NSW Trustee and Guardian v FYV

Background facts

1. The following facts are largely taken from the decision under appeal and the Sale decision.
2. The Aunt migrated from Italy and has been living in Australia for many years.
3. She is reported to have dementia.
4. In 2013, the Aunt executed an enduring power of attorney (the 2013 EPoA) appointing Alice and Matthew, jointly and severally, as her attorneys. At around the same time, she appointed Scarlett and Gabriel as the executors of her will. Under the terms of that will, the Aunt's estate is to be divided equally among her four nieces and nephews. The Aunt has no children.
5. The Aunt's main asset is the residential property where she was living before moving to residential aged care (the property).
6. In May 2022, Centrelink notified the Aunt that the property now counted as an asset for the purpose of determining her eligibility for the Age pension because she had not been living in the property for two years. As a consequence, the total value of her assets now exceeded the maximum amount she was entitled to hold in assets before becoming ineligible to receive the Age pension. Centrelink advised the Aunt that she would no longer receive the Age pension. (For the first two years after entering aged care, a person's principal place of residence is generally excluded from the assets considered in assessing a person's eligibility to receive the Age pension.)
7. In September 2022, Alice applied to the Guardianship Division of NCAT seeking review of the 2013 EPoA and the removal of Matthew as attorney. Following a hearing on 12 January 2023, the Guardianship Division reviewed the 2013 EPoA and exercised the discretion under s 37 of the Powers of Attorney Act 2003 (NSW) to treat Alice's application for review of the 2013 EPoA as an application for a financial management order.
8. The Tribunal decided to make a financial management order and to commit the management of the Aunt's estate to the NSW Trustee under s 25M of the Guardianship Act 1987 (NSW). In reasons for that decision (unreported, 2 February 2023), the Tribunal noted at [16] that the relationship between family members had broken down: "[B]ecause of a difference of opinion regarding how [the Aunt's] property should be managed, specifically whether it should be sold, rented out or used to secure a reverse mortgage. An alternative source of income for [the Aunt] needs to be arranged because her cash reserves are diminishing and she is not eligible for a pension because of the value of her property."
9. At [31], the Tribunal found that because of the inability of the attorneys to agree about the management of the Aunt's estate, there "is a need for a financial management order and that it is in [the Aunt's] best interest that a financial management order is made". The Tribunal noted that decisions need to be made about "how to generate liquid funds to pay for [the Aunt's] ongoing care in the aged care facility".

NSW Trustee appointed to manage the Aunt's estate

1. Five days after the Tribunal made a financial management order in respect of the Aunt, Matthew contacted the NSW Trustee and advised that the Aunt wished to retain the property. A file note of that conversation recorded that Matthew said he had spoken to a financial planner who had proposed three options: obtain a reverse mortgage on the property, obtain a reverse mortgage and rent the property, or sell the property: documents produced by the NSW Trustee under s 58 of the Administrative Decisions Review Act 1997 (NSW) (the section 58 documents), p 83.
2. In the intervening 14 months before the decision under appeal was made, Matthew and the NSW Trustee were in regular communication about the reverse mortgage proposal. Matthew and Scarlett urged the NSW Trustee to adopt that proposal. Alice and Gabriel, on the other hand, urged the NSW Trustee to sell the property.
3. In a Statement of Advice dated 8 March 2023 (the Statement of Advice), the NSW Trustee's Financial Planning Unit (the FPU) recommended that the property be sold. In that statement the FPU recorded: 1. the Aunt's only source of income was an Italian pension of $1550 pa; 2. the Aunt's assets consisted of $13,500 in cash and the property valued at $1.8M; 3. based on the Aunt's current income and expenses, there was a recurring annual cashflow shortfall of approximately $70,800.
4. Under the heading "Future of the property", the FPU recommended against the options of renting the property and/or obtaining a reverse mortgage. The FPU wrote that it was not financially viable to rent the property because the estimated annual rental income ($28,700) was insufficient to fund the Aunt's recurring annual cashflow shortfall ($70,800). With respect to the reverse mortgage option, the FPU said that notwithstanding the advice received by Matthew, that option was not supported "due to rising interest rates, your DAP [daily accommodation payment] $24,450 pa not being refundable, ongoing property related expenses as well as land tax being charged because of your former home being leased". The FPU went on to note that a "usual condition of a reverse mortgage is that the loan is repaid when the owner and spouse vacate the property".

The Sale decision

1. In written reasons given for the Sale decision dated 9 June 2023, the NSW Trustee said that it was in the Aunt's best interests to sell the property because: 1. the Aunt had insufficient funds to meet her ongoing expenses and liabilities which included a $500,000 refundable accommodation deposit (RAD) and "accommodation arrears" of $6210, payable to the aged care facility where the Aunt was residing; 2. the Aunt had a recurring annual cashflow shortfall of $70,780; 3. the proposed reverse mortgage was not an option as there is "no suggestion as to how the loan will be repaid"; 4. the Aunt does not have the funds to pay for the significant repairs and maintenance needed to be undertaken to the property; 5. the property is vacant and not generating income.

FPU considers financial advice submitted by Matthew

1. In an undated advice apparently prepared on 5 October 2023, the FPU responded to an advice prepared by Senior First at the request of Matthew about the reverse mortgage proposal (section 58 documents, p 82). The FPU said that the property is "currently uninsurable" and that the Aunt has no funds to pay for necessary repairs. The FPU noted that the NSW Trustee now holds only $1690 in cash on behalf of the Aunt.
2. The FPU noted that Senior First had proposed a reverse mortgage for a term of five years. The FPU said that if the Aunt were to outlive that term, she would have no funds to pay for her ongoing expenses and, at that point, the property would need to be sold.

