AL v Office of the Protective Commissioner

[2007] NSWADT 176

CITATION:	AL v Office of the Protective Commissioner [2007] NSWADT 176
DIVISION:	General Division
PARTIES:	APPLICANT AL RESPONDENT Office of the Protective Commissioner
FILE NUMBER:	073158
HEARING DATES:	13 July 2007
SUBMISSIONS CLOSED:	13 July 2007
DATE OF DECISION:	3 August 2007
BEFORE:	O'Connor K - DCJ (President)
CATCHWORDS:	Protected Estates Act - Protective Commissioner - powers as to property - Protective Commissioner - powers as to property
MATTER FOR DECISION:	Principal matter
LEGISLATION CITED:	Administrative Decisions Tribunal Act 1997 Protected Estates Act 1983
CASES CITED:	XO v Protective Commissioner [2006] NSWADT 322 GJ & Ors v Protective Commissioner [2005] NSWADT 266
REPRESENTATION:	APPLICANT J Raine of counsel instructed by P Gibson, solicitor, Nyman Gibson Stewart RESPONDENT T Tunbridge, solicitor, Office of the Protective Commissioner
ORDERS:	1. That the decision under review be set aside.; 2. That, in substitution, the following decision is made:; (a) The Protective Commissioner may sell the Kiama property as from January 2009.; (b) The Protective Commissioner may sell the Kiama property before that date if a suitable, substitute property in the Kiama area is able to be rented.

Section 126 of the Administrative Decisions Tribunal Act 1997 applies to this decision.
Section 126 provides
(1A) This section applies only to the following:

(a) proceedings in the Community Services Division of the Tribunal,

(b) appeals to an Appeal Panel from a decision made by the Tribunal in the Community Services Division,

(b1) proceedings in relation to an external appeal made under section 67A of the Guardianship Act 1987 or section 21A of the Protected Estates Act 1983,

(b2) proceedings in relation to a reviewable decision made under the Guardianship Act 1987 or the Protected Estates Act 1983

(c) such other proceedings (or class or classes of proceedings) as may be prescribed by the regulations for the purposes of this section.


(1) A person must not, except with the consent of the Tribunal, publish or broadcast the name of any person:

(a) who appears as a witness before the Tribunal in any proceedings, or

(b) to whom any proceedings before the Tribunal relate, or

(c) who is mentioned or otherwise involved in any proceedings before the Tribunal,


whether before or after the proceedings are disposed of.
Maximum penalty: 10 penalty units or imprisonment for 12 months, or both.
(2) This section does not prohibit the publication or broadcasting of an official report of the proceedings that includes the name of any person the publication or broadcasting of which would otherwise be prohibited by this section.
(3) For the purposes of this section, a reference to the name of a person includes a reference to any information, picture or other material that identifies the person or is likely to lead to the identification of the person.

REASONS FOR DECISION

1 JL is a protected person whose estate, resulting from a damages award, is managed by the Protective Commissioner under a financial management order. The order was made in 1991 and the award was made in 1993. JL is now 33 years age, and is brain impaired as a result of the motor vehicle accident that gave rise to the damages award. The assets of the estate under administration including a dwelling at Kiama. These proceedings have been brought by JL’s mother, AL.

2 The Protective Commissioner decided on 5 January 2007 under s 24 of the Protected Estates Act 1983 to let the house on the open market at a market rental through a real estate agent appointed by the Protective Commissioner. AL claimed in a communication of 2 April 2007 with the office that she had not received formal notice of the decision and the reasons for decision. Mr Gulline, of the Office of Protective Commissioner (OPC), has filed an affidavit setting out the steps he took to send the letter containing the decision and reasons on or about 5 January 2007.

3 As a result of her complaint on 2 April 2007, AL was sent a copy of the reasons. On 2 May 2007 solicitors acting for AL asked for an internal review of the decision. The OPC declined to undertake an internal review as the application for internal review was out of time (letter, 17 May 2007). On 22 May 2007 AL applied, through her solicitors, to the Tribunal for review of the decision.

