SZQ [2018] NSWCATGD 50

SZQ [2018] NSWCATGD 50 - NSWCATGD 2018 case summary — Zoe

[4]

TAQ

TAQ told the Tribunal that he has no concerns about his sister's decisions regarding their mother's care, but is troubled about how his sister has managed their mother's finances. He said that SZQ is no longer in a good financial position. WYE's aim was to purchase a house for herself and to that end she retained a one-third share from the proceeds of their mother's home for herself and then withdrew another $180,000 from their mother's account. Since WYE has been managing their mother's money, more than $800,000 has been spent. Their mother had around $700,000 in the bank and also owned her own townhouse in Inner West Sydney when the power of attorney was executed. Now she only has around $2,000 in savings. The nursing home bond was $450,000 and the balance has reduced to $336,000. SZQ is in debt to the nursing home and is paying 7.5% interest. WYE borrowed $180,000 interest free and that money should be repaid to SZQ.
WYE and TAQ each received a one-third share of the proceeds of the sale of their mother's townhouse. WYE then asked if she could borrow an additional $180,000. She thought it would look bad, so asked TAQ if she could borrow $90,000 from his half share of the $180,000 instead. WYE then purchased a property using their mother's funds. She initiated all decisions and he went along with it. WYE also arranged to have their mother's will changed and removed a debt of $70,000 she owed to SZQ. The new will provides that any future debts incurred by WYE are waived.
WYE and her son lived in SZQ's house for a year before it was sold and did not pay any rent. TAQ understands that all the fees associated with the property were taken from SZQ's savings. The house was damaged by WYE, her family and dogs and needed to be extensively renovated before it was sold. TAQ said that he assisted with the renovations. An agent valued the property at $690,000 before the renovations and it ultimately sold for $840,000. After costs, the net profit was $67,648.76 which was divided equally between TAQ, WYE and Mr Y.
TAQ said that WYE advised him to set up trusts to cover themselves against any claims by their brother. They set up three trusts; one in joint names and one each in separate names. TAQ said that he has no idea about trusts and does not know how much money is in the trust account he holds with his sister. TAQ said that he was happy to help his sister as she was in a bad financial situation. However, he now realises she was just using him. TAQ said that he is close to his mother despite his sister's claims to the contrary.
TAQ told the Tribunal that he has not spoken with his brother, Mr Z, since 2012. WYE is trying to get as much money from their mother as possible so that their brother does not receive anything when SZQ passes away. He wants the trusts investigated and for his sister to repay the $180,000. TAQ said he also wants his sister removed as his mother's attorney.

[5]

WYE

WYE told the Tribunal that her mother's nursing home bond was $450,000. The retention amount of $19,000 finished in November 2017. At the end of September 2015, WYE negotiated a change in the financial arrangements so the daily fees would be deducted from the bond. WYE said she spoke with Ms S, senior member resident management team at the nursing home, who said that it was alright to do that and it is not an uncommon arrangement. WYE said that her mother receives a Veterans' Affairs pension of $909.10 per fortnight. Each Thursday, $800 from her pension is automatically transferred to another account and then debited by the nursing home. There is $478 remaining in SZQ's passbook bank account. The other account has $2,687. WYE said that she sometimes hired a private nurse to go on outings with her mother because her behaviour was difficult on group outings. SZQ's hairdressing fees are added to her daily care fees. WYE said that her mother's money has been spent on her care.
WYE said that all decisions regarding the sale of SZQ's home were made with the full knowledge of TAQ. WYE told the Tribunal that she did not sell the house until she was sure that her mother was going to stay in the nursing home. They split the proceeds three ways; she and TAQ received a one-third share and her mother received a one-third share. They renovated the home first and WYE paid for the renovations. They met with a solicitor in West Sydney and set up trusts. WYE said that the legal fees were $11,000. WYE said that she was given legal advice that they could receive an advance on their inheritance. She has not 'stolen' their mother's money and has not done anything wrong. WYE said that she often pays for her mother's expenses out of her own pocket and her mother therefore sometimes owes her money. At one stage her mother owed WYE $10,000.
WYE gave evidence that there was $654,000 in her mother's account when she began managing her finances. Her mother also owned the townhouse at Inner West Sydney. They spent $46,000 on the renovations and she and TAQ split the profits from the renovation between themselves.
WYE told the Tribunal that the $180,000 she withdrew from her mother's account was never meant to be loan, but an advance on her inheritance. WYE said that she obtained legal advice before making any decisions. They received $225,000 each after their mother's home was sold and she also gave TAQ a share of the renovation profit. They did not pay rent because SZQ said that she would never charge her family rent. They only stayed in SZQ's home because they did not want to leave it empty. WYE said that it is not her fault if she has done anything wrong. WYE gave evidence that she has repaid her brother some of the $90,000 she borrowed from him. WYE denied that she owns a home and said she is renting.