NSW Trustee affirms the Sale decision

1. At the request of Matthew made under s 53 of the Administrative Decisions Review Act, the NSW Trustee conducted an internal review of the Sale decision and affirmed that decision. In reasons for that decision dated 31 July 2023, the delegate of the NSW Trustee who conducted that review noted that the property requires substantial maintenance and repairs; that the Aunt does not have the funds to pay for any maintenance and repairs, and that her existing liabilities, which include unpaid Council rates, water usage charges, and care fees "continue to grow".
2. The delegate noted that to obtain a reverse mortgage required the "repayment of fees" associated with the property. The delegate reasoned that the reverse mortgage proposal is not a feasible option as there is "no suggestion as to how the loan would be repaid". In addition, the delegate reasoned that it is not an option to rent the property because it requires "substantial maintenance/repairs".

Tribunal reviews the Sale decision

1. In September 2023, Matthew lodged an application with the Administrative and Equal Opportunity Division of NCAT, seeking administrative review of the Sale decision. Matthew submitted that in circumstances where the Aunt has consistently expressed her opposition to the sale of the property, the correct and preferable decision was to retain the property. On 1 December 2023, the Tribunal heard that application and reserved its decision.
2. On 29 February 2024, the Tribunal decided to set aside the Sale decision and to remit that decision to the NSW Trustee for reconsideration: FYV v NSW Trustee and Guardian [2024] NSWCATAD 54 (the Reasons). At [49], the Tribunal reasoned that the sale of the property would be inconsistent with many of the "section 39 principles" and "cause some prejudice to [the Aunt's] welfare and interests". At [51], the Tribunal said that it is was unable to conclude that the Sale decision is the "correct and preferable decision". The Tribunal found that there is a "clear and pressing need for arrangements to be made to satisfy or at least pay down the Refundable Accommodation Deposit (RAD) debt" which the NSW Trustee calculated as being $550,000 and to pay or reduce the nursing home fees arrears of over $24,000.
3. At [55], the Tribunal recommended that the NSW Trustee reconsider the Sale decision and "determine a course of action other than sale of [the Aunt's property]" to clear the Aunt's debts. The Tribunal remitted the Sale decision for reconsideration by the NSW Trustee in accordance with that recommendation.

Statutory framework

1. As a result of the decision made on 12 January 2023 by the Guardianship Division of NCAT to commit the Aunt's estate to the management of the NSW Trustee, the NSW Trustee has, and may exercise, all functions necessary and incidental to the management and care of that estate: NSW Trustee and Guardian Act 2009 (NSW) (the Trustee Act), s 56.
2. The Sale decision was a decision made in the exercise of the NSW Trustee's functions under Div 1 of Pt 4.5 (Management of estates by NSW Trustee) of the Trustee Act. An "affected person" may apply to NCAT for administrative review of a decision made by the NSW Trustee under that Division: Trustee Act, s 62(1). An "affected person" includes any person whose interests are, in the opinion of the NSW Trustee, "adversely affected by the decision": Trustee Act, s 62(2).
3. In determining Matthew's application for administrative review of the Sale decision, the Tribunal was required to make the correct and preferable decision having regard to the material then before it, including any relevant factual material and any applicable written or unwritten law: Administrative Decisions Review Act, s 63(1). In undertaking that task, the Tribunal may exercise all of the functions that are conferred or imposed by any relevant legislation on the NSW Trustee: Administrative Decisions Review Act, s 63(2). The powers available to the Tribunal on review were to affirm, vary or set aside the Sale decision and make another decision in substitution for that decision or set aside the Sale decision and remit the matter for reconsideration by the NSW Trustee: Administrative Decisions Review Act, s 63(3).
4. In Youssef v NSW Legal Services Commissioner [2020] NSWCATOD 85 (Youssef), the Tribunal (NCAT President, Armstrong J presiding) considered the nature of a review under s 63 of the Administrative Decisions Review Act. Citing Donaghy v The Council of the Law Society of New South Wales [2013] NSWCA 154 at [21], the Tribunal emphasised that a review under s 63 of the Administrative Decisions Review Act is a "review on the merits" and is "not concerned ... whether there was challengeable error in the process or reasoning" by the original decision-maker. Rather, the role of the Tribunal is to "decide what the correct and preferable decision is having regard to the material before it" which includes "any relevant factual material". The review is to be conducted "without any presumption as to the correctness of the decision": Youssef at [24].
5. Section 39 of the Trustee Act instructs the NSW Trustee (and, on review, the Tribunal) when exercising functions under Ch 4 of that Act (Management functions relating to persons incapable of managing their affairs), to observe the following principles (the section 39 principles): 39 General principles applicable to Chapter … (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.

Grounds of appeal

1. The NSW Trustee has a right to appeal from the decision under appeal, an "internally appealable decision", on any question of law or, with the leave of the Appeal Panel, on any other ground: Civil and Administrative Tribunal Act 2013 (NSW) (NCAT Act), ss 32(1), 32(4), 80(2)(b).
2. In oral submissions, the NSW Trustee refined the grounds of appeal it listed in its submissions dated 31 May 2024. We understand the questions of law said by the NSW Trustee to be raised on appeal are: 1. Whether the Tribunal failed to have regard to a "substantial, clearly articulated argument" made by the NSW Trustee, and if so, whether: 1. by that failure, the Tribunal failed to afford the NSW Trustee procedural fairness; and 2. that failure amounted to a "constructive failure to exercise jurisdiction". 1. Whether the Tribunal failed to consider the audio recordings filed by Alice of her conversation with the Aunt on 4 September 2023 about the proposed sale of the property and, if so, whether by that failure the Tribunal failed to afford the NSW Trustee procedural fairness. 2. Whether the Tribunal failed as required by s 39(a) of the Trustee Act to give paramount consideration to the "welfare and interests" of the Aunt.

