AHB V NSW Trustee and Guardian
[2012] NSWADT 76
•27 April 2012
Administrative Decisions Tribunal
New South Wales
Medium Neutral Citation: AHB V NSW Trustee and Guardian [2012] NSWADT 76 Hearing dates: 15 February 2012 Decision date: 27 April 2012 Jurisdiction: General Division Before: P H Molony, Judicial Member Decision: The decision of the NSW Trustee and Guardian is affirmed.
Catchwords: NSW Trustee and Guardian - decision to sell home - best interest Legislation Cited: NSW Trustee and Guardian Act Category: Principal judgment Parties: AHB (Applicant)
NSW Trustee and Guardian (Respondent)File Number(s): 113308 Publication restriction: S 126 Administrative Decisions Tribunal Act 1997
REasons for decision
Introduction
[GENERAL DIVISION (P H Molony, Judicial Member)]. This is a review of a decision made by the NSW Trustee and Guardian to sell the home of a protected person at Gymea Bay. That decision was made on internal review. AHB, the applicant, is the protected person's son.
The protected person's has been diagnosed with dementia. She has been a resident of the Wollongong Nursing Home since November 2009. She has one son and two daughters. There is a level of conflict among the siblings.
The Guardianship Tribunal appointed the Public Guardian as the protected person's guardian on 16 July 2010, with the functions of access and accommodation. At the same time the Guardianship Tribunal appointed one of her daughters as her guardian, with healthcare and medical and dental consent functions. The Guardianship Tribunal also converted an application to review an enduring power of attorney appointing the same daughter as the protected person's attorney, to an application for financial management. The Tribunal then made a financial management order and appointed a financial manager, namely the NSW Trustee and Guardian (the financial manager).
On 20 December 2011, the Guardianship Tribunal reviewed, that guardianship order. It appointed the Public Guardian as the protected person's Guardian for a period of three years with the functions of accommodation, access, healthcare, and medical and dental consents. At the same time, the Tribunal confirmed the appointment of the NSW Trustee and Guardian as financial manager, on a requested review by AHB.
On 11 September 2011, the financial manager made a decision to sell the protected person's home at Gymea Bay. The decision was based on the view, taken by the Public Guardian, that the protected person should be accommodated in an extra services nursing home. This would require the payment of a bond. Given her assets and income, the financial manager reasoned that the only way in which a bond could be paid and the protected person's future secured, is by the sale of her home.
AHB requested an internal review of that decision. On 7 October 2011. The decision was affirmed on internal review.
AHB applied to review the decision on 1 November 2011.
On 25 January 2012 Public Guardian made a formal decision to place the protected person in an added services facility. It was decided that she should remain living where she is until such time as she can afford an extra services facility.
In order for the protected person to move to an extra services facility the financial manager says that her home must be sold. AHB is now living there, and was living there, caring for his mother, for approximately 3 years prior to her admission to a nursing facility. He is not paying rent. He is on Newstart allowance. He claims that he is maintaining the property, and has done substantial works, none of which involve cash outlays of any great value.
AHB's position is that the home should not be sold. He is hopeful that developments in the treatment of dementia will lead to a situation where his mother will be well enough to return home, albeit with support. Even if that is not the case, he would like to see his mother return home. He acknowledges, for that to occur, it would then be necessary to pay for her care. He considered it essential that her home be there for her to return to.
In the meantime, he agrees that his mother should be accommodated in a higher standard nursing home. He favours Chesalon. In order for her to afford to live there he argued that her home at Gymea Bay should be rented out, and funds borrowed to pay her bond (secured on the house), by way of an accommodation bond loan. He said that $360,000 would have to be borrowed to pay a bond at Chesalon.
The financial manager's view was that, depending on the nursing home selected; the bond would be in the range of $250,000 to $500,000.
AHB proposed that he let the house at a rental of $660 per week, to yield an income sufficient to pay his mother's fees at an extra service facility. Such rental would be on a shared rental model, where individual rooms are rented out. He would continue of live at the premises and manage the accommodation. He is unable to rent the home himself, and would have to have boarders or sub-tenants.
He relied on what he says are his mother's expressed wishes to retain the home. He produced a number of recordings of discussions he has had with her, whereby, he claims, she decided to retain the home. Having listened to those tapes, with the agreement of the financial manager, I am satisfied and that:
- AHB did not explain all of the available options, and the full consequences of each, to his mother.
- AHB did not provide his mother with figures outlining her financial position.
- AHB told his mother it might be possible for her to return home.
- The protected person did not demonstrate a full and complete understanding of the options available, nor think them through.
- She expressed a desire that her home not be sold, but that was not a reasoned or thought through decision
I note that Ms Stormont also spoke with the protected person to ascertain her views on 7 February 2012. Her notes of that discussion were tendered. They paint the picture of the protected person being somewhat confused, but not happy with the prospect of paying a lot of interest, if a loan were taken out on her house.
