BMD v KWD
[2008] WASC 196
•12 SEPTEMBER 2008
BMD -v- KWD [2008] WASC 196
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2008] WASC 196 | |
| Case No: | GDA:6/2008 | 20 AUGUST 2008 | |
| Coram: | McKECHNIE J | 12/09/08 | |
| 14 | Judgment Part: | 1 of 1 | |
| Result: | Leave to appeal refused | ||
| B | |||
| PDF Version |
| Parties: | BMD KWD PUBLIC TRUSTEE JID |
Catchwords: | Guardianship and administration Appointment of trustee Review of trustee's decision Whether failed to take into account relevant considerations Courts and judge Leave to appeal Prima facie case |
Legislation: | Nil |
Case References: | BMD and KWD [2008] WASAT 127 In re Hastings-Bass (dec) [1974] 2 All ER 193 Jaques v Public Trustee of Queensland [2008] QSC 108 Karger v Paul [1984] VR 161 Martin v Office of the Public Advocate (Unreported, WASC, Library No 990150, 26 March 1999) Mettoy Pension Trustees Ltd v Evans [1991] 2 All ER 513 Re Whitehouse [1982] Qd R 196 Sinclair v Moss [2006] VSC 130 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
- IN CHAMBERS
- Appellant
AND
KWD
First Respondent
PUBLIC TRUSTEE
Second Respondent
JID
Third Respondent
ON APPEAL FROM:
Jurisdiction : STATE ADMINISTRATIVE TRIBUNAL OF WESTERN AUSTRALIA
Coram : MR M ALLEN (SENIOR MEMBER)
- MR J MANSVELD (MEMBER)
DR E LEIPOLDT (SENIOR SESSIONAL MEMBER)
Citation : BMD and KWD [2008] WASAT 127
File No : GAA 1377 of 2007, GAA 2105 of 2007
(Page 2)
Catchwords:
Guardianship and administration - Appointment of trustee - Review of trustee's decision - Whether failed to take into account relevant considerations - Courts and judge - Leave to appeal - Prima facie case
Legislation:
Nil
Result:
Leave to appeal refused
Category: B
Representation:
Counsel:
Appellant : Mr M E Herron
First Respondent : No appearance
Second Respondent : No appearance
Third Respondent : No appearance
Solicitors:
Appellant : Gibson & Gibson
First Respondent : No appearance
Second Respondent : No appearance
Third Respondent : No appearance
Case(s) referred to in judgment(s):
BMD and KWD [2008] WASAT 127
In re Hastings-Bass (dec) [1974] 2 All ER 193
Jaques v Public Trustee of Queensland [2008] QSC 108
Karger v Paul [1984] VR 161
Martin v Office of the Public Advocate (Unreported, WASC, Library No 990150, 26 March 1999)
Mettoy Pension Trustees Ltd v Evans [1991] 2 All ER 513
Re Whitehouse [1982] Qd R 196
Sinclair v Moss [2006] VSC 130
(Page 3)
- McKECHNIE J:
Background to the application
1 This is an application for leave to appeal. KWD is an elderly man, now 84. For 20 years, he lived on a de facto basis with JID. In November 2006, the relationship was experiencing difficulties and the parties separated. However, they reconciled and in January 2007 they married. Each of them had adult children from previous relationships.
2 In 1995, KWD bought land known as the Peel Manor House in Karnup. The buildings were for the conduct of a business staging wedding receptions. From 2000, JID conducted the business with him. In early 2005, the property and the business were placed on the market for sale, but not sold. On 14 November 2006, KWD entered into an agreement to sell the property and business to JID as to one undivided quarter share and JID's sons and the partner of one of her children taking the balance. The purchase price was to be $1.5 million.
3 Doubts arose as to the mental capacity of KWD and, on 12 January 2007, SAT ordered that the Public Trustee be appointed plenary administrator of the estate of KWD and directed the Public Trustee to investigate whether an application should be made to set aside the contract of 14 November 2006.
4 The Public Trustee investigated the sale and as a result a supplementary deed was made between KWD and JID on 1 June 2007.