Ground 1: whether the Tribunal failed to have regard to a "substantial, clearly articulated argument"

1. The NSW Trustee contends that the Tribunal failed to engage with its primary submission that the only feasible option to fund the estimated $70,000 annual shortfall between the Aunt's expenses and liabilities was to sell the property. The NSW Trustee contends that the Tribunal failed to consider its submission, and the material contained in the section 58 documents on which it was based, that to rent and/or to obtain a reverse mortgage on the property were not feasible options. The NSW Trustee pointed to the Statement of Advice which recorded that the property was in a state of disrepair, was burdened by various charges and the Aunt was without the funds to pay for necessary maintenance and repairs and the outstanding charges on the property.
2. The NSW Trustee submits that by focussing on the Aunt's views about the proposed sale of the property, the Tribunal was distracted from the central question raised in its submissions, namely whether it was feasible to retain the property. Alice and Gabriel agree.
3. Matthew and Scarlett submit that it is implicit from the Reasons that the Tribunal considered and rejected the NSW Trustee's submission about the feasibility of the reverse mortgage proposal. They point to the material before the Tribunal which they contend challenges the opinion of the FPU that it was not possible to obtain a reverse mortgage.

Principles

1. In Dranichnikov v Minister for Immigration and Multicultural Affairs [2003] HCA 26 (2003); 77 ALJR 1088, Gummow and Callinan JJ (with whom Hayne J agreed), held that for an administrative decision-maker "[t]o fail to respond to a substantial, clearly articulated argument relying upon established facts" was both a constructive failure to exercise jurisdiction and a failure to accord natural justice: at [23]-[25].
2. In Gautam v Health Care Complaints Commission [2021] NSWCA 85 at [104], Payne JA (with whom Leeming JA and Simpson AJA agreed) explained that a failure to expressly address an argument or to consider some material does not, without more, constitute legal error. However, a failure to address a "substantial, clearly articulated argument" may amount to a failure to afford procedural fairness and, in some circumstances, a constructive failure to exercise jurisdiction: see Dranichnikov v Minister for Immigration and Multicultural Affairs at [24]-[25]. At [105], Payne JA explained that "the ultimate question is whether a failure to consider and address certain issues or arguments involved a failure to address central or critical elements of the case or claim".

Reasons for decision under appeal

1. To put the submissions made by the parties in context it is necessary to first consider the structure and content of the Reasons.
2. At [1]-[7], the Tribunal set out the background to the Sale decision. At [8], the Tribunal correctly stated that it was required to decide whether the Sale decision is "the correct and preferable decision". At [10]-[12], the Tribunal set out the principles which apply to the task required to be undertaken by s 63(1) of the Administrative Decisions Review Act.
3. At [16]-[24] under the heading, "The recorded video evidence", the Tribunal considered the recordings tendered by Matthew of conversations between himself and the Aunt made in 2022 about the proposed sale of the property. At [23], after discussing the reliability of that evidence, the Tribunal said: "I assess the videos as clearly and sufficiently demonstrating that on the relevant dates of the discussions [the Aunt] held a strong view that the [suburb suburb deleted] property should not be sold prior to her death because it is a family asset and had been her home and that of her husband."
4. At [25]-[29], the Tribunal set out the opposing views of the Aunt's nieces and nephews about the sale of the property.
5. At [31], the Tribunal said that deciding whether the Sale decision was the correct and preferable decision involves: "[A] consideration of whether in making the decision to sell the [the property] the Trustee acted in compliance with the principles in section 39 of the NSW Trustee and Guardian Act 2009 (NSWT&G Act)."
6. Under the heading "Preservation of the estate and the section 39 principles", the Tribunal considered the nature of the role of the NSW Trustee in managing the Aunt's estate and the application of the section 39 principles. After referring to several authorities which have considered s 39(a) of the Trustee Act, which requires the NSW Trustee to give paramount consideration to the welfare and interests of the protected person, the Tribunal said: "41 NSW Trustee's case on this central issue, as expressed in his written submissions at [22] is that a reverse mortgage as proposed by the Applicant will unnecessarily deplete the capital of the estate and incur significant interest, whereas a sale of the suburb deleted]] property will ensure that her financial needs are met without unnecessarily depleting the estate. It is readily apparent that NSW Trustee's position is based to a significant extent upon the principle of 'protection' or 'maintenance' of the capital of [the Aunt]'s estate. 42 But, as demonstrated above, in order for any decision about [the Aunt]'s estate to be the correct one it must be demonstrated to have been made: (1) in observance of each of the relevant section 39 principles; and (2) as a result of giving paramount consideration to the and interests of the protected person. 43 Section 39 does not include the terms 'protection' or 'maintenance', other than in its reference to maintenance of family relationships. 44 Even though the principle of protection or maintenance of capital continues to have some relevance to the process of making decisions involving the sale of the property of protected persons, that principle must now give way to an obligation not to sanction the sale unless it will also promote the welfare and interests of the protected person and satisfy such of the other section 39 principles as are relevant." (Emphasis added)
7. Under the heading "Findings: Effect upon [the Aunt] of a sale of the property" at [47], the Tribunal said it could not be satisfied that the Aunt's "welfare and interests will be promoted by the sale of the [property]", reasoning that if the property were to be sold: "(1) there is a clear prospect that [the Aunt] will be bitterly disappointed if not devastated by that decision to such an extent that the sale could not be consistent with her wellbeing: see section 39(a). In reaching that conclusion I rely on the evidence available and in particular to the sworn statement of [the Aunt's]'s niece who resides in France, [name omitted], there having been no objection to that statement. There is no suggestion that the more deceptive course of just not informing her of a sale will be pursued; (2) there must be some prospect of a corresponding deterioration or acceleration of the deterioration of her emotional state, her mental health and perhaps her cognitive ability: see section 39(a). (3) her freedom of action and particularly freedom of decision will have been interfered with in a substantial way: see section 39(b); (4) such a sale is clearly contrary to her views, as made apparent in the video evidence discussed above: see section 39(d); (5) although I accept that the relationship between the two opposed 'camps' of her nephews and nieces is a fractious one, [the Aunt]'s own family relationships, that is, the relationships she wishes to have and depends upon with members of her family including of course each of her nieces and nephews, will almost certainly be damaged by the sale of her former home: see section 39(e); and (6) such a sale would be at best inconsistent with her cultural environment, which is reflected by an attachment to the home which has been owned and maintained for many years and to her family including her nephews and nieces: see section 39(e)."
8. At [49], the Tribunal said that the sale of the property "would be inconsistent with many of the section 39 principles and, as a paramount consideration, would cause some prejudice to [the Aunt's] welfare and interests". At [51], the Tribunal said that it was "unable to conclude that [the Sale decision] is the correct and preferable decision".
9. At [52], the Tribunal noted that s 63(3) of the Administrative Decisions Review Act gave it the power to set aside the Sale decision and to make a decision in substitution for that decision. However, the Tribunal decided not to exercise that power, reasoning that the NSW Trustee, in particular the FPU, "is better placed and more qualified than I am to quantify, assess and recommend a course of action consistent with my decision which best accords with [the Aunt's] welfare and interests". Instead, the Tribunal decided to set aside the Sale decision and to remit that decision for reconsideration by the NSW Trustee. The Tribunal went on to state: "54 I accept there is a clear and pressing need for arrangements to be made satisfy or at least pay down the Refundable Accommodation Deposit (RAD) debt which the Trustee assesses at $550,000 and to pay or reduce the nursing home fees arrears of over $24,000. The Trustee is well placed to assess the best means of doing that. 55 For the avoidance of doubt, I confirm that the means of ensuring repayment of the RAD debt and nursing home arrears may involve the implementation of a reverse mortgage arrangement, but I make no finding that such any such arrangement (including any of the reverse mortgage proposals made by [FYV] is the appropriate and preferable means by which [the Aunt]'s future accommodation and care can be secured. The means by which the clearance of those debts is achieved, so as to secure appropriate accommodation and care for [the Aunt], is clearly a matter which the Chief Commissioner through his staff is better placed to determine than is the Tribunal."

