FINANCIAL MANAGEMENT - application for a financial management order - potential for large compensation payout - whether appropriate timing to bring application - consideration of H v H - [2020] NSWCATGD 22 - NSWCATGD 2020 case summary

NCAT Guardianship|2020-02-10|Before: Cootes AM

What the Tribunal decided

The Tribunal committed the estate of TZF to the management of the NSW Trustee and Guardian. The Tribunal excluded from the order Centrelink benefits and employment income. We also ordered that the order is to be reviewed in two years' time.

Background

TZF is a 21-year-old Aboriginal man who for the past 12 months or so has lived in rental accommodation in regional NSW. TZF has the support of his former foster carer, DYJ, and her family who live near to where TZF lives.
DYJ is the applicant for a financial management order for TZF. The application explains that TZF will potentially receive a sum of money as a result of proceedings involving the State of NSW. This relates to the mental harm caused to TZF by the physical and emotional abuse he suffered whilst in the care of his mother between approximately November 2002 and June 2010 and what is said to be the breach of the duty of care owed by the State of NSW to TZF over this period.
Formal court proceedings have not yet been lodged but a mediation process is scheduled for 30 March 2020. TZF is represented in those matters by Ms FL of a law firm.
Ms FL appeared in the proceedings in this Tribunal as a Mackenzie friend for TZF.
The application was made on the basis that due to the state of TZF's mental health, he would not be able to engage fully in the mediation process and nor would he be capable of managing any funds received.

TZF's participation in the hearing

Although TZF participated by telephone at the hearing on 13 January 2020, he did not participate in this hearing. We were told by DYJ that although TZF knew about the hearing he had gone to another suburb in regional NSW for a boxing session instead of taking part in the hearing. DYJ told us that TZF has experienced some difficulties since the last hearing date including the death of his Pop with whom he was very close. TZF also had a relationship end. DYJ described him as "going a bit off the rails lately".
DYJ told us that she did not believe that there was any point adjourning the hearing so that TZF could attend a later hearing and that TZF has consistently made his view clear to her that he wishes to have a financial management order made in relation to the legal proceedings underway.
We had to consider whether we should proceed with the hearing in TZF's absence. In doing so we had regard to the fact that he had been served with notice of today's hearing but that he had made a positive decision not to participate. We understood that this may well have been a conscious decision of TZF's not to participate in proceedings that may for a variety of reasons be stressful for him in circumstances where he has also had upsetting events occur in recent weeks. We also had regard to the fact that he took part on the previous hearing date and gave his views about the application then. On that occasion TZF agreed with the making of a financial management order.
Based on the evidence provided by DYJ, we were of the view that adjourning the hearing would not necessarily mean that TZF would participate on a later occasion particularly given some of the material before us concerning the levels of anxiety that TZF can experience and that this may well lead to a decision not to participate in a later hearing.
Therefore, whilst we had careful regard to the principle that we should have regard to TZF's views and take them in to consideration (s 4(d) of the Guardianship Act 1987 (NSW)) and that this is optimally done by speaking to TZF personally, we formed the view that we could ascertain his views through the evidence of DYJ, the view TZF expressed at the previous hearing and the solicitor acting as a Mackenzie friend for him on this occasion. In these circumstances we decided to proceed with hearing the application in TZF's absence.

Consideration of whether the financial management application should be pursued at this point in time