By the Supplementary Deed, KWD and JID acknowledged that they were presently equally entitled to beneficial ownership of the property and the business as well as all other assets owned by them jointly or individually by either of them. The parties agreed that the November agreement should proceed but that, upon its completion; (a) JID would be the legal and beneficial owner of an undivided 25% interest in the property and business; (b) KWD would be the legal and beneficial owner of the nett cash proceeds of sale of the property and business after payment of all the various amounts to be paid out in accordance with the November agreement, which was to be not less than $300,000; and (c) KWD and JID would be the legal owners of a residential property in South Perth (the South Perth property) where KWD and JID live, free of all encumbrances, but that JID would transfer to KWD a 20% undivided legal and beneficial interest with the effect that KWD and JID would then be the beneficial owners of the South Perth property as to (for KWD) a 70% undivided interest and as to JID a 30% undivided interest as tenants in common [15].
(Page 4)
5 Importantly, the supplementary deed was by way of settlement of all property issues at common law, equity or pursuant to the Family Law Act 1975 (WA) and to be so far as practicable a full and final settlement of financial issues between them but not affecting the rights and obligations of the party under the Family Law Act or the testamentary rights of each of them. The Public Trustee declined to make application to set aside the transaction.
6 BMD, a son of KWD, applied to SAT to have the order of January 2007 reviewed. The essence of the application revolved around the decision of the Public Trustee not to apply to set aside the November 2006 contract. SAT handed down its decision as BMD and KWD [2008] WASAT 127. It refused to intervene and made the following orders:
1. The Public Trustee of 565 Hay Street, Perth, Western Australia be appointed administrator of that part of the estate of [KWD] (the represented person) as consists of the represented person's interest in and entitlement to monies held in an escrow account as part of the sale of the land and business referred to in an agreement dated 14 November 2006 as varied by a Supplementary Deed dated 1 June 2007 with the powers and duties of negotiating with the other parties to the November 2006 agreement and settling the represented person's entitlement to such monies.
2. [JID] of [address], be appointed plenary administrator of all the balance of the represented person's estate with all the powers and duties conferred by the Guardianship and Administration Act 1990 (WA).
The application for leave to appeal
7 From that decision BMD seeks leave to appeal pursuant to the Guardianship and Administration Act 1990 (WA) div 3, on amended grounds as follows:
1. The Tribunal erred in law at [66] by failing to provide any, or any adequate, reasons for its findings that:
(a) they were not persuaded that considerable weight should have been placed on the Knight Frank Valuation;
(b) they were not persuaded the Knight Frank approach towards the value of the improvements was appropriate;
particularly given the recommendation in the report of Richard Bosward, (pages 12-11 Applicant's Book of Documents) that a review may be obtained by a third valuer as aspects of both the Agnello and Knight Frank Valuations were unreliable.
(Page 5)
- 2. The Tribunal erred in fact by failing to place sufficient weight on the Knight Frank valuation on the basis that its approach to valuing the improvements was not appropriate where:
(a) The evidence of the appellant's expert, Richard Bosward, was that the Knight Frank valuation had properly and thoroughly analysed the value of the improvements;
(b) There was no evidence that the Knight Frank valuation of improvements was inaccurate or flawed.
3. The Tribunal erred in fact by failing to give any or any sufficient weight to the recommendation in the Richard Bosward report that a review be obtained by a third valuer in circumstances where the Knight Frank Valuation of the property at $4,335,000 was almost double or more than $2,000,000 above the Agnello Valuation of $2,200,000.
4. The Tribunal erred in fact and in law in finding that the decision of the Public Trustee not to make application to set aside the sale of the property pursuant to s 82 of the Guardianship and Administration Act 1990 was justified and reasonable.
8 A judge shall grant leave only if it is shown to his satisfaction that there is a prima facie case justifying an appeal.
9 This test was examined in Martin v Office of the Public Advocate (Unreported, WASC, Library No 990150, 26 March 1999):
In my opinion s 22(1) does not require a Judge to reach a view that it is more probable than not that the applicant will succeed on appeal. Rather, the section requires that a Judge - after taking into account the test propounded in Wing Luck Foods v Lay Choo Lim - should also be satisfied that it is not unlikely that the applicant will succeed on appeal (6).
