply to the forfeiture of bail money and to the recovery of any bail money so forfeited.
4. The special power and other general powers are in Division 2 of Part 4.5 of Chapter 4 of the NSWTG Act. The heading to Chapter 4 is "Management functions relating to persons incapable of managing their affairs" Part 4.5 is headed "Management of estates". It has three Divisions: "Management of estates by NSW Trustee", "Management of estates by other persons" and "Management of estates generally". Division 2 (ss 63 -70) applies to this case because a manager other than the NSWTG has been appointed: NSWTG Act, s 63.
5. The word "security" is not defined in the NSWTG Act. Apart from s 68(1) the only other place the word "security" appears is in s 19 which provides that: No bond or other security is required from the NSW Trustee before being appointed, by or under this or any other Act, in any trust capacity.
6. The effect of the two provisions which contain the word "security" is that the Supreme Court and NCAT can require a manager it appoints to give security to the NSWTG in respect of the management of an estate, but no bond or security can be required from the NSWTG before being appointed in any trust capacity.
7. The Supreme Court has ordered managers to give many kinds of security under the special power. Young J mentions several examples in Re McL. [2001] NSWSC 280 at [8] to [18] including ordering that a manager: 1. purchase a bond from a bank or insurance company; 2. provide undertakings in relation to title documents for a capital sum that may be invested; 3. hold the certificate of title to property at a particular location; and 4. deposit cash with the NSWTG.
8. There was no dispute that the security decision made in this case, as well as the examples listed above, come within the definition of "security" in the special power.

