YKM [2023] NSWCATGD 9

Background

YKM is 52 years old and lives with his wife, AZJ, and son, Mr Z, in north-west Sydney. In 2018 YKM was injured in an industrial accident and the Tribunal has previously accepted evidence that he has significant disabilities as a result. He has been diagnosed with post-traumatic stress disorder, persistent depressive disorder and schizophrenia.
On or about 19 April 2022 a consent order in YKM's favour was made by the District Court of New South Wales in relation to personal injury proceedings against his employer and another person in relation to the accident.
On 5 July 2022 the Tribunal made a financial management order for YKM and ordered a review within nine months. The financial management order excluded all YKM's assets other than the judgment sum of approximately $450,000 payable to him in relation to District Court Proceedings [Number removed for publication.] from the order (the 'Compensation Payment').

Should the financial management order be revoked because it is in YKM's best interests?

A document dated 31 March 2023 signed by YKM was lodged with the Tribunal. During the hearing AZJ told me that her husband wrote the document in Cantonese and she translated it into English. It states that in December 2022 YKM purchased an investment property with his son for $780,000 in which he has a 45% share. Costs associated with the purchase were $30,210. He wants the funds held by the NSW Trustee and Guardian to be released to repay his share of the loan on the property which is $366,000. He will then receive income of $315 per week from his 45% share of the rental income of the property.
YKM states in his written submission that: "If I did not have this investment property, I would only receive a weekly payment of $500 from the NSW Trustee and Guardian, and pay over $110 in weekly management fees. By the time I reach retirement age, I would be left with nothing. The calculation reveals that $375,178 (as of 31/12/2022) divided by ($500 + $110) divided by 52 weeks, equals 11.8 years. However, by investing in this property, both the rental income and the property value will continue to increase, and I can benefit from it as continuing financial support until my death."
It is stated that the use of the funds for the property investment is consistent with the recommendation in [28] of the Reasons for Decision of the Tribunal relating to the hearing on 7 July 2022 that the Compensation Payment be preserved for YKM's benefit because it will be funding an investment in which he has a legal interest.
Also before me was a copy of a Contract for the Sale and Purchase of Land and a title search from NSW Land Registry Services evidencing that YKM has a 45% share in a property in regional NSW that was purchased for $780,000 on 23 December 2022. His son, Mr Z, holds the other 55% of the property.
AZJ explained during the hearing that since purchasing the property YKM has been paying $420 per week in mortgage repayments from his allowance of $500 per week, which is paid from his Compensation Payment. This leaves him with only $80 per week. She submitted that he would be in a better financial position if the mortgage was repaid and he was receiving rental income of $350 per week. The property is currently rented for $500 per week to a developer who is constructing apartments on an adjoining block of land and using the garden for storage. AZJ anticipates the rent will increase to $700 once the construction is finished and the property can be rented to a residential tenant.
When the financial management order was made, the Tribunal noted concerns about the stability of YKM and his wife's relationship and that, at that time, the plan was for his funds to be used to support the mortgage payments on a property in which he had no clear interest and from which any financial benefit would flow to his wife and son.
YKM told me that the relationship with his wife is now 'excellent'.
Ms Y provided a report and represented the NSW Trustee and Guardian during the hearing. She reports that YKM has $366,366.29 in his trust account and that a compensation payment of $390,000 was received by the NSW Trustee and Guardian on 20 July 2022. An allowance of $500 per week was established on 2 August 2022. This amount was based on ensuring YKM's funds last his lifetime. On 19 October 2022 a request to increase the allowance to $1500 was declined on the basis that this would deplete YKM's funds within six years. The NSW Trustee and Guardian was not consulted about the purchase of the property by YKM as tenant-in-common with his son.
A finding that a person is incapable of managing their affairs does not necessarily mean they lack contractual capacity at law. However, if the contact concerns the estate of the person, there may be restrictions on the exercise of legal powers in relation to the estate.
Section 71(1) of the NSW Trustee and Guardian Act 2009 (NSW) suspends a protected person's decision-making powers 'in respect of so much of that estate as is subject to management'. Where a financial management order excludes a part of the person's estate from the order under s 25E(2) of the Guardianship Act 1987 (NSW), the power to deal with that part of the estate is not suspended. As Lindsay J stated in Re Application for Partial Management Orders [2014] NSWSC 1468 at [29]: "…it may be (as was recognised in Re W and L (Parameters of Protected Estate Management Orders) [2014] NSWSC 1106 at [9] that partial management orders can, and should, be called an aid of 'self management', allowing a protected person to manage part of his or her own estate if capable of doing so."
The purpose of making a partial financial management order is to take the least restrictive approach that is consistent with the person's welfare and interests. It would be inconsistent with this purpose to impose a general restriction on a person's power to enter into legal contracts regarding the part of the estate that is excluded from the financial management order.
The decision of YKM and his family to purchase an investment property in which YKM has a legal interest without consulting the NSW Trustee and Guardian was somewhat brazen, particularly as control of the Compensation Payment managed by the NSW Trustee and Guardian is now being sought to finance the investment, in a sense retrospectively.
YKM's power to deal with the Compensation Payment was suspended by the making of the financial management order. There was no legal impediment, however, to him entering into a contract to purchase a property given that he did so without reliance on the part of his estate that is subject to management (the Compensation Payment), notwithstanding that he now seeks control of those funds to pay out a loan in relation to his share of the property purchased.
The role of the Tribunal is to determine what is in YKM's best interest. There is a significant discrepancy between the evidence of YKM and Ms Y in relation to how long the Compensation Payment would last if YKM received an allowance of $500 per week, possibly due to a misunderstanding by YKM about the fees charged by the NSW Trustee and Guardian. I am satisfied, however, that given the property has been purchased, it is in YKM's best interests for the financial management order to be revoked so that the mortgage in his share of the property can be paid off. I accepted the evidence of YKM and his wife that the Compensation Payment will be deployed on a property in which YKM has a legal interest and from which he will benefit financially.
The financial management order for YKM is revoked.

At a glance

Court

Decision date

Source

Judgment (7 paragraphs)

Legislation Cited (3)

Cases Cited (2)