The appellant wants a third valuation
10 The factual basis supporting the appellant's submissions rests in large measure on a valuation of the property obtained by CDM, who is JID's son, which valued the property as at 18 December 2006 at $4,335,000. It is contended that SAT's reasons for discounting that valuation were inadequate, especially having regard to a report prepared by an accountant, Mr Bosward, on behalf of the appellant to examine both the Knight Frank valuation and a valuation obtained by the Public Trustee from Agnello Property Valuations. What the applicant wants to achieve is a direction that there be a third valuation. Indeed, counsel who argued the application for leave remarked that upon leave being granted the first step should be mediation in respect of this issue.
(Page 6)
The issue is not a third valuation
11 The real issue is not whether there should be a third valuation, but whether the Public Trustee's discretion miscarried in deciding not to apply to set aside the contract (following an adjustment to the terms) and whether SAT, in turn, erred in failing to accept that the discretion miscarried and gave insufficient reasons to explain why it did not.
12 Where a trustee has acted in good faith, its actions or decisions will not be lightly reviewed and a court should not interfere with the trustee's actions notwithstanding that it does not have the effect intended unless it is clear that the trustee would not have acted as it did had it not taken into account considerations which it should not have taken into account or had it not failed to take into account considerations which it should have: In re Hastings-Bass (dec) [1974] 2 All ER 193, 203; Mettoy Pension Trustees Ltd v Evans [1991] 2 All ER 513. There is recent authority (Sinclair v Moss [2006] VSC 130 at [4]) casting doubt on the Hastings-Bass principle but I am content to apply it in this application as it is favourable to the appellant.
13 In Karger v Paul [1984] VR 161, McGarvie J said:
For the plaintiff it was submitted that in this case the Court should examine whether the trustees gave fair and proper consideration to the exercise of the discretion and that the plaintiff should succeed in the action if they did not. In my view, in this case it is open to the Court to examine the evidence to decide whether there has been a failure by the trustees to exercise the discretion in good faith, upon real and genuine consideration and in accordance with the purposes for which the discretion was conferred. As part of the process of, and solely for the purpose of, ascertaining whether there has been any such failure, it is relevant to look at evidence of the inquiries which were made by the trustees, the information they had and the reasons for, and manner of, their exercising their discretion. However, it is not open to the Court to look at those things for the independent purpose of impugning the exercise of discretion on the grounds that their inquiries, information or reasons or the manner of exercise of the discretion, fell short of what was appropriate and sufficient. Nor is it open to the Court to look at the factual situation established by the evidence, for the independent purpose of impugning the exercise of the discretion on the grounds the trustees were wrong in their appreciation of the facts or made an unwise or unjustified exercise of discretion in the circumstances. The issues which are examinable by the Court are limited to whether there has been a failure to exercise the discretion in good faith, upon real and genuine consideration and in accordance with the purposes for which the discretion was conferred. In short, the Court examines whether the discretion was exercised but does not examine how it was exercised (164).
(Page 7)
14 McGarvie J went on to note that the consideration by the trustees should be real and genuine. See also Jaques v Public Trustee of Queensland [2008] QSC 108.
15 Decisions made by the Public Trustee under the Guardianship and Administration Act for the benefit of the represented person are wider than a spare examination of the financial affairs. The statutory duties set out in s 70(1) and s 70(2) are:
(1) An administrator shall act according to his opinion of the best interests of the represented person.
(2) Without limiting the generality of subsection (1), an administrator acts in the best interests of a represented person if he acts as far as possible -
(a) as an advocate for the represented person in relation to the estate;
(b) in such a way as to encourage the represented person to live in the general community and participate as much as possible in the life of the community;
(c) in such a way as to encourage and assist the represented person to become capable of caring for himself and of making reasonable judgments in respect of matters relating to his person;
(d) in such a way as to protect the represented person from financial neglect, abuse or exploitation;
(e) in consultation with the represented person, taking into account, as far as possible, the wishes of that person as expressed, in whatever manner, or as gathered from the person's previous actions;
(f) in the manner that is least restrictive of the rights, while consistent with the proper protection, of the represented person;
(g) in such a way as to maintain any supportive relationships the represented person has; and
(h) in such a way as to maintain the represented person's familiar cultural, linguistic and religious environment.
