L v L

Judgment 1The parties to these proceedings are members of the one family. 2The principal parties (namely, the plaintiff, the first defendant and the second defendant) are siblings, each of mature age. The first defendant's husband has been joined as a cross claimant but, for the present, his position does not require separate elaboration. 3The third defendant is the mother of the principal parties. They are her only children. For convenience, and with no disrespect intended, I refer to them from time to time as "the children". 4The third defendant was born in 1921 and is presently aged 93 years. Her husband (the father of her children), the patriarch of the family, died in 1997. 5The third defendant (the family matriarch) now lives, comfortably, in a nursing home. All parties agree that she is best cared for there, that she is incapable of managing her own affairs or living independently and that she lacks the mental capacity to transact business. She is a "protected person" within the meaning of the Guardianship Act 1987 NSW, s 25D and the NSW Trustee and Guardian Act 2009 NSW, s 38. 6On 20 June 2012 the Guardianship Tribunal declared that she is incapable of managing her affairs, and appointed the plaintiff and the first defendant as financial managers of her estate. 7On 8 February 2013 the Tribunal ordered that the second defendant replace the plaintiff as financial manager so that the financial managers became, and remain, the first and second defendants. 8There has been interminable disputation between the plaintiff (on the one hand) and the first and second defendants (on the other). 9There is no dispute between the parties about the third defendant's testamentary arrangements. 10It is common ground that the third defendant's last will (dated 4 July 1989) is valid. 11Her husband having predeceased her, its material terms provide for: (a)the three children (the plaintiff, the first defendant and the second defendant) to be executors and trustees of the Will: clause 2. (b)the deceased estate of the third defendant 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 stirpes: clause 4. 12It is also common ground that the third defendant's estate presently has a net value estimated at about $18 million. 13According to an affidavit affirmed by the second defendant on 25 November 2014, the estate comprises (in summary terms): (a)cash in bank, estimated at $942,074 (b)shares, with an estimated value of about $209,226.54 (c)a property at North Sydney (comprising two semi-detached residences on one lot), with an estimated value of about $2 million. (d)a property at Waverley (comprising two semi-detached residences on the one lot), with an estimated value of about $2.3 million. (e)the third defendant's former matrimonial home (comprising two lots) at North Sydney, with an estimated value of about $6 million. (f)a 99% interest in the property adjoining the third defendant's matrimonial home, the total estimated value of which is about $4.5 million. (g)a 40% interest in a block of flats at North Sydney (estimated to have a total value of $1.8 million), with an estimated value of $720,000. (h)a home unit at Mona Vale, with an estimated value of about $900,000. (i)a 99% interest in a property (described as a family holiday house) at Wombarra, with an estimated total value of between $800,000-$900,000. (j)a 50% interest, as a joint tenant with the first defendant, in an office in North Sydney, with an estimated value of between $115,000-$200,000. (k)12 parcels of vacant land in Greece, with an estimated value of about $50,000. 14The former matrimonial home of the third defendant is vacant, with no plans for it to be leased. The first and second defendants have no plans for the property to be sold or leased. They say that it is better left vacant lest any utilisation of it (other than as the entirely nominal principal residence of the third defendant) would be likely to attract unwanted taxation consequences. 15They evidently prefer to keep it as part of a redevelopment package with the adjoining property. That property is occupied by the first defendant (as a 1% co-owner of it with the third defendant) and her husband. 16As managers of the third defendant's estate, the first and second defendants have obtained a survey, and they have had a concept plan prepared, with a view to obtaining development approval for a dwelling on each of the three adjoining lots that, together, presently comprise two residences. 17As managers of the third defendant's estate, the first and second defendants have also taken steps towards having each of: (a) the North Sydney property comprising two semis; and (b) the Waverly property, sub-divided. 18These steps have been taken subject to approval by the NSW Trustee as monitor of private managers. 19Each development proposal is rationalised by the first and second defendants on the basis that it is likely to enhance the value of the third defendant's estate, and accord with her predisposition (until she ceased to be compos mentis) to hold on to real estate rather than to trade it. 20The principal proceedings were commenced by a statement of claim filed on 8 May 2013. The current pleadings (subject to the possibility of further, foreshadowed amendments) comprise a further amended statement of claim filed on 3 July 2014; the first and second defendants' defence to the further amended statement of claim, filed 28 July 2014; the third defendant's defence (to the amended statement of claim), filed 12 May 2014; a further amended statement of first cross claim filed by the first and second defendants (with the husband of the first defendant) against the plaintiff, filed 28 July 2014; and the plaintiff's defence to the further amended cross claim, filed 11 September 2014. 21The principal proceedings ostensibly bear the character of a dispute between the children about management by the first defendant and her husband (the third cross claimant), over many years, of the Kirribilli property, in which: (a)the third defendant holds a 40% interest as a tenant in common (representing her initial 20%, and another 20% interest inherited from her late husband); and (b)each of the three children holds a 20% interest. 