BP v PM & Ors
[2022] QSC 268
•2 December 2022
SUPREME COURT OF QUEENSLAND
CITATION:
BP v PM & Ors [2022] QSC 268
PARTIES: REDACTED
FILE NO/S:
263 of 2022
DIVISION:
Trial
PROCEEDING:
Application
ORIGINATING COURT: Supreme Court of Queensland at Cairns
DELIVERED ON:
2 December 2022
DELIVERED AT:
Cairns
HEARING DATE:
21 November 2022
JUDGE:
Henry J
ORDER:
1. Pursuant to s 118(2) Powers of Attorney Act 1998 (Qld) the Applicant, in her capacity as enduring attorney of and for Victoria is authorised:
(a) to sell land located at 196 Powley Road, Barrine in far north Queensland more particularly described as Lot 11 on SP 300464 on behalf of Victoria , in the exercise of the Applicant’s power as enduring attorney of and for Victoria . . , to the Fourth Respondent and the Fourth Respondent’s wife, Kate , as joint purchasers, upon the terms and conditions set out in the written contract, exhibit BP13 to the affidavit of the Applicant filed herewith, and to do all things necessary for or incidental to the effectuation of the said sale, subject to:
(i) the price being the valuation ascribed to the property by Trevor Gard in an updated market valuation to be procured from him by the Applicant;
(ii) the amendment of the contract’s Annexure A Special Condition 4 by deleting the word “later” and inserting the word “earlier”.
2. The Applicant’s costs of and incidental to this application be paid out of the assets of Victoria . (including the nett proceeds of the said sale) on the indemnity basis.
3. I will hear the First and Second Respondents as to what, if any, order should be made as to their costs at 9.15 am 7 December 2022 (out of town parties having leave to appear by telephone), unless the Applicant in her capacity as enduring attorney of and for Victoria . reaches agreement with the First and Second Respondents about their costs in the meantime.
4. Liberty to apply on the giving of two business days notice in writing.
CATCHWORDS:
HEALTH LAW – GUARDIANSHIP, MANAGEMENT AND ADMINISTRATION OF PROPERTY OF PERSONS WITH IMPAIRED CAPACITY – ADMINISTRATION AND FINANCIAL MANAGEMENT – where the applicant is the attorney for financial and personal/health matters of the adult, her mother – where the adult is in permanent residential care at a care facility – where the adult does not have capacity to make decisions about personal health and finances – where the adult owns a small cattle property which is being maintained by the applicant and three of her siblings and its only income is from renting of one of the houses on the property – where the applicant seeks approval from the court to sell the property to her brother at market value – where the transaction is a ‘conflict transaction’ – where the court may approve a ‘conflict transaction’ if satisfied it would be in accordance with the general principles of the Power of Attorney Act 1998 – where two of the respondents, who are siblings of the applicant, oppose the transaction – whether the transaction accords with the general principles – whether the court should exercise its discretion to authorise the applicant to undertake the transaction
Powers of Attorney Act 1998 (Qld), s 6C, s 73, s 118(2)
Adamson v Enever & Anor [2021] QSC 221, cited
Ex Parte Whitbread in the Matter of Hinde, a Lunatic (1816) 2 Mer 99; 35 ER 878, cited
Secretary Dept Health and Community Services v JWB and SMB (Marion’s Case) (1992) 175 CLR 218, cited
COUNSEL: MA Jonsson KC for the applicant
JA Sheehan for first and second respondents
SOLICITORS: Greenwoods Law for applicant
HopgoodGanim Lawyers for first and second respondents
The applicant, Bernadette, is the long-standing attorney for financial and personal/health matters of Victoria, her 93-year-old mother. Victoria is cognitively impaired by dementia. She is in the permanent residential care of a care facility and there is no realistic prospect of her ever returning to her home on her small cattle property (“the farm”). Bernadette considers it would be in her mother’s best interests to sell the farm, but to keep it in the family by selling it at market value to one of her four siblings and his wife.
Because the proposed sale is to a relative, Bernadette has applied for the court’s authorisation of the transaction. The transaction is in her mother’s best interests and should be authorised.
How the application came to be before the court
Victoria and her late husband Wilhelmus had five children: the applicant Bernadette and the four respondents, Patricia, Michael, Johannus and Wilton. Bernadette, Johannus and Wilton are largely based in the Cairns region. Patricia resides in Brisbane and Michael in northern New South Wales. Johannus and Wilton consent to Bernadette’s current application and have provided affidavits in evidentiary support of it. The application is opposed by Patricia and Michael, with Patricia having been the leading proponent against it.
Victoria and Wilhelmus were farmers who lived on a property in Millaa Millaa for 45 years. As old age encroached, they moved to a rental property in Atherton for two years and, in 2016, to the farm at Barrine, to the east of Lake Tinaroo on the Atherton Tablelands. Wilhelmus died four years later on 14 September 2020.
Bernadette maintained an actively supportive relationship with her parents as they aged. From 2002, when they would travel to Cairns for medical appointments and hospital procedures, they would stay with her family at her house in Cairns, sometimes for weeks or months while recovering. Bernadette accompanied her mother to all her medical appointments since 2010 and her father since 2017.
Victoria executed an enduring power of attorney on 9 March 2010 appointing Wilhelmus and Bernadette severally as her attorneys for “financial and personal/health matters”. Victoria was diagnosed with Alzheimer’s and vascular dementia by her consultant geriatrician in November 2017. Her sad decline resulted in her entering a local aged care facility as a permanent resident in March 2019. Wilhelmus apparently remained cogent and managed the couple’s affairs until his death in September 2020.
Prior to the death of Wilhelmus he initiated steps to liquidate a number of the couple’s substantial assets, though not the farm, which, as he informed Bernadette on many occasions, he hoped one of his children would acquire. Following the death of Wilhelmus, Victoria’s assets consisted of the farm, two blocks of land at Glenwood, an industrial shed at Tolga, a cattle grazing property at Ravenshoe, and a $873,000 share portfolio in funds and bank accounts.
Bernadette, in her capacity as Victoria’s attorney, continued the liquidation of assets process which Wilhelmus had commenced. One of the blocks of land at Glenwood sold for $67,500 in November 2020. The other Glenwood block sold in January 2021 for $128,000. The Ravenshoe grazing property sold for $1,072,350 in March 2021. The last sale of the share portfolio was completed in January 2022, and the industrial shed at Tolga was sold for $315,000 in February 2022.
