AHJ v NSW Trustee and Guardian
[2011] NSWADT 311
•23 November 2011
Administrative Decisions Tribunal
New South Wales
Medium Neutral Citation: AHJ v NSW Trustee and Guardian [2011] NSWADT 311 Hearing dates: 23 November 2011 Decision date: 23 November 2011 Jurisdiction: General Division Before: Magistrate N Hennessy, Deputy President Decision: The applicants' application for a stay of the decision of the NSW Trustee and Guardian is refused.
Catchwords: STAY - decision by NSW Trustee to give private manager a direction - whether prima facie case established - whether balance of convenience favours applicants - stay refused Legislation Cited: Administrative Decisions Tribunal Act 1997
NSW Trustee and Guardian Act 2009Category: Interlocutory applications Parties: AHJ (First Applicant)
AHK (Second Applicant)
AHL (Third Applicant)
AHM (Fourth Applicant)
NSW Trustee and Guardian (Respondent)
AIG (Second Respondent)
AIH (Third Respondent)Representation: Counsel
G W McGrath SC and S Adair (Applicants - AHJ, AHK, AHL and AHM)
WG Muddle SC (Second Respondent -AIG)
Mr O'Sullivan (Third Respondent - AIH)
JP Gould (Applicants)
Streeterlaw (Third Respondent) -
File Number(s): 113323 Publication restriction: S126 of the Administrative Decisions Tribunal Act 1997 applies
REasons for decision
HER HONOUR: I am going to give some oral reasons for the decision that I gave earlier to refuse the application for a stay of the decision of the New South Wales Trustee that is the subject of these proceedings. I am going to give some reasons for that decision now so hopefully that will not take too long but it will take some little time.
This is an application for a stay of a reviewable decision made by three siblings, AHJ, AHK, AHL, and their mother, AHM, on 17 November 2011. The subject matter of the stay application is a decision made by the New South Wales Trustee on 11 October 2011 in relation to Mrs X's estate. Mrs X is the grandmother of the siblings and the mother-in-law of AHM. I will read the additional direction and authority that the New South Wales Trustee made on that day:
"The Guardianship Tribunal made a financial management order on 9 June 2011 appointing [AIH], referred to as 'the Manager' throughout this document, manager of the Estate of [Mrs X]. The New South Wales Trustee & Guardian gives the following additional direction and authority to the Manager to enable him to manage the Estate. The New South Wales Trustee and Guardian is empowered to issues these directions and authorities under ss 64, 65 and 66 and the New South Wales Trustee & Guardian Act 2009.
16 MISCELLANEOUS
The Manager is authorised to exercise the managed person's voting rights in respect of her shareholdings in [X] Holdings Pty Limited, [X] Holdings Trust No 1, [X] Holdings Trust No 2, and/or [X] Holdings Trust No 3, including but not limited to voting at extraordinary general meetings, voting in favour of a resolution for the appointment of a provisional liquidator and the winding up of the companies."
The application for a stay has been made pursuant to s 60 of the Administrative Decisions Tribunal Act 1997 ( ADT Act ). The background to these proceedings is set out in various statements and submissions of the parties and essentially it is not in dispute. At the centre of these proceedings is a 100 year old woman who has dementia. I will refer to her in these reasons as Mrs X. As I am exercising functions under the NSW Trustee and Guardian Act 2009 and the ADT Act I must ensure that her welfare and interests are given paramount consideration at all times.
The background to Mrs X's financial affairs is that she has six shares, and that is a fifty per cent shareholding, in [X] Holdings Pty Limited. The other shareholders are AIG (the aunt of the sibling applicants) who has three shares, and AHJ, AHK and AHL, the sibling applicants, all of whom have one share, giving a total of twelve shares.