22The proceedings involve, amongst other things, a claim by the plaintiff for an accounting by the first defendant and her husband arising from their management of the Kirribilli property, and a cross claim by them alleging, inter alia, that the plaintiff holds his interest in the property on trust for them or, at least, ought to be ordered to pay them equitable compensation. 23The first and second defendants do not deny that, for many years, they managed the Kirribilli property, ostensibly for the whole family under the direction of the third defendant, on terms that may have been favourable to themselves. 24They contend, rather, that all members of the family acquiesced in this until, after the third defendant became incapable of managing her affairs, the plaintiff objected to the property being managed otherwise than on a strictly accountable basis. They also contend that the first defendant and her husband, relying on the informal acquiescence of the family in their receipt of arguably preferential terms, took on onerous obligations which they would not otherwise have borne. 25At this point the parties' competing cases become enmeshed in allegation and counter allegation. 26There has been much interlocutory manoeuvring in this litigation, sometimes but not uniformly involving a claim for the Kirribilli property to be sold by trustees for sale appointed pursuant to the Conveyancing Act 1919 s 66G. 27That manoeuvring has involved the appointment of a tutor to represent the third defendant in the proceedings. 28Costs incurred by the tutor, which the children of the third defendant evidently anticipate will be charged against her estate, are presently estimated to total $94,600. 29On one view, the amount at issue in the principal proceedings is said, ultimately, to be of the order of about $138,624. This is the amount which, on the plaintiff's calculations, the first defendant has overdrawn on her share of profits collectively derived by the family letting out the Kirribilli property over the period 1997-2012. 30None of the children can afford this litigation. In his affidavit of 25 November 2014 the second defendant included a paragraph to the following effect: "95. Neither [the first defendant] nor I have ready funds to pay for legal costs incurred in these proceedings. [The first defendant] is unable to borrow any more money. To pay for legal fees, I have obtained a $300,000 line of credit secured by a mortgage over my previously unencumbered home to pay for our legal fees. Approximately $200,000 of this credit remains. Apart from my income from property as a family co-owner [of the Kirribilli property] I receive wages of approximately $55,000 per annum ..." 31Although it may be necessary or desirable for there to be more precise evidence of the financial circumstances of each member of the family before any decision is taken about the possibility of substantial provision being made for them out of the protected estate of the third defendant, the picture that emerges of this family is one of communal wealth having been accumulated (as far as is presently material) in the name of the third defendant, leaving the next generation, her children, with little more than an expectation of a sizeable inheritance from the third defendant's deceased estate, should they survive her. 32That might have worked well enough when the third defendant (and her late husband) were in a position, by dint of parental authority, to manage the affairs of the whole family, but its weakness as a model for family harmony has been exposed with the third defendant's descent into dementia and the next generation's relative penury. The third defendant nominally controls more resources than she possibly needs or could use. The children, lacking access to their presumptive share of communal wealth, fight over control of her estate and incidental business. 33The current proceedings, coupled with those in the Guardianship Tribunal, are a manifestation of the parties' inability to adjust to the new relationship they must have with their mother, and with one another, in consequence of a breakdown in the family's traditional decision-making model and the need, which will emerge unequivocally on the death of the third defendant if not earlier, for the children either to go their own separate ways or to resolve to work together. 34Each child, in his or her own way, seeks to be relieved of the burden of the proceedings. 35Each acknowledges the jurisdiction of the Court, upon an exercise of protective jurisdiction, to order that provision for a protected person's family be made out of the protected estate. See Protective Commissioner v D (2004) 60 NSWLR 513 at 540-542, 543 and 544; Griffin v Union Trustee Co of Australia Limited (1947) 48 SR (NSW) 360 at 363; 65 WN (NSW) 5 at 7; Re DJR and the Mental Health Act 1958 [1983] 1 NSWLR 557 at 564E-G; Re S and the Mental Health Act 1958 [1984] 3 NSWLR 341 at 343-344; Scott v Scott [2012] NSWSC 1541; 7 ASTLR 299 at [287]; Secretary, Department of Family and Community Services v K [2014] NSWSCC 1065 at 67; HS Theobold, The Law Relating to Lunacy (Stevens & Sons, London, 1924), pp 462-467. The Court's inherent jurisdiction is in addition to the powers conferred on the Court, or the NSW Trustee, by the NSW Trustee and Guardian Act 2009 NSW: eg, ss 95 and 64-65. 36Each party acknowledges that it cannot be in the interests, or for the benefit, of the third defendant that these proceedings be prolonged. Quite apart from the direct financial burden on her estate (manifested in costs incurred in her name by her tutor), the litigious spirit presently sustaining her children must have an impact on the level and character of personal contact they have had, can have or are likely to have with her in her nursing home environment. Materially, she wants for nothing. She has property and income more ample than her needs. What she lacks, is a companionable family, torn apart by being shackled to one another in their co-ownership of the Kirribilli property, their dissatisfaction with the mode of management of that property, and their expectation of a joint inheritance presently under the control of two children to the practical exclusion of the third. 