[9]

Summary of relevant documents

The Tribunal was provided with a copy of the enduring power of attorney executed by SZQ on 20 February 2012 and notes that it operates from the date that the attorney accepted the appointment, which was 20 February 2012. The certificate under s 19 of the Powers of Attorney Act was signed by Mr Q, solicitor. The power of attorney authorises WYE to give reasonable gifts, confer benefits on WYE to meet her reasonable living and medical expenses and confer benefits on SZQ's children and grandchildren to meet their reasonable living and medical expenses, as provided by ss 11(2), 12(2) and 13(2) of the Powers of Attorney Act.
A number of emails between WYE and TAQ were also provided. One dated 28 February 2015 from WYE states that SZQ had $654,720.83 in a term deposit and $1,978.50 in her pension passbook in January 2012. A list of major expenses, gifts and sundries indicates that a 90th birthday party was held on 17 January 2013 for SZQ which cost $10,200. On 4 and 12 December 2013, two amounts of $90,000 were deducted from SZQ's account as "advanced loan of Mum estate". WYE stated in the email that between January 2012 and January 2015, she spent $26,971.53 on shopping for SZQ "(magazines, fruit etc)". Rates and levies for the Inner West Sydney property paid by SZQ totalled $8,306.27.
Another email also dated 28 February 2015 from WYE to TAQ states "… even though Mum's Will states that 3 equal shares go to [TAQ], [Mr Z] and [WYE], Mum's wishes were that [Mr Z] only gets a 1/3 share of her 3rd share after [the Inner West property] is sold..."
An email from TAQ to WYE, dated May 2017, states "…I REALLY WENT ALONG FOR THE RIDE WITH YOU AGREEING TO SPEND MUM'S MONEY SO [Mr Z] WOULD ONLY RECEIVE A SMALL AMOUNT BUT NOW I REALISE THAT THE RATE YOU ARE USING MUM'S MONEY THAT MUM WILL NOT HAVE ENOUGH MONEY TO SURVIVE ON BEFORE SHE PASSES…"
An email exchange between WYE and Mr P, managing director of a law firm, dated 31 May 2013, was submitted by WYE. WYE stated the following: "As initially advised we got a valuation on Mum's current property 'prior' to doing any renovation work which was valued at $690,000. So once we finish all renovation work we will put it on the market and it will obviously be worth a lot more. So can you please confirm who gets the extra money that is received after the sale due to the Reno…is the difference given solely to us as we have paid for and done all the work Or…does Mum receive the total amount, 'including' the Extra profits made Or…do we have to divide the Extra monies made between the three beneficiaries of my Mum's Will being us three children…including the bad brother even though he did nothing and didn't outlay any funds. Our initial understanding was that…my bad brother and Mum are not entitled to the profits. (Just to let you know that our intention is and always will be, to share any extra money made with my good brother)…" Mr P replied the same day, stating "You are correct. The valuation is your shield and sword to go into any future battle. Essentially you have lent monies to your mother for a renovation on the agreement that any upsell is yours…"
A copy of an agreement between WYE and TAQ was also submitted, dated 1 December 2013, and states that WYE is deducting $180,000 from her mother's assets and that she deems the amount of $90,000 to be her "rightful portion" of her mother's assets (and future estate upon her passing). TAQ agreed to authorise WYE to deduct the amount of $90,000 from his mother's assets and deemed this amount to be his "rightful portion" of his mother's estate upon her passing. TAQ also confirmed that he lent his $90,000 share to WYE interest free, to be repaid within 60 days of their mother's death. The document was witnessed by Mr Y.
Numerous statutory declarations and statements were also provided from family and friends to testify that WYE is of good character.