4 The Protective Commissioner objected to the Tribunal dealing with the application as it was out of time. The applicant sought, and was given, leave to proceed. The Tribunal took into account, among other factors, that no steps had been taken to advertise the property for rental. (The Protective Commissioner had been engaged in preparing the property for rental.) Further, the Tribunal gives leave for the matter to proceed in the Tribunal without internal review: s 55(2)(c) of the Administrative Decisions Tribunal Act 1997.

5 The damages award was for $4,700,000. (Rounded figures are used throughout this decision.) JL has a life expectancy of 47 years. His estate is presently valued at $3,370,000. The present income is $110,000. The costs to the estate of JL’s care services and other necessary items for the last financial year was $330,000. He is cared for full-time at home.

6 It is obvious that at this rate of expenditure his estate will be exhausted within a relatively short time (probably in 16 years at age 50) compared to his life expectancy. It is desirable that the estate be managed in a way that maximises income and reduces the need to diminish the capital so that it can provide the kind of support JL presently enjoys for a longer term, though it will still be exhausted well ahead of his life expectancy.

7 In making decisions as to financial plans for estates, the Protective Commissioner seeks to take account of the wishes of the protected person and the wider family. In this instance it is not possible to ascertain with any precision JL’s wishes.

8 The Protective Commissioner has regularly consulted AL. According to the OPC’s file, AL has consistently resisted any diminution of the real estate component of the portfolio. The file includes a note of a meeting held on 12 December 2006 with AL stating that a ‘consensus’ view had been reached that the whole of Kiama be leased and not sold.

9 AL disputes this record. She says that she only agreed to part of the Kiama property being leased. The Kiama property has two relatively separate elements. AL says that she did not agree to the smaller of the two elements, a kind of flat, being leased. The advice from the real estate agent is that is not practical because of the way the flat connects with the rest of the house for the main element of the house only to be leased.

10 AL’s desire is that the Kiama property continue to be used as a weekender and retreat for JL and the rest of the family.

11 The estate has 44% of its assets in real estate and 56% in liquid form, principally shares. The two main real estate assets are JL’s home (which is also the family home) at Chiswick, valued at $480,000 and the Kiama property. In addition there are two investment flats, which are seen as producing a good rental return. Obviously, the Chiswick home can produce no income, while Kiama’s income is small ($4,800 in holiday lets in the year 2005-06).

12 It is arguable, I think, whether the domestic residence should be included in the estate when looking at the financial returns that might be achievable. It is probably better to measure the income potential of the estate by direct reference to the segment of the estate that is practically available to produce income. Deducting the estimated value of Chiswick, that amount is $2,890,000. The Kiama property is a substantial, older style one on a headland close to the ocean. It is estimated to be worth $700,000 and constitutes 18.0% of the assets of JL’s estate or just under 25.0% of the assets practically available to earn income.

13 It can be seen that a strategy that aimed to produce, let us say, 7% return, would result in approximately $200,000 gross income. So there would still need to be a substantial diminution of the capital each year to sustain JL’s present level of care.

14 The proposal to let Kiama on a full-time basis is expected to bring an improvement in the income stream of about $10,000 (if let at the agent’s estimate of about $300 per week), i.e. the difference between $15,000 p.a. and the $5,000 p.a. that might be achieved by holiday lets.

15 If the aim is to enhance the income stream substantially it would be better to sell Kiama and put the money into equities. Even after allowing for capital gains tax on the sale, the balance should earn substantially more than the increase of $10,000 or so now sought. The financial manager familiar with this estate at the OPC, Ms Annette Woods, attended the hearing and agreed with this view.

16 On the other hand the OPC has not in the past taken an active approach to maximising the income from the Kiama dwelling. As I understand the evidence, the Protective Commissioner was, until the present four-yearly review of the financial plan was undertaken, happy to allow Kiama to be used as it was.