Bernadette continued to use the services of her parents’ accountant of 31 years, Mr Paul Tsakissiris, seeking his financial and taxation advice prior to making any decisions in relation to her mother’s affairs. In a letter to Bernadette of 14 January 2022 Mr Tsakissiris referred to the liquidation of assets strategy which had been initiated by her father and she had continued. The letter explained that capital losses in an individual’s name, which can be deducted during the individual’s life from taxable capital gains, are lost on death. Mr Tsakissiris recommended that sale of shares or further real estate should be considered prior to anything happening to Victoria, to mitigate any potential capital gains tax liability and maximise her estate assets.
The letter continued:
“Having said that, I believe it was also a wish of your Dad that if possible, it would be nice to keep the family property in the family name. Having known him for many years I think he would have taken great pride in seeing family continue to farm on his legacy.
The problem with continuing to hold the [the farm] in your Mum’s name is the ongoing expense and time involved in maintaining it. There will be no further income from the property once the present cattle are sold as I believe you are not going to restock the property. That means rates, insurance, cleaning, repairs etc. You advised me on one of your previous visits that your Dad had made an agreement with one of his neighbours to replace a boundary fence and that you were in the process of organising this. These are all ongoing expenses that will continue to drain finances from your Mum’s existing funds. To be fair to all, I would also suggest if any of the family are contributing time to any of this it should be paid for from your Mum’s funds.”[1]
[1]Affidavit of Bernadette, Court doc 2, exhibits pp 19-20.
In an email to her siblings of 27 January 2022 Bernadette referred to the potential capital gains exposure on Victoria’s passing because the current capital loss otherwise available to Victoria while living would be lost. The email went on to refer to the comparable advantages of selling the farm before or after their mother’s passing. It noted not only the apparent tax advantage of a sale prior to her passing, but also that there would no longer be a need to continue to maintain the property and that if a family member was to purchase the farm, their mother could still visit whilst able, a prospect which Bernadette described as being “to Mum’s advantage”.
The letter concluded:
“Moving forward, I personally think selling the farm prior to mum passing is best as I can utilize mums’ capital loss, which is a huge tax advantage. Like I said, if a family member can successfully meet the valuation price and purchase the farm, then mum (if able) can still visit. It could also be stipulated, that if a family member purchased the farm that the house stays as is until mum passes or can no longer visit. Also, mum won’t have to pay commission on sale. I am only saying all this because 4 members expressed interest. It is not my intention to make anyone feel pressured to buy the farm. Dad mentioned several times he thought it would be great if someone bought the farm, but at the end of the day, if you can’t afford it or not interested, then it is what it is.”[2]
[2]Affidavit of Bernadette, Court doc 2, exhibits pp 23-24.
So began a chain of communications in which Patricia, and in briefer terms Michael, expressed opposition to the sale of the farm and Wilton emerged as the apparently only sibling interested and willing to buy the farm at market value.
One of Patricia’s initially articulated reasons for opposing such a sale was that holding onto the farm would mean Victoria maintained “a balanced portfolio of property, cash, and shares”. She also suggested it would be “Mum and Dad’s expectation that we would work together to maximise their lifetime legacy” and “investigate subdivision potential”.
Of subdivision potential Patricia wrote:
“I am willing to pursue this and present the costs involved. DAs for subdivision are part of the building approval process. This is why I can contribute to help Mum and the family. This is an opportunity to increase the property value and potential sale price. This could be to Mum’s benefit and in turn benefit all five of us equally.”[3] (emphasis added)
The potential benefit to the siblings’ prospective inheritance interest is of course irrelevant. Bernadette’s duty as attorney is to act in her mother’s interests, not that of her siblings. In any event Bernadette subsequently explained that a representative of Council had indicated subdivision could not occur and Patricia’s pursuit of it seemed to fall away in the ensuing email exchanges.
[3]Affidavit of Bernadette, Court doc 2, exhibits pp 26-27.
The pursuit of “a balanced portfolio” also appeared to fall away as a basis for resistance. That is unsurprising. There had been underway an uncontroversial process of liquidating substantial assets likely to attract capital gains tax, with the consequent advantage that Victoria’s capital loss could be set off in mitigation thereof. In fact, in due course the liquidation of assets resulted in a very substantial reduction of Victoria’s capital loss, so that it fell away as an influential reason to sell the farm. That said, the present position on the advice of Mr Tsakissiris is that if the proposed transaction proceeds it will attract no capital gains tax.
Bernadette evidently perceived there were other persisting advantages in her mother’s interests to pursue the sale. She negotiated the proposed contract of sale to Wilton and his wife at the market value, appraised on 13 April 2022 by Trevor Gard, Certifying Practising Valuer, of $1,260,000. Johannus supports the sale proceeding.
Patricia and Michael opposed such a sale, particularly on the basis that according to what their mother told them, she did not want the farm to be sold. This remains their position.
The persisting advantages in support of the sale were and remain that it would remove the ongoing demands and costs associated with ownership of the farm and convert the equity in the farm to a monetary form which can be readily invested and easily managed. Another advantage, though of less weight given Victoria’s diminished mental insight, is the potential emotional comfort for Victoria of connection with the farm via contractual conditions a buyer outside the family would be unlikely to agree to.
The proposed contract includes conditions calculated at the farm remaining Victoria’s de facto home by excluding from the sale all furniture and personal effects in the main house, which was the marital residence. Under the contract the buyers warrant they will leave the main house vacant and unoccupied “until the later (sic – earlier) of, the death of the Seller, or the date by which [the aged care facility] decides the Seller is no longer of sufficient health to visit”. The buyers warrant that they will look after the maintenance and cleaning of the main house. Special conditions also exclude all tractors, plant, machinery and tools in the sheds and the cattle on the property from the sale and permit the cattle to remain and graze at the property until they are in due course sold.
The factual issues
Despite the apparent force of the reasons favouring the proposed transaction, the court’s authorisation of the transaction was actively opposed at the hearing by Patricia and Michael. Their persistence in that opposition seemed at odds with the poor evidentiary support for it and absence of cross-examination of any of the applicant’s deponent witnesses.
