DKF v NSW Trustee & Guardian

Background

1. The property the subject of this application is located on the harbour. It is made up of two separate blocks. The home on the property was constructed in the 1940/50s and remains in its original condition. The home remains fully furnished with the mother's furniture and contains her belongings. The mother has not lived in the home since May 2013 when she moved to a nursing home.
2. The property is not the only property owned by the mother. In November 2014, the mother's estate was estimated to have a net value of about $18 million. At that time, the property was estimated to have a value of $6 million.
3. The mother is 97 years of age. The husband of the mother and father of the applicants and the second respondent died in 1997.
4. In 2007, the mother was diagnosed with Alzheimer's.
5. On 20 June 2012 the former Guardianship Tribunal declared that the mother was incapable of managing her affairs and appointed DKF (the first applicant) and DKL (the second respondent) as the financial manager of their mother's estate. Prior to this appointment, DKF had assisted her mother in managing her estate. In February 2013, the Tribunal replaced DKL with DKG as financial manager of their mother's estate.
6. In the same month as the mother moved into a nursing home (i.e. May 2013), the second respondent (DKL) commenced proceedings in the Supreme Court seeking an accounting by the first applicant and her husband arising from their management of the mother's estate and an order for the partition and sale of another property in which he, his sister, his older brother (GKG) and his mother had an interest. I understand that the order for partition and sale was subsequently withdrawn.
7. On 27 November 2014, the NSW Supreme Court made orders, by consent, staying the orders of the former Guardianship Tribunal, appointing the first respondent as receiver and manager of the estate of the mother and that the proceedings be referred for mediation: see L v L [2014] NSWSC 1686. The Court formally confirmed the appointment of the first respondent as manager of the mother's estate, on 16 March 2015, following the settlement of the matter at a second mediation.
8. It is common ground that the last will of the mother is valid. In L v L, at [11], His Honour Justice Lindsay described the material terms of that will as follows: "(a) the three children [DKF, DKG and DKL] to be the executors and trustees of the Will: clause 2. (b) the deceased estate of [the mother] to be left on trust for its sale, calling in and conversion into money, and for it to be held on trust for the three children per stripes [in equal shares]: clause 4."
9. In L v L, at [25], Lindsay J noted that, in those proceedings, the competing case of the parties (DKF, DKG and DKL) had become "enmeshed in allegation and counter allegation".
10. In May 2015, the first respondent arranged for the locks to the property to be changed.
11. In a file note of an officer of the first respondent, dated 7 September 2015, concerning the real estate portfolio of the mother, it was noted that the applicants were of the view that the property should be retained and remain vacant for use by family members. However, DKL was noted as wanting to have the property sold, subject to some repairs being undertaken.
12. On 14 September 2015, the first respondent made a decision that the property was to be maintained as a vacant property and remain vacant for use by family members as agreed between them.
13. On 8 October 2015, the first respondent sent an email advising the applicants and the second respondent that a decision had been made to agree to access to the property by a family member each month on a rotation basis until September 2016 when the arrangement would be reviewed. The applicants and the second respondent were asked to sign and return the undertaking and agreement that was attached to the email and upon receipt of that document they would be provided with a set of keys to the property. The applicants and the second respondent each signed the undertaking and agreement which was in the following terms: "I, [name and address] hereby undertake to not remove any contents contained at [the property] and ensure the security of the items when I am in the residence. I agree to the access arrangement as set out below: 1 October 2015 - 31 October 2015 - [DKG second applicant] 1 November 2015 - 30 November 2015 - [DKL second respondent] 1 December 2015 - 31 December 2015 - [DKF first applicant] This arrangement will rotate on a monthly basis in the above order until reviewed in September 2016."
14. In the email of 8 October 2015, the applicants and the second respondent were informed that the decision to grant access on the terms set out above was a reviewable decision. The applicants, nor the second respondent sought review of the decision and the first respondent did not conduct the foreshadowed September 2016 review.
15. On 12 July 2017, DKF wrote to her brothers, DKG and DGL, seeking their support for a proposal being put to the first respondent that her daughter and partner be allowed to reside in the property as caretaker and pay minimal rent to meet the outgoings of the property. She explained that she had contacted the NSW Office of State Revenue and was informed that if the property were to be leased for more than 6 months in any year, their mother would be required to pay land tax. She went on to say that the "only occupancy" of the property "with a fee payable" would be "one where payments to mum do not exceed the regular outgoings". While the proposal was supported by DKG, DKL advised that he could not agree with the proposal and that he and his family would exercise their rights under the 5 October 2015 agreement.
16. On 10 August 2017, DKF submitted her proposal to the first respondent; namely that her daughter and partner occupy the property as caretaker.
17. In the absence of any response from the first respondent, DKF's daughter moved into the property in September 2017, which was a month during which DKF was entitled to use the property under the October 2015 agreement. A colleague of DKF's daughter also moved in with her.
18. In November 2017, when it was his turn to use the property under the September 2015 decision of the first respondent, DKL attended the property and found that the friend of DKF's daughter was also living there. It would appear that she felt intimidated by DKL's appearance and behaviour, which caused an escalation of the tensions between the applicants and DKL.
19. DKL also approached the first respondent objecting to the presence of DKF's daughter and friend on the property when the back deck and stairs were not safe. On 12 December 2017, DKL sent an email to the first respondent raising concerns that he had about the safety of the "deck" at his mother's home.
20. Following receipt of DKL's objections, the first respondent instructed Cerberus Construction Services (Cerberus) to undertake an inspection of the rear deck, the rear stairs from the deck, the stairs from the garage to the garage to the deck and the roof top deck. That inspection occurred on 19 December 2017 and DKL was present during this inspection.
21. At 9.10 am on the day of that inspection, DKL sent an email to the first respondent requesting urgent action in regard to the safety of the back deck and stairs. He noted that he had taught building subjects at TAFE between 2008 and 2012 and that he has a Diploma in Building and that he had not raised his concerns lightly and without knowledge. A copy of his email was sent to the local Council. In his affidavit, DKL explained that while he was at TAFE his area of expertise while teaching at TAFE were the legal obligations in regard to building work.
22. In a report dated 20 December 2017, Cerberus advised the first respondent that the house was very poorly maintained with clear signs of significant damage, "with fences near collapse, obvious issues with roofing, rotting timbers, overgrown gardens etc. In regard to the decks and stairs, Cerberus advised that: "all 4 areas are severely rotten and structurally unsafe" and were "extremely dangerous and at a high risk of collapse". It was noted that the rear deck was 15 metres long, 3 metres wide and "approx. 8m above ground" and "should the handrail or deck collapse there is significant life safety risk". The first respondent subsequently, instructed Cerberus to block access to those areas as being identified as being unsafe.
23. A copy of the Cerberus report was sent to the applicants and the second respondent. They were also advised of the closure of sections of the decks and stairs that were found to be unsafe. The first respondent advised that the continued occupancy of the "non-family member" (i.e. friend of DKF's daughter) was not agreed to and that person was to be asked to leave immediately. The first respondent also advised that the property was to remain vacant until a formal decision was made.
24. On 3 January 2018, the first respondent again wrote to the applicants and the second respondent, seeking written confirmation that the property was vacant and would remain vacant until the property was "deemed safe by a professional property inspector".
25. On 8 January 2018, DKF wrote to the first respondent advising that she had engaged an engineer to inspect the property and that he would provide a report the following day. She also requested that no further action be taken to exclude her daughter from the property and that no steps be taken in regard to replacing the deck and the stairs until there had been a discussion between her and her brothers.
26. On the following day, DKF forwarded to the first respondent and her brothers a copy of the report of the engineer from Close Consultants. In that report, Close Consultants concluded that the "rear timber deck and in-particular the stairs" were in "varying degrees dilapidated and must be repaired and replaced" and until this was done, blocking access to the areas should be maintained. The "internal portion/structure of the house (with access to the deck and rear stairs blocked - off)" was otherwise said to be "structurally sound, safe and suitable for ongoing occupation".
27. On 10 January 2018, the engineer who conducted the inspection on behalf of Cerberus forwarded a quote to the first respondent in regard to undertaking the work recommended in their report.
28. As I have already noted, the original decision of the first respondent in regard to DKL's request was made on 6 February 2018.

