RM [2010] WASAT 152 (14 October 2010)

Guardianship and Administration - Administration - Power of attorney - Property settlement - Need for an administrator - Administrator appointed - Public Trustee appointed - Turns on its own facts

Guardianship and Administration Act 1990 (WA), s 3, s 4, s 4(2)(b)(iv), s 17A, s 64(1)(a), s 68, s 97(1)(b)(iii), s 97(1)(c)

State Administrative Tribunal 2004 (WA), s 77

FS [2007] WASAT 202

KS [2008] WASAT 29

1 The daughter of an elderly man diagnosed with dementia made an application for her and the man's son to be appointed the administrators of his estate.

2 The man was a respondent in a Family Court action for a property settlement initiated by his spouse from whom he was separated.

3 The man had gifted a significant portion of his estate to his daughter and son. The spouse had alleged that the man had been overborne by his children in the disposal of his estate. The children had been named as respondents in the Family Court proceeding.

4 The Tribunal decided that only an administrator independent of the interests of the parties in dispute could take a wholly objective view of the best interests of the man in the conduct of the Family Court proceedings and in the assessment of his future financial needs in the context of a much reduced estate.

5 The Tribunal appointed the Public Trustee as the man's plenary administrator for a period of 12 months.

6 On 8 January 2010, the Tribunal appointed the Public Trustee as the plenary administrator of the estate of RM pursuant to the provisions of the Guardianship and Administration Act 1990 (WA) (GA Act).

7 RM is an elderly man who has a diagnosis of dementia and who, at the time of the hearing, was living at home with care.

8 RM has two children, a daughter, who is the applicant, and a son. He had a spouse whom he married on 6 February 2009 but from whom he was separated. The spouse, EJM, had initiated proceedings in the Family Court for a property settlement.

9 On 28 January 2009, the daughter made an application under s 17A of the GA Act for the Full Tribunal to review the decision made on 8 January 2010. In the proceedings under s 17A, the parties were given a transcript of the hearing of 8 January 2010.

10 On 11 March 2010, the daughter was granted leave to withdraw her application under s 17A of the GA Act.

11 Under s 77 of the State Administrative Tribunal Act 2004 (WA) the Tribunal must give reasons for its final decision. These are the reasons for the decision made on 8 January 2010.

12 The daughter made an application for administration and guardianship orders for RM in August 2009.

13 On 1 October 2009, the daughter was appointed limited guardian to decide RM's accommodation, the contact he should have with others, and to consent to his treatment and health care.

14 The application for the administration order was adjourned on that date. The daughter said that she was managing RM's estate under a power of attorney executed on 13 November 2006 which raised the issue of whether it could still operate if RM was said now to lack capacity.

15 The spouse, EJM, had not been given notice of the hearing of 1 October 2009 and therefore did not attend. The daughter had not mentioned EJM in her application but at the hearing on 1 October 2009, the status of EJM became known to the Tribunal.

16 EJM's legal representative subsequently contacted the Tribunal and from that contact a directions hearing was called for 23 October 2009. At that hearing, the legal representative for EJM alleged that the nature of the relationship between RM and EJM (and estate matters) had been misrepresented by the daughter.

17 The Tribunal decided to refer the application for an administration order to the Public Advocate under s 97(1)(b)(iii) of the GA Act for investigation and report. A further referral was made to the Public Advocate under s 97(1)(c) of the GA Act to investigate whether RM was under inappropriate guardianship.

18 The application for administration proceeded to its determination on 8 January 2010. No party has to date sought a review of the guardianship order made on 1 October 2009.

19 The daughter and the son proposed that they be appointed the administrators of the estate of RM. This was opposed by EJM who supported the appointment of the Public Trustee.

20 The main issue before the Tribunal, if it was determined that RM was in need of an administrator, was whether the son and the daughter were suitable to be appointed given that RM had largely divested himself of his estate to his children at a time when there was some concern about his capacity to make that decision and close to the time of his marriage to EJM.

21 The bona fides of the daughter and son were questioned by EJM in light of the decisions that culminated in a significant disposition of RM's estate and in the context of an action in the Family Court initiated by EJM for a property settlement.