The arguments of Patricia and Michael’s counsel against the court’s authorisation of the transaction, insofar as they are related to potentially determinative facts, coalesced into arguments that: the proposed sale is at an undervalue, there is no evidence Victoria lacks capacity in financial matters, the transaction is contrary to Victoria’s wishes and the transaction is not in Victoria’s best interests.
The Court’s statutory decision-making process
Those issues fall for consideration in the exercise of the court’s protective jurisdiction, which evolved at common law to enable care to be taken of those without capacity to take care of themselves.[4] This involved a form of substituted judgment by which the court judged what was in the person’s best interests, including by consideration of what the person would likely want done if capable of self-management.[5] The exercise of that protective jurisdiction in respect of those who have executed an enduring power of attorney now involves a decision-making process stipulated by the Powers of Attorney Act 1998 (Qld).
[4]Secretary Dept Health and Community Services v JWB and SMB (Marion’s Case) (1992) 175 CLR 218, 258.
[5]Ex Parte Whitbread in the Matter of Hinde, a Lunatic (1816) 2 Mer 99; 35 ER 878.
The proposed sale is a so-called conflict transaction according to s 73(6) of the Act, because it “is a transaction in which there may be conflict … between … the duty of an attorney towards the principal; and … the interests of … a relation … of the attorney”. Section 73(1) provides an attorney may enter into a conflict transaction “only” if the principal or the court authorises it. Victoria’s mental state precludes her authorisation. For an authorisation by the court to occur s 73(1) requires it to be authorised under s 118(2) of the Act.
Section 118(2) relevantly provides:
“…[T]he court may, by order and subject to the terms the court considers appropriate, authorise an attorney, either generally or in a specific case, to undertake a transaction that the attorney is not otherwise authorised to undertake or may not otherwise be authorised to undertake, if the court is satisfied the transaction would be in accordance with the general principles.”
Section 118(2)’s reference to the “general principles” is to a group of ten guiding statutory principles in s 6C of the Act, of which more will be said shortly.
The content of s 118(2) contemplates the court “may” make an order authorising the transaction “if” it is satisfied the transaction accords with the general principles. It follows s 118(2) requires the court to answer two questions in the affirmative before deciding to give an authorisation, namely:
(1)Is the court satisfied the transaction accords with the general principles?
(2)Should the court exercise its discretion to authorise the attorney to undertake the transaction?
The requirement that the court be satisfied the transaction would be in accordance with general principles was introduced by amendment to s 118(2) in the Guardianship and Administration and Other Legislation Amendment Act 2019 (Qld). Prior to this amendment the relevant pre-condition to the exercise of the discretion to authorise was that “the court considers it in the best interests of the principal”. That change did not remove the interests of the principal as a relevant consideration. It is inevitably a consideration relevant to whether the discretion to authorise the attorney to undertake the transaction should be exercised, because the attorney’s fiduciary duty, mandated by s 66 of the Act, is to “exercise power honestly and with reasonable diligence to protect the principal’s interests”. Additionally, the general principles also mandate consideration of whether the transaction is in the interests of the principal, per principle 9.
It is apparent from the general principles’ content, set out at s 6C, that they were drafted to meet the full array of potential circumstances in which the Court or an attorney is performing a function or exercising a power. The guidance they provide will be of variable assistance depending upon the nature of the incapacity the relevant adult suffers and the nature of the decision in consideration.
In deciding whether the proposed transaction accords with the general principles it is convenient to first consider principle 1 and the issue of capacity, followed by the decision-making process set out in principles 8 to 10 and the issues of Victoria’s wishes and interests, before returning to principles 2 to 7, about which little issue was taken.
Does the transaction accord with general principle 1?
The first of s 6C’s principles, principle 1, states, “An adult is presumed to have capacity for a matter”. The use of the term “matter” reflects the nomenclature of the Act relating to different categories of matters, including financial matters, personal matters and health matters.[6] It is to be borne in mind that capacity can involve matters of degree. For example, a principal with minor cognitive impairment may retain capacity for a simple, minor transaction but not for a transaction which is more complex or consequential. As Applegarth J explained in Adamson v Enever & Anor, capacity is therefore “decision specific”.[7] The issue here is whether Victoria has the capacity to understand the real nature and consequences of the transaction in question.
[6]See the Act’s Schedule 2 “Types of Matters”.
[7][2021] QSC 221 [6].
The effect of the only evidence in the nature of a medical opinion about Victoria’s mental capacity to make decisions about financial matters is that she lacks capacity. That evidence, uncontradicted by evidence from any other medical practitioner, is the letter of Dr Adrian Conner dated 29 September 2020, written a fortnight after the death of Victoria’s husband, Wilhelmus. It states:
“Re: EPOA for [Victoria] for health and financial matters
This letter is to confirm that [Victoria] lacks the competence to make decisions relating to her personal health and finances.
I have been involved in [Victoria’s] medical care as a general practitioner since January 2018. I visited her weekly at [the aged care facility] for her medical reviews since December 2019.
She has a diagnosis of Alzheimer’s and vascular dementia initially made by a consultant geriatrician in November 2017. Her condition has since progressed and she now has moderate to severe cognitive impairment based on her cognitive assessment screening.
Based on my assessment and that of the memory clinic geriatricians in Mareeba, where she has been assessed every 6-12 months, [Victoria] lacks the capacity to make decisions about matters relating to personal care and welfare. She is unable to understand the nature of such decisions and lacks the capacity to foresee the consequences of these decisions. Due to the nature of [Victoria’s] condition she will not regain or recover competence.
Based on this assessment I feel [Victoria’s] EPOA can act on her behalf. With the recent passing of her husband, this would be her daughter [Bernadette].”[8]
[8]Affidavit of Bernadette, Court doc 2, exhibits p 16.
The respondents’ counsel focussed upon the fourth paragraph of this letter, and its statement that Victoria lacks the capacity to make decisions about matters relating to personal care and welfare, to submit I ought to interpret this letter as not providing evidence that Victoria lacks capacity for financial matters.