37One outcome of a mediation of these proceedings held on 22 May 2014 was that the parties reached a "non-binding" agreement that included a term to the following effect: "Parties agree that the 1st & 2nd Defts shall resign as financial mngrs of the Est of the 3rd Deft. The parties are to negotiate in good faith to agree the identity of the replacement Fin Mngr & the terms of appointment". 38Despite urging on the part of the plaintiff, and encouragement on the part of the Tutor of the third defendant, the first and second defendants have declined to step aside from their managerial role. They have, on the contrary, dug in. 39The second defendant's affidavit affirmed 25 November 2014, coupled with submissions made by the first and second defendants in writing and orally, manifests a strong resistance to any proposal for their displacement from the role of the third defendant's financial managers. Acknowledging their fiduciary obligations to the third defendant, they nevertheless exhibit a tendency to claim an entitlement to control the affairs of the third defendant as incumbent managers. 40Given the protective, purposive character of protected estate management, no manager has an entitlement to remain in office: Ability One Financial Management Pty Limited and Anor v JB by his Tutor AB [2014] NSWSC 245 at [151]-[153]. 41The proceedings are bogged down in disputation about the production of documents and the like. The plaintiff seeks production of documents relating to bank accounts of the third defendant, apparently presently in the possession or control of the first defendant. The first and second defendants resist production of the records sought by the plaintiff, and complain about the case pleaded against them by the plaintiff. 42The plaintiff has sought, and the first and second defendants have resisted, the appointment of an independent manager of the third defendant's protected estate. 43The first and second defendants evidently have strong views about the retention and redevelopment of the third defendant's real estate, especially the Kirribilli and North Sydney properties. 44The principal proceedings first came before me on 30 October 2014 when the first and second defendants moved the Court (on a Notice of Motion filed on 3 July 2014) for interlocutory relief relating to pleadings, the continuation in office of the tutor for the third defendant and their resistance of a notice to produce served by the plaintiff. 45In reviewing the parties' court book (including their respective affidavits and written submissions) I formed the view that the interests of the third defendant, as a protected person, required that closer attention be given to the arrangements in place for management of the third defendant's protected estate. Having invited the parties to consider those concerns, I directed that the proceedings (including the notice of motion) be listed before me as the Protective List Judge on 10 November 2014 for directions, with the benefit of short written submissions directed how the proceedings, generally, should be case managed. 46In anticipation of the directions hearing, each of the principal parties filed and served written submissions: the plaintiff's were dated 2 November 2014; the first and second defendants' were dated 5 November 2014; and those of the third defendant's tutor were dated 6 November 2014. 47On 10 November 2014 I formally noted the following questions relating to management of the estate of the third defendant as falling for consideration upon an exercise of the Court's protective jurisdiction: a) whether the current managers of her estate (the first and second defendants) should be replaced by an institutional manager (such as a licensed trustee company or the NSW Trustee) or, pending a determination of other disputes, displaced by the appointment of the NSW Trustee as a receiver. b) whether an order should be made (under, or by reference to, s 66G of the Conveyancing Act 1919) for the sale of the jointly owned property at North Sydney. c) whether the children of the third defendant (namely, the plaintiff and the first and second defendants) should be permitted to apply for, and be granted, an allowance (by way of a capital grant or otherwise) from the protected estate of the third defendant. d) whether, if the answer to (c) is in the affirmative, any property of the third defendant (including but not limited to the third defendant's former matrimonial home, and properties currently leased out by or on behalf of the third defendant) can, and should, be sold to fund any such allowance. e) whether, upon the appointment of a new manager, or receiver, of the estate of the third defendant, the appointment of the tutor for the third defendant might be revoked. f) whether any costs incurred by the estate of the third defendant, by payments to or on the account of the tutor, can or should be ordered to be borne by a party or parties other than the third defendant. g) whether these proceedings, or some part of the proceedings, might usefully be made the subject of an order for mediation. 48I also ordered that each party to the proceedings, no later than 14 November 2014, file and serve any evidence he or she sought to file bearing upon those several questions, and written submissions on them. 49Each of the plaintiff and the tutor for the third defendant, respectively, filed written submissions dated 17 November 2014. 50When the proceedings came before me on 24 November 2014 the first and second defendants sought an extension of time within which to file an affidavit and written submissions. 