NSW Trustee and Guardian Act

1. Part 4 of the NSW Trustee and Guardian Act deals with the management functions relating to persons who are incapable of managing their own affairs (a protected/managed person).
2. Section 39, in Part 4.1 of the NSW Trustee and Guardian Act sets out the general principles applicable to the exercise of the management functions with respect to a protected person who is incapable of managing their affairs. That section relevantly provides: "39 General principles applicable to Chapter It is the duty of everyone exercising functions under this Chapter with respect protected persons … to observe the following principles: (a) the welfare and interest of such persons should be given paramount consideration, …, (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, …"
3. Division 1 of Part 4.4 deals with the management of estates by the first respondent. Section 56 in this Part gives the first respondent a general power to exercise all functions necessary and incident to the management of the estate of the person who is incapable of managing their affairs (the protected/managed person). Section 57 provides that the first respondent has, and may exercise all the functions the protected/managed person can exercise or would have and could exercise if not incapable of managing their affaires.
4. Section 16 of the NSW Trustee and Guardian Act set out the powers of the first respondent in regard to property he holds on trust, or in his protective capacity (i.e. management of the estate of a protected person). That section relevantly provides: "16 Powers of NSW Trustee relating to property and other matters (cf PT Act, s 35, PE Act, s 24) (1) The NSW Trustee may exercise the following functions when acting in a trust capacity or protective capacity: (a) receive money, rent, income and profit of real and personal property, (b) grant leases 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 any such renewal does not exceed 10 years, (c) …, (d) surrender a lease and accept a new lease, (e) accept a surrender of a lease and grant a new lease, (f) …, (g) buy, sell, realise and mortgage (with or without a power of sale) real and personal property, Note. Mortgage includes charge (see section 3 (1)).
5. Section 72 of the NSW Trustee and Guardian Act prescribes what steps must be taken by the first respondent before any action is taken in respect of the estate of a managed person. That section provides as follows: "72 Consultation by NSW Trustee (cf PE Act, s 50) (1) The NSW Trustee must take the following steps before taking any action in respect of the estate of a managed person: (a) the NSW Trustee must determine whether the action is of such a nature that the person or a relative or relatives of the person should be consulted about the action, (b) if the NSW Trustee determines that consultation should take place, the NSW Trustee must cause to be taken all steps that are reasonably practicable in the circumstances to give notice to the person or the relative or relatives of the person of the action, (c) the NSW Trustee must consider any submissions made in response to the notice within the time specified in the notice. (2) In determining whether consultation is required in relation to the action, the NSW Trustee must consider all relevant circumstances and matters, including (without limitation) the following: (a) the value of the estate, (b) the value and nature of any particular property proposed to be affected, (c) the consequences of the proposed action, (d) the necessity or practicality of the proposed action, (e) the extent (if any) to which the estate may be prejudiced by any delay in the proposed action being taken."
6. Section 75 of the NSW Trustee and Guardian Act provides that a manager (including the first respondent) of the estate of a protected person is to ensure the preservation of any items of a personal nature of the person that the person, or a relative of the person, has requested to be preserved.

The case of the first respondent (NSW Trustee and Guardian)

1. The first respondent contended that its decision was the correct and preferred decision and relied on the reasoning set out in the internal review decision. In support of its case, the first respondent tendered a bundle of documents which included copies of: 1. the decision in L v L, 2. documents that supported the decision (i.e copies of the undertaking and agreement of the applicants and the second respondent dated 8 October 2015, advice of the first respondent's Financial Planning Unit dated 6 December 2017, advice of the first respondent's Tax Branch dated 19 January 2018 and a quote/scope of works dated 10 January 2018 from Waterview Projects in regard to the removal and replacement of the rear balcony and steps to that balcony), 3. the original decision and the internal review decision, and 4. the file notes and correspondence between officers of the first respondent's office and the applicants and the first respondent.
2. In the original decision, the first respondent noted that there was no approach that would suit all three children, including an agreement that the property be sold. Hence in the absence of any agreement between the children the question was "what is best for the client." In this regard, there was no need to rent the property as the estate of the mother was large and all her needs were being met.
3. Internal investigations within the tax unit of the office of the first respondent had indicated that the property could be leased, on the basis of a non-renewable lease, for up to 180 days in any tax year without "impacting negatively on the estate in regards to land tax". It was also noted that the property could be leased for up to 6 years without losing the "CGT main residence exemption if it was purchased after 20 September 1985."
4. However, for the property to be occupied, it required repair for safety reasons. This included repair and or replacing of the back deck and the steps to the deck. There were ample funds in the estate to meet those costs, which had been estimated to be between $70,000 and $83,000.
5. It was noted that: "the client cannot offer an informed view. Her will does not favour one child over another and in fact all three children are co-executors".
6. The first respondent concluded that, in the circumstances, the property should be rented for up to 180 days each financial year once essential repairs are completed to make the property safe. Otherwise, the undertaking and agreement of 5 October 2015 is to be continued with DKL occupying the property during March 2017.
7. In its internal review, the first respondent made the following findings following submissions from DKF (the first applicant): 1. That the deck be replaced - the report provided by DFK, agreed with the original decision to replace the deck at the back of the house - "It is not safe and this agency has a duty of care to ensure the property is maintained appropriately to a safe standard". 2. That the property is leased - that the life expectancy of the mother of the applicants and the second respondent was short should not impact the decision to rent the property for a period of 6 months. That the property could be demolished and redeveloped in the future was not relevant to the issue as to whether the property should be leased. However, the fact remained that the property was in an unacceptable state of repair. 3. That DKF's daughter not be allowed to remain as caretaker - the office of the first respondent has endeavoured to deal equitably with the applicants and the second respondent in regard to their mother's estate. There has been no agreement between them for DKF's daughter to live in the property permanently as caretaker. If DKF's daughter is prepared to pay market rent for 6 months consideration could be given to this proposal. However, it would require consultation and agreement with DKG and DKL.
8. Based on these findings, the first respondent affirmed the original decision and made a decision that DKF's daughter was to vacate the property and that the agreed monthly rotations would continue with DKL having access to the property during April 2018.

