Mrs HNL's Management of Mrs IEI's finances
86Mrs HNL provided to the Tribunal a report titled "Independent Assurance Report in relation to expenditure authorised by Mrs HNL on behalf of Mrs IEI" prepared by law firm A and dated 25 March 2014.
87The report purports to cover "expenditure authorised by Mrs HNL on behalf of her mother Mrs IEI during a period from 24 July 2009 to 28 February 2014" and concludes that "the expenditure authorised by [Mrs HNL] on behalf of [Mrs IEI]...appears to be reasonable and has been expended solely for the benefit of [Mrs IEI]." The report was signed by Solicitor Y, Director of law firm A.
88Mr MHI questioned the independence of the report on the basis that Mr SCL, Mrs HNL's husband, is an employee of law firm A. Mrs HNL and Mr SCL denied Mr SCL was an employee and vouched for the independence of the report.
89Despite the provision of the report of 25 March 2014 Mr MHI and Mr NBI were concerned about the lack of transparency and honesty in Mrs HNL's management of Mrs IEI's finances. Mr MHI and Mr NBI complained that they were unable to assess whether Mrs HNL had been managing their mother's finances appropriately and honestly unless they were supplied with source documents.
90The Tribunal made directions that Mrs HNL produce one year's bank statements, the letter from financial planner, and the reverse mortgage agreement and associated documents, the agreement with service provider A and professionals' invoices for a year.
91Mrs HNL told the Tribunal she had all the receipts for the expenditure. The parties agreed that it would be sufficient for Mrs HNL to produce the receipts for a representative period of three months and the Tribunal invited Mr MHI to nominate a three month period, which he did, May 2013 to August 2013.
92Mrs HNL complied with the Tribunal's directions.
93The Supreme Court had occasion to examine the issue of accounts kept by attorneys recently in the matter of Susan Elizabeth Parker v Margaret Catherine Higgins & Ors [2012] NSWSC 1516.
94In this case George and Gwenda Higgins two daughters, Susan and Margaret, were their joint and several attorneys. Susan lived in the UK and Margaret lived in Australia. Margaret exercised the day to day management of their parents' financial affairs.
95Susan wanted access to documents and accounting information held by Margaret. Margaret made an offer to provide some of the material but Susan was dissatisfied with this and hence the Supreme Court application was made by Susan to review the powers of attorney made by her parents.
96Gwenda required a tutor in the proceedings and George was appointed as her tutor.
97Susan was seeking access to an extensive range of documents, which Margaret resisted, including trustee standard accounts.
98The Supreme Court decided that the attorney's obligation is only to keep accurate primary records.
99Slattery J wrote:
"19 Thirdly, neither the Powers of Attorney Act nor the general law applicable to powers of attorney ordinarily requires one of two attorneys to produce journals, ledgers, bank reconciliations and the other main elements of trustee's accounts, of the type that Susan requests here.
(a) Whether trustee standard accounts are required?
54. ...There is little doubt that the documents that have been produced do not meet the trustee standard for accounts. But, in my view, they do meet the lesser standard, which the law provides for attorneys. I conclude in this section that: (1) the powers that Susan and Margaret are exercising are not those of trustees; and (2) the law in this jurisdiction does not require attorneys such as Susan and Margaret to produce accounts to the standard that would apply to trustees.
55. I accept Margaret's argument that these two attorneys are not trustees. The position of an attorney is one that carries with it fiduciary duties. But not every fiduciary is a trustee....
60. But the standard of account keeping under a power of attorney for attorneys appointed in New South Wales is not the trustee standard. It is less demanding. The relevant law in this State is summarised in G D Dal Pont's, Powers of Attorney, LexisNexis Butterworths, Australia, 2010:-
"[8.55] Although courts speak of agents, and attorneys, being obliged to account to their principals, the general law remains relatively vague on detail. At a basic level accountability presupposes the maintenance of records of transactions, with sufficient particulars in readily accessible form, that afford the principal, or a third party in the principal's stead, the ability to ascertain with clarity the dealings in which the attorney has engaged. General law obligations are reflected by statute in most jurisdictions, which speaks in terms of an obligation to keep accurate records and accounts of all dealings and transactions made under the power....