22 In a document before the Tribunal dated 26 October 2009 and titled 'Draft Judgment', Moroni M in the Family Court proceedings stated that there was common ground between the parties before the Court that RM was a person under disability and would require a case guardian to proceed with the Family Court matter (at page 3 to page 7). The appointment of an administrator under the GA Act if given the requisite authority would, under the relevant Family Court rules, become the case guardian by virtue of that appointment.

23 Before an administration order can be made, the Tribunal must be satisfied that a person is unable, by reason of a mental disability, to make reasonable judgments in respect of matters relating to all or any part of his or her estate and is in need of an administrator (s 64(1) of the GA Act).

24 Mental disability is defined to include dementia, acquired brain injury, psychiatric illness and intellectual disability (s 3 of the GA Act).

25 The determination of capacity and need is made subject to the principles of the GA Act as stated in s 4. They are, relevantly, that the primary concern of the Tribunal shall be the best interests of the person; that every person shall be presumed capable of making reasonable judgments in respect of matters relating to his or her estate until the contrary is proved to the satisfaction of the Tribunal; that an administration order shall not be made if the needs of the person can be met by other means less restrictive of his or her freedom of decision and action and, in considering any matter relating to the person, the Tribunal shall, as far as possible, seek to ascertain the view and wishes of the person.

26 If an administrator is to be appointed, the Tribunal needs to be satisfied that the proposed appointee will act in the best interests of the person and is otherwise suitable to act as administrator of the person's estate. In this determination, the Tribunal shall take into account, as far as possible, the compatibility of the proposed appointee with the person (and with the guardian of the person, if one is appointed), the wishes of the person and whether the proposed appointee will be able to perform the functions proposed to be vested in the administrator (s 68 of the GA Act).

27 To decide if RM was in need of an administrator the Tribunal had first to decide whether he was unable, by reason of a mental disability, to make reasonable judgments in respect to matters relating to all or any part of his estate (s 64(1)(a) of the GA Act).

28 A person is presumed to be capable of making reasonable judgments in respect of matters relating to his or her estate until the contrary is proved to the satisfaction of the Tribunal (s 4(2)(b)(iv) of the GA Act).

29 The resolution of the question of capacity involves finding the presence of a mental disability and deciding to what extent that disability impacts on the ability of the person to make 'reasonable judgments' about his or her estate. The test is set against that person's particular estate (see FS [2007] WASAT 202 (FS) at [103] - [106]).

30 The cognitive task in the making of a 'reasonable judgment' is the outcome of mental process that involves knowledge, understanding and evaluation (FS at [108] and [109]).

31 The Tribunal had before it a number of medical reports relevant to the proceedings.

32 RM's general practitioner of more than nine years in a report dated 3 August 2009, stated that RM had been diagnosed with Alzheimer's dementia in 2005, that he was incapable of making reasonable decisions about his financial affairs but that he had '... some insight but some of his decisions are affected by cognitive function[al] decline'.

33 Reports from a consultant physician dated 19 June 2009 and 14 August 2009 stated that the Alzheimer's dementia had been initially diagnosed in September 2007, that RM was deteriorating quite quickly and that he had '... deteriorated to a stage where I feel he no longer has the capacity of making [sic] decisions regarding his life eg accommodation, business and financial affairs etc'.

34 The parties to the proceedings presented a somewhat ambivalent view of RM's residual capacity.

35 Counsel for EJM raised the matter of the affidavit deposed by RM on 12 May 2009 for the Family Court proceedings in which he gave detailed evidence about his past and present estate, and which counsel stated appeared contrary to the abilities of a person diagnosed with dementia. Counsel for the daughter and son said that the affidavit did not go to RM's mental capacity to make decisions but was rather a statement of facts about how RM understood the progress of his estate over the years. The affidavit went to his memory of certain events.

36 Counsel for the daughter and son stated that it was RM's short­term memory that at first became a problem for him and that the question of his ongoing capacity was impacted by his inability to remember a decision he had made only a short time previously.