The submission sought to invoke an interpretation more apt to interpreting a statute than the letter of a lay person. True it is the first sentence of the letter referred to “competence”, not “capacity” but those words were evidently used interchangeably in the letter as carrying the same meaning. Thus, in paragraph four, having spoken of Victoria’s loss of “capacity” Dr Conner opines she will not regain or recover “competence”. Dr Conner obviously meant, in using the word “competence”, to convey the same meaning as the word “capacity”. Further, that the fourth paragraph did not expressly refer to financial matters is unlikely to convey any distinction intended by Dr Conner, given that he grouped reference to personal health and finances together in the letter’s heading and its first sentence. In light of these aspects and the letter’s explanation of Victoria’s condition and progressive decline I infer the opinion Dr Conner was intending to convey by his letter was that Victoria lacks capacity to make decisions about financial and personal matters including her health care.
There is no reason to suspect Victoria’s mental capacity has improved in the over two years since Dr Conner’s letter. Indeed, Bernadette has observed her mother, who remains in the aged care facility requiring a high level of care, has continued to deteriorate.[9] Sad circumstantial examples of Victoria’s obviously significant cognitive impairment abound. She needs to be reminded about her needs for assistance,[10] she has decreased mental capacity to perform familiar self-care tasks,[11] she is confused even by light conversation,[12] she exhibits absence of insight into her lack of capacity by not seeking required assistance and claiming she can do things she clearly cannot do,[13] she demands to live at home without insight into that being beyond her high care needs,[14] she has a confused recollection of the farm, sometimes having little to no recollection of it and sometimes confusing it with the family’s property of 45 years at Millaa Millaa,[15] and she is distressed and confused by discussion of the farm saying everyone wants to buy it and that she will be left on the street.[16]
[9]Affidavit of Bernadette, Court doc 2, exhibits p 23.
[10]Affidavit of Bernadette, Court doc 2, exhibits p 17.
[11]Affidavit of Bernadette, Court doc 2, exhibits p 18.
[12]Affidavit of Bernadette, Court doc 2, exhibits p 36.
[13]Affidavit of Bernadette, Court doc 2, exhibits pp 33, 36.
[14]Affidavit of Bernadette, Court doc 2, exhibits p 33.
[15]Affidavit of Bernadette, Court doc 2, exhibits p 23.
[16]Affidavit of Bernadette, Court doc 2, exhibits p 36.
Victoria’s deluded belief she will be left on the street, discussed further below, bespeaks an obvious lack of comprehension of her safe financial position and of the real nature and consequences of the transaction in question. That lack of comprehension is consistent with the evidence of Victoria’s sadly significant degree of cognitive impairment. I infer her impairment is so significant that it deprives her of capacity in financial matters, including the capacity to understand the real nature and consequences of the transaction in question.
Further, it is quite apparent that the need for Bernadette to manage her mother’s financial matters because of Victoria’s incapacity to do so was long accepted by her siblings. No objection by them was raised when Bernadette liquidated other assets of Victoria’s.[17] Even when Bernadette raised the suggestion that the farm be sold and she encountered Patricia’s resistance, that resistance arose because the specific asset in question was the farm, not because their mother had capacity and Bernadette was thus precluded from acting as her mother’s attorney in financial matters. Even more recently, as Patricia and Michael made the choice to provide affidavits to resist this application, neither of them asserted their mother in fact has capacity for financial matters. Rather, to the extent their deposed evidence related in any sense to Victoria’s mental state, it related to their contention that their mother says she does not want the farm to be sold.
[17]Affidavit of Bernadette, Court doc 2, exhibits p 41.
Of course, Patricia and Michael carry no onus and it is for Bernadette to displace the presumption of capacity. However, Patricia and Michael’s approach fortifies the confidence with which I draw the inference of lack of capacity.
Does the transaction accord with general principles 8 to 10?
Principle 8
Principle 8 promotes an adult’s right to make or participate “to the greatest extent practicable” in decisions affecting the adult’s life by providing that “to the greatest extent practicable” a person or other entity in exercising power for a matter for an adult “must seek the adult’s views, wishes and preferences”. For reasons explained below in connection with principle 10, such references to the adult’s “views, wishes and preferences” are to “views, wishes and preferences of relevance to the matter to be decided”.
Without principle 8’s qualifying references to practicability, the principle would otherwise require the adult’s views, wishes and preferences to be sought every time there is an exercise of power for a matter. However, a decision-maker’s experience and or knowledge of an adult’s degree of cognitive impairment may support the conclusion it is not practicable to seek the adult’s views, wishes and preferences. In this case my knowledge of Victoria’s significant cognitive impairment causes me to conclude it is not practicable for this court to seek her views, wishes and preferences, nor did either side suggest it would be. Views, wishes or preferences deriving from deficient or erroneous comprehension are irrelevant. It is not practicable to seek Victoria’s views, wishes or preferences because they could not be accompanied by sufficient comprehension of the nature and consequences of the proposed transaction for them to be views, wishes or preferences of relevance to the matter to be decided.
The same impracticability applies to Bernadette seeking such views, wishes or preferences as attorney. In reaching that conclusion I appreciate there is some evidence, discussed below, that Bernadette and some other siblings have had conversations with their mother in which Victoria seemingly expressed some views, wishes or preferences. However, none of that evidence suggests they were expressed with sufficient comprehension of the nature and consequences of the proposed transaction for them to be views, wishes or preferences of relevance to the matter to be decided.
Principle 8 also requires the provision of the support and access to information necessary for the adult to make, communicate and participate in decisions affecting the adult’s life. The premise of such a requirement is that the adult is able to make a decision about a matter. Principle 8(6) precludes treating the adult as “unable” to make a decision about a matter “unless all practicable steps have been taken to provide the adult with the support and access to information necessary to make and communicate a decision”. In the present case Victoria’s cognitive impairment is so significant that she is beyond the reach of any practicable steps which could provide her with the support and access to information necessary for her to make and communicate a decision of the present kind. It follows for the purposes of principle 8 that she can be treated as unable to make the decision under consideration.
Principle 9
Principle 9 requires that in performing the function or exercising the power the decision-maker must do so in a way that promotes and safeguards and is least restrictive of the adult’s rights, interests and opportunities. Given how significantly Victoria’s cognitive capacity is impaired this principle does not relate in any practical sense to the process part of dealings with her prior to arriving at the decision. Rather, it relates to the content of the decision to be reached. In this context the best treatment of her rights and opportunities aligns with a decision which promotes, safeguards and is least restrictive of Victoria’s interests. To have that quality the decision sought (ie. to authorise the transaction) should be in Victoria’s interests and be more in her interests than the status quo or some other apparently available course. Putting it another way, the decision to authorise should be in her best interests.