[10]

What did the Tribunal have to consider?

The Tribunal may, on the application of an interested person, decide to review the making or the operation and effect of a reviewable power of attorney, or not to carry out such a review: Powers of Attorney Act, s 36(1). As a consequence of reviewing the making or operation and effect of a reviewable power of attorney, the Tribunal may decide whether or not to make an order under s 36 of the Powers of Attorney Act (s 36(2)).
The Tribunal may make a number of orders relating to the making of a power of attorney including the following:

An order declaring that SZQ did or did not have mental capacity to make a valid power of attorney
An order declaring that the power of attorney is invalid (either in whole or in part) if the Tribunal is satisfied: 1. SZQ did not have the capacity necessary to make a valid enduring power of attorney 2. The enduring power of attorney did not comply with the requirements of the Powers of Attorney Act 3. the enduring power of attorney is invalid for any other reason, for example, dishonesty or undue influence

The Tribunal may make a number of orders relating to the operation and effect of a power of attorney if it is satisfied:

that it would be in the best interests of SZQ to make the order
that it would better reflect the wishes of SZQ to make the order

These orders include:

An order varying a term of, or a power conferred by, the power of attorney
An order removing a person from office as attorney
An order appointing a substitute attorney to replace an attorney who has been removed from office or who otherwise vacates the office
An order reinstating a power of attorney that has lapsed by reason of any vacancy in the office of power of attorney and appointing a substitute attorney to replace the attorney who vacated office
An order directing the attorney to: 1. Furnish accounts to the Tribunal or someone nominated by the Tribunal 2. Lodge a copy of all records and accounts of dealings and transactions made under the power 3. Require that the records and accounts be audited and that a copy of the report of the auditor be furnished to the Tribunal 4. Submit a plan of financial management for approval
An order revoking all or part of the power of attorney
Such other orders as the Tribunal thinks fit

If on a review of the enduring power of attorney, the Tribunal decides not to make an order under s 36, it may, if it considers it appropriate in all of the circumstances to do so, decide to treat the application for review as an application for a financial management order under Pt 3A of the Guardianship Act 1987 (NSW).

[12]

Should the Tribunal make any orders under s 36 of the Powers of Attorney Act?