General powers

1. The NSWTG submitted that other general powers, particularly those in s 64(1) and (2), s 65(3) (a) and s 66(1) (b) of the NSWTG Act, also confer on the NSWTG power to require certain kinds of security including the power to make the security decision under review in this case.
2. The NSWTG has "such functions as are conferred or imposed on it by or under" the NSWTG Act or any other Act: NSWTG Act, s 10(1). Sections 64 and 65 give both the Supreme Court and the NSWTG powers in relation to estates where a manager has been appointed. 64 Orders by Supreme Court and NSW Trustee as to management of estates (1) The Supreme Court or the NSW Trustee may make such orders as it thinks fit in relation to the administration and management of the estates of managed persons. (2) The Supreme Court or the NSW Trustee may also make such orders as it thinks fit in connection with authorising, directing and enforcing the exercise of the functions of managers under this Act. (3) The Supreme Court may also make such orders as it thinks fit in connection with supervising the exercise of the functions of managers under this Act. (4) An order by the NSW Trustee is subject to the regulations or to any direction by the Supreme Court or to any order of the Civil and Administrative Tribunal (in the case of a person under guardianship). 65 Orders by Supreme Court and NSW Trustee as to property (1) General power The Supreme Court or the NSW Trustee may make such orders as appear to it necessary for rendering the property and income of a managed person available for the following purposes: (a) the payment of the debts and engagements of, and otherwise for the benefit of, the person, (b) the maintenance and benefit of the family of the person, (c) otherwise as it thinks necessary or desirable for the care and management of the estate of the person. (2) Orders as to disposal of estate Without limiting the generality of subsection (1), the Supreme Court or the NSW Trustee may order that any property of the person be sold, mortgaged, dealt with or disposed of as the Court or the NSW Trustee thinks most expedient for the purpose of raising or securing or repaying with or without interest money which is to be or which has been applied to any one or more of the following purposes: (a) payment of the person's debts or engagements, (b) discharge of any encumbrance on property of the person, (c) payment of any debt or expenditure incurred for the maintenance (including future maintenance), or otherwise for the benefit, of the person, (d) payment of the costs of any proceeding under this Act or of any sale or other disposition made under this Act, (e) payment of such other sum or sums to such person or persons as the Court or the NSW Trustee thinks fit. (3) Orders as to application of money Without limiting subsection (1), the Supreme Court or the NSW Trustee may authorise and direct the application of money comprising the whole or any part of the estate of the person to any one or more of the following purposes: (a) the preservation and improvement of the estate of the person, (b) the taking up of rights to issues of new shares, or options for new shares, to which the person may become entitled by virtue of any shareholdings, (c) the investment of money, being money not required for the time being for any of the other purposes specified in this subsection, in such manner as the Court or the NSW Trustee thinks fit. (4) An order by the NSW Trustee is subject to the regulations or to any order of the Supreme Court or to any order of the Civil and Administrative Tribunal (in the case of a person under guardianship).
3. The relevant powers given to both the NSWTG and the Supreme Court in s 64 and 65 of the NSWTG Act are: 1. to make "such orders as it thinks fit in relation to the administration and management of the estates of managed persons"; s 64(1) 2. to make "such orders as it thinks fit in connection with authorising, directing and enforcing the exercise of the functions of managers"; s 64(2) 3. to "make such orders as appear to it necessary for rendering the property and income of a managed person available" for certain purposes; s 65(1) and 4. to "authorise and direct the application of money comprising the whole or any part of the estate of the person to" certain purposes including "the preservation and improvement of the estate of the person": s 65(3)(a).
4. Under s 66, the NSWTG alone is given the following powers, in addition to the powers given together with the Supreme Court in s 64 and s 65: (1) The NSW Trustee may, by order: (a) authorise a manager to have all, or any specified, functions necessary and incidental to the management and care of an estate and such other functions as the NSW Trustee may direct or authorise the manager to have or exercise, and (b) give a manager such directions in respect of the orders, authorities and directions authorised by this subsection as the NSW Trustee thinks fit. (2) Without limiting any other provision of this Division, the NSW Trustee may authorise a manager to have functions of a kind specified in section 16. (3) An order by the NSW Trustee is subject to the regulations or to any order of the Supreme Court or to any order of the Civil and Administrative Tribunal (in the case of a person under guardianship). (4) This section is in addition to sections 64 and 65.
5. Lindsay J has noted that these general powers "have been recognised as broad, purposive powers serving the protective jurisdiction": Re Application for Partial Management Orders [2014] NSWSC 1468 at [45].
6. There is no dispute that the scope of the general powers includes requiring a manager to purchase home insurance or other insurance to protect particular assets. The NSWTG submitted that these general powers also overlap to a considerable extent with the special power.

Do the general powers give the NSWTG power to make the security decision?