Would the decision to authorise be in Victoria’s best interests?
The decision whether to authorise the sale transaction is a decision about a financial matter with the consequence that consideration of what is in Victoria’s best interests requires consideration of what is in her financial best interests.
A significant aspect of that consideration is the argument of the first and second respondents that the proposed sale is at an under-value.
The proposed purchase price of the contract is $1,260,000, which is the farm’s value as assessed in a valuation report of Trevor Gard, Certifying Practising Valuer, dated 13 April 2022. Mr Gard had earlier provided a valuation of 19 October 2021 of $1,250,000.
In her first affidavit Patricia exhibited a letter to her of 8 July 2022 by Ms Lucy Capponi of Thomas Baldwin Real Estate.[18] In that letter Ms Capponi indicated that, after a “curb-side appraisal”, it was felt the farm’s current market price was between $1,490,000 and $1,630,000 and she went on to explain that firm’s beneficial strategies as a prospective sales agent.
[18]Affidavit of Patricia, Court doc 8 (court doc 6 is a photocopy duplicate) exhibits pp 1-3.
In her second affidavit Patricia noted Mr Gard’s valuation was significantly below that provided in the above-mentioned letter of Thomas Baldwin Real Estate. However, that letter was of limited evidentiary significance without the valuation it asserted (and the process and professional qualifications behind the assertion) being verified on affidavit by someone from Thomas Baldwin Real Estate, whose opinion might then be tested in cross-examination.
Patricia’s second affidavit also noted that Mr Gard’s valuation report of 13 April 2022, in referring to recent sales, included reference to a property of similar size to the farm which sold for $1,860,000 in December 2021. That observation, like some other content in the affidavits of Patricia and Michael, appears to have been undiscerningly included for persuasive effect rather than as relevant evidence. But it was also a disingenuous observation because the report content to which it referred expressly explained, in the “comparison” note against that property:
“Considered to be superior to the subject due to having lake frontage and a possibility to subdivide.”
In Mr Gard’s affidavit he elaborated on this, explaining of the aforementioned property:
“This property is located in a far superior position to [the farm],and has the capacity to be subdivided into five rural residential allotments that add significant value to the property. The proposed allotments would range from 8 to 11 hectares and would achieve, in my opinion, between $600,000 to over $1,100,000 for each lot, depending on improvements to the sites and position.”[19]
[19]Affidavit of Trevor Gard, Court doc 16 [6]. (Mr Gard went on to depose that another of the properties in his reports which had sold for $1,525,000 on 15 November 2019 was much larger (46.81 hectares larger) than the farm.)
The evidentiary equation by the morning of the hearing was that the only deponent with expertise to testify to the farm’s market value was Mr Gard. No affidavit by any other professional valuer or someone from Thomas Baldwin Real Estate or any other real estate agent was proffered by Patricia and Michael. Furthermore, Mr Gard was not required for cross-examination.
The decision to not require Mr Gard for cross-examination was persisted in notwithstanding that another affidavit of Patricia, filed at the outset of the hearing, made assertions that the sale was “below cost” in light of renovations that had occurred after the farm’s purchase and that “the property has the potential to be sub-divided”. It was open to Patricia and Michael to cross-examine Mr Gard to suggest the farm’s value was greater than he opined having regard to what had been spent on it and the supposed potential for sub-division. They chose not to do so.
The fact there had been money spent on post-acquisition renovations went nowhere relevant unless it bore upon the property’s value and it is well known that there is not a linear connection between expenditure upon a property and its value. As to the alleged potential for sub-division, which seemed to have fallen away in the past emails, it was presumably resurrected in the latest affidavit of Patricia to cultivate the inference the property had greater inherent worth than the market value attributed to it by Mr Gard. If that was to be asserted then it ought have been explored with Mr Gard by cross-examination, particularly given he had explained the farm was worth materially less than another property which did have the capacity to be sub-divided. The obvious implication of Mr Gard’s explanation was that the farm did not have the capacity to be sub-divided.
Further to the telling absence of cross-examination, Patricia’s assertion the farm had the potential to be sub-divided, which she well knew was at odds with what Bernadette told her had been ascertained on inquiry with the local Council, went unaccompanied by any evidentiary foundation (this despite her earlier in the year indicating she was willing to pursue the possibility of sub-division and present the costs involved). The high point is that she understands some other properties in the district had been sub-divided. That is to say nothing of the possibility, practicality, timeliness or cost of the farm being sub-divided. It is of course Bernadette who carries the onus but it is not for her to lay on evidence to positively exclude speculative rather than obviously realistic and desirable options. It is not obvious that the option of property development by sub-division is realistic and desirable here and there is no evidence to suggest it is.
In light of the evidentiary equation explained above it is uncontroversial that this court should accept the valuation evidence of Mr Gard.
It was submitted by counsel for Patricia and Michael that if I reached that conclusion, and intend to authorise the sale, I should nonetheless require it be at an updated valuation price, since Mr Gard’s latest valuation occurred back in April this year. It was also submitted the updated valuation should be by some other valuer.
I reject the latter submission. If there is to be a further valuation there is no reason why it should not be provided by Mr Gard, the professional witness who already has the experience of valuing the property. His pre-existing knowledge makes it likely it will be less expensive to use his expertise than engage a new valuer. The only reason advanced in support of a different valuer seemed to be that it may be re-assuring to Patricia and Michael, which is not a relevant consideration. That Mr Gard is a qualified and experienced valuer, whom Patricia and Michael did not even elect to challenge by cross-examination, should leave any objective observer content as to his independence.
The more substantive issue is whether an updated valuation should be obtained. The pattern of interest rate increases in Australia since the April valuation and their dampening effect upon the property market generally probably make it unlikely there has been a material upswing in the meantime in the farm’s market value. Nonetheless, it is conceivable local rural considerations may offset that general dampening impact. On balance it would be a prudent step, in Victoria’s financial interests, for Bernadette to procure an updated valuation from Mr Gard. The proposed contract should adopt that valuation. My orders will reflect such a requirement.