As previously noted, directions were made seeking written submissions as to the relevance, or otherwise, of H v H [2015] NSWSC 837. In H v H, personal injuries proceedings had been commenced in the Supreme Court of NSW. The issue arose as to whether an application for protected estate management orders in relation to a claimant for compensation, whose only substantial asset was whatever course of action he or she might have in the compensation proceedings, is generally to be regarded as premature if it is made before a determination of those proceedings ([9]). Justice Lindsay expressed the view that save in exceptional circumstances (such as a case in which an award of interim damages is made under s 82 of the Civil Procedure Act 2005 (NSW)), the conduct of compensation proceedings is best left to those directly engaged in their conduct without an overlay of protected estate management orders made before their determination ([11]). Justice Lindsay noted that those involved in the conduct of common law compensation proceedings may seek by a premature but strategically timed application for protected estate management orders to influence the course of the common law proceedings in circumstances in which protected estate management costs may be recoverable as a not insubstantial head of damage on a claim for personal injury compensation ([8]). His Honour noted that the office of a tutor, appointed in and for the purpose of compensation proceedings, is generally best calculated to manage those proceedings and to do so in a manner that operates fairly to the party or parties against whom an award of compensation is sought ([10]). His Honour also noted that a claimant for damages may succumb to a temptation to magnify indicators of incapacity (in order to inflate the level of damages recovered) only to find that success in the common law jurisdiction may be attended by inconvenient constraints imposed according to imperatives of the protective jurisdiction ([19]).
Having regard to these matters, we nevertheless accepted the essential submission made on TZF's behalf that in his circumstances in which proceedings have not yet been commenced in the Supreme Court and in which a tutor is therefore unable to be appointed, some of the considerations outlined by Justice Lindsay cautioning against an application for protective orders being made are not directly relevant. The written submissions note that if a financial management order is made at this time TZF will have the advantage of an independent financial manager to negotiate and agree to any agreement on his behalf. TZF's status under s 74 of the Civil Procedure Act and s 38 of the NSW Trustee and Guardian Act 2009 (NSW) as a 'protected person', if a financial management order is made, will also mandate that, pursuant to s 75 of the Civil Procedure Act, any settlement for his claim will need to be approved by the Court.
We were satisfied that the consideration of the application for a financial management order should proceed and that the considerations outlined in H v H are not an impediment to this application being heard.

What did the Tribunal have to decide?

The questions to be considered by the Tribunal are:

Is TZF incapable of managing his affairs?
Is there a need for another person to manage TZF's affairs and is it in his best interests for a financial management order to be made?
If so, who should be appointed financial manager?

Is TZF incapable of managing his affairs?

Dr Z, psychiatrist, prepared a written report of an assessment undertaken on 18 June 2019. Dr Z's report provides an overview of the traumatic and abusive childhood that TZF experienced in his birth family up until the time that he entered into foster care with DYJ's mother when TZF was approximately 12 years of age. Dr Z noted that in terms of TZF's functional status, he:

is independent with regard to his personal care and will do instrumental activities of daily living. According to Dr Z, these instrumental activities of daily living are motivated by his obsessions regarding germs;
has been unable to hold down a job;
can maintain social and intimate relationships although irritability and conflict is a characteristic of these relationships often in association with his substance use or his anxiety; and
enjoys boxing and is considered good at this.

In response to a direct question posed by TZF's legal representative as to whether TZF is capable of managing any settlement funds he may receive, Dr Z responded in the negative and stated as follows: [TZF] in my opinion requires a financial manager. He engages in impulsive behaviour, has significant issues with regards to addiction and poor affective regulation. He has learning difficulties, problems understanding complex, written and verbal material. He would be at risk for exploitation and would not be capable of managing his funds independently.
Dr Z diagnosed TZF with persistent depressive disorder, obsessive compulsive disorder, polysubstance abuse disorder and mild intellectual impairment.
DYJ provided us with evidence concerning TZF's ability to manage his day to day financial affairs. According to DYJ:

she provides him with a significant degree of support so that he meets his financial commitments and spends more or less one hour per week helping TZF to work through his bills, mail and any fines that apply
she has assisted TZF to put in place a number of direct debits which ensures that his rent, electricity and other regular bills are paid
TZF is very open to her assistance, welcomes it and has never attempted to cancel any of these direct debits
described TZF as having essentially missed out on the fundamentals of his schooling as he barely attended primary school. It was not until, as previously noted, he entered in to her mother's care in a fostering arrangement that he really commenced his education
is keen to continue to support TZF to develop his independence and maturity in terms of his financial management skills but described him as being extremely vulnerable to others
as an example of TZF's vulnerability, told us that members of TZF's family frequently request money from him, sometimes from prison, and that when he has visited with family, items such as his money, wallet and telephone have gone missing
told us that TZF is also vulnerable to exploitation from other acquaintances. She provided an example that TZF visited friends in Dubbo and during that period his car keys were taken as well as his shoes, wallet and telephone.