51To facilitate their doing so, the proceedings were adjourned until 26 November 2014. That allowed the first and second defendants to file an affidavit affirmed by the second defendant on 25 November 2014, together with written submissions bearing the same date. 52When the proceedings came before me on 26 November 2014 the business transacted was limited to a hearing of the questions referred to in sub paragraphs 47 (a), (e), (f) and (g). In order to allow the parties to preserve, for the time being, their competing positions about the identity of the manager, or managers, of the third defendant's protected estate, the first of the four questions limited for present consideration was confined to the question whether the NSW Trustee should be appointed as a receiver of the protected estate. 53The hearing was conducted as an interlocutory proceeding, with no cross examination sought or allowed. The plaintiff complained that, by failing to adhere to the Court's timetable for the filing of affidavits and submissions, the first and second defendants had placed him at a disadvantage in responding to evidence and written submissions served only after 24 November 2014. In the event, however, having regard to the interlocutory character of the business presently before the Court, no party made a submission that the course of the proceedings was attended by procedural unfairness. 54A representative of the office of the NSW Trustee was present in court on both 24 and 26 November 2014 as an observer, but did not participate in the proceedings and was not called upon to do so. 55Upon consideration of the business presently before the Court it is necessary to keep to the fore the purposive nature of an exercise of protective jurisdiction. The jurisdiction is parental and protective. It exists for the benefit of the person in need of protection, taking a large and liberal view of what "benefit" is. It contemplates that the Court 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 their own affairs, he or she would as a right-minded and honourable person desire to do: Theobold, pp 362-363, 380 and 462. 56The financial management orders made by the Guardianship Tribunal (superseded, now, by the Guardianship Division of the Civil and Administrative Tribunal of New South Wales ("NCAT")) had the intent, and effect, of subjecting the third defendant's estate to management under the NSW Trustee and Guardian Act 2009 NSW: Guardianship Act 1987 NSW, s 25E(1). 57Section 39 of the NSW Trustee and Guardian Act 2009 NSW (reflecting a similar set of priorities set out in s 4 of the Guardianship Act 1987 NSW) is to the following effect: "39 General principles applicable to Chapter It is the duty of everyone exercising functions under [Chapter 4 of the Act, entitled "Management Functions Relating to Persons Incapable of Managing their Affairs"] with respect to protected persons ... 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." 58These principles are compatible with, but not exhaustive of, the principles that inform an exercise of the Court's inherent jurisdiction: RL v NSW Trustee and Guardian (2012) 84 NSWLR 263 at 285 [96]. 59The leading authority on the principles to be applied in the identification of a person suitable to act as a protected estate manager continues to be Holt v Protective Commissioner (1993) 31 NSWLR 227, a recent exposition of which can be found in M v M [2013] NSWSC 1495 at [50]. 60Fundamental problems with the first and second defendants continuing to serve as managers of the estate of the third defendant, in the context of continuing disputation within the family, are: first, that they lack any real perception that there may be a conflict between their duty to the third defendant and their personal interests; and, secondly, they have, for practical purposes, excluded the plaintiff from a say in management of the third defendant's estate. That may not have been their intention, but it is a practical consequence of their management, and maintenance of the current proceedings. 61These problems cannot be passed over, in the interests of expediency, in circumstances in which the protected estate under management is a large one; the protected person's children are engaged in substantial, unproductive litigation that they can ill afford; and two of the children, under the guise of estate management, are in control of the protected person's estate to the exclusion of their sibling, whose personal interest in the estate is no less significant than theirs. 62The personal interests of the first and second defendants include their interests as co-owners of property with the third defendant, and as the third defendant's expectant heirs. 63The interests of the first defendant (if not also those of the second) go beyond this to the extent that questions have been raised by the plaintiff about the possibility that the first defendant has wilfully failed to account to the third defendant for profits derived from the Kirribilli property. 64Although the Court could (consistently with s 41(2) of the NSW Trustee and Guardian Act 2009 NSW) make an order on its own motion for the appointment of a new manager of the estate of the third defendant, notwithstanding continuing appointments of the first and second defendants as financial managers, it is not necessary, at this stage, to go so far. 65In my assessment, the parties could benefit from a fresh round of discussions about how best to manage the affairs of the third defendant and, incidentally, their own affairs in circumstances in which the Court's jurisdiction to appoint a receiver (JMK v RDC and PTO v WDO [2013] NSW SC 1362 at [55]-[56]) can be called in aid, for the protection of the third defendant's estate, in the meantime. 66Although the first and second defendants have resisted the appointment of a receiver (because, they submit, there is no necessity for one) no party dissents from the proposition that, if a receiver is to be appointed, the NSW Trustee should be appointed to that office. 67The NSW Trustee is familiar with the estate of the third defendant, having monitored the first and second defendants' management of it. 68The third defendant's tutor does not resist his discharge from the office, subject to payment of his reasonable costs.