Accepting that Victoria will receive the farm’s existing monetary worth, because it is a sale at market value, it appears Victoria’s financial interests will be well served by the sale. The sale proceeds will doubtless join Victoria’s broader monetary asset pool in the financial marketplace, accruing in value over time, with a component being available to draw upon to fund Victoria’s living expenses. The management of the farm’s monetary worth in the financial marketplace will involve less cost and risk than would be involved in the significant burden of owning and maintaining the property.
The material showed it has been a significant impost upon Bernadette, aided by some local siblings, to maintain the property and the cattle presently remaining on it. The only income currently generated by ownership of the property is $300 per week, generated by renting one of the two houses on the property, the other house being the former marital home which has been preserved for Victoria’s benefit. Allowing for the ongoing costs of ownership of the property, the property’s sale at market value with investment of the proceeds is likely to generate a more substantial net income than present ownership of the property does. The other ways in which the property may potentially generate income would involve the leasing of the farmland which is presently problematic because of the existing cattle upon it and the improbability of them being sold within the next 18 months. The installation of a manager in the meantime to care for the stock and properly maintain the property would be an added material cost of ongoing ownership of the property.
Another option would be the immediate appointment of a manager with a view to restocking the farm and running it as a going concern. That option would require significant expenditure with no material return for some years. Indeed, it may reasonably be expected that the property would be run at a loss for the first couple of years of that process.
True it is, a return to running the property as a going grazing concern, even allowing for the cost of it being done so by a paid manager, may in some years return profits, subject to the variable fates of cattle and cattle prices. But this begs the question why, bearing in mind the losses which would be incurred in the meantime, such a long run means of preserving equity and eventually gaining a potential income is best suited to the financial interests of a 93-year-old with dementia in an aged care facility. The better financial option for her is to simply liquidate the asset and invest the proceeds wisely so as to begin generating a timely financial return without the costs and risks attached to continued ownership of the property.
Weighing all of these matters the proposed transaction is in Victoria’s best financial interests.
Other than Victoria’s financial interests the only other consideration with the potential to bear upon whether the proposed transaction is in Victoria’s best interests is her emotional well-being, in that the maintenance of her connection to the property may provide some comfort to her. It is, however, an inescapably vague consideration because of Victoria’s significantly impaired cognition. To the extent it is relevant it can only be sensibly considered by reference to its effect in a theoretical moment of correct understanding. In that equation the level of emotional distress Victoria may feel at no longer being the owner of her home is likely to be outweighed by the comfort she would draw from the knowledge that the sale will lift the ongoing managerial and financial burden of ownership of her home in a way which safely preserves her substantial asset pool, while at the same time preserving the state of her home and her possessions in it for her, for so long as she may be able to visit there.
For all of these reasons the proposed transaction is in Victoria’s interests and is more in her interests than is preserving the status quo or pursuing any other apparently available course; that is, the proposed transaction is in her best interests.
Principle 10
Principle 10(1) provides the following four stage approach must be adopted in applying principle 9:
“(2) First, the person or other entity must –
(a)recognise and preserve, to the greatest extent practicable, the adult’s rights to make the adult’s own decision; and
(b)if possible, support the adult to make the decision.
(3) Second, the person or other entity must recognise and take into account any views, wishes and preferences expressed or demonstrated by the adult.
(4) Third, if the adult’s views, wishes and preferences cannot be determined, the person or other entity must use the principle of substituted judgment so that if, from the adult’s views, wishes and preferences, expressed or demonstrated when the adult had capacity, it is reasonably practicable to work out what the adult’s views, wishes and preferences would be, the person or other entity must recognise and take into account what the person or other entity considers the adult’s views, wishes and preferences would be.
(5) Fourth, once the person or other entity has recognised and taken into account the matters mentioned in subsections (2) to (4), the person or other entity may perform the function or exercise the power.”
As to the first stage this court, and doubtless Bernadette, recognise Victoria has a right to make the subject decision but her significant cognitive impairment precludes her from doing so or being supported in such a way that she can do so.
Two points should be made about stages two and three. Firstly, their references to the adult’s “views, wishes and preferences” do not specify the topic to which the views, wishes and preferences relate. Considering the context in which those references occur, they should not be read narrowly as “views, wishes and preferences as to the decision”. The matter to be decided may have some complexity yet that narrow interpretation would require synchronicity between the views, wishes and preferences and the whole of the content of the decision. It would thus exclude regard to views, wishes and preferences that might relate only to some aspect of the decision or a topic of relevance to its subject matter. Such an exclusion would be at odds with the emphasis on inclusivity in the general principles. The correct interpretation is that the words “views, wishes and preferences” mean the “views, wishes and preferences of relevance to the matter to be decided”. That interpretation reflects the context in which the words are used. It is also consistent with stage 3’s contemplation of regard to views, wishes and preferences held in the past, when the whole of the content of the decision now in contemplation was unknown but views, wishes and preferences about topics of relevance to the matter to now be decided may have been known.
The second point, flowing from the first, is that despite first blush appearances, the second and third stages are not mutually exclusive alternatives to each other, as if the former applies where the adult’s present views, wishes and preferences are known and the latter applies where they are not. In this context it is to be borne in mind that the nature and consequences of a transaction requiring authorisation may involve a broad array of elements. The second stage refers to “any” views, wishes and preferences “expressed or demonstrated by the adult”. “Any” views, wishes or preferences so expressed or demonstrated will not necessarily relate comprehensively to the whole of the content of the decision and may only be relevant to some aspect of the decision or a topic of relevance to its subject matter. It may thus remain that the adult’s views, wishes and preferences of relevance to other aspects of the transaction’s nature or subject matter or indeed to the whole of its nature and consequences “can not be determined”, allowing recourse to the substituted judgment process referred to in the third stage. Such an interpretation also rests comfortably with each such stage involving the stipulated process of the decision-maker recognising and taking into account, rather than being bound by, the views, wishes and preferences ascertained in each stage.
Turning to the application of stage 2, Patricia and Michael contend the proposed transaction is against Victoria’s wishes. The breadth of this contention is problematic in its erroneous implicit assumption that Victoria’s mental state permits her to arrive at a view, wish or preference informed by and relating to the real nature of the transaction and its real consequences for her. The nature of her incapacity discussed above likely precludes her from arriving at sufficient overall comprehension of the real nature of the transaction and its real consequences for her to have a view, wish or preference regarding the whole of the transaction’s nature and consequences.