DYJ told us that in her view, TZF is not capable of managing the legal process and providing instructions in terms of the mediation process. Nor would he be capable of managing any settlement sum that may be paid. She expressed the view that were TZF to be responsible for any compensation that he receives, it is likely that he would be unable to protect these funds because he would be open and vulnerable to other people requesting money from him and he would have difficulty saying no. DYJ described TZF as having a poor memory and that the trauma he has experienced was so great that he becomes overwhelmed by small things.
Ms FL told us that whilst her firm has been taking instructions from TZF in terms of the compensation proceedings, she believes that it would be in TZF's interests to have a financial manager appointed at this stage so that a financial manager is engaged in the mediation proceedings. Ms FL emphasised TZF's vulnerability and that the mediation discussions that would take place are intertwined with any compensation payment that is ultimately made and that in her view, TZF is incapable of managing either process.

Legal principles

The test for determining a person's capability to manage his or her affairs has been described as follows (P v NSW Trustee and Guardian [2015] NSWSC 579, [307]-[308]): Is a person reasonably able to manage his or her own affairs in a reasonably competent fashion, without the intervention of a [financial manager] charged with a duty to protect his or her welfare and interests? … [A] focus for attention is whether the person is able to deal with (making and implementing decisions about) his or her own affairs (person and property, capital and income) in a reasonable, rational and orderly way, with due regard to his or her present and prospective wants and needs, and those of family and friends, without undue risk of neglect, abuse or exploitation.
In considering whether the person is "able" in this sense, consideration may be given to:

past and present experience as a predictor of the future course of events;
support systems available to the person; and
the extent to which the person, placed as he or she is, can be relied upon to make sound judgments about his or her welfare and interests: see Lindsay J in CJ v AKJ [2015] NSWSC 498 at [38], and P v NSW Trustee and Guardian [2015] NSWSC 579 at [309].

The relevant time for considering whether a person is incapable of managing his or her affairs is not merely the day of the hearing but the reasonably foreseeable future (McD v McD (1983) 3 NSWLR 81 at 86). See Lindsay J in Re W and L (Parameters of Protected Estate Management Orders) [2014] NSWSC 1106 at [20]: Each case must, of course, be considered on its own facts, including not only actual facts presently known but also, so far as they can be known, prospective developments

Consideration

We accepted the professional views of Dr Z given her qualifications, the detailed assessment she undertook in relation to TZF and the consistency between the views she expressed and the evidence provided by DYJ in terms of TZF's day to day functioning in relation to his financial affairs. Dr Z provided evidence of the impact of the trauma that TZF's experienced in his childhood on his functional capacity to manage his financial affairs. We accepted the evidence that his limited schooling at a young age, mild intellectual disability and trauma have contributed to the level functioning that he experiences at this point in his life.
Whilst as previously noted, we did not hear directly from TZF during this hearing, we accepted the evidence of DYJ as credible and reliable given her close relationship with TZF and her intimate knowledge of his ability to manage on a day to day basis.
We accepted that TZF is incapable, due to the impairments he experiences reflected in his multiple diagnoses and his difficulty with managing day to day financial affairs, to engage in the detailed mediation negotiations that will be required in the near future.
Despite the support systems available to TZF including the strong emotional and practical support that DYJ provides, we accepted that based on the evidence of past experience, TZF is vulnerable to financial exploitation and he would not be capable of managing a significant sum of money if it were paid to him as a result of the mediation discussions. Based on DYJ's evidence, which we accept, that TZF has been exploited in the past by family and acquaintances, we formed the view that TZF would have difficulty in resisting attempts from others to gain access to those funds.
We were therefore satisfied that TZF is incapable of managing his affairs.