The case of the applicants, DKF and DKG

1. The applicants relied on two affidavits of DKF (sworn on 4 April 2018 and 16 April 2018) and a bundle of documents tendered by DKG.
2. In her affidavit of 4 April 2018, DKF set out the background to this application and her communications with officers of the first respondent, since May 2015, concerning her mother's home. DKF also set out her communications with her brothers, DKG and DKL. Copies of the correspondence to which she referred are attached to her affidavit. Included in these documents are DKF's position in regard to the repairs/replacement of the back deck and stairs, the October 2015 agreement, the proposed 6 monthly lease of the property and her daughter's ongoing occupation of the property and why she should not be required to vacate the property. DKF made similar arguments in these proceedings. In summary, they were as follows: 1. repairing/replacing the decking and leasing the property for 6 months a year - as advised by Richardson & Wrench in May 2014, given the age of the property "the highest and best value" of the property "is in its redevelopment potential" and on this basis only minimal work needed to be undertaken as the likely purchaser would "demolish all existing improvements (except the pontoon, pool, marina birth and slipway)". Hence, demolishing and replacing the deck and stairs would not add value to the property and should not be undertaken. Their mother is old and her life expectancy is unfortunately short. There would be no net benefit to her mother if the property is leased, as the costs of repairs would exceed any rental that is obtained. Leasing the property also attracts risks and the pool of tenants willing to accept a 6-month lease would be very low; 1. the October 2015 agreement - their mother meets all the expenses associated with the property and "it does not benefit anyone". DKF lives next door and she and her brothers have no need to use the house. The only use that is made of the property included her use of the carport, the use of the pool by her family and that of DKG. DKL's family had also occasionally used the pool, but otherwise DKL nor his family had used the property during his allocated month for a long time; 2. DKF's daughter to remain as caretakers - this arrangement would mean that her mother need not expend any money on the property, her mother's possessions would remain in the property, her husband would continue to maintain the pool and pontoon, all members of the family could use the pool and pontoon and other grandchildren could stay in the house with her daughter and her partner. In regard to the latter, DKF said that this would be consistent with her mother's wishes who had in the past, while she had capacity, provided assistance to her grandchildren on a needs basis and not on an equal basis. DKF's daughter, a PhD student was in need of accommodation while she completed her studies and her mother would have assisted her if she had capacity; 3. reasons why DKF's daughter should not be required to vacate the property before a final decision is made - if her daughter were required to move out she would need to enter into another lease, which would mean she would be unavailable to move back in; 4. why DKL should not have exclusive use of the property during his allocated month - "excluding a person to enable another to choose not to use the property is ridiculous. It is a waste and not what my mother would have wanted"; and 5. reason not to keep the property empty - "it is a waste" and "not what my mother would have wanted" or in her financial interest. The property, if empty, would be prone to break-ins.
3. DKG supports what is contained in the affidavit of his sister, DKF.
4. The second affidavit of DKF is a detailed response to the affidavit of DKL. To the extent necessary, I have dealt with that response below.

The case of the second respondent, DKL

1. DKL relied on an affidavit he swore on 11 April 2018. In his affidavit, DKL supported the decision to replace/repair the back deck and that once this work was completed he supported the leasing of the property for 6 months of the year.
2. In regard to the decision to replace the back deck, he said he believed that this was necessary as repair was impractical and not supported by the evidence. If it were established that repair would be advantageous and safe he would not object to such but he had not seen any evidence of this being the case. He noted the findings of the Richardson and Wrench report that a replaced or repaired deck was necessary to facilitate the ultimate sale of the property and to maximise value, which was substantial.
3. He noted that he had been present when the engineer of Cerberus had attended the property at the request of the first respondent. He said he accepted the findings contained in the Cerberus report. DKL also referred to a quotation he obtained, on 16 January 2018, from NSW Insurance Builders, in regard to the work that was recommended in the Cerberus report. That quote he pointed out contained a statement that: "Due to the current state of the veranda we recommend urgent repairs".
4. In regard to the Close Consultant report, DKL noted that the engineer had not investigated the roof deck. Nor had the engineer disclosed what access, if any, he had to the deck and the stairs, other than to say he had limited access to the deck as it was blocked off. Nor had the engineer suggested that the deck complied with the relevant legal standards, or that an assessment had been made of the structural adequacy of the deck.
5. In her response, DKF said she had accompanied the Close Consultant engineer when he inspected the property and that he was able to access the back deck through the window. She noted that in his report, the engineer suggested that this window access be closed off.
6. DKL said he supported the decision that the DKF's daughter vacate the property as her occupation was not authorised and the property was not safe.
7. DKL said that the best indication of his mother's wishes was reflected in her will, namely that her children be treated equally. In that regard she had appointed each of her children as her executor of her will and provided that her estate be divided equally amongst her children. He noted that his mother's will did not provide any bequests to her grandchildren. Nor did the will support the retention of property or that a particular child had a claim of right on a particular property that made up her estate. On the contrary, the will provided for the sale of properties. He said a decision to approve "caretaker" occupation by DKF's daughter was not consistent with his mother's will and her wishes that her children be treated equally.
8. In her response, DKF reiterated what she had said in her earlier affidavit about how her mother had treated her children and grandchildren on a needs basis. She also gave further examples of when this had occurred.