The Directors of X Holdings are Mrs X, the respondent aunt, AIG, and one of the sibling applicants, AHJ. The sole business of [X] Holdings is to act as the trustee of three discretionary trusts, Trust No 1, Trust No 2 and Trust No 3. The trust deeds for each of the trusts are very similar in their terms and effect. They confer [X] Holdings with the following trust powers: to distribute income from the trust property among one or more of the beneficiaries as it deems fit and to raise or apply the whole or any part of the trust fund for the maintenance, education, advancement or benefit of any one or more of the beneficiaries. The [X] trusts derive income from the rent paid by the tenants and licensees of three properties in New South Wales. The living beneficiaries of each of the X trusts are Mrs X, the respondent aunt AIG, the siblings, AHJ, AHK and AHL and their mother, AHM, as well as any religious, scientific, charitable or public institution.
On 9 June 2011 the Guardianship Tribunal made a financial management order in relation to Mrs X. The application was made by AIG and involved each of the parties to the current proceedings. In their decision the Guardianship Tribunal went through each of the elements required to determine whether or not a financial manager should be appointed for Mrs X's estate and noted at page 2 that:
"[Mrs X's] financial interests appear to be basically confined to interests that she has in the family discretionary trusts. She is a fifty per cent shareholder in [X] Holdings Pty Limited, the trustee of three family trusts of which she is a beneficiary, [X] Holdings Trust Nos 1, 2 and 3. The other immediate family members are also recorded as shareholders in [X] Holdings Pty Limited and beneficiaries of the three trusts."
The Guardianship Tribunal found that Mrs X was incapable of managing her own affairs and that does not seem to be a matter which is in dispute. The second task of the Tribunal was to determine whether to exercise their discretion to appoint a financial manager. Sometimes a shorthand term used for that process is to determine whether there is a need for a financial manager. Under the heading, "Should the Tribunal make a financial management order" the Tribunal said:
"With the agreement that was reached at the March hearing and that refers to an interim application, [Mrs X's] immediate spending needs in relation to her accommodation and care at [name of facility deleted] appeared to be largely resolved. However there remain substantial issues to be resolved in relation to the [X] Holding Trusts of which [Mrs X] is a discretionary beneficiary and a fifty per cent shareholder in the trust."
The Tribunal went on to say that attempts had been made to settle those disputes without success and concluded that:
"A central outstanding issue is the major and complex uncertainty about loan accounts of family members and inter trust loans as referred to in the statement of Mr L."
Those loans will become significant in relation to the later question as to whether or not the balance of convenience favours the applicants or the respondents. The Tribunal went on at p 6 to say that:
"The Tribunal was clear that someone needs the explicit role of watching out for Mrs X's interests and exercising her rights in relation to the [X] Holdings trusts and [X] Holdings Pty Limited."
With that in mind the final question for the Guardianship Tribunal was who to appoint as the financial manager. The Tribunal decided to appoint AIH, the second respondent who is a practising accountant. They did that because:
". . . he is completely independent from the situation having been introduced to the family by the separate representative . . ."
At the Guardianship Tribunal hearing, AIH confirmed his willingness to take on the role under the usual supervision of the NSW Trustee. That was the situation from 9 June 2011. The Guardianship Tribunal made the following note on the financial management order:
"The Financial Manager is not authorised to deal with the estate (other than to protect the assets) until he/she has obtained all necessary authorities from the New South Wales Trustee".
That is a standard note that is appended to decisions of this kind according to Ms Phang representing the NSW Trustee. I accept that evidence. Subsequently, on 4 July 2011, the NSW Trustee made directions and authorities pursuant to the NSW Trustee and Guardian Act 2009, Part 4.5 Division 2. Those directions and authorities cover some five pages and are organised under fifteen headings.
The additional direction and authority which is the subject of these proceedings comprises item 16 of those directions and authorities. It is an addition to the directions that were originally made. That direction was required to be made to put into effect the reasons for the Guardianship Tribunal making the financial management order, namely to exercise Mrs X's voting rights in respect of her shareholding given that there was a deadlock in the negotiations. That was a matter that was omitted from the directions on 4 July 2011 but which was necessary to enable AIH to manage Mrs X's financial affairs.