Such evidence as Patricia and Michael rely on in this context is only of a view, wish or preference that the farm not be sold and is not of a view, wish or preference regarding the whole of the transaction’s nature and consequences. Indeed, the very evidence relied upon unravelled during Patricia’s cross-examination by positively demonstrating Victoria’s wishes must not relate to the whole of the transaction’s nature and consequences because she clearly does not comprehend what its nature and consequences are.
Patricia and Michael each deposed that their mother has repeatedly and consistently told them that she does not want the farm to be sold.
In contrast, Bernadette deposed that when she had a conversation with her mother about selling the farm to Wilton, her mother did not say she did not want to sell the farm, but said, “I do not want the farm to go to an outsider”.[20]
[20]Affidavit of Bernadette Court doc 2 [34].
It was notable but unsurprising that neither side led evidence of discussions with Victoria in which she indicated any view, wish or preference relating to the full detail of the actual transaction and its consequences, for any attempt at discussion at that level would be unproductive in light of Victoria’s level of incapacity. The high point in Michael’s evidence was that his mother has said: “There is plenty of other farms for sale, why does he (Wilton) want to buy mine? Why are they doing this to me? It is disgusting.”[21] Patricia’s affidavit evidence was supplemented by assertions her mother has told her the decision to sell the farm should be her decision, that she does not know how to stop it being sold, that she owns it and it should be her decision.
[21]Affidavit of Michael filed at hearing [37].
Patricia also deposed to her mother’s history of having lived in Malta during World War II when it was bombed and food was in short supply and, in seeming connection with that history, deposed (seemingly to her opinion rather something specifically said by Victoria) that farm ownership provides Victoria “with a sense of security and a belief that she is independent and will never have to go without again”.[22] This heralds the point that the proposed sale of the farm is clearly no threat to Victoria’s security and is on conditions which preserve her connection to the property. The point gathers force when it is appreciated Patricia also deposed her mother has said, “I have everything there, where will all my stuff go?”[23] The terms of the proposed contract of course have the effect that “her stuff” at the farm will not “go” anywhere. The developing point assumed more telling significance given the following run of events.
[22]Affidavit of Patricia filed at hearing [22(a)].
[23]Affidavit of Patricia filed at hearing [20].
In an email of 24 February 2022 Michael wrote:
“Mum does not want to sell the farm…. I respect Mum’s demands, as it is her right to keep it for as long as she wants.”[24]
[24]Affidavit of Bernadette, Court doc 2, exhibits p 33.
Responding to that assertion and providing other information in an email of 1 March 2022, Bernadette wrote:
“Regarding respecting mums demands – Mum believes she can go home and live. She says that she can cook and clean and can shower herself. Mum says she can toilet herself. She says she can still do gardening. She says she can drive a car. Yesterday, 26/02/2022 mum asked Johannus to teach her how to use the mower. She says there is nothing wrong with her.… So should we take her out of [the aged care facility]…. because that is what she wants and demands?
Mum said that ‘everyone wants to buy the farm’ and she will be left on the street. I was not sure where she got this information from, but it is clear now. Just so you know, mum has told other people (apart from family members) that everyone wants to buy the farm and she will be out on the street.”[25] (emphasis added)
[25]Affidavit of Bernadette, Court doc 2, exhibits p 36.
Patricia was reminded of this in cross-examination and acknowledged that her mother, in the context of the sale of the farm being mentioned, has repeatedly asserted that she will be “left on the street”. Such evidence is consistent with the conclusion that she lacks capacity to make the decision, for if Victoria had a proper understanding of her existing assets, even without regard to the value of the farm, she would understand there is not the faintest risk of her being left on the street. More particularly it shows her wishes relate to the concept of a sale of the farm which would leave her destitute. They are not views, wishes or preferences relating to the nature and consequences of the proposed transaction.
The evidence realistically only allows of two inferences in this context. One is that Victoria’s repeated assertions she does not want the farm to be sold is of no relevance to the transaction to be decided because she does not comprehend it, indeed her assertions appear to relate to a decision of quite different effect. The other is that her assertions can be regarded as having some relevance as indicators of a preference against selling regardless of the nature of the sales transaction. I infer the former. However, allowing that it may be the latter, and thus a preference of Victoria which I recognise and take into account pursuant to stage 2, I attach little weight to it because it is a product of a mind without comprehension of the nature and consequences for her of the proposed transaction and of why the proposed transaction is in her best interests.
Even if the latter inference is drawn it does not relate to the overall nature and consequences of the proposed transaction so that recourse to stage 3’s principle of substituted judgment may be had. However, that does not provide substantial assistance because there is so little evidence of views, wishes and preferences, expressed or demonstrated by Victoria when she did have capacity, of relevance to working out what her views, wishes or preferences would be.
The expressed preference of her husband that the farm remain in the family is not said to have been a preference expressed by her. It is probably a reasonable inference that after such a long marriage Victoria would give some weight to her husband’s wishes but it is a stretch to describe her as actually having demonstrated or expressed a view, wish or preference about that which makes it reasonably practicable to work out what her views wishes and preferences of relevance to the decision whether or not to make the transaction in question would be. Similarly, the fact that Victoria has long been an owner of rural real estate, and likely derived emotional security and satisfaction from such ownership, would likely mean that she would have a natural desire to retain some such ownership. But again it is a stretch to describe her as having demonstrated or expressed a view, wish or preference about that which makes it reasonably practicable to work out what her views wishes and preferences of relevance to the decision whether or not to make the transaction in question would be.
The only clear view, wish or preference expressed or demonstrated by Victoria, when she did have capacity, of some relevance to the decision whether or not to make the transaction in question, is that if she lacked capacity she wished her daughter Bernadette to make such decisions on her behalf. That wish makes it reasonably practicable to work out that Victoria would want Bernadette, the person she entrusted to act in her best interests in the event of incapacity, to judge for her whether or not to make the transaction. I recognise and take into account that wish and thus Bernadette’s judgment on her mother’s behalf regarding the proposed transaction. The weight I give it is subject to the obvious qualification that it cannot be determinative in the context of a decision which is now for the court’s as distinct from Bernadette’s judgement.
Having recognised and taken into account the matters mentioned in stages 1, 2 and 3, stage 4 envisages I may make the decision whether or not to authorise the transaction. Before deciding whether I should exercise my discretion to make that decision it remains to finalise the question of whether the transaction accords with the general principles by returning to consideration of principles 2 to 7.