We do not consider that the matters set out in s 70(2)(a), (b) and (c) of the GA Act are particularly relevant to the case, and only the Public Trustee
(Page 8)
- referred to one of them - item (c). We accept the point made by the Public Trustee in his SIFC at par 4 that KWD was incapable of managing the business that he had previously operated and it was doubtful that he would have been able to continue to service the amounts owing in relation to the business and the South Perth property. Allowing the sale transaction to proceed allowed KWD to discharge his debts, to receive a lump sum amount, to allow him to travel as he wished, and generally to enjoy his retirement. In view of KWD's advanced years, his limited decision-making capacity, his complicated financial position, his difficult personal situation due to the deterioration in (but subsequent resumption of) his relationship with JID, the differences that had emerged with BMD and his other children, and an overall need to stabilise all these matters so that KWD could enjoy his remaining years with as much financial security and settled personal life as possible, we consider that the approach of the Public Trustee was to be an advocate for KWD's interests rather than anyone else's interests, and to resolve matters relating to his estate in a way that would allow him to live a retired life that was as settled as possible [51].
17 A heavy onus rests on a person seeking review of a trustee's decision: Re Whitehouse [1982] Qd R 196.
The Public Trustee's position
18 SAT summarised the Public Trustee's position:
In relation to the question of value, we understand that the Public Trustee's overall position, as set out in the Public Trustee's SIFC, submissions filed 21 September 2007 and Mr Rorrison's oral submissions, can be summarised as follows:
a) Based on its understanding of the history of the relationship between KWD and JID (extending over more than 20 years; their joint ownership and operation of various businesses over the time of the relationship, including the land and business in contention in these proceedings; JID's financial and other contribution made to those ventures; fact that the land constituted the matrimonial home) and based upon advice received from a family law practitioner, it was appropriate for the Public Trustee to adopt the position that JID was entitled to a 50% interest in the land and business, and the South Perth property, either in equity or under the FL Act.
b) The November agreement was not only intended to operate as a sales document but also to record an entirely different matter, namely a agreement that recognised JID's interest as above and a settlement of what were to be the respective interests of KWD and JID in their assets.
c) There was no reason to believe that there had not been genuine efforts since the beginning of 2005 to sell the land and business.
- The best offer received was $1.25 million; Garland thought the achievable price was $1.5 million to $1.75 million; Egan valued the property at $1.25 million; and Agnello valued it $2.2 million from a range of $2 million to $2.5 million.
- d) The Knight Frank valuation should be given very little weight because it was so far out of the range of all the other values and little or no weight could be placed on the conditional offer received for $3.5 million. Similarly, the offer made by BDM could not be seriously entertained because it was conditional on the setting aside of the November agreement (by agreement or by order of the Tribunal), conditional on BDM raising finance of $3.3 million without any evidence of his ability to do so, conditional on a settlement of the JID's claims to the assets (in relation to which the Public Trustee had no control), and also conditional on it being a purchase on a going concern basis - and there was no certainty that the purchasers under the November agreement who were in fact operating the business would be prepared to carry on doing so until a final settlement could be negotiated and carried into effect.
e) Because the sale was, in effect, only of a 75% interest (because JID was to retain a 25% interest), a sale at $1.5 million was in effect valuing 100% of the assets at $2 million.
f) By the end of 2006 the total borrowings of KWD and JID (including borrowings for the South Perth property) amounted to $1.1 million. Because the business was not operating at a profit at that time, KWD was not capable of personally working in the business at that time, and there was no certainty that JID's sons would continue to do so if the November agreement was not implemented, there was a significant risk that KWD would not be able to service the borrowings.
g) Using a valuation of $2.2 million or thereabouts, there was a need to adjust the November agreement to equalise the assets of KWD and JID, and this was achieved by increasing KWD's share of the South Perth property from 50% to 70%.
h) The result of the adjustments to the November agreement effected by the later Supplementary Deed between KWD and JID was that KWD and JID were free of all debt, they were able to continue to live in the South Perth property, JID could expect to draw some future income from the 25% share in the business (although Mr Rorrison said that in the end the Public Trustee did not place great weight and that potential), KWD would have a lump sum of $300,000, which would generate income for him, and KWD would qualify for a partial aged pension. All of those things had been achieved as a result of completing the transaction [65].
(Page 10)
Did SAT provide adequate reasons?
