DPT [2015] NSWCATGD 3

NCAT Guardianship|2015-02-27

What the Tribunal decided

The Tribunal dismissed the application for review of the enduring power of attorney made on 7 July 2005.

Background

Mrs DPT executed an enduring power of attorney appointing three of her four children, namely Mr TXT, Mr NFT and Ms BDT, as her attorneys. They were appointed to act jointly and severally.
On 31 July the Tribunal received an application from Mr QAT, Mrs DPT's remaining son, to review the enduring power of attorney.
Mrs DPT passed away on 6 September 2014. The applicant decided to proceed with his application and made directions about the conduct of the proceedings in November and December 2014.
Mrs DPT executed her last will and testament on 12 December 2003. She appointed Mr SEB and Mr XFB as her executors and trustees. After making a number of modest monetary bequests, she left the balance of her estate to her four children. Mrs DPT made provision for Mr TXT to have an option to purchase from her executors a three-quarter share in her house in Regional NSW at three quarters of the fair market value. If Mr TXT chose to take this option, the remaining quarter share was to be transmitted to him with the proceeds of the sale to be distributed to her remaining children.
On 21 November 2014, the Tribunal joined Mr SEB to the proceedings at his request. The Tribunal also issue directions that the parties file and serve submissions and documents regarding various transactions between the children and Mrs DPT.

Statutory framework and issues for determination

Section 36(1) of the Powers of Attorney Act 2003 (NSW) (the POA Act) provides as follows: A review Tribunal may, on the application of an interested person, decide to review the making, revocation or the operation and effect of a reviewable power of attorney or not to carry out such a review.
In reviewing the making of a power of attorney, the Tribunal may make the orders set out in s 36(3) of the POA Act, including orders that the power of attorney is invalid. In reviewing the operation and effect of a power of attorney, the Tribunal may make orders as provided under s 36(4) as follows: A review Tribunal may, if satisfied that it would be in the best interests of the principal to do so or that it would better reflect the wishes of the principal, make any one or more of the following orders relating to the operation and effect of a power of attorney: (a) an order varying a term of, or a power conferred by, the power of attorney, (b) an order removing a person from office as an attorney, (c) an order appointing a substitute attorney to replace an attorney who has been removed from office by a review Tribunal or who otherwise vacates the office, (d) an order reinstating a power of attorney that has lapsed by reason of any vacancy in the office of an attorney and appointing a substitute attorney to replace the attorney who vacated office, (e) an order directing or requiring any one or more of the following: (i) that an attorney furnish accounts and other information to the Tribunal or to a person nominated by the Tribunal, (ii) that an attorney lodge with the Tribunal a copy of all records and accounts kept by the attorney of dealings and transactions made by the attorney under the power, (iii) that those records and accounts be audited by an auditor appointed by the Tribunal and that a copy of the report of the auditor be furnished to the Tribunal, (iv) that the attorney submit a plan of financial management to the Tribunal for approval, (f) an order revoking all or part of the power of attorney, (g) such other orders as the review Tribunal thinks fit.
At the directions hearings, the applicant advised the Tribunal that he sought orders under s 36(4)(e)of the POA Act.
As noted by the Tribunal in UQH [2014] NSWCATGD 37 at [17], it is well-established law that the death of the principal of a power of attorney terminates the power. As Mrs DPT died on 6 September 2014, her power of attorney ceased to have operative effect from this date. This is not in dispute.
The issues for determination were: first, whether the Tribunal had power to review the power of attorney of Mrs DPT given she had passed away by the time of the hearing; secondly, if there was power to review the instrument, whether the Tribunal should conduct such a review and, thirdly, if the Tribunal were to conduct reviews what orders should be made.

Evidence and submissions

Mr SEB filed evidence about Mrs DPT's estate. According to an affidavit filed by him in probate proceedings before the Supreme Court of NSW, Mrs DPT's estate comprised the following (estimated values included): Money on deposit $17,000 Money due under mortgage $155,600 (to secure loan to Mr TXT) Money owing by Mr TXT $188,000 Money owing by Ms BDT $114,000 Money owing by Mr NFT $73,000 Money owing by Mr QAT $65,000