Does the transaction accord with principles 2 to 7
General principles 2 to 7 state considerations about adult rights, empowerment, relationships, values, liberty and security to be taken into account or applied. They did not assume particular significance in argument in the present case, argument being focussed upon considerations more relevant to principles 8 to 10, relating to the decision-making process.
Principle 2, “Same human rights and fundamental freedoms”, requires that I recognise and take into account various iterations of Victoria’s rights and freedoms and the principles on which they are based, being informed in so doing by considerations such as non-discrimination and equality and, of particular relevance here, respect for “individual autonomy (including the freedom to make one’s own choices)”. I do so, as doubtless Bernadette did. It is to be appreciated though, that even according respect to Victoria’s individual autonomy, as I do, her significant cognitive impairment sadly precludes her having sufficient comprehension of the nature and consequences of the proposed transaction as to be able to make her own choice in the matter.
Principle 3, “Empowering adult to exercise human rights and fundamental freedoms”, requires the importance of the matters listed in its sub-sections (a), (b) and (c) to be taken into account. Those listed in (b) and (c) are of no material relevance to the present context. As to (a), “empowering an adult to exercise the adult’s human rights and fundamental freedoms”, its contextual relevance here would be to promoting Victoria’s autonomous decision-making. However there is nothing which can be done to empower Victoria to resume the capacity needed for her to have sufficient comprehension of the nature and consequences of the proposed transaction as to be able to make her own choice in the matter.
Principle 4, “Maintenance of adult’s existing supportive relationships”, requires account to be taken of the importance of maintaining an adult’s existing supportive relationships and, more relevantly at sub-section (3), the “role of families … to support the adult to make decisions should be acknowledged and respected”. I do so and am quite satisfied that Bernadette did so. She clearly consulted her siblings in respect of the prospective decision. That she did not agree with the views of some of her siblings merely reflects the fact that there were good reasons not to agree with them. On the topic of supporting Victoria to make the decision in question it remains as already explained that her significant cognitive impairment places her beyond the reach of any form of support which could equip her with sufficient comprehension of the nature and consequences of the proposed transaction as to be able to make the decision. The point is illustrated by the fact that her significant impairment appears to have had the regrettable consequence, antithetical to “support”, that some persons in their conversations with Victoria about the fate of the farm, appear to have fuelled confusion and distress.[26]
[26]See [74] above.
Principle 5, “Maintenance of adult’s cultural and linguistic environment and values”, requires Victoria’s cultural and linguistic environment and set of values, including religious beliefs, to be taken into account. The only evidence of potential relevance to that consideration is Patricia’s opinion by reference to her mother’s wartime experience that her mother values security and not having to go without again. Even without evidence of that opinion I readily take Victoria’s security and proper provision being made for her needs into account, just as Bernadette doubtless did.
Principle 6, “Respect for privacy”, has no potential relevance here.
Principle 7, “Liberty and security”, has no potential relevance other than security, in the sense already discussed, being taken into account.
I am accordingly satisfied the transaction accords with principles 2 to 7.
Should the court exercise its discretion to authorise the attorney to undertake the transaction?
I have concluded the proposed transaction is in accordance with the general principles. This enlivens the court’s power, in the exercise of its discretion, to authorise Bernadette to undertake the transaction.
My reasons already given in dealing with the general principles expose on the one hand that the arguments trending against exercising the discretion to authorise the transaction are unpersuasive. On the other hand I have explained why in my conclusion the transaction is not just in Victoria’s interests but is in Victoria’s best interests. That conclusion provides a powerful reason for exercising my discretion in favour of authorising the transaction. It should be a determinative consideration in circumstances where the authorisation also accords with the judgment of Bernadette as the adult Victoria entrusted to make such a decision on her behalf.
Subject to the below qualifications as to the order’s content, the court should authorise the proposed transaction.
Orders
For reasons explained above, the orders should require the contract to be at the valuation ascribed to the farm by Trevor Gard in an updated market valuation to be procured from him by Bernadette. Similarly, the erroneous use of the word “later” rather than “earlier”, identified above, in one of the contract’s conditions should be corrected by the orders.
It is uncontroversial that Bernadette should have her costs on the indemnity basis. It will be necessary to hear the parties as to what if any costs order should be made regarding the first and second respondents, unless of course agreement about that is reached with Bernadette.
It has not been suggested I should anonymise this judgment. Further it is likely persons who know Victoria and her family would ascertain from the judgment’s facts that it relates to her family. However, bearing in mind the nature of this case and that the version of this judgment published on the court’s website would be publicly searchable, it is an appropriate case in which to anonymise that on-line version of the judgment to the extent of only using the first names of the family members and redacting their names from the coversheet.
Given the authorised sale may encounter some unforeseen issue relevant to the terms of my order authorising it I will include provision for liberty to apply.
My orders are:
1.Pursuant to s 118(2) Powers of Attorney Act 1998 (Qld) the Applicant, in her capacity as enduring attorney of and for Victoria is authorised:
(a)to sell land located at 196 Powley Road, Barrine in far north Queensland more particularly described as Lot 11 on SP 300464 on behalf of Victoria , in the exercise of the Applicant’s power as enduring attorney of and for Victoria , to the Fourth Respondent and the Fourth Respondent’s wife, Kate , as joint purchasers, upon the terms and conditions set out in the written contract, exhibit BP13 to the affidavit of the Applicant filed herewith, and to do all things necessary for or incidental to the effectuation of the said sale, subject to:
(i)the price being the valuation ascribed to the property by Trevor Gard in an updated market valuation to be procured from him by the Applicant;
(ii)the amendment of the contract’s Annexure A Special Condition 4 by deleting the word “later” and inserting the word “earlier”.
2.The Applicant’s costs of and incidental to this application be paid out of the assets of Victoria (including the nett proceeds of the said sale) on the indemnity basis.
3.I will hear the First and Second Respondents as to what, if any, order should be made as to their costs at 9.15 am 7 December 2022 (out of town parties having leave to appear by telephone), unless the Applicant in her capacity as enduring attorney of and for Victoria reaches agreement with the First and Second Respondents about their costs in the meantime.
4.Liberty to apply on the giving of two business days notice in writing.
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