1. The special power and the general powers must be read in context. The context includes the legislative context, the purpose or object of the legislation and the mischief intended to be remedied: CIC Insurance Ltd v Bankstown Football Club Ltd (1997) 187 CLR 384 at 408. The primary object of statutory construction is to construe the general provisions in a way which is consistent with the language and purpose of all the provisions in the NSWTG Act: Project Blue Sky Inc v Australian Broadcasting Authority [1998] HCA 28; (1998) 194 CLR 355 at 381 [69]. When construing legislative provisions, the Tribunal is to have regard to the purposes or objects of the legislation: Interpretation Act 1987 (NSW), s 33.
2. The purpose of the NSWTG Act is "parental and protective": Re Application for Partial Management Orders [2014] NSWSC 1468 at [49]. In the same paragraph, Lindsay J states that the protective jurisdiction: … exists for the benefit of the person in need of protection, but it takes a large and liberal view of what that benefit is, and will do on behalf of a protected person not only what may directly benefit him or her, but what, if he or she were capable of managing his or her own affairs, he or she would as a right minded and honourable person desire to do: Theobald, Law Relating to Lunacy (1924), p 380.
3. The NSWTG drew on this characterisation of the protective jurisdiction to submit that one relevant question to ask is what decisions the managed person would make for himself or herself in the same circumstances if he or she had capacity. The NSWTG submits that CTS's wife would say that in relation to her liquid assets, she would want to make sure she was insured, or otherwise secured, against the risk of defalcation or maladministration by her manager.
4. Even if I accept that that is what CTS's wife would say, that finding does not necessarily support the conclusion that the legislature intended to give the NSWTG power to require CTS to provide security over his wife's liquid assets. The issue is not whether CTS's wife would want to make sure that her finances are protected from maladministration, it is whether the NSWTG has power to do so in circumstances where the legislature has given the Supreme Court and NCAT that power expressly in another provision in the same Division of the statute.
5. The Court of Appeal discussed the role of legislative purpose in construing legislation in Victims Compensation Fund Corporation v Brown [2002] NSWCA 155; (2002) 54 NSWLR 668. At [9] Spigelman CJ referred to the following passage from a decision of the Supreme Court of the United States - Rodriguez v United States [1987] USSC 36; 480 US 522 (1987) at 525-526: … it frustrates rather than effectuates legislative intent simplistically to assume that whatever furthers the statute's primary objective must be the law.
6. While I should interpret the general powers in a way that promotes the protective purpose of the NSWTG Act, that interpretation must have regard to the language and purpose of all the provisions in the NSWTG Act.
7. A similar conclusion applies to the effect of the general principles applicable to Chapter 4 of the NSWTG Act which are set out in s 39: It is the duty of everyone exercising functions under this Chapter with respect to protected persons or patients 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.
8. NSWTG submitted that making the security decision is consistent with the principles in s 39(a) and (g). CTS disagreed. He submitted that using his wife's money to protect her against maladministration was not in her interests because he has been managing her affairs without incident for 6 years. Regardless of whether the security decision in this case is consistent with the principles in s 39, those principles only apply when a person is exercising functions under Chapter 4 of the NSWTG Act. The initial question is whether the legislature has conferred on the NSWTG the function or power to make the security decision.
9. Deane J explained the relevant principle of statutory construction in Refrigerated Express Lines (Australasia) Pty Ltd v Australian Meat and Livestock Corporation (1980) 29 ALR 333 at 347: As a matter of general construction, where there is repugnancy between the general provision of a statute and provisions dealing with a particular subject matter, the latter must prevail and, to the extent of any such repugnancy, the general provisions will be inapplicable to the subject matter of the special provisions… "The rule is, that wherever there is a particular enactment and a general enactment in the same statute, and the latter, taken in its most comprehensive sense, would overrule the former, the particular enactment must be taken to be operative …" (per Romilly MR: Pretty v Solly (1859) 26 Beav 606 at 610).