37 This is not inconsistent with the view of RM's stepdaughter who observed RM in this way:

So it's definitely an in and out thing, but he definitely seems to have some sort of capacity. (T:12, 080110)

38 The Public Advocate, who interviewed RM prior to the hearing, said that with prompting about certain events, RM appeared to have some recall, seemingly consistent and could comment on matters; the problem was, however, that he might shortly forget what he had just said.

39 As an indication of the problems he was facing given the diagnosis of dementia, counsel for the daughter and son said that in February 2009 RM had resigned as managing director of his family company '... acknowledging that he no longer had the capacity himself' (T:14, 080110).

40 The Tribunal was satisfied that RM had a mental disability (his diagnosed dementia) (s 3 of the GA Act). The Tribunal accepted the evidence of the medical practitioners who had attended to RM for a number of years, that the effects of the dementia, in particular the problems with his short­term memory, which would progressively worsen, meant that RM was unable so summon the intellectual faculties to make ongoing reasonable judgments about his estate.

41 Although RM's estate had been much diminished (see below), it still contained shares in the family company of significant book value and upon which he continued to rely for his income. He owed money and there was a potential call upon his estate from the property settlement action initiated by EJM.

42 The Tribunal accepted that RM was still able to provide some comment on the decisions to be made as evidenced by the parties who had direct contact with him but that this did not amount to the ability to make a decision based on the evaluative process required to manage his estate in his best interests.

43 In the course of the hearing, evidence was adduced about the composition of RM's estate and about the contested circumstances of his disposing of certain of his assets in late 2008 and early 2009.

44 This much appeared clear. Just prior to the end of 2008, the estate of RM comprised mainly of a 50% shareholding in his family company, including holding a class of share which gave him effective control of the company; a home unit and some bank funds. The value of his shareholding in the family company was estimated by his accountant to be $1,500,000 and the home unit $535,000 (estimated 2007 value). RM had debts to the company of $87,000 and a bank loan of $120,000. The net value of his estate was approximately $1,900,000.

45 According to the daughter, RM was in receipt of $4,000 a month from the company by way of director's fees including payment for his role as managing director. EJM was in receipt of $2,000 a month which was debited to RM's loan account in the company.

46 In a letter to the Public Advocate in December 2009, the accountant stated that RM had come to him in May 2008 and said that he wanted to transfer his shares in the company to the children. In his oral evidence, the accountant said he advised RM not to transfer the shares because it would result in a large capital gains tax liability. This matter was not further progressed till November 2008 when the accountant was contacted by RM's solicitor. The accountant said he raised the issue of capital gains tax on the proposed disposal of the shares but was advised RM wanted to continue with the transaction.

47 In his oral evidence, the accountant estimated the capital gains tax liability on the sale of the shares to be $140,000 (in his earlier letter to the Public Advocate mentioned above he had estimated the tax liability as $180,000).

48 The company's share register, which was before the Tribunal, showed that RM disposed of (by way of gift equally to the son and daughter), 10,000 ordinary shares on 27 November 2008 and 10,000 ordinary shares on 7 April 2009. He also disposed of his controlling share by way of gift to the daughter on 7 April 2009. After the disposal, RM owned 16.67% of the family company.

49 RM resigned as director of the company on 9 February 2009 and requested that the $4,000 monthly payment be reduced to $2,000.

50 On 23 February 2009, a signed transfer of land (which was before the Tribunal), evidencing the sale of RM's home unit to the daughter and son for a consideration of $1, was registered with the Registrar of Titles. The transfer was signed by RM.

51 After the above transaction, and at the time of the hearing, RM's net estate had been reduced to, in the accountant's estimation, a net value of about $113,000. The value of his remaining company shares was estimated at $500,000 and his liabilities had increased to reflect the capital gains tax liability. The accountant said that RM's income from the company would be determined by the directors (the daughter and son) and would depend on the company's profitability (there had been a recent reduction in company income due to a tenant leaving the commercial premises).