Conclusion

1. It falls to the NSW Trustee to show that the Tribunal failed to consider its submission that it was not feasible to obtain a reverse mortgage and that that submission was a "substantial, clearly articulated argument", a central or critical element of its case.
2. The Reasons disclose that central to the conclusion reached by the Tribunal that the Sale decision was not the correct and preferable decision was the finding that the Aunt "will be bitterly disappointed if not devastated by that decision to such an extent that the sale could not be consistent with her wellbeing": Reasons at [46(1)].
3. In the Reasons, the only references to the reverse mortgage proposal was in the context of recording that that proposal was favoured by Matthew and Scarlett and not supported by the NSW Trustee, Alice and Gabriel (at [5], [26], [46]) and, in the context of remitting the Sale decision to the NSW Trustee, in acknowledging that to be able to pay the Aunt's debts may require "the implementation of a reverse mortgage arrangement" (at [54], [55]).
4. The single reference in the Reasons to the option of leasing the property is contained at [26] where the Tribunal recorded the Aunt's view that "if we need the money", the property might have to be leased.
5. Missing from the Reasons is any analysis of the submission made by the NSW Trustee that the reverse mortgage proposal was not a feasible option. The Tribunal correctly noted at [41] that the Sale decision was based in part on the NSW Trustee's assessment that a reverse mortgage "would unnecessarily deplete the equity in the [property] and incur significant interest". However, the reasons for the Sale decision, together with the FPU's statement of advice, reveal that was not the only stated reason for that decision. That decision was also based on the FPU's advice that the Aunt did not have the liquid funds to pay for the significant repairs that needed to be undertaken and the outstanding charges on the property to enable a reverse mortgage to be obtained or to lease the property. The FPU had advised that the property is currently uninsurable. In circumstances where the Aunt was without funds to make those payments, the NSW Trustee concluded that neither the reverse mortgage nor the lease proposals were feasible options to fund the identified $70,000 shortfall between the Aunt's annual income and expenses.
6. That the Tribunal failed to engage with the submission made by the NSW Trustee that the reverse mortgage proposal was not feasible is evident from the concluding paragraphs of the Reasons. There, the Tribunal said that the "means of ensuring repayment of the RAD debt and nursing home arrears may involve the implementation of a reverse mortgage arrangement, but I make no finding that such … arrangement … is the appropriate and preferable means by which [the Aunt's] future accommodation and care can be secured" (emphasis added).
7. The Tribunal was not obliged to accept the NSW Trustee's submission about the feasibility of the options favoured by Matthew. Nor was the Tribunal required to accept the factual assumptions which underpinned the Sale decision. However, because it was central to the NSW Trustee's case, the Tribunal was required to consider that argument. By failing to do so, the Tribunal failed to afford the NSW Trustee procedural fairness.
8. Concentrating almost exclusively on the Aunt's emotional attachment to her home, the Tribunal lost sight of one of the critical issues it was required to resolve. The error was inadvertent but significant. The NSW Trustee was not heard as it should have been and, in our view, this constituted a constructive failure on the Tribunal's part to exercise its jurisdiction and a failure to accord the NSW Trustee procedural fairness.
9. This ground of appeal is established. It is not necessary to consider the remaining grounds of appeal.
10. For these reasons, we allowed the appeal.

Redetermination by way of rehearing

1. Having allowed the appeal we decided to procced, pursuant to s 81 of the NCAT Act, to redetermine Matthew's application for administrative review of the Sale decision on the material that was before the Tribunal, together with the transcript of the hearing before the Tribunal on 1 December 2023. In conducting that review, we invited the parties to make written submissions and, in addition, to identify any material which had been before the Tribunal said to support their contention that a reverse mortgage was/was not a financially feasible option.
2. Further, we invited the parties to make submissions about whether the redetermination of Matthew's application could be adequately determined without a further hearing. All parties submitted that a further hearing was not required. Having reviewed the filed material and submissions, we concluded that, as permitted by s 50(2) of the NCAT Act, the issues for determination could be adequately determined in the absence of the parties by considering any written submissions or any other documents or material lodged with or provided to the Tribunal.

Submissions made by the parties

1. The submissions made by the parties in answer to the directions we made in this appeal largely reflected their respective submissions made in the proceedings before the Tribunal. The NSW Trustee, Alice and Gabriel, urged us to affirm the Sale decision. Matthew and Scarlett urged us to set aside that decision and, in substitution, to direct the NSW Trustee to make an application for a reverse mortgage on the property.
2. Those submissions are summarised below.