There was considerable dispute between the parties about the administration of the estate, the manner in which the attorneys had operated the power of the powers of attorney and whether the tribunal should review the operation and effect of the power of attorney.
Notwithstanding this, there was apparently little contest about the following matters: 1. Mrs DPT lived in a retirement village in Inner West Sydney from 2011 until 2014, when she moved into an aged care facility. She lived in this facility until her death. 2. Mrs DPT had owned a property in Regional NSW which was sold to Mr TXT. 3. There were two contracts said to have been entered into for the sale of the Regional NSW property. The first contract was in May 2010 for a purchase price of $330,000. After adjustments in favour of Mr TXT of $219,831.83, the balance of the purchase price payable was $118,427. Mr TXT did not pay the balance of the purchase price and Mrs DPT gave him a loan for this amount, secured by a mortgage over the property. The second contract was dated 14 August 2014 for a purchase price of $530,000. No monies were paid under this contract. 4. Mrs DPT owned her retirement unit in Inner West Sydney which was sold in September 2012. The proceeds were distributed to the attorneys. 5. Over the years, Mrs DPT had made a number of loans to each of her children, although there was dispute about whether those loans had been repaid or were payable. 6. Mr QAT was made bankrupt on 14 December 2006 and his bankruptcy and the date for his automatic discharge was 14 December 2009. 7. Mr SEB was Mrs DPT's solicitor for many years and his law firm acted in respect of a number of the transactions involving Mrs DPT, either on her own account or through her attorneys.
There is no evidence before the tribunal as to when the Regional NSW property was transferred to Mr TXT. Mr SEB's law firm acted in respect of the Regional NSW property transactions.
The parties provided submissions about the issues in dispute, their views on the application and the amounts said to be owing to the estate by them and by their siblings.
Mr TXT and Mr NFT submitted that there was no need for orders to be made by the tribunal because Mr SEB, as the executor of the estate, could conduct investigations and adjudicate on the issues of which amounts were owing to the estate and what should be distributed. They both accepted that the attorneys should not have made distributions of Mrs DPT's estate, to the exclusion of Mr QAT, prior to Mrs DPT's death.
Mr QAT and Ms BDT submitted that the tribunal should order that there be an accounting undertaken, such accounting to be audited, about the various transactions between Mrs DPT and her children and in particular those transactions authorised by the attorneys. Neither were satisfied that Mr SEB could properly exercise his functions as executor because he had a conflict of interest and "could not be trusted."
Mr SEB submitted that he had no conflict of interest as the matters had been undertaken on instruction, either by Mrs DPT or by Ms BDT. He was able to undertake an investigation in relation to the amounts owing to the estate and if necessary he could seek court determination of the issues in dispute. If any matter was identified by the beneficiaries that raised a conflict of interest, namely a cause of action against his law firm or him for participation in the various for giving effect to the various transactions, he could make an application to the court. It will be nonetheless helpful to the administration of the estate if the tribunal could undertake an accounting exercise.
At the hearing, Mr SEB produced for schedules setting out a summary of the various claims made between the parties about monies owed to the estate and between each other.
It was clear from the submissions of the parties that the main issues in dispute related to the sale of the Regional NSW property, namely the purchase price and the adjustments made in favour of Mr TXT, a loan from a commercial bank to Mr QAT in 2003 repaid by Mrs DPT, transfers of cash and personal belongings from Mrs DPT's estate alleged to be have been made to the benefit of Ms BDT and loans made by the father of Mrs DPT's children in 1992 which were apparently alleged by Mr TXT and Mr NFT to be the assets of Mrs DPT's estate. There were also issues about interest said to be payable on the various loans and rent that was alleged to have been payable to Mrs DPT in respect of the Regional NSW property. It was common ground that the attorneys would need to account to the estate for the proceeds of the retirement unit that were distributed to them prior to Mrs DPT's death.
Mr QAT contended that the majority of these disputed transactions occurred when Mrs DPT did not have capacity and were effected by her attorneys. Ms BDT agreed she was involved in authorising a number of these transactions but she submitted that she had not realised there were issues with the transactions and she now believes Mr TXT obtained unfair benefits.

