EWT

[2020] NSWCATGD 98

NSW Civil and Administrative Tribunal

New South Wales

Medium Neutral Citation:

EWT [2020] NSWCATGD 98

Hearing dates:

16 June 2020

Date of orders:

16 June 2020

Decision date:

16 June 2020

Jurisdiction:

Guardianship Division

Before:

A R Boxall, Senior Member (Legal)
Dr S L Thompson, Senior Member (Professional)
K Clark, General Member (Community)

Decision:

002: Financial Management Application

1. The estate of EWT is subject to management under the NSW Trustee and Guardian Act 2009 (NSW).

2. The management of the estate of EWT is committed to the NSW Trustee and Guardian.

003: Review of an Enduring Power of Attorney

In relation to the enduring power of attorney made by EWT on 11 October 2016 which appointed JYK and SAK as attorney(s) the Tribunal determines, orders or declares:

not to carry out a review of the operation and effect of the enduring power of attorney.

Catchwords:

FINANCIAL MANAGEMENT – application for a financial management order – subject person is of advanced age – subject person has a Major Neurocognitive Disorder – family members appointed as joint attorneys under an enduring power of attorney – mismanagement of the subject person’s finances by the attorneys – subject person dissatisfied with the attorneys’ management of his money – subject person lacks capacity to manage his affairs – in the subject person’s best interests for a financial management order to be made – no private financial manager suitable to be appointed – NSW Trustee and Guardian appointed – order made.

REVIEW OF ENDURING POWER OF ATTORNEY – application to review an enduring power of attorney – decision not to carry out a review of the operation and effect of the enduring power of attorney – automatic suspension of the enduring power of attorney under s 50(3) of the Powers of Attorney Act as financial management order made.

Legislation Cited:

Guardianship Act 1987 (NSW), ss 4, 25M

Powers of Attorney Act 2003 (NSW), ss 36 ,36(1)-(2), 50(3)

Cases Cited:

Susan Elizabeth Parker v Margaret Catherine Higgins & Ors [2012] NSWSC 1516

Texts Cited:

None cited.

Category:

Principal judgment

Parties:

002: Financial Management Application

EWT (the person)
BZN (applicant)
SAK (attorney)
JYK (attorney)
NSW Trustee and Guardian

003: Review of an Enduring Power of Attorney

EWT (the person)
BZN (applicant)
SAK (attorney)
JYK (attorney)
NSW Trustee and Guardian

Representation:

Nil.

File Number(s):

NCAT 2019/00258919

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: Civil and Administrative Tribunal Act 2013 (NSW), s 65.

REASONS FOR DECISION

FINANCIAL MANAGEMENT APPLICATION

REVIEW OF AN ENDURING POWER OF ATTORNEY

FINANCIAL MANAGEMENT APPLICATION

Background

1. EWT is 76 years old and lives at an aged care facility in regional NSW. Immediately before moving there he had been an involuntary patient at a mental health unit, and before that had for many years lived alone in Housing NSW accommodation in regional NSW. He is unmarried and has no children. However, he has three siblings: JYK (who is married to SAK), Mr Z and Ms Y.

2. On 11 October 2016 EWT appointed his sister JYK and her husband (the attorneys) as:

1. his joint and several attorneys under an enduring power of attorney (the EPA); and

2. his enduring guardians with authority to make decisions for him concerning accommodation, health care, services and medical and dental treatment (the EGA).

3. On 5 September 2019, the Tribunal:

1. Found that EWT was a person in need of a guardian, because his ability to make informed and rational decisions was impaired by mental illness; and

2. Made a guardianship order for him, appointing the Public Guardian as his guardian for 12 months to authorise others (including NSW Police and the Ambulance Service of NSW) to take him to, keep him at and return him to a place of accommodation approved by the guardian.

4. On 6 May 2020, the Tribunal received an application from the Applicant, seeking the appointment of a financial manager for EWT.

5. On 26 May 2020, the Tribunal subsequently received an application from the applicant seeking the review of the EPA.

6. The purpose of today’s hearing is to consider both applications.

The hearing

7. At the end of these Reasons for Decision are lists of the parties to the application and the witnesses who attended the hearing. [Appendix removed for publication.]

Does BZN have standing to bring this application?

8. A person has standing to bring a financial management application if he/she is:

1. the person who is the subject of the application

2. the NSW Trustee and Guardian or

3. any other person who, in the opinion of the Tribunal, has a genuine concern for the welfare of the person.

9. A person may apply for the making, revocation or operation and effect of an enduring power of attorney to be reviewed if he/she is:

1. an attorney (including an attorney whose appointment has been purportedly revoked),

2. the principal,

3. any person who is:

1. a guardian of the principal (whether under the Guardianship Act 1987 (NSW) or any other Act or law), or

2. an enduring guardian of the principal under the Guardianship Act,

4. any other person who, in the opinion of the review tribunal, has a proper interest in the proceedings or a genuine concern for the welfare of the principal.

10. The Tribunal found that BZN, as the community case worker involved in EWT’s care and support, has standing to make the applications because she can reasonably be considered to have the necessary concern.

APPLICATION TO REVIEW AN ENDURING POWER OF ATTORNEY

Decision not to conduct a review of the EPA

11. The Tribunal may, on the application of an interested person, decide to review the making or the operation and effect of a reviewable power of attorney, or not to carry out such a review: Powers of Attorney Act 2003 (NSW), s 36(1). As a consequence of reviewing the making or operation and effect of a reviewable power of attorney, the Tribunal may decide whether or not to make an order under s 36 of the Powers of Attorney Act (s 36(2)).