Consideration

1. As evidenced in the correspondence filed in these proceedings, there remains considerable hostility between the applicants on the one hand and the second respondent on the other. However, they do acknowledge that their mother's home is old and that the external decks and stairs are in need of repair and/or replacement. They also agree that any future purchaser of the property would develop it by demolishing the existing house and re-building on it. However, this does not mean that the house itself is not fit for occupation, or that the external decks and stairs should not be repaired or replaced in the mean time. As I have noted, the Close Construction report specifically stated that the internal portion/structure of the house was structurally sound, safe and suitable for occupation. The Cerberus report does not say otherwise, even though some remarks are made about what had been observed about the condition of the house generally.
2. What is in dispute is the extent to which repairs are necessary and whether the property should be leased as determined by the first respondent.
3. In determining these issues, the Tribunal (as was the first respondent before it) is required to observe the principles set out in s 39 of the NSW Trustee and Guardian Act. That is, in determining the matters in issue, the Tribunal (as was the first respondent before it) must consider: 1. whether it is in the best interest of the mother and her estate to have the back deck and stairs relaced - if not what is in the best interest of the mother and her estate; 2. whether is it in the best interest of the mother and her estate to have the property leased - if not what, in the circumstances is in the best interest of the mother and her estate as to the use and occupancy of the property; 3. the mother's wish in regard to the replacement of the back steps and stairs and the use and occupancy of her home, if she had the capacity to express her wishes; and 4. the importance of preserving family relationships.

Repairs/replacement of the decks and stairs

1. I understand from the material filed that the only repairs/replacement in issue are the back steps and the stairs of that deck. That is, it is agreed that the roof top deck and the stairs at the rear of the garage to the deck are not to be repaired or replaced. The only work that is to be undertaken to these steps and roof top deck is to remove them or render them inaccessible and not useable.
2. From the photos provided of the property, the back deck appears to be an important feature of the mother's home, it expands the width of the house and provides expansive water views. DKL explained that the applicants had used the back deck to host functions at various times. The stairs from the deck provide access from the house to the pool and garden. While the mother was living on the property, she and her extended family used the deck and stairs to entertain and access the back garden and pool and they have continued to be used for such purposes.
3. As I have noted, the advice of the real estate agent is that the back deck and stairs are an important feature of the property in the event it is offered for sale. The property, as I have noted does not need to be sold to meet the mother's needs. This does not mean that it cannot be sold, but as no party in these proceedings has argued that the property be sold, or that this would have been the mother's wish, I have not considered this any further.
4. The deck and steps are not of a modern design and as pointed out in the Cerberus report aspects of the deck and stairs would not meet today's requirements. However, as pointed out in the Close Consultants' report this does not mean that the back deck and stairs need to be demolished and replaced with a new deck and stairs that meet today's requirement. However, the Close Consultants' report did agree that the back deck and stairs needed to be repaired and in doing so some sections would need to be replaced. This did not mean that the replaced items necessarily needed to meet today's requirements. The Close Consultant's report did not include a detailed scope of works for undertaking such repair work. However, it did indicate in some detail the areas of concern that needed to be examined further.
5. The applicants accept that the back deck and stairs are in a state of disrepair. However, before any money is spent on repairs or replacement, alternatives such as ensuring that barriers are installed which prevent access from the house to the deck. If this cannot be done successfully, they suggest: 1. that a further engineer report be obtained that investigates the alternatives of repairing the deck in part or whole, replacing the deck in part or whole and removing the deck in part or whole and making all openings from the house to those sections where the deck is removed compliant with current standards; and 2. that quotes be obtained in respect of each alternative.
6. The first respondent and DKL do not agree with this approach given the findings in the Cerberus report and the Close Consultants report in regard to the state of the back deck and stairs.
7. In my opinion, a further engineers report would incur unnecessary costs and delay the inevitable while the home remains part of the mother's estate. However, I do agree, based on the Close Consultants report that quotes be obtained for undertaking the work necessary to make the back deck and stairs safe. These quotes can then be compared with that provided by the engineer who inspected the property on behalf of Cerberus.
8. In my opinion, it is also in the best interest of the mother that her property, including her home, be maintained and kept in a state of repair that it is safe to use and occupy. As I have noted, there is no dispute that there is sufficient funds in her estate to either replace or undertake repairs to the back deck and stairs. However, I agree with the applicants that the mother, if she had capacity to manage her affairs, would not wish for the deck and stairs to be replaced, if they could be repaired cost effectively along the lines recommended in the Close Construction report.
9. While I find that the decision of the respondent to replace the back deck and steps, as recommended in the Cerberus report is not the correct and preferred decision, I agree, that it is in the best interest of the mother and her estate that the back deck be repaired and replaced where necessary, subject to the respondent obtaining a quote from two independent licensed and appropriately experienced builders as to the costs of repairing and/or replacing the back deck and stairs as recommended in the Close Consultants report. Any repairs that are undertaken should also include the removal or permanent closure of the remaining external decks and stairs so that they cannot be accessed or used.
10. Based on my findings, the appropriate order is to vary the decision of the first respondent.