Submissions in support of the Sale decision

1. The NSW Trustee points out that the Statement of Advice recommending the sale of the property was based an assessment of the Aunt's current income, liabilities and future needs. That advice noted that a reverse mortgage usually requires repayment of the loan when the property is vacated. Contrary to Matthew's assertions, the NSW Trustee's policies and procedures would not permit a "rushed sale" of the property for below market value.
2. The NSW Trustee noted that in support of his submission that the correct and preferable decision is to obtain a reverse mortgage on the property, Matthew relied on advice received from Mr Andrew Cate of "Seniors First Reverse Mortgage Broker" and Farrow Hughes Mulcahy.
3. Referring to letters dated 15 October 2022 and 20 September 2023 prepared by Mr Cate, the NSW Trustee noted that Mr Cate: 1. relies on calculations from a website titled "moneysmart.gov.au" which appears to be a reverse mortgage calculator. That website states "You will need to repay the loan when you stop living in the property"; 2. does not address the Aunt's circumstances, specifically, how a reverse mortgage would apply, and, whether it would be possible to obtain a reverse mortgage given that the Aunt is no longer living in the property; 3. explained that the exact terms of a reverse mortgage vary according to the lender; 4. explained that to obtain approval for a reverse mortgage requires an application to be submitted; 5. said that any reverse mortgage would require the property to be insured and kept in a reasonable condition; 6. said that there is no guarantee that a reverse mortgage could be obtained on behalf of the Aunt.
4. At the request of the Aunt's then attorneys, Matthew and Alice, financial planner, Farrow Hughes Mulcahy, prepared an "Aged Care Statement of Advice", dated 13 July 2022 (the Farrow Hughes Mulcahy report), which considered three options: to sell the property; to access equity in the property through a reverse mortgage and rent out the property; and, to obtain a reverse mortgage without renting out the property. Commenting on the third of those options, the NSW Trustee noted that the calculations used for that option revealed that limited funds would be available to the Aunt to undertake any major work to the property or "a significant change in finances". The NSW Trustee contended that the calculations used for the Sale option are the "only calculations that provide certainty that there will be funds available to meet [the Aunt's] expenses throughout her lifetime without significant cost to her estate".
5. The NSW Trustee disputes the conclusion reached by the Tribunal that its decision to sell the property was significantly based on the principle that it was necessary to "maintain and protect" the Aunt's estate. Rather, the NSW Trustee contends that its decision was based on advice provided by the FPU and sought to ensure that the Aunt has sufficient funds to meet her needs without "incurring unnecessary expenses relating to the retention of the property or the significant interest which would accrue on a reverse mortgage which would significantly deplete her estate". The NSW Trustee contends that in making the Sale decision it considered the section 39 principles, in particular that the welfare and interests of the Aunt be given paramount consideration.
6. The NSW Trustee points out that: 1. The Aunt's trust account is in arrears, and she has incurred significant debts, including fee arrears with her current accommodation provider. 2. To be able to rent out the property would require significant maintenance and repairs to be undertaken. If the property were to be rented out, the Aunt would incur ongoing costs including agent's commission, landlord insurance, costs of renovating and preparing the property to be rented out together with the costs of repairing any damage to the property caused by tenants. Rental income is not guaranteed, and it would be necessary to borrow the funds to pay for repairs as part of the advance of the reverse mortgage. This would incur significant interest. 3. If the property is retained there will be ongoing costs including insurance (if the property is vacant, as asserted by Matthew, that cost would be higher), council rates, water rates, regular property maintenance such as lawn care, and repairs to the property. 4. Despite the advice of Mr Cate, no approval has been obtained from any lender for a reverse mortgage based on the Aunt's property and current circumstances. There is no guarantee that a lender would approve an application for a reverse mortgage.
7. The NSW Trustee contends that the decision to sell the property remains the correct and preferable decision to ensure that the Aunt's financial needs can be met and her liabilities paid.
8. Alice continues to support the Sale decision. She contends that the views expressed by the Aunt, on which Matthew and Scarlett rely, must be understood in the context of when the Aunt expressed those views. Alice considers it to be significant that: 1. The Aunt did not want to know life without her husband, yet she managed when he passed, indicating an ability to accept change. 2. The Aunt did not want to move into a nursing home, yet she transitioned well and now calls it home. 3. When she was living in the property the Aunt said she did not want to sell her home. However, she also said that she understood that there would come a time when she would have to move. Her comments are to be understood in that context. 4. In the 2013 EPoA, the Aunt did not instruct her attorneys to retain the property. 5. The Aunt has expressed conflicting views about retaining the property. The recordings of Alice's conversation with the Aunt on 4 September 2023, indicates a willingness to sell the property to "pay nursing home fees".
9. Gabriel also continues to support the Sale decision. He submits: 1. Retaining the property would impose undue financial strain on the Aunt. Paying maintenance costs, interest charges, and upkeep expenses benefit future owners without any return to the Aunt. 2. The RAD is an upfront deposit, not an ongoing expense. It will offset future fees. Anticipating the Aunt's future need for a private room, it is necessary to plan for an increased RAD to accommodate her increasing medical needs. 3. The potential risks associated with a reverse mortgage option outweigh the benefits, especially considering the unique circumstances of aged care residents.