17 In the OPC file it is asserted that ‘the family’s preference for real estate holdings has led to an overweight investment in that area’. The Tribunal was informed that the Financial Planning Unit of which Ms Woods is a member was set up in 2002. In an affidavit, Ms Woods said that the appropriate amount to have held in direct property assets in a properly diversified portfolio for a person with JL’s life expectancy was 10%, citing recommendations by Van Eyck Research.

18 It emerged at hearing that the weighting towards real estate has a more subtle history than is reflected in the bald assertion that it reflects a family preference. The Tribunal was informed that prior to 1999 the Protective Commissioner was restricted by law to investing in a limited range of asset classes that included real estate but not equities. Now that the restrictions have been lifted the OPC is seeking to pursue a policy more in keeping with usual financial planning practice. This information suggests to the Tribunal that there may be many older major estates where there is – what is now seen as – an undue weighting towards real estate, possibly giving rise to more disputes of the present kind in the future.

19 AL says that she is concerned at the impact that the loss of availability of the Kiama property will have on her son’s enjoyment of life. Her evidence, the only evidence on this point, is that JL receives a good deal of pleasure from the visits to Kiama. He looks forward to them, and they provide a break in the routine of full-time care.

20 AL was represented at hearing by Mr Raine of counsel. Mr Raine informed the Tribunal that AL recognised the financial logic that favoured letting on a permanent basis or selling Kiama. She is not opposed to a plan that involves the sale of Kiama in the medium term. But she wants to maintain breaks at Kiama as part of JL’s enjoyment. For that reason she is opposing the letting of Kiama on a permanent basis.

21 In light of this information, the Tribunal raised with Mr Tunbridge, solicitor, OPC, and with Mr Raine, the possibility of an approach which preserved the status quo in the short term (i.e. only renting Kiama out on a holiday let basis, therefore leaving it free to be used on most weekends by JL and the family) and set a clear date for sale. There were private discussions between the parties, but a resolution was not reached.

22 In my view it is necessary, in the medium term, to sell Kiama.

23 As noted, JL is not able to express his wishes over the decision to let Kiama full-time. The Protective Commissioner does not question his mother’s evidence that JL obtains enjoyment from the breaks at Kiama. The Protective Commissioner notes that the estate has supported over the years annual holidays at the Gold Coast.

24 The Protective Commissioner is concerned to ensure that as much income as possible is generated to meet JL’s primary care costs. On the other hand, as already noted, the Protective Commissioner has, for several years, allowed Kiama to be used in the way it has been.

25 This has produced a situation, the Tribunal thinks, where JL has become used to a pattern of activity in his life of which Kiama is an important part. This factor is not taken into account in any of the filed material. For example, there was no professional report (say from a social worker or psychologist) assessing the significance of the breaks at Kiama for JL’s overall well-being, though the OPC has permitted its use in this way for many years. It may well be that JL has built up an attachment to the activity, and that helps with his care.

26 At hearing Mr Raine referred to the case of XO v Protective Commissioner [2006] NSWADT 322. In that case the Tribunal set aside a decision by the Protective Commissioner to decline to enter a loan by way of a second mortgage with Rivwest Finance Pty Ltd on behalf of the applicant. The Tribunal referred to various considerations that the Protective Commissioner takes into account in making financial planning decisions for protected persons, and endorsed them.

27 On 18 July 2007, five days after the hearing, the Protective Commissioner, without leave, filed further written submissions. The applicant was advised of these submissions, did not object to them being considered and chose not to file submissions in reply.

28 The Protective Commissioner’s submissions refer to statements of principle found in various decisions of the Tribunal, as well as in XO, going to the desirability of preserving a fund to support the care needs of protected persons, especially severely disabled ones, for as long as possible, and using investment strategies with that in mind. This Tribunal does not question that policy.

29 The Protective Commissioner places particular weight on views expressed by me in GJ & Ors v Protective Commissioner [2005] NSWADT 266. In GJ, members of the family of the protected person were seeking a payment from the estate for gratuitous care that they had rendered to the protected person. As to that matter, I noted, after reviewing Supreme Court authority, that:

- A ‘large view’ should always be taken in seeking to serve the person’s best interests and that includes fulfilment of moral obligations to a carer.