AHM produced a quick reference guide to accommodation bond loans offered by the Banksia Financial Group. They offer accommodation bond loan between $100,000 and $500,000. If lent for 3 years, the maximum loan to valuation rating is 50%. If lent for 5 years, it is 40%. There are valuation and establishment fees totalling $2,250. According to the quick reference guide, interest is charged at 8.7% pa, is calculated daily and charged monthly. The Banksia Group has a calculator available on its web-site, which enables one to calculate the payout at the end of a loans term.
The material before the Tribunal indicates one of the protected persons daughter's indicating that she was unwilling to provide a view due to conflict with ABH. The other daughter's views are unknown.
The financial manager view was that AHB's proposal is not feasible. The protected persons income is limited. The financial manager has difficulty meeting her current expenses. She could not afford to repay any loan at the end of term, other than by selling the house, and would lose a considerable amount in interest paid and potential income foregone. The proposal that AHB let out the house on a shared accommodation basis offers her no surety of income, is reliant on him, and he can offer no method of covering any short fall in rental income.
As a result the financial manager argued that it was in the protected person's best interest the house at Gymea bay be sold.
The protected person's financial position
With respect to the value of the Gymea Bay property there is a restricted assessment inspection report from MVS Valuers dated November 2010 estimating its value at $700,000. A market appraisal from Century 21 Real Estate at Gymea gives a figure of $750,000 to 775,000. AHB has obtained a market opinion from Strong Property of Gymea in which they advised they are "confident of marketing your home in the vicinity of $820,000 to $850,000." Given the diversity of those valuations I consider that for the purposes of this decision the home should, conservatively, be notionally valued at $750,000.
The protected person also has a one-quarter interest in a shack in the Royal National Park. As I understand it, this is a licence and cannot readily be sold. It is of nominal value. A licence fee is payable by the protected person each year.
The protected person also has an outstanding loan she made to one of her daughters, upon which approximately $128,000 is owing. This is concerned with the protected persons sale to the daughter of a property that the protected person owned on the South. The sale was effectively on vendor finance at 5%, but with the property being transferred before payment in full. AHB believes that the transfer, sale and loan should be set aside on the basis of a breach of fiduciary duty by the daughter. Ms Stormont, however, told me that the financial manager has received advice that there is no basis for setting aside the transactions. The daughter is making payments on the loan to the NSW Trustee and Guardian of $250.00 per fortnight.
At the time of the hearing the protected person had $13,000 in the financial manager's trust account.
Her net assets are therefore in the region of $891,000.
During the financial management order the financial manager has spent $5,093.71 on expense associated with the property.
Since November 2011, which was the second anniversary of her move to the nursing home, the house is treated as an assessable asset under the assets test, for the purpose of the calculation of her nursing home fees and pension entitlements, whereas it was previously exempt.
The protected person's income is presently $2,300 including her State Superannuation pension, and Workers Compensation benefits. Her nursing home fees, including an allowance for comforts are $2,700.00. In addition, she receives loan re-payments of her daughter of $546.66 per month. These are effectively a return of capital.
In addition to the outgoings on the Gymea house, the protected person also has ongoing chemist and medical expenses.
It is clear that the protected person's income is insufficient to meet her expenses. Her liquid assets, which represent only a very small portion of her estate is being used to meet the shortfall, resulting in them being depleted.
Even if she remains where she is, rather than moving to an extra services nursing home, the situation will clearly reach a point were all her liquid assets will be consumed. There is therefore a need to either sell her principle asset (her home) or use it to generate sufficient income to meet her expenses. If she is to move to an extra services facility, in order to pay the bond, the home will either have to be sold or used as security for a loan.
It was against this background that the financial manager made the decision to sell the home.
Relevant Legislation
Chapter 4 of the NSW Trustee and Guardian Act 2009 is concerned with 'management functions relating to persons incapable of managing their affairs.' By s 55(a) the Trustee may exercise all the functions necessary and incidental to management and care of the estate of a managed person. This includes all the function of the managed person: s 56. Managed person is defined in s 38 as including a 'protected person". This, in turn is defined as -
protected person means a person in respect of whom an order is in force under Part 4.2 or 4.3 or the Guardianship Act 1987 that the whole or any part of the person's estate be subject to management under this Act.
There is in force an order to the Guardianship Tribunal committing management of the protected person's estate to the Trustee. In managing that estate the Trustee may exercise any of the powers vested in it by s 16. Relevantly, these include -
(b) grant leases of property for a term not exceeding 10 years and give to a lessee an option of renewal if the aggregate duration of the lease and any such renewal does not exceed 10 years,
...
(d) surrender a lease and accept a new lease,
(e) accept a surrender of a lease and grant a new lease,
(f) execute a power of leasing vested in a person having a limited estate only in the property over which the power extends,
(g) buy, sell, realise and mortgage (with or without a power of sale) real and personal property,
Note. Mortgage includes charge (see section 3 (1)).
(h) pay interest secured by a mortgage out of capital, if income is insufficient,
Section 39 provides -
It is the duty of everyone exercising functions under this Chapter with respect to protected persons or patients to observe the following principles:
(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.
Consideration
During the hearing I spent some time explaining to ABH that the Tribunal was reviewing the decision to sell the property at Gymea, to see if it is the correct and preferable decision. The Tribunal was not reviewing accommodation decisions made by the Public Guardian.