64. The attorney's obligation is really one to keep accurate primary accounting records, for which the principal can call, if necessary, for the principal's examination. If the principal then wishes to produce secondary accounts, or full financial accounts, that is a matter for the principal.
65. In my view this is the applicable standard by which Susan and Margaret's account and record keeping as attorneys must be judged."
100On 19 June 2014, after the parties had had the documents filed by Mrs HNL, there was no allegation that she had not been keeping appropriate primary records. The Tribunal finds that Mrs HNL has been managing her mother's finances since 2009 and has kept adequate primary records of income and expenditure on her mother's behalf.
101At the hearing on 19 June 2014, after having had time to consider all the documents filed, Mr MHI's told the Tribunal that, prior to July 2013, Mrs HNL cannot be said to have mismanaged or misused Mrs IEI's funds as the only money she had to manage at that stage was Mrs IEI's pension payment. It is submitted by Mr MHI that that situation changed in July 2013 when $250,000 was made available to Mrs HNL as a result of her obtaining a reverse mortgage on Mrs IEI's property in that sum. He says Mrs HNL in her role as power of attorney mismanaged or misused Mrs IEI's finances since July 2013 as follows:
"a) Corporate Insolvency Lawyer (Mediator) fees $4,400
b) Accountant fees - tick off receipts to bank statement/worksheet $2,750
c) Mrs HNL Lawyer fees (January 16 hearing) - bill presented after questioning $4,416.50
d) Mrs HNL estimated lawyer fees (Feb/Jun 3 hearings) -$8,800 bills not presented
e) Service provider A Bond interest/fee - $3,850 x 6 months (December 2013 on)$21,510
f) Estimated interest on reverse mortgage loan (December 2013 on) $1500
g) May 2014 RP Data 1% drop in NSW house sale prices since April $13,000
"Total financial mismanagement/misused funds since the July 2013 Reverse Mortgage created surplus/available funds $56,376.50"
102It is the Tribunal's view that Mrs HNL has a valid argument that the money spent on mediator and legal fees which would not have been incurred but for Mrs HNL's role as power of attorney and the allegations that have been made against her in that role, is properly charged to Mrs IEI, particularly given that there have been no adverse findings made by the Tribunal relating to her record keeping (and mismanagement as will be seen later in these reasons).
103There was no evidence presented to the Tribunal that the sums expended for the professional fees were excessive or unreasonable. In these circumstances the expenditure on mediation or legal fees cannot be characterised as mismanagement or misuse or a breach of Mrs HNL's fiduciary duties to her mother.
104Similarly there was no evidence that what Mr MHI's described as the accountant's fees was an unreasonable amount to be charged for the work he undertook. The Tribunal accepts that the reason the report was obtained was Mrs HNL's attempt to satisfy her brothers that she has been carrying out her duties as attorney properly. It is disingenuous of Mr MHI to argue that the money was wasted when he has argued strenuously for transparency. The Tribunal is not satisfied that the money expended on what Mr MHI describes as the "accountant's report" constitutes mismanagement or misuse or a breach of the attorney's fiduciary duties.
105In his oral evidence Mr MHI referred to there being $7000 missing from the accounts. It was the Tribunal's understanding that his allegation was not that there had been $7000 misappropriated only that the figure had been left out of the spreadsheet, due to an error on the part of the accountant. The Tribunal understands Mr MHI argument to be that the accountant who prepared the documents did was incompetent or careless in doing so and therefore not worthy of the fee paid by Mrs HNL for the work. The Tribunal considers this error to be minor and is an irrelevant consideration in judging Mrs HNL's management.
106Mr MHI seeks to include in his assessment of loss the interest payments which have had to be made to service provider A because the bond payment has not been made. He estimated these losses to amount to $3,850 per month. The Tribunal agrees that this loss to Mrs IEI has been considerable and avoidable. Mr MHI considers that Mrs HNL is responsible for these losses. The Tribunal does not accept this.
107Mr MHI told the Tribunal that:
- In November or December 2013 he and Mrs HNL started negotiations regarding the appointment of a real estate agent to sell their mother's house. As at the date of the hearing no real estate agent has been appointed;
- Mrs HNL's "obstruction has caused the delay;"
- Mrs HNL has just tried to denigrate him;
- Mrs HNL's purpose in this behaviour has been undertaken to remove him as power of attorney;
- Money has been wasted, in the area of $40,000 and "we need to put a stop to it."