Is there a need for a manager to be appointed?

We were satisfied that there is a need to appoint someone to manage TZF's affairs. This application was prompted by the legal proceedings and the mediation conference that is due to occur on 30 March 2020. We were satisfied that a financial manager is needed so that TZF may get the greatest benefit from the mediation process and that so any compensation payment that arises from the mediation is protected and utilised for his sole benefit.

Is it in TZF's best interest to make a financial management order?

In considering whether or not to make a financial management order we were very cognisant of TZF's youth and the onerous nature of a financial management order on a person at such a young age. For the reasons that follow, however, we made certain exclusions from the order that will enable TZF to continue to have responsibility for the management of certain parts of his estate, namely any Centrelink benefits or employment income. We also included a review period of two years so that the Tribunal may consider whether or not the order is at that time operating in TZF's interests.
Having regard to the exclusions we imposed and the review period that we included, we were satisfied that the protection offered by the appointment of a financial manager outweighed the potential negative impact of the making of an order. In arriving at this view, we gave weight to the principles that TZF's freedom of decision and freedom of action and that his decision making should be restricted as little as possible (Guardianship Act, s 4(b)), he should be encouraged as far as possible to live a normal life in the community (Guardianship Act, s 4(c)), and that he should be encouraged as far as possible to be self-reliant in matters relating to his financial affairs (Guardianship Act, s 4(f)).

Who should be appointed as financial manager?

It was clear to us that DYJ had given careful consideration as to whether she should seek to be appointed as TZF's financial manager. However, DYJ told us that she did not wish to seek to take on this role. DYJ told us that she did not want the responsibility of the role but rather wanted to focus on her ongoing relationship with TZF and all of the informal supports she provides to him.
In these circumstances, and as there was no other person available to be considered for this role, we committed the management of TZF's estate to the NSW Trustee and Guardian.

Should exclusions be included in the order?

Financial management orders apply to the whole of the estate of the person. However, the Tribunal may order that certain parts of the estate should be excluded from a financial management order: Guardianship Act, s 25E(2).
We decided that TZF's Centrelink benefits and employment income should be excluded from the financial management order. The evidence persuaded us that with the ongoing support that DYJ provides to TZF in managing his Centrelink income, it is in his interests to continue to have responsibility for this financial aspect of his life. We accepted DYJ's view that it is important for TZF to continue to develop his financial management abilities and although he experiences ups and downs in terms of his mental health and his ability to manage, she is confident that with her support, he can continue to do so.
The exclusion order was made with the consent of Ms Rice, the representative of the NSW Trustee and Guardian.
We note that Ms Rice also raised the possibility of making an order that applied to the entirety of TZF's estate but that the NSW Trustee and Guardian could, pursuant to s 17(2) of the NSW Trustee and Guardian Act, prepare an instrument allowing TZF the responsibility to manage those earnings. We took into account however DYJ's evidence that this application would not have been made were it not for the upcoming mediation conference and that it was in TZF's interests to exclude certain matters from the financial management order rather than have the order apply to the entirety of his estate.

Should a reviewable financial management order be made?

We decided to make the financial management order reviewable in two years' time having regard to TZF's youth and that his capability to manage his affairs may change and develop over time and as he matures. We chose a review period of two years given the suggestion provided in Dr Z's report that a minimum of 12 to 24 months of psychological intervention may assist TZF to develop strategies to regulate and control his emotional health. A review hearing in approximately two years' time will provide an opportunity for the Tribunal to be provided with evidence as to whether TZF has regained his capacity to manage this aspect of his financial affairs or whether in any event it would be in his best interests to revoke the order or to make any changes to the terms of the financial management order including any exclusions.

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: 18 August 2020

Trustee and Guardian Act 2009(NSW)

FINANCIAL MANAGEMENT - application for a financial management order - potential for large compensation payout - whether appropriate timing to bring application - consideration of H v H

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