BPK

[2016] NSWCATGD 69

NSW Civil and Administrative Tribunal

New South Wales

Medium Neutral Citation:	BPK [2016] NSWCATGD 69
Hearing dates:	28 April 2016
Date of orders:	28 April 2016
Decision date:	28 April 2016
Jurisdiction:	Guardianship Division
Before:	J S Currie, Senior Member (Legal) M L Williams, General Member (Community)
Decision:	1. The financial management order made by the Tribunal on 12 January 2015 in relation to the estate of Ms BPK is varied as follows: (a) The order is to be reviewed within 24 months.
Catchwords:	FINANCIAL MANAGEMENT – application to review or revoke financial management order – best interests – consideration of suitability for appointment of an undischarged bankrupt – NSW Trustee and Guardian confirmed as financial manager
Legislation Cited:	Bankruptcy Act 1966 (Cth), ss 58, 266 Guardianship Act 1987 (NSW), ss 4(a), 4(g), 25P(1)-(2) NSW Trustee and Guardian Act 2009 (NSW), ss 39(a), 39(g)
Cases Cited:	Application by AMAM; Re SAM [2011] NSW SC 503
Texts Cited:	Nil
Category:	Principal judgment
Parties:	Mrs BPK (the person under financial management) Mr JAS (the person seeking the review of the order/ applicant) The NSW Trustee and Guardian
Representation:	Nil
File Number(s):	57819
Publication restriction:	Decisions of the Guardianship Division of the Civil and Administrative Tribunal have been anonymised to remove any information that may identify any person involved in the Tribunal’s proceedings (s 65, Civil and Administrative Tribunal Act 2013 (NSW)).

REASONS FOR DECISION

APPLICATION TO REVOKE FINANCIAL MANAGEMENT ORDER

What the Tribunal decided

1. The Tribunal declined to revoke the financial management order made for Mrs BPK on 12 January 2015. The Tribunal decided to vary the order by adding a condition that the order be reviewed within two years.

Background

2. Mrs BPK is a 92-year-old woman who was diagnosed in November 2014 with substantial cognitive impairments. This followed her admission to hospital on 5 August 2014 as a result of a fall in her home in southern Sydney. It is further reported that Mrs BPK is dysphasic following a stroke. She has been a resident of a nursing home in southern Sydney since 13 November 2014.

3. Mrs BPK has a sister Mrs LG and a nephew Mr JAS.

4. On 12 January 2015, the Tribunal made a limited continuing guardianship order for Mrs BPK. It appointed the Public Guardian for 12 months with the decision-making functions of accommodation, health care, medical and dental consent, and services. On 14 January 2016, the Tribunal revoked this order.

5. On 12 January 2015, the Tribunal also made a financial management order for Mrs BPK under which it committed management of her estate to the NSW Trustee and Guardian. On 15 January 2016, the Guardianship Division of the Tribunal received from Mr JAS, nephew of Mrs BPK, an application for review of the financial management order, which sought the revocation of that order on the ground that it would be in Mrs BPK’s best interests for the order to be revoked. The purpose of the Tribunal’s proceedings at Sydney on 28 April 2016 was to conduct the review of the financial management order requested by Mr JAS.

Parties and witnesses

6. The Appendix to these Reasons for Decision identifies the parties to the application and the witnesses who participated in the hearing. [Appendix removed for publication.]

Issues for determination by the Tribunal

7. Under s 25P(1) of the Guardianship Act 1987 (NSW), when the Tribunal reviews a reviewable financial management order it must vary, revoke or confirm the order. Under s 25P(2) of the Guardianship Act, it may revoke the order only if:

1. it is satisfied that the protected person is capable of managing his or her affairs, or

2. it considers that it is in the best interests of the protected person that the order be revoked (even though the Tribunal is not satisfied that the protected person is capable of managing his or her own affairs).

8. In his application, Mr JAS sought the revocation of the order solely on the ground that it would be in the best interests of his aunt, Mrs BPK, for the order to be revoked. We understood Mr JAS to concede that Mrs BPK has not regained the capability of managing her own affairs and there was nothing before us to indicate that Mrs BPK’ cognitive ability or her capability to manage her affairs had improved since the Tribunal’s hearing on 12 January 2015, when the Tribunal Panel had been satisfied that she was incapable of managing her affairs.