Occupancy and use of the property

1. In my opinion, based on the material before the Tribunal, if the mother had the capacity to manage her estate, she would wish for her home to be used and occupied by her family. Her wish would of course have been that her children reach an agreement on how this could best be achieved equitably having regard to their respective wishes and needs, including any special needs of her grandchildren. Regrettably, as between the applicants and the second respondent this has not occurred.
2. Hence, there are three proposals as to the occupancy and use of the property. These are that it be leased, occupied by DKF's daughter and her partner as caretaker (with the family having ongoing access to the back yard pool and pontoon), or the retention of the rotating month by month use by the applicants and the second respondent.
3. In its decision, the first respondent relied on the advice received from the financial planning unit of his office. In this regard it was noted that the annual costs of rates, water, insurance and up-keep of the property was about $12,500 per year, and paid by the mother's estate. If rented full time, at $2,000 per week, it was estimated that there would be a cost to the mother's estate of about $35,820, as the property would attract an annual land tax liability of about $120,000. This expense, it was noted, far outweighed what would be received in rent.
4. If the property were to be leased, on the basis of a non-renewable 6-month lease, it was estimated that the mother's estate would receive an income of $34,840 per year, as the land would remain exempt from land tax. And, if the property were rented on a caretaker basis there would be no cost to the mother's estate in regard to the on going up-keep of the property. However, no additional income would be derived from this arrangement.
5. In my view, on the information before the Tribunal and for the reasons set out below, it is not in the interest of the mother for the property to be leased. Nor, as I have mentioned, would it be the preferred wish of the mother if she had the capacity to manage her estate. Accordingly, I have found that the decision of the first respondent to lease the property and her home is not the correct and preferred decision. However, I have found that it would be in the interest of the mother and accord with her wish, if she had the capacity to manage her affairs, that DKF's daughter and husband use and occupy her home on the basis proposed by DKF and supported by DKG.