108In an email to Mrs HNL on 22 April 2014 Mr MHI wrote:
"I was surprised that you, [Mr SCL] and [Mr CAL] were not willing to meet and discuss your recommendations nor were willing to meet the agents for group briefings at a time in the 8 weeks since the cancelled February 21 meetings or those rescheduled last Wednesday/Thursday.
Without face to face or telephone discussions it is very difficult to understand your logic in selecting the 2 sales people who have the least experience and market knowledge selling in the south-eastern Sydney area and as such almost impossible to come to a well thought out decision....
It is amazing that not one of the 3 of you thought to at least speak with [Mr W] as he is the only of the 4 people we are considering who could be considered an expert in selling homes in the south-eastern Sydney area.
[Mrs HNL], we are fine to use any one of the top 3 sales people selling in the south-eastern Sydney area (of which [Mr W] is one). We are fine for you to exclude [Mr W] if you can articulate your reasoning, after you have actually met with him, other than your reasoning being personal. Or we are fine to use [Mr V] or [Ms U] in some co capacity with one of the top 3 sales people.
It is very difficult to discuss this without meeting in person, we do not know what you are considering nor your rationale for select (sic) [Ms U] and [Mr V] nor if you are even considering someone else and possibly one of the other top 3 people.
... shutting down communication, seemingly due to your personal grievances is hindering our ability to maximise the potential return from mum's home and carry out our power of attorney responsibilities in the best interests of mum."
109Mrs HNL copied the Tribunal into many pieces of correspondence in which she asked Mr MHI to confirm that he was not making arrangements to sell the home in a non-arms-length transaction and to sell it by public auction. Mrs HNL also alleged that she received from Mr MHI "sub-standard sales submissions arranged by you....failed to nominate any proper sale method leaving the door open for sale by private treaty at a lower price or the opportunity for an off market sale at a lower price than could be achieved at public auction." (Letter from Mrs HNL to Mr MHI dated 12 February 2014.)
110It is not the Tribunal's role to apportion blame between the attorneys in relation to the failure to appoint an agent to sell Mrs IEI's home. The Tribunal is not satisfied however that Mrs HNL is solely responsible for this failure. It seems to the Tribunal that it is unreasonable, given the level of animosity between the parties, and in the context of the insulting correspondence to Mrs HNL, to be suggesting a face to face meeting in order to be able to make a decision about the appointment of a real estate agent. It should also be noted that Mr MHI was also an attorney with equal responsibilities to Mrs HNL.
111 There was no evidence led in the Tribunal that the decision to reverse mortgage Mrs IEI's property was a decision which could constitute mismanagement by the attorney. The issue Mr MHI and his brothers complained of was that this was entered into without their knowledge and without acknowledging her intention to the Tribunal. It follows therefore that the Tribunal cannot conclude that the interest incurred on the reverse mortgage constituted mismanagement or misuse or a breach of the duties of the attorney.
112Mr MHI contends that as there was a 1% drop in NSW house sales prices since April of $13,000 and that this represents a loss to Mrs IEI in that sum and constitutes mismanagement or misuse by Mrs HNL. This argument is flawed in many respects. First in order to be able to make findings in this regard the Tribunal would require reliable evidence, probably from a valuer or expert in real estate, and evidence which is more specific. The second flaw is that the "calculation" of loss was made from April 2014. There is no explanation as to why this date was chosen and it would seem to the Tribunal that the decision to sell the house was made months before April 2014 and any calculation would need to be made from that date. Thirdly Mr MHI, in alleging mismanagement by Mrs HNL must be attributing the sole responsibility for failure to sell the house to Mrs HNL. The Tribunal has concluded she is not solely responsible and she cannot be held responsible for this loss. It is the Tribunal's view that if Mrs HNL had been acting alone it is likely that she would have settled on an agent soon after the decision was made to sell the house.
113The Tribunal does not accept there is any evidence of dishonesty or mismanagement of Mrs IEI's finances by Mrs HNL.