19 SAT's reasons are succinct:
Having considered carefully all the evidence and submissions made to us relating to the question of value, we have concluded that the Public Trustee's position, as outlined above, was a reasonable one. In the end we are satisfied that the land and business represented a fairly unique set of assets and was difficult to value. We accept that genuine efforts were made to sell, but without success; there was a need to recognise JID's interest in the property and to find a way to relieve KWD of the debt that he had at the time. On the evidence before us we are not persuaded that considerable weight should have been placed on the Knight Frank valuation because we are not persuaded that its approach towards the value of the improvements was appropriate. Overall, the implied value of $2 million that was achieved was above the other valuations and near the final Agnello value.
Whether a better price may have been achieved had the property been placed on the market for auction in early 2007 is a question that cannot now be answered, nor was it one that was ever a realistic possibility given the existence of the November agreement and the approach of the Public Trustee - which was, for the reasons referred to, that carrying out the November agreement was preferable and in KWD's interests given his particular circumstances at the time, provided that a fair price could be achieved in a way that equalised the interests of KWD and JID.
We consider that the modified November agreement achieved that and we cannot conclude that any of the evidence before us demonstrates that the actions of the Public Trustee have been other than to protect KWD from financial neglect, abuse or exploitation [66] - [68].
20 It seems to me that SAT has sufficiently explained the reasons for its decision bearing in mind the matters raised in proposed amended ground of appeal 1. There was material to support the conclusion that the Knight Frank approach to improvements was not appropriate (ts 121 - 121). Possible value of the land was an important component in the decision that the Public Trustee had to make - whether to make an application. But although it was an important component, it was by no means the only important component. The Public Trustee had to take into account the other matters as accepted by SAT and outlined in [65] of the SAT decision. In addition to those reasons, the Public Trustee and SAT took into account the wishes of KWD:
BMD said at times that he did not want to interfere in the relationship between KWD and JID. That stance sits uneasily with the many comments made by BMD about JID's motives - such as that JID's relationship with KWD '… was used to engineer and complete this
(Page 11)
- fraudulent transaction' (BMD's SIFC dated 10 December 2007 at [40]); and that JID had 'all along … other intentions' and had wanted to 'back her interests' rather than just approach the possible sale of the land and business as one that should simply seek the best possible price (submission of BMD made on 14 December 2007 at T:169). It seems to us that BMD has (wrongly, in our opinion) formed an adverse opinion about JID and her family, and what he believes to be their long-term motives to disadvantage his father [74].
21 SAT also took into account the possible cost on KWD's financial resources of an unsuccessful s 82 application:
Both Mr Rorrison and Mr Robinson submitted at the hearing that any application made under s 82 of the GA Act would constitute very significant litigation and would involve many parties not involved in the present proceeding. Such litigation would place very considerable burden on KWD's financial resources as well as having an emotional cost, and it was possible that a s 82 application would be unsuccessful. We agree with that assessment of the scale and possible cost of such proceedings [77].
22 The grounds of appeal also assert that SAT was in error in failing to follow Mr Bosward's recommendation for a further valuation. However, that has to be seen in context. Mr Bosward's conclusions:
(e) That there are overall sufficient significant points of difference between the AGNELLO and KNIGHT FRANK reports as to make it necessary to require a third valuation.
(f) For purposes of proper administration of the tax affairs of its client the Public Trustee has no option other than to seek a third valuation so that capital gains tax on sale can be properly calculated. (Section 4.3).
(g) That the Buyer cannot properly resolve its liability to the State Taxation Office in respect of stamp duty until a third valuation is completed. (Section 5.3).
23 In relation to Item (f), KWD's accountant of long standing advised the Public Trustee that no capital gains tax would be payable on any disposal by KWD at values up to $2.5 million, and that at $3 million the tax would be $2,552, increasing for higher values [63]. In relation to Item (g) the Commissioner for State Revenue accepted, with Valuer General advice, the Agnello valuation of $2.2 million for stamp duty purposes.
24 Item (e) is not an expert opinion and, in any event, is the question, or one of them, posed for answer by SAT.
(Page 12)
The valuations of the land
25 These are dealt with by SAT from [53].
26 In January 2005, KWD granted John Garland International authority to offer the land and business for sale at a listed price of $4.5 million.