Lease

1. I understand that currently, the property is exempt from land tax under the Land Tax Management Act 1956 (NSW) (LTM Act) because it was the mother's principal place of residence in the 6 months prior to her moving into residential care as prescribed under that Act: see LTM Act, ss 7, 9, 10(1)(r) and Sch 1A, cls 2, 8(4) and (5). That is, despite her absence from her home (the property), the concession in cl 8(4) and (5) of Sch 1A applies. That clause also contains a number of concessions in regard to income derived from the principal place of residence during the absence of the person/owner from his, her principal place of residence. While there is insufficient material before the Tribunal to make any conclusive findings in regard to the mother's possible liability, or exemption from liability, for land tax on the property, it is instructive to set out the concessions in cl 8 of Sch 1A of the LTM Act to the extent relevant to this application: "8 Concession for absences from former residence (1) A person is taken, for the purpose of the principal place of residence exemption, to continue to use and occupy land formerly used and occupied by the person as a principal place of residence (a former residence), after the person ceases to so use and occupy the former residence, if the Chief Commissioner is satisfied that: (a) the person used and occupied the former residence as a principal place of residence for a continuous period of at least 6 months, and (b) the person does not own any other land used and occupied by the person as a principal place of residence. (2) The maximum period for which a person may be taken, under this clause, to continue to use and occupy a former residence as a principal place of residence is 6 years starting at the end of the last period (of at least 6 months) during which the former residence was used and occupied by the person as a principal place of residence (not including any period for which the person may be taken, under clause 7 or this clause, to have used and occupied the former residence as a principal place of residence). (3) If the principal place of residence exemption applies to the former residence of a person by operation of this clause, the exemption ceases to have effect if the person is the owner of the former residence at the end of the 6-year period referred to in subclause (2) and fails: (a) to resume actual use and occupation of the residence as a principal place of residence by the end of that period, and (b) to continue that use and occupation for at least 6 months. (3A) The principal place of residence exemption also ceases to have effect if the land ceases to be capable of being used and occupied as a residence and remains incapable of being so used and occupied for a period exceeding 4 years. (4) Any period during which a person is in full time care is not to be counted toward the maximum period referred to in subclause (2). Accordingly, a person who is in full time care may continue to be taken to use and occupy his or her former residence as his or her principal place of residence during any period in which he or she is in full time care. (5) For the purposes of this clause, a person is in full time care during any period in which the person: (a) … (b) resides at an aged care establishment (within the meaning of section 10R) while being provided with residential care, or respite care, or (c) … (6) This clause applies in respect of the assessment of a person's ownership of land in a tax year only if the Chief Commissioner is satisfied that no income has been derived from the use or occupation of the former residence in the preceding tax year, except as permitted by subclause (7). (7) Income may be derived from the use or occupation of the former residence in a tax year if: (a) the income is derived from a lease, licence or other arrangement under which a person has a right to occupy the former residence and the period for which any such right of occupation is conferred does not exceed a continuous period of 6 months, or a total period of 182 days, in the tax year, or (b) the income is derived from any arrangement under which a person occupies the former residence, but the income is no more than is reasonably required to cover council, water and energy rates and charges and maintenance costs of the owner in respect of the residence. (7A) For the purposes of subclause (7), each overnight stay counts as one day. (8) …"
2. Every year, commencing 1 January, land tax is levied on land that is owned at midnight on 31 December in the year immediately preceding the year for which it is levied: see LTM Act, s 8. Land tax is levied on the "taxable value" of all land situated in New South Wales and payable by the owner of that land unless it is exempt from taxation under that Act: see LTM Act, ss 7 and 9.
3. As noted in cl 8(7)(a) above, during any land tax year, income derived from the use or occupation of the mother's home is permitted, on the condition that any grant of right to occupy the premises (e.g. a lease) does not exceed a continuous period of 6 months in any one land tax year. Where that right to occupy the mother's home exceeds one day or night, this concession would no longer apply.
4. A 6 month lease would be subject to the terms of the Residential Tenancies Act 2010 (NSW) (RT Act) and as pointed out by DKF, no consideration appears to have been given to what type of tenant may be interested in, or desirable for a short term lease of the property, or what a tenant would be prepared to pay today in rent for a lease of this kind. DKF also noted a number of potential additional costs and risks involved in leasing the property every year for a short period of time had not been considered. The mother's furniture and belongings are in the home - whether that will stay or whether it will be stored does not appear to have been considered. If it is to be stored, there will be additional costs for storage, which has not been accounted for in estimating the income that would be derived from this option. Nor were the costs of the first respondent in managing these leases accounted for in the estimate of costs.