The starting basis was the protected person is a person who the Guardianship Tribunal has determined requires a guardian to make decision about where she should live, among other things. The Guardianship Tribunal had also found that she was incapable of managing her financial affairs and had therefore appointed the NSW Trustee and Guardian as her financial manager. The Public Guardian had determined she should move to an extra services nursing home, but should remain where she is until she could afford such a move. The decision under review had been made in aid of that object. The issue is whether it is the correct and preferable decision. The issue is not whether she should remain in residential care, or return home.
I noted that both the NSW Trustee and Guardian and ABH, agreed that a move to an extra services nursing home is in the protected person's best interest. I accepted that was the case.
It is clear that, in order for that to occur, liquid funds will have to be obtained, so that a residential bond can be paid and extra services fees met. There were two proposals as to how this could occur. The first is the sale of the home; the second is for it be rented on a shared accommodation basis, and for an accommodation bond loan in the region of $360,000 to be taken out, secured on the house.
If the house were sold it could be expected, after the expenses of sale, to yield a figure of around $730,000. Less an accommodation bond of $360,000 this would leave $370,000, which could be invested to meet the protected person's needs. That interest will not be taxed while the protected person is paying a bond.
The financial manager projects those investment, combined with the protected person's superannuation pension and workers compensation payment, should yield an income of $71,123pa. In addition, as a result of the sale, she would no longer be paying property expenses. While her fees will increase because of her greater income, it should be more that sufficient to meet her expenses at an extra-services nursing home, and to pay for contingencies. The NSW Trustee and Guardian projects her expenses in the event of a sale at $56,228pa, leaving a projected surplus of nearly $15,000pa.
This is to be compared with ABH's proposal. The first limb of that proposal involves him being given authority to let the property on a shared accommodation basis. He believes that on that basis it could yield a rental income of $660.00 each week, or approximately $34,400 per year. This I note is higher that the only rental estimate in the material, which estimated a rental for the house in total of $500 to $550 per week. Again adopting a conservative approach, I think the likely rental should be fixed at a notional amount of $525 a week: $27,300pa.
I have a number of concerns with this aspect of ABH's proposal. First, there is no assurance that the income will be regular, or that the property will have a 100% occupancy rate. Indeed this would seem unlikely. Secondly, while ABH is willing to offer his services in managing the house, he is unable to provide a guarantee against any shortfall.
This is important because the income generated from rental will not only have to meet the protected person expenses of living at an extra services nursing home, but will also provide a reserve to pay out the loan at the end of the term.
ABH proposed a three year term and to borrow $360,000. Using the loan calculator at the Banksia Financial Group web-site one sees, assuming a 3% pa growth in house prices and no changes in house prices, that the amount to be repaid at the end of the loan is $466,922.11. This would leave the protected person a projected equity of $352,622.89. If there was no growth in property prices and interest rates remained unchanged the calculator projects the amount to be repaid at the end of the loan remain $466,922.11, but the protected person's projected equity would be reduced to $283,077.89.
I note that this represents 13.5 years of the rental income suggested by ABH.
That rental income, combined with her other income, will yield the protected person an income of $62,486. As she will be paying an accommodation bond, the rental income will not be subject to tax. From that income, the protected person will have to meet property costs and projected expenses of approximately $52,500, leaving a surplus of around $9,900 pa.
If the yearly surplus was saved for three years the protected person would have nearly $30,000 to pay towards the outstanding loan at the end of the term. As a result she would be substantially worse of than if she sold now. The house would have to sold at the end of the term to pay off the loan, as the protected person would not have sufficient equity to be able to borrow enough to repay the loan.
As a result of all of the above, I am satisfied that, from a financial point of view, the protected person's interest and welfare would be better secured if the house is sold. This will enable her to move to an extra fees nursing home, which I am satisfied is also in her best interest.
While the sale of her home will deprive her of the freedom to return to it, the reality is that she has dementia and has now been in an aged care facility for two years. Despite her son's hope for a miracle cure, that prospect is not one that should drive decision making on her behalf. She does not have sufficient funds to pay for in home care.
While ABH opposes the sale of the property the reality is that he has been living it in rent-free for the last two years, and will be the person most directly affected by a decision to sell.
The protected person has been in a nursing home for two years and her family are able to visit her there and maintain family relationships as they see fit. The decision to sell the home will not change that, nor will it change the level at which the protected person presently participates in the community. Indeed, the opportunities offered at an extra services nursing home, may well provide her with a greater chance to get out and participate.
On the material before me I am not satisfied that the protected person has provided (or is capable of providing) a considered opinion on the benefits or otherwise of selling her home. I do accept that, like most people, she would like to keep her home. That is a wish or desire, rather than a considered and calculated opinion, reached after considering all the options available to her.
Taking into account all these factors, and the principles in s 39 of the NSW Trustee and Guardian Act 2009 I agree that the correct and preferable decision is to sell the protected person's property at Gymea Bay.
As a result the decision of the NSW Trustee and Guardian is affirmed.
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Decision last updated: 27 April 2012
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