The power of the Tribunal to make an interim order is set out in s 60 of the ADT Act . Essentially there are two steps: the first is that the Tribunal must be satisfied that a stay is necessary to "secure the effectiveness of the determination". That phrase is another way of saying that there needs to be irreparable loss or harm to the applicant before consideration will be given to making an interim order. That is a principle that is familiar in the case law surrounding the granting of interlocutory injunctions. The second step is to determine whether it is desirable to stay the decision taking into account three things - the interests of any person who may be affected, any submissions made by the administrator (in this case, Ms Phang) and the public interest.
Section 60 is to be read keeping in mind the common law principles in relation to the exercise of interlocutory injunctions. In Castlemaine Tooheys Limited v South Australia [1986] HCA 58, Acting Chief Justice Mason said at paragraph 11:
"The principles governing the grant or refusal of interlocutory injunctions in private law litigation have been applied in public law cases, including constitutional cases, notwithstanding that different factors arise for consideration. In order to secure such an injunction the plaintiff must show (1) that there is a serious question to be tried or that the plaintiff has made out a prima facie case, in the sense that if the evidence remains as it is there is a probability that at the trial of the action the plaintiff will be held entitled to relief; (2) that he will suffer irreparable injury for which damages will not be an adequate compensation unless an injunction is granted; and (3) that the balance of convenience favours the granting of an injunction".
Keeping in mind both s 60 and those principles I make the following observations. Firstly the public interest is not at the forefront in these proceedings. It is the interests of Mrs X that must be given paramount consideration. Secondly, a feature of both s 60 and the common law principles is the need for an order to be necessary to secure the effectiveness of the proceeding or, in other language, that the applicant will suffer irreparable injury if an interim order is not granted. I intend to address that as the first issue and then go on to determine whether there is a serious question to be tried, or put another way, whether the applicants have a prima facie case. Finally, I will address the balance of convenience factors.
The evidence in this case comprised, on the applicants' part, three statements: one from John Gould, the solicitor for the four applicants, one from AHJ and one from AHM. I agree with Mr Muddle SC, representing AIG and Mr O'Sullivan representing AIH, as well as Ms Phang, that the material in the statements is largely irrelevant. In particular, the details of the settlement negotiations in which AIH as Mrs X financial manager, was engaged prior to the bringing of this application, do not affect any issue that I have to determine.
It was put by Mr McGrath SC, acting for the applicants, that there would be irreparable loss to the applicants if a stay is not granted because there is an extraordinary general meeting scheduled for tomorrow, 24 November 2011, at which AIH intends to vote pursuant to the authority given by the NSW Trustee. I turn now to the text of the application for the stay to set out the applicants' submissions in that regard:
"If a stay of the additional direction and authority dated 11 October 2011 issued by the New South Wales Trustee to [AIH] is not granted, the applicants will suffer irreparable loss because AIH is likely to exercise the voting rights attached to the shares of [Mrs X] in [X] Holdings Pty Limited to vote at an extraordinary general meeting of the members of [X] Holdings convened on 24 November 2011 in favour of resolutions removing the first applicant as a director of [X] Holdings and appointing RJ accountant as a director of X Holdings and (b) consequently the new board of directors of [X] Holdings is likely to implement decisions regarding the [X] Holdings Trust Numbers 1, 2 and 3 of which [X] Holdings is the trustee by way of implementing the proposal of RJ as set out in the email from AIH to the second applicant dated 24 October 2011 or some other proposal which will be an unlawful exercise of the powers of [X] Holdings as the trustee of the [X] Trust by reason of advantaging one of the beneficiaries of [X] Trust, namely AIG, to the disadvantage of other beneficiaries of the [X] Trust including [Mrs X]. Those are the grounds for the stay application and the identification of the irreparable loss".