9. Accordingly, the issues for determination by the Tribunal at this hearing were:

1. Would it be in the best interests of Mrs BPK for the existing financial management order to be revoked?

2. If there are insufficient grounds to revoke the existing financial order to be revoked, should any variations be made to it?

Limited participation in the hearing by Mrs BPK

10. At the commencement of the hearing, telephone contact was established with the Manager of the aged care facility where Mrs BPK resides. The Manager had Mrs BPK with her. The Presiding Member briefly attempted to obtain Mrs BPK views by telephone but received no response. Mr JAS told us that it was likely that his aunt, Mrs BPK, was dysphasic and would become distressed required to continue to participate. Mr JAS reported that his aunt continued to have substantial cognitive impairment and had not regained the capability of managing her own affairs. It was clear to us that Mrs BPK may well become distressed if required to participate and that in any case she would not understand the issues before us at this hearing. For those reasons we excused Mrs BPK from further participation in hearing.

THE TRIBUNAL’S ASSESSMENT OF THE EVIDENCE AND DETERMINATION OF THE ISSUES

Would it be in the best interests of Mrs BPK for the existing financial management order to be revoked?

Mr JAS’s submissions

11. Mr JAS told us that he wished to take over the management of Mrs BPK’s affairs from the NSW Trustee and Guardian and that in his view it may not be in her best interests for the financial management order to continue. Mr JAS’s position was that if the order were to be continued he wished to be considered for appointment as financial manager.

12. In particular, Mr JAS alleged that the NSW Trustee and Guardian had failed properly to maintain Mrs BPK’s home in southern Sydney (“Mrs BPK’s home”). He produced photographs of the property and told the Tribunal that despite the fact that he had made several calls to the relevant office of the NSW Trustee and Guardian, it appeared that no maintenance had been undertaken in the previous 14 months and that the property was falling into disrepair, with the garden and grounds being in an unkempt state.

13. Mr JAS said that he wished to manage his aunt’s estate informally and hence sought the revocation of the financial management order. As an alternative, he sought an order replacing the NSW Trustee and Guardian as financial manager and appointing him to that position.

14. Mr JAS asserted that he is close to his aunt and visits her every second day. He said that there was support within the family for his proposal to manage his aunt’s estate.

The extent of Mrs BPK’s estate

15. Shortly prior to the hearing the Tribunal had received a written report dated 22 April 2016 from the NSW Trustee and Guardian. That report revealed that Mrs BPK’s estate is a substantial one. The report revealed the current assets as follows:

1. NSW Trustee and Guardian Trust Account: $385,389.30

2. Balance of bank accounts at Bank A, Bank B, and Bank C: $42,174.07

3. Total share portfolio: $371,584.57

4. Term deposits at Bank B and Bank C: $588,097.36

5. Deposit paid to aged care facility: $250,000

6. SUBTOTAL items (1) to (5): $1,637,245.30

16. To those amounts should be added the value of Mrs BPK home and her personal contents. These values were unspecified but the NSW Trustee and Guardian indicated that all personal contents of the property other than those wanted by Mrs BPK herself were to be sold or disposed of. Allowing a conservative estimate of $850,000 for these items the total of Mrs BPK would appear to be a little under $2.5 million.

The views of the NSW Trustee and Guardian and the facility manager

17. Ms Tina Xenos, a Senior Client Service Officer of the NSW Trustee and Guardian, who was the author of the NSW Trustee and Guardian’s report referred to above, was able to participate in the hearing by telephone. Ms Xenos confirmed that Mrs BPK’s sole income is derived from her large share portfolio. She reported that Mrs BPK clearly has no liquidity issues but given the diverse nature of her estate, there is substantial work which would need to be done in managing it, either informally or under a continuing order.