5. In its internal review, the first respondent said that these were matters to be considered after the decision to lease the property had been made. In my opinion, in this case, where the costs and benefits of a proposal of this kind are finely balanced, an approach of this kind is not appropriate in order to assess what is in the best interest of the mother. For example, if the NSW Office of State Revenue were to find that the lease failed to meet the terms of cl 8(7)(a) of Sch 1A of the LTM Act because the tenant remained in occupation for an additional day, the property would arguably be subject to a substantial land tax liability. Hence, a more comprehensive and detailed analysis, based on current information of income, total costs and risks is required. In my view, the respondent has failed to do so. Had a more comprehensive analysis been undertaken, there is likely to have been little, if any cost benefit, to the mother's estate if the property was offered for lease as suggested by DKF and DKG.
6. Accordingly, on the information before the Tribunal, I am not satisfied that it is in the best interest of the mother's estate for the property to be leased. On this basis alone, I find that the decision of the respondent to lease the mother's property and home is not the correct and preferred decision.

Caretaker

1. Clause 8(7)(b) of Sch 1A of the LTM Act, permits income to be derived, during any land tax year, by the owner of land that is the persons' principal place of residence and from which the owner is absent, if a third party is given a continued right to occupy the owners residence and the income derived from that right of occupation is no more than what is reasonably required to cover council, water and energy rates and charges and maintenance costs of the mother in respect of the property.
2. It was on this basis that DKF proposed that her daughter and her partner occupy the mother's home. However, that occupation was to be subject to members of the mother's family having access to the back yard and pool. In her written submissions DKF also proposed that the son of DKL should also be given a right to occupy the premises should he wish to do so.
3. I have not been informed that DKF's proposal is no longer of any relevance. Hence, I have considered the proposal. It is also one that might be of general relevance to what is in the interest of the mother in regard to the use and occupation of her home.
4. On the basis of the findings in the Close Consultants' report the mother's home is structurally safe to use and occupy even though the back deck and stairs need to be repaired. Hence, it would appear that an occupation and use of the mother's home along the lines proposed by DKF would be permitted under cl 8(7)(b) of Sch 1A of the LTAM Act, without any loss of the principal place of residence exemption under the LTM Act.
5. The question is whether DKF's daughter and partner should be given this right to occupy the property. DKG supports this proposal. The proposal, as indicated above would benefit the mother in that there would be no need to remove the mother's furniture or belongings and there would appear to be no additional costs to the mother for this occupation. However, DKL does not support the proposal, in particular the proposal that DKF's daughter and partner be granted a right to occupy and use the mother's home. His objection that the proposal is contrary to his mother's will and her wish that her estate be shared equally amongst her children, in my view is misconceived. The proposal does not alter what is contained in his mother's will, or provide any advantage or preference to DKF or her daughter. Nor is it one where, in the circumstances, he and his family would be dealt with unfairly. The proposal, examined objectively, is one that is made in the interest of the mother and her estate. In this regard, DKL supports a proposal that income should be derived from the occupation and use of the premises. This proposal is consistent with his position. Hence, his objection appears to be that the occupation and use is for one family member to the exclusion of other family members. Yet at the hearing he was adamant that neither he, nor any of his children had any desire to use or occupy the premises.
6. In my opinion, DKL is entitled to take the position he has taken and I am not critical of him for doing so. However, this does not detract from the issues as to whether it is in the interest of the mother that her property is used and occupied in the terms of cl 8(7)(b) of Sch 1A of the LTM Act. In my view, given the evidence of DKF and DKG, that they do not have a need to use or occupy the property and the evidence of DKL that he, nor his family wish to use or occupy the property, it is in the interest of the mother that DKF's daughter and her partner are given a right to use and occupy the mother's home on terms that satisfy cl 8(7)(b) and without any additional costs to the mother's estate. I am also satisfied that, if the mother had the capacity to manage her estate, it would be her preferred wish to have DKF's daughter and partner use occupy the premises. However, I make this finding subject to the first respondent obtaining independent legal and tax advice on the written agreement that is to be entered to give effect to this proposal.