Submissions in opposition to the Sale decision

1. Matthew and Scarlett continue to oppose the Sale decision. They contend that the Aunt has repeatedly expressed the wish that the property not be sold in her lifetime. They submit that the reverse mortgage proposal not only gives effect to the Aunt's will and preference but is financially feasible.
2. Matthew submits that being asset rich and cash poor, the Aunt is a "prime candidate" for a reverse mortgage and this makes achieving her long held views to retain the property "very feasible". He submits that a reverse mortgage will release sufficient funds to pay all the Aunt's outstanding debts, to maintain the property in good condition, to pay for the Aunt's ongoing aged care needs and, at the same time, enable the Aunt to visit the property. He says that the Farrow Hughes Mulcahy report reveals that a reverse mortgage with or without rental income is financially viable.
3. Matthew contends that the NSW Trustee has failed to provide "valid and reliable material/data that proves without reasonable doubt" that selling the property is in the Aunt's "best financial interest" and will provide a "better financial outcome" than the reverse mortgage option. He claims that the NSW Trustee's decision to sell the property was not based on "sound financial advice".
4. Matthew submits that the NSW Trustee has mismanaged the Aunt's estate and left her with an accumulated debt and no funds to pay costs associated with the property, such as council rates, insurance and maintenance.
5. Matthew asserts that under a reverse mortgage: 1. interest is only calculated on the funds as they are drawn down; 2. although the mortgagee may elect to do, it is not necessary to repay a reverse mortgage during the loan period. Any interest accrued during that period is added to the loan; 3. the loan is usually repaid (being the portion of the loan drawn and any interest on that amount) after the sale of the property. The mortgagee is not, as claimed by the NSW Trustee, required to repay the loan once they vacate their former home. The loan may be repaid at a time elected by the mortgagee, or within 12 months of their death,
6. Matthew submits that if a reverse mortgage were to be obtained, the Aunt would not, as claimed by the NSW Trustee, be required to pay a RAD of $500,000. That fee, asserts Matthew, is only payable if the property is sold. By including the RAD, the NSW Trustee has falsely inflated the Aunt's liabilities. A benefit of a reverse mortgage is that the money that would otherwise have been used to pay the RAD will remain in the Aunt's estate and continue to "incur 100% capital growth".
7. The Aunt is currently paying a Daily Accommodation Payment (DAP) of $66 per day ($24,450 pa). That fee is based on a RAD of $500,000 and a Maximum Permissible Interest Rate (MPIR) of 4.89%. That rate is fixed. However, if the property were to be sold and the RAD paid, the Aunt would be required to pay a means-tested care fee of $75 per day ($27,375 pa) which would be subject to a lifetime cap of $73,378: section 58 documents, p 78. While the DAP would no longer be payable, if the RAD is paid, the Aunt will still be required to pay to pay a non-refundable means-tested care fee which, over a three-year period, is equivalent to the non-refundable DAP fee: section 58 documents, pp 79, 82.
8. To obtain approval for a reverse mortgage loan, the property must be kept in reasonable condition, building insurance and council rates must be paid and kept up to date for the life of the loan: section 58 documents, p 301. It is of "great concern" that the property is currently uninsured. However, it is noted that in May 2023 the NSW Trustee obtained a quotation from the NRMA of an annual premium of $1155.
9. If, consistent with the valuation obtained by the NSW Trustee in February 2023, the property were to be sold for $1.8M, after deducting sales costs (sales commission, legal and cleaning costs), the net proceeds of the sale would only be approximately $1.74 M. In addition, the Aunt would be required to pay marketing fees that could potentially add thousands of extra dollars to the sale option. In contrast, with a reverse mortgage, the only costs are the legal costs of about $2500 to establish the loan.
10. Furthermore, Matthew argues, the figure of $1.8M used by the FPU in the Statement of Advice, underestimates the value of the property. He points to the valuation report prepared by CoreLogic in June 2023, which estimated the value of the property to be $2.55M with an estimated range $2.039M to $3.039M. In the opinion of a local real estate agent, that estimate is "fairly realistic".
11. Matthew considers significant that the FPU failed to mention in the Statement of Advice that if the property were to be sold, the Aunt's current debt will continue to grow until the sale is finalised. On the NSW Trustee's own estimate, this could take up to 20 weeks. In contrast, under a reverse mortgage option, within four to five weeks the Aunt would be able to pay off all her debts, have regular monthly funds to pay for her ongoing expenses and a line of credit/cash reserve for unexpected expenses, such as health, dental and house maintenance.
12. Scarlett submits that a reverse mortgage is the most financially feasible option and is a genuine solution "both emotionally and financially".
13. Scarlett submits that the FPU's Statement of Advice is "incorrect and misleading" and repeats many of the criticisms made by Matthew. She contends that in assessing its reliability the following factors should be taken into account: 1. The increase in Sydney rental income. The CoreLogic report states that median weekly rents in the suburb in which the property is located rose 2.09% in the 12 months to March 2023: section 58 documents, p 48. Therefore, if the property were to be rented out, the rental income would be higher than that estimated by the FPU. 2. The likely increased rental income means that any loan drawn down would be minimal if the property were to be rented out. As a consequence, the Aunt would benefit from an increase in her capital and in five years' time, a decrease in the loan to capital value. 3. The impact of the increase in Sydney residential property prices on the amount of RAD payable by the Aunt. Scarlett points to the valuation report prepared at the request of the NSW Trustee in February 2023, which estimated the value of the property to be $1.8M, and the CoreLogic report prepared four months later which estimated the price range of the property to be $2.039M to $3.039M: section 58 documents, pp 42, 56, 78. Scarlett reasons that given that the RAD is based on the value of the property, any increase in the original estimated value of the property may result in an increase in the RAD, currently $500,000. That increase would be an unnecessary expense for the Aunt to incur during her lifetime. 4. The claim made by the NSW Trustee that the aged care facility where the Aunt resides has requested it to pay the RAD "is based on false advice". Scarlett asserts that the "negotiated terms of [the Aunt's] residence at the aged care facility does not require [the RAD] to be paid, unless she sells the home". 5. According to the Statement of Advice, it is proposed that the proceeds of the sale of the property will be placed in a Trust Account earning interest of 1.07%. In contrast, Scarlett asserts that "capital growth in a home exceeds 3%".
14. In support of the claim that it is the Aunt's long-held wish that the property not be sold in her lifetime, Scarlett points to, among other things, the recordings made by Mathew of his interviews with the Aunt in July and October 2022, in which the Aunt said: 1. "I don't want to sell the house. When I go do what you want. Now, no one touches my home"; 2. "But they shouldn't do me wrong. Not on this" (referring to [Alice and Gabriel] wanting to sell the home); 3. "I can't go home, but I don't want to sell it"; 4. "To [Alice] I say my house is not for sale"; 5. "When I go, do what you want. But my house is not for sale"; 6. "You're not selling it, you're not selling it."
15. In addition, Scarlett point to the findings made by the Tribunal that "there is a clear prospect that [the Aunt] will be bitterly disappointed if not devastated" by the decision to sell the property, that "there must be some prospect of a corresponding deterioration or acceleration of the deterioration of her emotional state, her mental health and perhaps her cognitive ability" and a "a sale would be at best inconsistent with her cultural environment": Reasons at [48].
16. Scarlett submits it would be a travesty of justice, a denial of the property owner's human and legal rights, including the rights of all elderly and vulnerable people, if the NSW Trustee sells the home when the Aunt has more than enough equity in her one and only asset to generate an income stream via a reverse mortgage while keeping her home for her visits.
17. Scarlett contends that the NSW Trustee has failed to "deliver clear, genuine and irrefutable advice about the reverse mortgage option". In addition, she says, the NSW Trustee has downplayed the "considerable upfront expenses and subsequent less funds available to invest for the Aunt's future care if the house were to be sold". In deciding to sell the property, the NSW Trustee has taken the "easy option".