18. Significantly, Ms Xenos confirmed that a decision had been made to sell Mrs BPK’s home and a marketing program was about to commence. She confirmed the account in her written report to the effect that the state of the property had been brought to the NSW Trustee and Guardian’s attention in the months prior to the hearing and that a service company had been retained to manage property maintenance pending the sale of the property. There appears to have been some delay in commencing the maintenance work but this was underway by early April this year. The back fence of the property has been replaced and the lawns are reported now to be in good order

19. Ms Xenos commented that Mr JAS appeared to have a genuine care and affection for his aunt, Mrs BPK, and appeared to be motivated by her best interests in seeking to manage her estate.

Would it be in Mrs BPK’s best interests for her affairs to be managed by Mr JAS?

20. As indicated above and as discussed at the hearing, we approached Mr JAS’s application on the basis that he wished to be responsible for managing his aunt’s estate, preferably informally but if not informally than as financial manager appointed in substitution for the NSW Trustee and Guardian.

21. We had initial concerns as to whether informal management of the estate would be possible, particularly given that it is intended to sell Mrs BPK’s home and as we understand it, contracts of sale have not yet been entered into. Given that it is accepted that Mrs BPK can no longer manage her own affairs, it would seem that she would not have the legal capacity to sign a contract of the sale or a memorandum of transfer of the property. In the absence of a power of attorney (the absence of which was confirmed in the application), Mr JAS would need to be appointed as financial manager in order to effect and finalise the sale. Similarly, he would have obvious difficulty in effecting dealings (sales, purchases, and redemptions) in his aunt’s very extensive share portfolio and her bank accounts and deposits without due legal authority, which could only be obtained in the circumstances through his appointment as financial manager.

22. We decided to proceed by applying the suitability tests which we would normally consider in the course of hearing an application for appointment of financial manager.

23. Before appointing a financial manager the Tribunal must be satisfied that the person seeking appointment is willing to act and is suitable for appointment. There are no express criteria for determining suitability in the relevant legislation, but the Tribunal will normally ensure that the person seeking appointment has:

1. reasonable familiarity with the subject person's estate;

2. a reasonable level of understanding of how to deal with and account for other people's money. This can usually be demonstrated through their having held a relevant position in a business (including as an owner or employee), or in a not-for-profit organisation such as a trade union or industry association, a community or sporting club or association. In some cases this can be satisfied by demonstrating substantial experience in relation to the affairs of the person for whom financial management is being sought;

3. no conflict of interest which would prevent their appointment on the basis that they might not be seen to be acting solely in the interests of the person under management; and

4. nothing in their public record, in particular by way of any criminal or bankruptcy proceedings or orders, which might render them unsuitable for appointment.

24. We were satisfied on the basis of the evidence that Mr JAS satisfied the conditions set out in sub-paragraphs (1) to (3) above. We accepted the evidence, including Mr JAS’s testimony at the hearing, as demonstrating his compatibility with Mrs BPK and his familiarity with her affairs. In relation to Mr JAS’s’ level of understanding of how to deal with other people’s money, he described his experience of 35 years in the Revenue Protection division of State Rail and his small business experience. He could identify no potential conflict of interest. We accepted his evidence as reliable and persuasive.

25. Mr JAS could not satisfy the requirements set out in sub-paragraph (4) above. In answer to the question from the Presiding Member, he frankly admitted that he was an undischarged bankrupt having been declared bankrupt apparently on debtor’s petition approximately 18 months prior to the hearing.

26. Mr JAS told us something of the circumstances of his bankruptcy. We accept that he was involved in the small business in a large country centre which, it appears, mainly because of the rural recession, became insolvent. Mr JAS was the principal of the business and presented a debtor’s petition. He understands that the bankruptcy order is due to be discharged in approximately 12 months.

The effect of Mr JAS’s bankruptcy

27. Whilst there is no express statutory prohibition in the Guardianship Act or in the NSW Trustee and Guardian Act2009 (NSW) on the appointment of the bankrupt person as financial manager, the long-term practice of this Division of the Tribunal and its predecessor, the Guardianship Tribunal, has been not to appoint an undischarged bankrupt as financial manager.

28. That general policy has particular application in this case and in our view it extends to Mr JAS whether he is appointed financial manager or alternatively is permitted to manage his aunt’s estate informally (which now seems unlikely for the reasons set out in [21] above).