The Tribunal then proceeded, pursuant to s 36(2) of the Powers of Attorney Act, to consider whether or not to make an order under s 36.
An attorney is in a fiduciary relationship with the person whose affairs they manage. An attorney must act in the best interests of the principal and must not obtain a personal benefit other than specifically provided for in the executed enduring power of attorney: Powers of Attorney Act, s 12(1).
The Tribunal had regard to the authority provided in the power of attorney executed by SZQ to give reasonable gifts, confer benefits on WYE and on SZQ's children and grandchildren, as provided by ss 11(2), 12(2) and 13(2) of the Powers of Attorney Act. However, those authorities are limited by the provisions of Sch 3 of Powers of Attorney Act, which provides that the gifts and benefits cannot be more than what is reasonable having regard to all the circumstances and, in particular, SZQ's financial circumstances and the size of her estate.
The Tribunal is satisfied on the evidence before it that WYE has obtained a personal benefit and given gifts and benefits to other family members that goes beyond what is specifically provided for in the executed power of attorney. There is uncontested evidence that WYE transferred one-third of the proceeds of the sale of her mother's Inner West Sydney home to herself (via a trust) after the home was sold in late-2013. Another one-third was transferred to TAQ. WYE and her partner renovated SZQ's home prior to the sale and shared the amount of the deemed increased value ($67,648) with TAQ. Further, WYE and TAQ agreed at the hearing that WYE withdrew an additional $180,000 from SZQ's account in December 2013 with the intention that they should each receive $90,000. TAQ then apparently 'loaned' his $90,000 to his sister on an interest free basis. Consequently, since being appointed as her mother's attorney, WYE has transferred a total of approximately $700,000 from her mother's estate to herself, TAQ and her partner, Mr Y. This is around one-half of SZQ's estate at the time the power of attorney was executed. From around September 2015, SZQ was no longer able to meet her residential care fees from her pension and savings. Consequently, WYE made arrangements with the facility to utilise SZQ's bond to pay the fees. It is unclear whether interest will ultimately be charged by the facility on the amount that SZQ owes.
WYE told the Tribunal that her brother was aware of all of her actions and that if she has "done the wrong thing", then he has as well. However, WYE was her mother's attorney and so had particular legal obligations to act in her best interests. WYE also stated that her solicitor advised her that she was able to retain the profit made after renovating her mother's home. WYE provided an email dated 31 May 2013 to the Tribunal from Mr P, Managing Director of a law firm, to support her assertion. While the Tribunal accepts that WYE received the advice claimed, there is no evidence before the Tribunal to support that Mr P is, or ever has been, employed as a solicitor. The Tribunal is not persuaded that the advice that WYE received from Mr P justifies her actions given her duty to act in her mother's best interests.
The Tribunal considered whether the situation could be adequately remedied by making an order under s 36 of the Powers of Attorney Act. In the circumstances it decided that it could not. There is no dispute that TAQ has also received significant funds from his mother's estate following the sale of her home (around $240,000). In that context, the Tribunal had no confidence that TAQ would manage and protect his mother's estate in her interests. The Tribunal was unable to contact Mr Z to obtain his views, but WYE stated that he has had very limited contact with his mother since the Tribunal hearing in 2012.
On the basis of the findings above, the Tribunal decided not to make any orders under s 36 of the Powers of Attorney Act. It was satisfied, however, that it was appropriate in all of the circumstances to treat the application for review of the enduring power of attorney as an application for a financial management order.

[14]

Is SZQ incapable of managing her affairs?

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

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

The relevant time for considering whether a person is incapable of managing his or her affairs is not merely the day of the hearing but the reasonably foreseeable future (McD v McD (1983) 3 NSWLR 81 at 86). See Lindsay J in Re W and L (Parameters of Protected Estate Management Orders) [2014] NSWSC 1106 at [20].
Each case must be considered on its own facts, including not only actual facts presently known but also, so far as they can be known, prospective developments.
In a report to the Tribunal dated 27 February 2018, Dr O, general practitioner, stated that SZQ has been her patient for many years. Dr O expressed concern that SZQ may be moved to another nursing home if "the power of attorney is taken away from [WYE]" as this would be detrimental to SZQ's health and welfare. Dr O stated that a move of accommodation would also "aggravate her dementia". It is not clear to the Tribunal why Dr O considers that SZQ's placement may be at risk if WYE is no longer her mother's attorney.
SZQ has been living in a residential aged care facility for more than five years. Ms R told the Tribunal that SZQ requires full assistance with showering, toileting and transfers. She is a slow eater and is at high risk of falls. Ms R said that SZQ cannot make decisions due to her condition. She is able to ask for a biscuit if given a cup of tea, but her communication is very limited.
SZQ was unable to discuss the application with the Tribunal due to her condition. WYE and TAQ agreed that their mother is no longer capable of managing her financial affairs. There is consistent evidence that SZQ has relied on her daughter to assist her with her finances for many years.
The Tribunal is satisfied on the basis of the evidence before it that SZQ is incapable of managing her financial affairs due to her dementia and advanced age.