Consideration

The issue of whether this Tribunal has power to review an enduring power of attorney after the principal had passed away was considered in UQH and recently by the Tribunal as currently constituted in KBX [2015] NSWCATGD 2. In both cases the Tribunal concluded it would have jurisdiction to review the operation and effect of an enduring power of attorney under the POA Act, even if the principal had passed away prior to the hearing.
We will not repeat the reasoning adopted by the Tribunal in those cases other than to note that we are also of this view. Accordingly, we find that the Tribunal has jurisdiction to conduct a review of the operation and effect of a power of attorney that is no longer operative under s 36(1) of the POA Act. The key issue is whether the Tribunal should exercise its discretion to conduct such a review, and, if so what orders should be made.
In this case, the Tribunal conducted a review of the operation and effect of the power of attorney of executed by Mrs DPT in that it examined certain transactions between Mrs DPT's children and her estate, as apparently authorised by Mrs DPT's attorneys, and directed the parties to provide information and submissions on these matters.
The Tribunal formed the view that a number of the transactions between Mrs DPT and Mr TXT warranted scrutiny. It was unclear from the evidence and submissions provided whether the consideration negotiated for the purchase of Regional NSW property in 2010 was fair market value, whether the adjustments made in favour of Mr TXT at this time were warranted or justifiable and whether the first "sale" was valid give the second contract for sale that was attached to the affidavit filed for Mr SEB in the Supreme Court for a higher purchase price. Furthermore, there were a number of transactions entered before Mrs DPT's death, such as the sale of her retirement unit, the distribution of the proceeds and transfers from her accounts, which could not be explained.
There was evidence that Mrs DPT was generous to her children throughout her life. She loaned money to Mr QAT and Mr NFT for their businesses and loaned or gave money to Ms BDT. Mr TXT lived in the Regional NSW property without paying rent. Through her last will and testament, Mrs DPT expressed an intention that her children share her estate equally, although she gave Mr TXT the option to purchase the Regional NSW property from her estate but for fair market value. There is evidence that her attorneys dealt with her estate before her death, taking benefits to which they anticipated they would ultimately become entitled on her death. There was no evidence that this negatively impacted on Mrs DPT's welfare during her lifetime although it is clear this impacted on her estate. This had the potential to cause unfairness between her children, particularly if any questionable transactions were not duly investigated and adjusted or recovered by Mrs DPT's executor.
The issue for the Tribunal was whether it should order an accounting, or some other order under s 36(4) of the POA Act, given these findings.
A number of the disputed transactions, such as the loans alleged from Mrs DPT's partner to their children in 1992 and Mrs DPT's repayment of Mr QAT's loan to the commercial bank in 2003, were unrelated to the operation of the power of attorney. The only transactions that could properly be scrutinised by this Tribunal under s 36(1) of the POA Act are those transactions that were undertaken by Mrs DPT's attorneys using the authority of the power of attorney. As such, the Tribunal does not have jurisdiction to make broad ranging orders covering all aspects of the estate.
The sale of the Regional NSW property was the most controversial and significant transaction and may have been capable of being the subject of an order for an accounting under s 36(4) of the POA Act. However, such an order would have been of limited utility in resolving the disputes between the parties and in progressing the due administration of the estate. For instance, appointing an auditor under s 36(4)(a)(ii) of the POA Act to undertake an accounting in respect of the Regional NSW property transactions would not be an effective or appropriate mechanism to resolve disputed facts about fair market value and claims by Mrs Mr TXT for reimbursement for moneys paid on Mrs DPT's account. How would the auditor determine those matters and would those determinations be binding? Would the Tribunal need to adjudicate on any further disputes?
Mr SEB and Mr XFB are the executors of Mrs DPT's estate. They are charged with the responsibility of properly administering her estate, which would include taking any action to recover moneys owing to the estate. On one view, the simplest approach in respect of the Regional NSW property may be to calculate the entitlements of the residuary beneficiaries by undertaking an accounting exercise to unwind the various Regional NSW property transactions. This is the role of the executors, not this Tribunal.
If there is disagreement or justifiable contentions that the executors are not able to make unconflicted investigations and decisions about the estate, action can be taken by the beneficiaries, in indeed by the executors, in the Supreme Court seeking the determination of these matters. The Supreme Court has jurisdiction to make a wide range of orders in relation to the administration of estates, whereas this Tribunal's jurisdiction is limited to the powers conferred under the POA Act.
Having regard to these matters, the Tribunal determined not to make any orders under s 36(4)(a) of the POA Act. First, the appropriate mechanism is for disputes in respect of the estate to be resolved by the executors, failing which by the Supreme Court, given in its broader powers to resolve disputes, particularly disputes in relation to the administration of estates. Secondly, it is not clear that an accounting under s 36(4)(a) would have resolved the critical issues in dispute.
Accordingly, the application for review of the power of attorney of 7 July 2005 was dismissed.

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: 05 May 2015

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