29. The policy has as its source in the Tribunal’s obligation to ensure that by virtue of its order, the subject person’s estate will be managed in their best interests. Additionally, under s 4(a) of the Guardianship Act and s 39(a) of the NSW Trustee and Guardian Act, the Tribunal must have as its paramount concern the welfare and interests of the subject person. Under s 4(g) and s 39(g) of those respective Acts, we must have regard to the importance of protecting the subject person from neglect abuse and exploitation. In saying that we are not suggesting that Mr JAS would act otherwise than properly if appointed to manage his aunt’s affairs.

30. However, the legal restrictions on the financial activities, dealings, and authorities of a bankrupt person are so substantial that in nearly every case the Tribunal could not be sure that the affairs of the subject person could be managed properly if a bankrupt person were appointed as financial manager.

31. There are many statutory restrictions on a bankrupt person’s ability to deal in money or property under the Bankruptcy Act 1966 (Cth). For example, if a person disposes of or creates any charge on any property at any time after presentation of a bankruptcy petition of which they are the subject, s 266 of that Act provides that if this is done with the intent to defraud creditors, it is an offence punishable upon conviction by imprisonment. There are restrictions in the Bankruptcy Act which would in practice severely limit a bankrupt person in dealing with property (for example the restriction on any person receiving property from a bankrupt) and there are many practical limitations on a bankrupt person’s ability to deal with money and property in the way expected of a financial manager. Many of these are set out in the guidance documents issued by the Australian Financial Security Authority (“AFSA”). AFSA is Mr JAS’s bankruptcy trustee.

32. These include, for example, the prohibition on Mr JAS while bankrupt acting as a director or manager of a company or, significantly administering a trust account or disposing of any property belonging to his bankruptcy trustee (bearing in mind that under s 58 of the Bankruptcy Act the property of bankrupt person acquired after the bankruptcy vests in the trustee).

33. We cannot see how Mr JAS could satisfactorily arranged for the sale and title transfer of Mrs BPK’s home or deal with her very substantial estate including in particular her share investment portfolio whilst he is bankrupt.

The Tribunal’s conclusions as to the request for revocation

34. For the reasons set out under the previous heading we cannot be satisfied that it would be in the best interests of Mrs BPK for either:

1. the financial management order to be revoked, so as to allow Mr JAS to administer her estate informally; or

2. the financial management order to be varied by revoking the appointment of NSW Trustee and appointing instead Mr JAS.

35. We wish to emphasise that were it not for the existence of his bankruptcy we would have found Mr JAS to be a suitable person to manage Mrs BPK’s affairs. It is simply that his bankruptcy which, we note, was freely and openly acknowledged by Mr JAS at the hearing, prevents us from authorising him to manage his aunt’s substantial estate. We are satisfied that Mrs BPK’s estate can be managed effectively by the NSW Trustee and Guardian and we note that appropriate steps have been made by the NSW Trustee and Guardian to improve the state of Mrs BPK’s home and to secure its sale.

Variation of the financial management order

36. We concluded that it would be reasonable and also consistent with Mrs BPK’s welfare and interests for the financial management order to be reviewed within two years. That would appear to allow sufficient time for the sale of Mrs BPK’s home and for major steps necessary to secure and consolidate the already substantial income flow from investments.

37. Mr JAS’s bankruptcy may in the normal course be discharged in approximately 12 months. Given the continuation of his close relationship with Mrs BPK it would appear to be open to him at that time, if he so wishes, to apply for further review of the order. We note that there is authority for the appointment of a discharged bankrupt as financial manager, provided that the Tribunal can be satisfied of the proposed manager’s: “character, honesty and ability to manage, diligently, the managed person’s property in the managed person’s best interests”. See Application by AMAM; Re SAM [2011] NSW SC 503 at [34] (Supreme Court NSW, Hallen AsJ).

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I hereby certify that this is a true and accurate record of the reasons for decision of the Civil and Administrative Tribunal of New South Wales.

Registrar

Decision last updated: 05 July 2018