10. In the same paragraph Deane J emphasised that repugnancy can arise "where there is no direct contradiction between the relevant legislative provisions". His Honour held that repugnancy is present: … where it appears, as a matter of construction, that special provisions were intended exhaustively to govern their particular subject matter and where general provisions, if held to be applicable to the particular subject matter, would constitute a departure from that intention by encroaching on that subject matter.
11. In Hamzy v Commissioner of Corrective Services (NSW) [2011] NSWSC 120 at [134] Johnson J noted that the principle in Refrigerated Express Lines (Australasia) Pty Ltd v Australian Meat and Livestock Corporation had not been doubted in later decisions. In that case Mr Hamzy, a prison inmate, submitted that his detention in restricted facilities under a general provision of the Crimes (Administration of Sentences) Act 1999 (NSW), was invalid because no segregation order had been made under a special provision of the same Act.
12. Johnson J cited several decisions in support of the conclusion that action under the broad or general power may be valid "even where the particular action which is taken may coincide with action which may be taken under a specific provision". Using Deane J's terminology in Refrigerated Express Lines (Australasia) Pty Ltd v Australian Meat and Livestock Corporation (1980) 29 ALR 333, His Honour held at [130] that: The test is one of repugnancy and not simply whether there is overlap between the provisions.
13. Several factors, including the legislative history, persuaded Johnson J that the special provision giving power to make a segregation order was not intended to be an "exhaustive code controlling and regulating the subject matter": Hamzy v Commissioner of Corrective Services (NSW) [2011] NSWSC 120 at [121] -[124] and [347].
14. Lindsay J has applied this principle in construing the NSWTG Act. His Honour held in Re W and L (Parameters of Protected Estate Management Orders) [2014] NSWSC 1106 at 68, that the NSWTG did not have power to revoke a financial management order under s 86 of the NSWTG Act. His Honour concluded that despite the fact that the NSWTG had the power to "modify or ameliorate" the operation of management orders (for example in powers under ss 40, 64 and 71), the express power of revocation given to the Supreme Court in s 86 "militates against a construction of the Act that locates another revocation power in an implication without resort to the Court's inherent or SCA (Supreme Court Act) s 23 jurisdiction". (Words in brackets added.)
15. In my view, the legislature intended the special power in this case exhaustively to govern the circumstances in which a manager may be required to give security to the NSWTG in respect of the management of an estate. It would not be in accordance with the legislature's intention to interpret the general provisions as giving the NSWTG the same powers as the special power or a sub-set of the special powers.
16. Division 2 of Part 4.5 of Chapter 4 of the NSWTG Act allocates some powers to both the Supreme Court and NCAT, some powers to both the Supreme Court and the NSWTG and some powers to the NSWTG exclusively. There is no reason to think this allocation of roles in the Division of the NSWTG Act that governs the management of estates by managers, was random or fortuitous. It reflects a deliberate choice made by the legislature about which entities should make which decisions.
17. That conclusion is supported by the fact that ancillary provisions to the special power in s 68(1) of the NSWTG Act allocate a particular role to the NSWTG when the Supreme Court or NCAT require security: (2) A manager is not taken to have complied with a requirement under subsection (1) unless the security given has been approved by the NSW Trustee. (3) The NSW Trustee is to ensure that the conditions of any security provided under this section, or before the commencement of this section, in respect of the management of the estate of a managed person are complied with. (4) The NSW Trustee must report any failure to comply with any such condition to the Supreme Court or the Civil and Administrative Tribunal (as the case requires) immediately on becoming aware of the failure.
18. Rather than allocate the special power to the Supreme Court, NCAT and the NSWTG, the legislature gave the NSWTG an oversight role in relation to the special power. That drafting supports the conclusion that legislature intended the NSWTG to have a secondary role when security is required.
19. The NSWTG noted that s 68(5) provides that certain provisions of the Bail Act 2013 (NSW) and the Fines Act 1996 (NSW) apply to the forfeiture of any security and to the recovery of any security so forfeited. (5) The provisions of Schedule 2 to the Bail Act 2013 and Part 7 of the Fines Act 1996 apply to the forfeiture of any security and to the recovery of any security so forfeited in the same way as they apply to the forfeiture of bail money and to the recovery of any bail money so forfeited.