52 EJM had raised concerns about certain withdrawals of funds from the company bank account and from RM's personal bank account in December 2008 and February 2009. These were purportedly explained by RM in an affidavit to the Family Court in May 2009 as a transfer of $30,000 from his account to a term deposit in his name; a transfer of $40,000 from his account to the company as a loan (the daughter, in a written submission, stated that the $40,000 was in payment of a loan); a transfer of $30,000 from the company to a term deposit in the company's name and amounts of $15,000 paid each to the son and daughter from the company account on 6 February 2009 as an advance of dividends.

53 It would appear on the evidence that the $30,000 term deposit in the name of RM (and possibly the $40,000 loaned to the company) have been utilised including for the ongoing costs of RM's care. The son and daughter said that that were now using their own funds to assist in payment of the care costs.

54 It was common ground that RM was in need of an administrator to manage his estate generally and more particularly to act as case guardian in the Family Court proceedings.

55 The appointment of a case guardian was at an apparent impasse as stated by Maroni M in the Family Court proceedings (see above). Various people had been proposed in the role but had been opposed by one or the other of the sides to the dispute. RM was not capable of mediating this impasse.

56 Another matter already alluded to and having a bearing on the need for an administrator (and impacting on who might be appointed), was the circumstances of the disposal of much of RM's estate to his children.

57 There was dispute about the capacity of RM to enter into those transactions.

58 The daughter produced a report from a consultant physician dated 17 October 2008 in which he opined that despite the diagnosis of Alzheimer's Disease made in 2007 and the attendant poor short­term memory, RM still had a good understanding of the larger issues in his life, he could still make an informed decision regarding his intentions in his will and his intentions about the general direction of his family company. He was considered to be capable of executing an enduring power of attorney (the physician incorrectly stated that the daughter already held such a power, she in fact was attorney under a general power of attorney).

59 The evidence of the accountant was that he considered RM to understand the transactions which lead to a divesting of his estate. However, this evidence had to be assessed in the context of the accountant's concerns on the impact of the large capital gains tax liability on RM's reduced estate and to what extent RM had understood the impact on his estate.

60 It was the evidence of EJM that the daughter and son had overborne RM in his decision to gift the majority of his assets to them as a deliberate strategy to circumvent her present and future claims on his estate. Through counsel she said that she would have wanted to continue with the marriage to RM but could not because of what she perceived as the emotional and financial abuse of RM by his children.

61 The Tribunal made no finding as to RM's capacity to make the gifting transactions, however, the facts themselves spoke to the difficult financial position RM was in after the transactions and at the time of the hearing. He had to rely upon the son and the daughter for his dividend income as they now controlled the family company. His shareholding had been reduced from 50% to 16.67%. He still had a debt to a bank and had a potential capital gains tax liability. He had no cash funds to pay these debts (between $250,000 and $300,000) and his only asset was a shareholding in the family (non-listed) company of which the prime asset was a commercial property. The evidence of the daughter was that she and her brother were paying for some of RM's care costs from their own funds.

62 The Family Court would of course decide what assets would be included in the pool of RM's assets in the property settlement action.

63 In considering all of the evidence, including the fact that the daughter and son were respondents in the Family Court proceedings, the Tribunal was satisfied that it would be in RM's best interests that the Public Trustee be appointed the administrator of his estate.

64 The daughter could no longer operate under the general power of attorney given RM's loss of capacity (KS [2008] WASAT 29 at [11]). The power of attorney which RM had executed in 1986 was an indication of RM's wish as to who might manage his financial affairs, however, the circumstances of his estate as presented to the hearing were such that the Tribunal could not be satisfied that the interests of RM were necessarily compatible with those of the daughter and son.

65 Only an administrator independent of the interests of the parties in dispute could take a wholly objective view of the best interests of RM in the conduct of the Family Court proceedings and in the assessment of his future financial needs in the context of a much reduced estate.

66 In the circumstances, the Tribunal decided that a plenary order was needed to deal with these matters.

67 The Public Trustee was appointed and the order set for review in 12 months.

The Public Trustee is appointed plenary administrator of the estate of [RM] with all the powers and duties conferred by the [GA Act].

I certify that this and the preceding [67] paragraphs comprise the reasons for decision of the State Administrative Tribunal.

___________________________________