I agree that as there is an extraordinary general meeting scheduled for tomorrow the applicants will suffer an irreparable loss if a stay is not granted. It is likely that AIH will vote at that meeting tomorrow, possibly in the way that the applicants have foreshadowed. However for reasons which I will go on to give, I am not satisfied that there is a prima facie case or to put it another way, that there is a serious question to be tried and I am also not satisfied that the balance of convenience favours the granting of a stay.
Turning then to the question of whether there is a prima facie case, the applicants have made an application for a reviewable decision in which they set out several grounds for requesting a review of the NSW Trustee's decision to give the additional authority to AIH. The Tribunal's role, if it were to review this decision, would be to determine what the correct and preferable decision is pursuant to s 63 of the ADT Act . I am satisfied, and there was no suggestion otherwise, that this Tribunal has jurisdiction to review such a decision pursuant to s 70 of the NSW Trustee and Guardian Act . Nevertheless such an application for review would, in my opinion, fail.
Before going through each of Mr McGrath's grounds for challenging the decision I will outline the basic reason for my opinion that the application will fail. That reason is contained in the submissions of Mr Muddle SC, who made the point that the Guardianship Tribunal made a decision appointing AIH as the Financial Manager for Mrs X on 9 June 2011. As with any appointment of a private manager, AIH is subject to the supervision and direction of the NSW Trustee. The powers of the NSW Trustee to give directions to managers are set out in the Act and in particular, ss 64, 65 and 66 of that Act are the provisions that the NSW relied on in making the additional direction and authority.
I am satisfied that the NSW Trustee exercised that additional direction and authority in light of its own knowledge and the decision of the Guardianship Tribunal. In particular the Guardianship Tribunal's findings about the nature of Mrs X's financial affairs would have informed that decision. Mrs X has no substantial assets and her only legal interest is that she has voting rights because she has a 50% shareholding in [X] Holdings Pty Limited. It is correct, as Mr McGrath points out, that pursuant to s 72 of the NSW Trustee and Guardian Act the NSW Trustee must take certain steps before taking any action in respect of the estate of a managed person. That is a mandatory provision requiring the NSW Trustee to do certain things. It is arguable that if those things were not done then the correctness of any subsequent authority or determination would be questionable. Section 72 provides that the New South Wales Trustee take the following step:
"The New South Wales Trustee must determine whether the action is of such a nature that the person or a relative or relatives of the person should be consulted about the action."
The provision then goes on to outline what further steps should be taken if such a determination is made. In this case it is conceded by Ms Phang, representing the NSW, that there was no consultation with any of the applicants to these proceedings. The inference is that the NSW Trustee took the view that the nature of the decision was such that no consultation was required. With respect, that is patently obvious because the direction that was given was a direction to exercise voting rights in respect of the shareholding of [X] Holdings. The direction was necessary, indeed imperative, to break the deadlock in negotiations between family members. No amount of consultation would have affected the NSW Trustee's decision to give AIH that authority.
Where the applicants have erred, in my opinion, is to suggest that the NSW Trustee, by giving those voting rights, was necessarily condoning the decision that it anticipated that AIH would make. There is no such implication on the face of the additional direction and authority. The authority itself is at large in the sense that it merely authorises AIH to exercise voting rights. Those rights are expressed as including, but not being limited to, voting at extraordinary general meetings, voting in favour of a resolution for the appointment of a provisional liquidator and the winding up of the companies. It does not say that AIH must vote in favour of a resolution to remove AHJ as a director and appoint another accountant, RJ, as a director.
Ms Phang rightly points out that the authority allows AIH to vote tomorrow at the Extraordinary General Meeting and also at any meeting at which Mrs X would otherwise have had the right to vote. No consultation was necessary in circumstances where it was imperative that a substitute decision maker make a decision in relation to Mrs X's financial affairs.