20. NSWTG acknowledged that while the Supreme Court and NCAT could require asset specific security under the special power, it could extend as far as payment into court of fixed sums by the manager. Section 68(5) was said to indicate that the sort of security contemplated by the special power is capable of going far beyond the sort of security an individual might want to obtain in respect of an individual managing his or her estate.
21. This submission was one aspect of the NSWTG's overall submission that the special power and the general powers overlap but address essentially different questions. The NSWTG characterised the special power as concerning the question of whether someone should be a manager at all and if so, on what terms. Support for that characterisation was said to be based, in part, on the fact that the security power refers to security "in respect of the management" generally, rather than security or protection in respect of particular assets. It was said that the Supreme Court and NCAT are concerned with the character or nature of the proposed manager rather than with the steps that the managed person would normally take if he or she did not lack capacity but was required to have his or her estate managed by a third party.
22. According to the NSWTG, consideration of appropriate insurance or security arises in the context of both the special power and the general powers. The general powers were said to give the NSWTG power to determine what should be done in respect of particular assets, including the preservation of those assets: NSWTG Act, s 65(3)(a).
23. In my view that was not the legislature's intention. After the Supreme Court or NCAT makes a financial management order it has to decide whether to "commit the management of the estate" to the NSWTG or to "appoint a suitable person as manager of that estate": NSWTG Act, s 41 and Guardianship Act, s 25M(1)(a). The issue as to whether the manager should be required to provide security is in a different provision and is separate from the question of whether a person is a "suitable person" to be the manager of the estate. Even though it is a separate question, the Supreme Court and NCAT are able to consider whether to exercise their discretionary power to require security over the whole estate or particular assets, at the same time as the manager is appointed. Considering that issue at the time of the appointment is consistent with the protective nature of the jurisdiction because it allows any necessary security to be put in place at the outset.
24. The relevant legislative history also supports my interpretation of the provisions. Before amendments to the legislation made by the Guardianship and Protected Estates Legislation Amendment Act 2002 (NSW), the Protective Commissioner (the NSWTG's predecessor) was an officer of the Supreme Court who performed judicial as well as administrative functions relating to financial management orders. In Re McL [2001] NSWSC 280 at [9], Young J noted that "the usual order consequent upon declaring a person incapable of managing his or her affairs includes an order that the managed person give security to the satisfaction of the Protective Commissioner": Supreme Court Rules 1970 (NSW), Part 76 rule 13 (repealed). When making the order that the manager in that case give security "to the satisfaction of the court" Young J emphasised at [12] that an order in that form was made to make it clear that when the Protective Commissioner or the Deputy Registrar make the appropriate order it is the Court's order made by its delegate.
25. The Guardianship and Protected Estates Legislation Amendment Act 2002 (NSW) separated the judicial decision-making role of the Protective Commissioner from the functions of financial management. In the second reading speech in the legislative Assembly, Mr Whelan explained that the "Supreme Court and the Guardianship Tribunal will continue to have the power to make financial management orders, and the Protective Commissioner will act exclusively as the financial manager or the supervisor of private financial managers": Hansard, 21 November 2002, 7422-7423. The role of the NSWTG in relation to financial management has remained substantially the same as the Protective Commissioner's role. The NSWTG is not the Court's delegate.
26. I note that Lindsay J routinely relies on the special power to make orders in similar terms to that made by Young J prior to the 2002 amendments. For example, in SLJ v RTJ [2017] NSWSC 137 at [34] (8) the following order was made: ORDER, pursuant to section 68 of the NSW Trustee and Guardian Act, that Ability One Financial Management Pty Ltd give such, if any, security in respect of its management of the defendant's estate as the NSW Trustee may determine to be appropriate.
27. By way of observation only, if the NSWTG had power under the general provisions to require security, there would be no need for the Supreme Court to make orders of this kind.