Some comments as to the history of the matter

1. What has arisen in respect of management of the Aunt's financial affairs is unfortunate and unsatisfactory.
2. In P v NSW Trustee and Guardian [2015] NSWSC 579 at [191], Lindsay J noted, in a different context but in comments apposite here, that "it is important to be mindful of a need, characteristic of the protective jurisdiction but reinforced by statute, to administer a protected estate without strife…". Clearly, that objective has not been met here.
3. We agree with the contention of Matthew and Scarlett that the NSW Trustee has failed to take steps to genuinely explore whether the reverse mortgage option would best promote the Aunt's welfare and interests. Its assessment of that option was cursory. The available material indicates that the NSW Trustee appears to have a limited understanding of what a reverse mortgage is likely to entail and the potential benefits and disadvantages to the Aunt's estate.
4. However, our role is not to review the appointment of, or the conduct of, the NSW Trustee. Rather our role is to "stand in the shoes" of the NSW Trustee and to decide the correct and preferable decision having regard to the material before us.
5. The options are as agreed by the parties: to sell the property or to obtain a reverse mortgage, with or without renting the property.

Consideration

1. In determining whether the decision to sell the property is the correct and preferable decision, we apply the principles set out under the heading "Statutory framework" above. These include the requirement that we observe the principles in s 39 of the Trustee Act which instruct that the welfare and interests of the Aunt be given paramount consideration and her views be taken into consideration. Our task is to decide what is now the correct and preferable decision on the material before us, not what might have been the correct and preferable decision at some earlier point in time.
2. While there are many issues in dispute between the parties, it is agreed that: 1. since May 2022, the Aunt's only source of income has been an Italian pension of about $1500 pa; 2. as at 9 October 2023, the NSW Trustee held $46.77 in trust for the Aunt; 3. because of insufficient funds, since October 2023 the Aunt has not paid fees for her accommodation and care charged by the residential age care facility where she now resides (the facility). As at March 2023, the fees payable to the facility were about $45,000 ($20,760 (basic daily fee) + $24,450 (means-tested care fee)); 4. the property is unencumbered and has been vacant since May 2020; 5. as at March2023, the Aunt's liabilities totalled $569,000, including a RAD of $500,000, which would need to be paid if the property is sold; 6. the Aunt is liable for ongoing expenses relating to the property, including council rates, insurance, and maintenance and repairs.
3. Despite the time that has passed since the appointment of the NSW Trustee and the proposal advanced by Matthew and Scarlett that the option of a reverse mortgage be explored, which was raised as early as 2020 when the Aunt entered age care, there remains no reliable evidence about: 1. the specific terms of a reverse mortgage that may be available to the Aunt; 2. beyond the generalised assertions of Mr Cate as to industry norms, if a reverse mortgage were available to the Aunt, when it would need to be repaid; 3. any impediment to renewing a reverse mortgage at the end of its initial term, which Matthew and Scarlett have assumed to be five years; 4. a reliable estimate of the scope and cost of works required to be undertaken to prepare the property for sale, or to be rented out; 5. the investment options likely to be considered by the NSW Trustee for the proceeds of the sale of the property; 6. the specific qualifications and experience of Mr John Lalic, the author of the FPU's Statement of Advice, reverse mortgage broker, Mr Cate, and Mr Aaron Klumpp, the author of the Farrow Hughes Mulcahy report to enable us to assess the respective reliability of their opinion evidence; 7. whether, as asserted by Matthew and Scarlett, the Aunt's potential RAD liability on sale has increased due to an increase in the value of the property; 8. an up-to-date, evidence-based analysis of how, using the gradual drawdown method advocated by Matthew and Scarlett, the outcome over a set period would compare to the outcome after sale, noting that the Farrow Hughes Mulcahy report indicated: 1. an approximate $100,000 benefit from sale, over five years, if a reverse mortgage is obtained and the property is not rented out, but 2. a similar outcome over that period between sale and a reverse mortgage if the property is rented out; 1. to try to ascertain whether that is likely in the future, and to place some relative weight on the importance of her being able to do so moving forward, whether the Aunt has been visiting the property since entering aged care.
4. This evidentiary lacunae makes a comparison of the three available options identified by the parties difficult.
5. A key factual issue in dispute is whether, under a reverse mortgage, the requirement to repay the RAD would be triggered. Matthew and Scarlett assert that the requirement to repay the RAD would not be triggered if a reverse mortgage were obtained. The NSW Trustee, on the other hand, appears to have accepted the FPU's opinion that a "usual condition of a reverse mortgage is that the loan is repaid when the owner spouse vacates the property". The basis for that opinion is unknown. So too is the basis for the assumption made by Matthew and Scarlett.
6. Those differing assumptions are significant because they determine the extent of the shortfall between the Aunt's income and liabilities and, in turn, the amount that she would need borrow to fund that shortfall. Self-evidently, if the Aunt was required to immediately repay the RAD, in addition to the funds necessary to repay her debts, and, to pay ongoing expenses, she would need to borrow $500,000.
7. In considering the available options, we have assumed for the purpose of argument that, as asserted by Matthew and Scarlett, under a reverse mortgage the Aunt would not be immediately be required to repay the RAD but rather, as reflected in the costs projection contained in the Farrow Hughes Mulcahy report, that the Aunt would be required to pay interest on the RAD by way of a DAP of about $25,000 pa.
8. We accept, as the Tribunal found, and as Matthew and Scarlett claimed, that the Aunt has repeatedly expressed the view that she wishes to retain the property. While the recording made by Alice of her recent conversation with the Aunt, arguably indicates a softening of that view, nonetheless her consistently expressed view over a long period is that the property be retained. This is a powerful consideration which favours the retention of the property.