I will not go through each of the other reasons for the substantive application in detail. I think there are five grounds that the applicants put forward as reasons for staying or setting aside the administrator's decision. They are dealt with ably by Mr Muddle SC in his submissions in response. However, apart from the consultation issue, there is one other issue that I should address specifically. Mr McGrath submitted that the powers of the financial manager were limited to making decisions on behalf of Mrs X which affected her and her alone. Mr McGrath suggested that the function of voting at the Extraordinary General Meeting was not something that a financial manager could or should be involved in because of the effect it had on parties other than Mrs X.
That submission is, in my view, untenable. The fundamental role of the financial manager in the context of Mrs X's estate is to exercise her voting rights as a 50% shareholder of [X] Holdings. It is not correct to suggest that exercising those voting rights would be beyond the power of a financial manager because he is confined to making decisions which affect only the subject person. That would leave a situation where nobody had the authority to exercise those voting rights. Furthermore, the fact that the applicants anticipate that AIH will exercise his powers unlawfully, is not a reason for regarding the giving of a lawful direction as an incorrect decision. For those reasons the applicants have not made out a prima facie case for a review of the additional direction and authority.
Finally I turn to the balance of convenience. That question does not strictly arise once I am satisfied that the application for review is hopeless but I will deal with it briefly. The evidence discloses that there has been a long history of dispute between AIG on the one hand and the three siblings who are three of the applicants in these proceedings on the other. There was evidence led of a resolution that the directors had made attached to AHK's statement dated 23 November 2011. At a director's meeting on 21 November 2011, two days ago, it was resolved
1. "That the company release the family members of [AHM's deceased husband] (including but not limited to AHK, AHJ and AHL) and the Estate of [AHM's deceased husband] from any loans made to such entities by the company in its capacity as Trustee for the [X] Holdings Pty Limited Trust No 1, [X] Holdings Pty Limited Trust No 2 and [X] Holdings Pty Limited Trust No 3.
2. That the company executed the deed of release."
A deed of release has been executed on 21 November 2011 and is signed by AHK and AHJ.
Mr Muddle, representing AIG, pointed out that these debts have now been waived and despite Mr McGrath giving an undertaking to the Tribunal that that the first resolution would not be acted on, I accept Mr Muddle's submission that it remains the case that the debts are forgiven in law and there can be no effect to any undertaking that Mr McGrath gives in that regard.
The situation is that the applicants currently have control of the Board's decision making. Given the recent resolution which favours their interests, the balance of convenience appears to me to rest with the respondent in particular AIG as well as with Mrs X that her voting rights be exercised in a way which accords with her welfare and interests.
AIG and the financial manager, AIH, also submitted that the application had been made for an improper purpose because the Guardianship Tribunal had made a decision and these proceedings were an attempt to circumvent that decision. Instead of making this application the respondents suggested that the proper course would have been to appeal against the decision of the Guardianship Tribunal if the applicants believed that error had been made in those proceedings.
I would add to that that the basis for the applicants' concern is how AIH will vote when he exercises Mrs X's voting rights tomorrow. That is not a matter that this Tribunal has jurisdiction over. The NSW Trustee has given a general authority to vote at Extraordinary General Meetings and in other circumstances. The applicants cannot restrict AIH's freedom to exercise that decision making authority through these proceedings.
I agree with the submission that the application has been brought for an improper purpose and should be dismissed.
The only other issue that I wish to flag is the suggestion by the second and third respondents that there had been a delay in bringing the proceedings. I do not accept that submission given that the authority from the NSW Trustee is dated 11 October 2011 and the application was made on 17 November. While that is a period of some five weeks I do not consider that to be an unreasonable delay. Mr Muddle and Mr O'Sullivan were dating the delay from the decision of the Guardianship Tribunal however a reviewable decision had not been made at that time.
For these reasons the application for a stay is refused. I can hear submissions on whether that also disposes of the substantive application or whether you wish to press that application.
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Decision last updated: 22 March 2012
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