[17]

Who should be appointed as financial manager?

In appointing a financial manager, as in making all other orders under the Guardianship Act, the Tribunal must act with the interests of the person concerned as the paramount consideration and in accordance with the other principles set out in s 4 of the Guardianship Act.
Section 25M of the Guardianship Act provides that, if the Tribunal makes a financial management order, it may appoint a suitable person to manage the person's estate or may commit the management of the estate to the NSW Trustee and Guardian.
In Holt & Anor v Protective Commissioner (1993) 31 NSWLR 227, the Court said that the dominant consideration in making orders about financial managers was the welfare of the person. The President of the Court of Appeal emphasised the Court's broad discretion in deciding who should be financial manager but also set out possible considerations as to the competing advantages of the then Protective Commissioner and a family member as the manager of an estate. The NSW Trustee and Guardian now exercises the role of the Protective Commissioner.
On the side of the then Protective Commissioner was seen to be the manifest independence of the statutory office, the advantages of a dispassionate and neutral approach in situations of family conflict and divided views as to the best interests of the person, expertise and experience in managing estates, an impeccable reputation and the security provided to an estate against loss or damage.
The advantages of the appointment of a family member were more economic management of smaller estates (that is, lower fees) and a greater familiarity with assets and liabilities in smaller estates, a greater capacity of a person with a disability to interact with the manager so as to exercise a greater influence over the broad directions of the management of the estate, love and affection for and knowledge of the protected person and concern for his or her quality of life, and particular qualities or qualifications enabling family members to act as managers.
The Court considered that interrelated property interests in a family situation, where a conflict of interest and duty may be "more apparent than real," should not necessarily present an absolute bar to appointment of a family member who is otherwise appropriate. However, when appointing a family member, a decision maker must be satisfied that the estate, income and capital assets, will be utilised to advance the interests and quality of life of a protected person rather than to eventually increase the assets of the family.
In Application by AMAM; Re SAM [2011] NSWSC 503, Hallen AsJ stated: "[34] It would be unwise to attempt any definition of the matters that may legitimately be enquired into to determine whether the applicant is suitable. Each case must depend on its own circumstances. Needless to say, however, the Court must consider, at least, the proposed manager's character, honesty and ability to manage, diligently, the managed person's property in the managed person's best interests."
The matters or "guidelines" that should be considered when determining who to appoint as financial manager, as established in Holt & Anor v Protective Commissioner (1993) 31 NSWLR 227, are discussed and expanded upon by Lindsay J in M v M [2013] NSWSC 1495 at [50].
The Tribunal notes that there is now considerable conflict between WYE and TAQ, although this was not always the case. While TAQ was reportedly agreeable to WYE's actions under the enduring power of attorney until recently, he gave evidence that he has become increasingly concerned about how his sister has managed his mother's estate. Given the evidence before the Tribunal indicating that TAQ was aware of and supported his sister's actions, it would not be in SZQ's interests to appoint TAQ to manage his mother's finances. The Tribunal considered it important to appoint a manager who would protect SZQ's estate and manage it effectively for her benefit to support her care and accommodation needs. After taking into account the evidence of family conflict and the significant depletion of SZQ's assets since the power of attorney was executed, the Tribunal determined that her estate should be managed independently. It therefore committed SZQ's estate to the NSW Trustee and Guardian.
For completeness the Tribunal notes that the making of a financial management order has the effect of suspending any enduring power of attorney for the duration of the order: Powers of Attorney Act, s 50(3).

At a glance

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Judgment (18 paragraphs)

Legislation Cited (4)

Cases Cited (8)