9. Despite this, for the following reasons we have decided that, on balance, the correct and preferable decision is to sell the property.
10. First, as the Tribunal found and as the parties agreed, there is a "clear and pressing need" for arrangements to be made to satisfy the Aunt's creditors and to pay her ongoing expenses, estimated by the NSW Trustee in March 2023 to be $72,000 pa. The fees payable to the facility have not been paid for over 12 months. While no evidence was tendered that, as a result, the Aunt's continued residency at the facility is at risk, it is not implausible that it will be if the Aunt's indebtedness to the facility continues. Concerningly, for over 12 months the Aunt has been unable to pay for goods or services that she might require or might improve her quality of life. Despite holding significant assets, the Aunt is reliant on goods and service providers to extend her credit. She is not financially independent.
11. A further example of the clear and pressing need to make funds available to the Aunt is the property's insurance status. In March 2023, the NSW Trustee reported that the property is "currently uninsurable", apparently because the Aunt lacked funds to pay for insurance and the necessary repairs to the property. In submissions dated 2 July 2024, the NSW Trustee asserted that the property was insured. In submission in response, Matthew disputed that assertion. While evidence was given that the NSW Trustee has obtained quotations to insure the property, there is no documentary evidence before us to indicate that insurance for the property has been obtained. It is demonstrably not in the Aunt's interests that there be any doubt about whether her sole asset is insured.
12. Second, on the available material, it is not possible to say whether, if an application were to be made on behalf of the Aunt for a reverse mortgage, that application would be successful. While the effect of the letters provided by Mr Cate to Matthew indicate that he is optimistic that, if made, such application is likely to be successful, he concedes that there is no guarantee that it would be. Until such time that an application is made, it is not possible to say with certainly whether it will be approved.
13. Third, beyond the generalised assertions of Mr Cate as to industry norms, the specific terms of a reverse mortgage that may be available to the Aunt are unknown. Until such time as those terms are known, it is not possible to undertake a meaningful comparison of the three options.
14. Fourth, the Farrow Hughes Mulcahy report dated 13 July 2022, the only evidence of an expert nature that provides a detailed comparison of the three options over a five-year period, indicates that at the end of that period, there would be little material difference between the total value of the Aunt's assets if the property were to be sold or a reverse mortgage obtained and the property rented out. The latter presupposes that the property can be rented out, assumes that the renovation expenses will not exceed $20,000 and makes no allowance for delays in the renovation process. It also assumes an ability of the Aunt's estate to fund a negative net cashflow in the first year of about $26,000. It would appear that Farrow Hughes Mulcahy has assumed that that shortfall would be met from funds then held by the Aunt. As noted above, for a significant period the Aunt has not held any cash reserves: section 58 documents, pp 320, 321.
15. Fifth, in his post-hearing submissions, for the first time Matthew indicated that he is willing to "finance any cost associated with the application for a reverse mortgage loan on [the Aunt's] estate, including any legal cost, insurance and cost to clean up the property back to its original state prior to [the NSW Trustee's] appointment": at [66]. However, that assertion is untested and unsupported by evidence as to Matthew's capacity to fulfil the offer. A further difficulty is that Matthew's offer to fund repairs to the property, appears to be qualified. In his most recent submissions, Matthew asserted in effect that the cost of repairs is likely to be minimal and challenged the assertion made by Alice and Gabriel that it would be in the range of $30,000 to $40,000. On the available material it is not possible to make a reliable finding about the likely costs of repairs. However, the uncertainty about this question raises the question of whether Matthew's stated willingness to fund repairs would extend beyond what he believes to be the likely costs. This issue has the potential to lead to further disputation and delay.
16. Sixth, the option favoured by the Tribunal of recommending that the NSW Trustee explore alternative options to the sale option to obtain the necessary funds to clear the Aunt's debts and to pay her ongoing expenses may have been the preferable decision in the past. However, in circumstances where the only identified alternative options are a reverse mortgage with or without renting out the property, it is unknown whether an application for a reverse mortgage would be successful, and that the terms of the reverse mortgage are unknown, exploring "alternative options" would inevitably lead to further delay. It is not in the Aunt's interest that her ability to access cash be further delayed. In reaching that conclusion, we have taken into account that, as pointed out by Alice, if the property were to be sold, the proceeds from the sale are unlikely to be available to the Aunt for some months.
17. Finally, as to the concern raised by Matthew and Scarlett that the NSW Trustee is likely to sell the property for less than market value, we note that the NSW Trustee is aware of, and is bound by, its obligation to take reasonable steps to prudently manage the sale of the property. That it obtained a valuation lower than that obtained by Matthew does not support a finding that the NSW Trustee is likely to sell the property below its market value. It only shows that property market valuations prior to sale vary within a range.
18. For these reasons, we have decided that notwithstanding that the Sale decision is contrary to the Aunt's wishes, in circumstances where she has no cash reserves, where there is a clear and pressing need for the Aunt to be able to access funds to pay for past and future expenses, where the reverse mortgage option is attended by significant uncertainty and further consideration of that option would result in further delay, we have decided that the Sale decision is the correct and preferable decision and that it gives paramount consideration to the Aunt's welfare and interest.

Orders 1. Appeal is allowed. 2. The decision made by the NSW Trustee and Guardian on 7 June 2023 to sell the Aunt's property is 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: 28 November 2024