27 Garland subsequently advised that the property had been extensively marketed and there is no evidence to the contrary. In November 2006, Garland confirmed that the only offer received was $1.25 million. Garland's opinion was that during the marketing period the potential achievable value was in the vicinity of $1.5 million to $1.75 million.
28 In November 2005, Mr Jeanes of Egan National Valuers valued the property as at 11 October 2005 as follows:
Land and buildings $1,100,000
Goodwill $50,000
Plant and equipment $100,000
__________
Total walk in/walk out $1,250,000
29 In December 2005, there was a conditional offer to purchase the property and business as a going concern but this fell through. In December 2006, Knight Frank conducted a further valuation of the property and business concluding the market value:
Land $1,535,000
Improvements $2,800,000
Total value for land and
Improvements $4,335,000
30 It is this valuation which grounds the appellant's submissions that the Trustee's discretion miscarried and there was a consequent error in SAT in failing to recognise it.
31 As part of its consideration whether to make application to set aside the transaction, the Public Trustee engaged a valuer, Agnello Property Valuations, to value the property using a number of methods. Agnello concluded that the property and business had a value of approximately $2 million using a direct comparison with other sales approach; a value of $2.48 million using an approach that added depreciated value of improvements and land value, and a value of $2 million using a
(Page 13)
- capitalisation of income from the business approach. Agnello's conclusion was that the valuation range was between $2 million and $2.5 million with a preferred value of $2.2 million.
32 Subsequently, the Commissioner of State Revenue, with Valuer General advice, that accepted the Agnello valuation of $2.2 million for stamp duty purposes.
33 The question for SAT was not whether the Public Trustee erred in failing to obtain a third valuation, but whether the Public Trustee's discretion miscarried in declining to make application to set aside the transaction.
34 The reason given by the Public Trustee for placing very little weight on the Knight Frank valuation was because it was so far out of the range of all the other values. This was a reasonable basis for placing little weight on the report, having regard to the sales history and lack of interest shown in the property, so that the offer received before the negotiated adjustment by the Public Trustee was significantly less than the Knight Frank valuation. There is no suggestion that the Public Trustee acted otherwise than in good faith and is advocating the best position for KMD. The Public Trustee did not ignore the Knight Frank valuation, rather it placed little weight on it. In other words, it took it into account and having done so was not persuaded to make an application to set aside the transaction when other factors were weighed.
35 SAT correctly addressed the right question:
As we have noted, this proceeding is not one that can involve consideration of the issues that would have to be determined by the Tribunal in an application under s 82 of the GA Act. Rather, we have approached our task in this case by considering whether, on the material before us, having regard to all the circumstances pertaining to KWD's estate since the January order and at the present time, there is sufficient reason to believe that there has been anything done or decided that has not been in KWD's best interests and, in particular, whether it would be in KWD's best interests to reopen the question of whether a s 82 application should be made to the Tribunal and, if so, how that should be achieved [47].
36 SAT accepted that notwithstanding its findings about his capacity, KWD still had a sufficient understanding of the broad nature of the transaction and his current situation and that considerable weight should be placed on his views and that he was happy with the current
(Page 14)
- arrangements, especially his retirement arrangements, living in the South Perth property with JID.
37 SAT correctly considered that the Public Trustee was justified in, and indeed obliged to, place great weight on the views of KWD as consistently expressed by him [71].
38 Moreover:
From our own observations at the hearing we consider that there is a close and supportive relationship between KWD and JID, and that JID is the person who has been most responsible for caring for KWD in recent years, despite the relatively short (in the context of the length of their total relationship) separation at the end of 2006. We consider that KWD's relationship with JID is the most important factor in his future care and well being, and the maintenance of that supportive relationship of great importance to KWD's best interests [73].
39 The conclusion of SAT was that BMD has not discharged the heavy onus on him that the Public Trustee should be removed and a new administrator appointed who could again investigate and decide whether a s 82 application should be made.
40 Having regard to the range of matters that the Public Trustee had to take into consideration in deciding what was the best course of action to take on behalf of KWD, the appellant has failed to establish that the Public Trustee's decision was wrong or that the SAT decision is attended with sufficient doubt to justify an appeal. Even if there is an arguable error (and I do not think there is) there will be no substantial injustice done in leaving the decision and KMD himself undisturbed.
41 Leave to appeal is refused.
3
1