- The starting point for calculating the value of past gratuitous care is the value of the services as measured by the market cost or market value of such services.

- There is a need to preserve a reasonable capital sum for the protected person’s benefit and future needs, and care must be taken to ensure that any payment does not ‘compromis[e] the future maintenance and care of that person’.

30 The submissions noted that while the present case under review does not involve the making of a gratuitous payment to a carer as such, it does involve the continued use of the protected person’s property at Kiama for non-income producing purposes. The principle of ‘preserving a capital sum for the protected person’s future needs and care’ also applies, it was submitted, to the present case. I, of course, accept that point.

31 The Protective Commissioner’s submissions are expressed in strong terms, for example:

(1)‘[a]s an investment property [Kiama] is being grossly under-utilised in terms of its income potential’

(2) ‘Allowing the Kiama property to remain as a weekend retreat/holiday residence for the Applicant and her family is akin to making a gratuitous payment to them in kind from the estate.’

32 Neither this submission nor, as already noted, the material previously filed by the Protective Commissioner, canvasses the impact on JL’s welfare and enjoyment of life of cutting him off from access to the Kiama property. Equally, there is no specific information from AL as to how often JL goes to Kiama. As best I could discern, it may at times be a fortnightly trip, at other times less frequent.

33 The Protective Commissioner does not acknowledge the contribution his Office’s own policies in the past have made to the present state of affairs. There is no sign in the material that the Protective Commissioner was concerned until the latest review to maximise the income-producing side of Kiama. The Office appears to have accepted for many years that it was reasonable to let the family have access to Kiama by way of a ‘gratuitous payment’ as it is now styled.

34 In my view it would be better not to move to terminate JL’s relationship with Kiama without some independent assessment of the contribution those breaks may make to his mental and physical well-being. Attempts should first be made to find some suitable substitute property in the Kiama area (one, in particular, that is wheel-chair accessible and has other necessary facilities such as an accessible bathroom) that could be occupied on a rental basis. The Protective Commissioner indicated at hearing that the OPC was accustomed to locating property and then arranging for it to be made suitable for clients.

35 AL indicated, through Mr Raine, at hearing that she would be prepared to buy Kiama, but not immediately. The family business has recently incurred debt in extending its premises. The Tribunal was informed that she and her husband have a building supplies business with an annual turnover of $2.5m which, in addition to family members, employs three people. She would be in a financial position, she advised, within 18 months to 2 years to buy the property, and asked for a first option.

36 In the Tribunal’s view the most appropriate resolution of these conflicting considerations is to empower the Protective Commissioner to sell the Kiama property as from January 2009, i.e. 18 months approximately from now. In the meantime the previous arrangements are to apply to the use of the Kiama property. The Protective Commissioner is encouraged to seek to locate a suitable, substitute property in the Kiama area for rent on a medium term basis to be available for use as desired by JL and the family. If such a property is found, the Protective Commissioner may proceed to sell the Kiama property forthwith. I accept that it may not be possible in the longer term for the Protective Commissioner to hold by lease a weekender for JL. It may be that breaks away from the home will have to be authorised in the way that presently applies to the annual holiday taken at the Gold Coast.

37 I accept that the result of this decision is that for the next 18 months, Kiama will generate approximately $10,000 less income for the estate than would otherwise have been the case, with the consequent impact that has on the depletion of the estate. There is also the risk, ever present, that the capital value of the property will move downwards rather than stay steady or move upwards, resulting in a further loss.

38 I have not included in the order which follows any option to purchase in favour of AL. The Protective Commissioner must seek to obtain the best price for the Kiama property. Certainly, I would encourage the Protective Commissioner to take an approach to the sale which gives AL an early opportunity to purchase the property at fair market value.

Order

1. That the decision under review be set aside.

2. That, in substitution, the following decision is made:

(a) The Protective Commissioner may sell the Kiama property as from January 2009.

(b) The Protective Commissioner may sell the Kiama property before that date if a suitable, substitute property in the Kiama area is able to be rented.