Does the Tribunal have jurisdiction to review the decision?

1. There is no dispute that the Tribunal has jurisdiction to review the decision. The reasoning in support of that conclusion is set out at [20] - [26] of CTS v NSW Trustee and Guardian [2017] NSWCATAD 119 (13 April 2017).

What is the "correct and preferable" decision?

1. As the reviewable decision was made without power, the correct decision is to set it aside.
2. Because I have not reviewed the merits of the security decision there is no need to describe the precise nature and scope of the surety bond scheme. Nevertheless, by way of background, I have set out below a brief description of my understanding of the scheme.

When and why was the scheme introduced?

1. The NSWTG implemented the surety bond scheme in March 2015. Expressions of interest were called for in 2014 and Willis Towers Watson, as agents for Aviva Insurance Limited, was the successful tenderer.
2. The NSWTG provided the Tribunal with the following explanation as to the need for a surety bond scheme. On 30 June 2016 about 16,040 people in NSW were under a financial management order. Of those 3,946 had a private financial manager appointed. The number of private financial management orders being made by the Supreme Court and NCAT is increasing and it is expected that this trend will continue. Historically, the NSWTG had attempted to ensure that the assets of a protected person's estate were secure. Methods used to achieve that purpose included holding the Certificate of Title to real estate or seeking a letter of undertaking from a professional or financial institution. The NSW Trustee found the letter of undertaking scheme difficult to enforce and decided to investigate the best way to secure the assets which were regarded as being 'at risk'.

What fees are payable?

1. The surety bond fee is $150 for estates below $25,000; $350 for estates between 25,000 and $50,000 and an annual fee at the rate of 0.4% per annum based on the total value of the estate for estates over $50,000. Property, motor vehicles, furniture and accommodation bonds are excluded from the value of the estate.
2. The NSWTG regards the non-payment of a security bond as non-compliance with a direction. If that occurs, the NSWTG may consider applying for the financial management order to be reviewed.

When will the estate be reimbursed if assets are dissipated?

1. If a manager fails in their duties to manage and protect the managed person's estate, the NSWTG may direct Aviva to pay to the managed person or their personal representative up to a maximum aggregate sum not exceeding the security amount.
2. The terms of the surety bond are described in a document with that title produced by Willis Towers Watson. Another document headed 'Important Information' provides that "… [I]f a Private Manager fails in their duties to manage and protect the managed person's estate, a claim can be made in or in part by NSWTG". CTS queried whether a claim would be made if money was lost because of an 'innocent mistake'. In a document headed Surety Bond Policy and Procedures, the NSWTG equates a failure of duty to manage and protect the managed person's estate with "maladministration". The NSWTG adopts the meaning of "maladministration" in s 11(2) of the Public Interest Disclosures Act 1994 (NSW): (2) For the purposes of this Act, conduct is of a kind that amounts to maladministration if it involves action or inaction of a serious nature that is: (a) contrary to law, or (b) unreasonable, unjust, oppressive or improperly discriminatory, or (c) based wholly or partly on improper motives.

Alteration or revocation of the surety bond

1. The NSWTG may stipulate that the security amount be increased or reduced and the security in respect of the bond will automatically be amended to the amount stipulated. Ms Rovina Krishna, Acting Senior Manager, Compliance and Audit with the NSWTG, gave evidence that if a decision was made to alter or revoke a surety bond, NSWTG will effect this change or revocation by notifying Willis Towers Watson of the decision. A reason for the decision could be that the private manager has purchased security or insurance from another provider. After Willis Towers Watson has been notified of the NSWTG's decision they, together with Aviva, will cancel or amend any invoice for a surety bond that has been issued to a manager.

When will the surety bond be required?

1. Various exclusions apply to the surety bond scheme. NSWTG will not require a surety bond: 1. where the financial management order made by the Supreme Court or NCAT is reviewable within 12 months; 2. where the liquid assets of the estate, such as money held in a bank account, term deposit, stocks, shares, bonds and superannuation (if the managed person is over 65 years old) are less than $2000; 3. in relation to non-liquid assets such as real property, accommodation bonds, motor vehicles, furniture, jewellery, life insurance policies and superannuation (if the managed person is under 65 years old); 4. where the private manager has purchased security or insurance from a provider other than Aviva such as indemnity insurance from Ability One Financial Management Pty Limited; or 5. where it can be demonstrated by other means that the managed person does not have the capacity to pay.
2. Other relevant considerations that NSWTG says it will take into account when determining whether to require a surety bond, and the assets to be included in the calculation as to the amount to be paid, are: 1. the length of a fixed period financial management order of more than 12 months duration; 2. whether the manager is married to the managed person and they have shared assets; and 3. where there is more than one manager appointed for a managed person.

Orders The decision of the NSW Trustee and Guardian made on 2 August 2016 that a surety bond should apply to CTS's wife's estate is set aside.

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: 30 June 2017