Monthly rotation as per decision of September 2015

1. In light of my findings above, the September 2015 decision of the first respondent in regard to the use of the mother's property by DKL and his family will need to be considered and reviewed. In any event, in my view, the September 2015 decision is no longer workable as it has caused ongoing tensions between the applicants and the second respondent, which is not in the best interest of the mother and the management of her estate. DKL and his family having no interest in using the property should be reflected in any review or decision that is made in regard to the use and occupation of the mother's home. This does not mean that the first respondent is absolved from his obligation to continue to consult with DKL, as required under s 72 of the NSW Trustee and Guardian Act, in regard to his management of his mother's home and to take into account any views he may express.

Conclusions

1. In summary, for the reasons set out above, I find that: 1. the decision of the first respondent that the back deck and stairs of the mother's home be replaced is not the correct decision and should be varied to repair and replace where necessary the back deck and stairs, subject to the first respondent urgently obtaining a quote from two independent licensed and experienced builders as to the costs of repairing and/or replacing the back deck and stairs as recommended in the Close Consultants report; 2. the decision of the first respondent that the mother's home be leased on the basis of a non-renewable lease for a period 6 months each year is not the correct and preferred decision and should be set aside. In substitution of that decision, I find that the correct and preferred decision is that subject to the first respondent obtaining independent legal and tax advice and DKF's daughter and partner making a written request to the first respondent to occupy and use the mother's home on the basis of an occupancy that meets the requirements of cl 8(7)(b) of Sch 1A of the Land Tax Management Act 1956 (NSW), approval should be given to DKF's daughter and her husband to use and occupy the mother's home on that basis; 3. the decision of the first respondent that DKL have ongoing use of the property in accordance with the September 2015 decision is not the correct and preferred decision and should be set aside. In this regard, I recommend that the September 2015 decision be reviewed in accordance with my findings in these reasons for decision and any decision that is made in regard to the occupation and use of the mother's home by DKF's daughter and her partner; and 4. the decision of the respondent, the subject of review, is otherwise affirmed.

Orders

1. Hence, I make the following orders: 1. The decision of the first respondent that the back deck and stairs of the mother's home be replaced is varied to repair and replace where necessary the back deck and stairs of the mother's home, subject to the first respondent urgently obtaining a quote from two independent licensed and appropriately experienced builders as to the costs of repairing and/or replacing the back deck and stairs as recommended in the Close Consultants report. 2. The decision of the first respondent to lease the mother's home on the basis of a non-renewable lease for a period 6 months each year is set aside and in substitution of that decision the following decision is made: 1. Approval is given to DKF's daughter and her husband to use and occupy the mother's home on the basis of the requirements of cl 8(7)(b) of Sch 1A of the Land Tax Management Act 1956 (NSW), subject to: 1. to DKF's daughter and partner making a written request to the first respondent to occupy and use the mother's home on this basis; and 2. the first respondent obtains independent tax and legal advice in regard to any agreement that is proposed to give effect to an occupation and use of the mother's home on the basis of cl 8(7)(b) of Sch 1A of the Land Tax Management Act 1956 (NSW). 1. The decision of the first respondent that DKL have ongoing use of the property in accordance with the September 2015 decision is not the correct and preferred decision and is set aside and remitted for reconsideration by the first respondent in accordance with the findings and recommendations in these reasons for decision. 2. The respondent's decision the subject of review is otherwise 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: 10 October 2018