12. In Susan Elizabeth Parker v Margaret Catherine Higgins & Ors [2012] NSWSC 1516, Slattery J stated [at 80]:

“On an application for s 36 review such as this the Court must first exercise a discretion under Powers of Attorney Act, s 36(1) to decide whether or not to conduct a s 36 review. In my view the Court does not have to conduct a full review of all documents associated with the operation of the subject power of attorney to do this. Something short of a full review must be able to justify the exercise of the s 36(1) discretion as to whether or not the Court should conduct a full s 36 review. In the circumstances of this case the Court can glean sufficient information to exercise the s 36(1) discretion by undertaking a general survey of what... (a party)...has produced.”

13. The Tribunal decided not to conduct a review of the revocation of the EPA. This was because the issues raised in the application go to the same considerations as are relevant to the Financial Management Application, and if the concerns raised by the Applicant about the attorneys’ stewardship of EWT’s affairs are justified, the most logical intervention for dealing with them, assuming EWT’s incapacity, is through the appointment of a financial manager. Hence there is, in the Tribunal’s view, little if any benefit for EWT in undertaking an independent review of the EPA.

FINANCIAL MANAGEMENT APPLICATION

What did the Tribunal have to decide?

14. The questions to be considered by the Tribunal are:

• Is EWT incapable of managing his affairs?

• Is there a need for another person to manage EWT’s affairs and is it in his best interests for a financial management order to be made?

• If so, who should be appointed financial manager?

Is EWT incapable of managing his affairs?

15. Accompanying the applications were:

1. A Brief Neuropsychology Assessment Report dated 4 December 2019 concerning EWT prepared by Ms X, clinical neuropsychologist; Ms X concludes that EWT has a Major Neurocognitive Disorder Due to Multiple Aetiologies within the meaning of DSM-5; she identifies the causes as including longstanding schizophrenia and vascular risk factors, and concludes that he needs assistance in decision making and a high level of care to attend safely and appropriately to activities of daily living; and

2. An Occupational Therapy Initial Assessment dated 27 May 2019 prepared by Ms W, occupational therapist; Ms W indicates that EWT is mostly independent in relation to his financial affairs, while requiring assistance with bigger financial decisions.

16. EWT’s psychiatrist, Dr V, provided oral evidence. He said that:

1. EWT has significant cognitive deficits consequent upon his schizophrenia;

2. He has no real capacity to manage his basic needs;

3. He is significantly impaired in relation to the more complex decisions required of him; and

4. In his treating team’s view, EWT lacks the capacity to manage his affairs.

17. None of EWT’s family members disagreed with this evidence.

18. EWT, however said that:

1. He can manage his financial affairs perfectly well;

2. He pays bills using his debit card;

3. He believes that he has about $10,000 in an account with an Australian bank (which is not broadly inconsistent with certain bank records provided by the Applicant); and

4. He was entitled to a large inheritance form his late mother, but this has been taken by his sister and her husband (SAK and JYK) who refuse him access to it.

19. Nothing in EWT’s evidence, apart from his assertion that he had full capacity, appeared to the Tribunal to contradict the evidence provided by his treating team or the attorneys. Moreover, the Tribunal’s own discussions with and observations of EWT during the hearing were generally consistent with Dr V’s assessment.

20. The Tribunal was satisfied therefore that EWT is, partially at least, incapable of managing his affairs.

Is there a need for a financial management order?

21. The essential issue in the financial management application is whether there is some deficiency in his attorneys’ stewardship of EWT’s financial and business affairs which is of sufficient gravity as to justify the appointment of a financial manager and, in consequence, the automatic suspension of the EPA pursuant to s 50(3) of the Powers of Attorney Act.

22. In support of her application the Applicant referred to several circumstances which, she believed, indicated a lack of diligence by the attorneys in the conduct of EWT’s affairs. These included:

1. delay or inefficiency in providing EWT with clothing,

2. failure to provide him with dentures,

3. delay in resolving the status of his Housing NSW accommodation following his entry into the aged care facility,

4. attempts to sell certain valuable musical instruments belonging to him, the retention of which might provide him with emotional support in view of his success as a professional musician,

5. a failure to properly monitor and utilise EWT’s royalties from musical works,

6. failure to share information about EWT’s affairs with family members, and

7. a general propensity to enlist the services of others to provide necessary support to EWT, rather than themselves making the effort to assist him when required.

23. In the Tribunal’s view, these concerns either:

1. Misconceived, or are not strictly relevant to any assessment of the performance by the attorneys of, their responsibilities as attorneys for EWT; examples of these are the complaints referred to in 22(1), (2), (6) and (7); in relation to that in 22(6), it should be noted that even elderly gentlemen with schizophrenia whose affairs are being managed under an EPA, are entitled to confidentiality and there is no general duty on their attorneys to share details of their management decisions with other family members or interested parties, however well-meaning; or

2. Are plausibly explained by the attorneys as either misunderstandings by EWT (and through him, the Applicant) or reasonable exercises by them of discretions which as his attorneys they are entitled to exercise; this second category covers:

1. the complaints referred to in 22(3) – here the attorneys say that they did not want to end EWT’s occupancy of the property until it was clear that he would become a permanent resident at an aged care facility;

2. those referred to in 22(4) – here the attorneys say that the possibility of a sale was considered with a view to raising funds for EWT, but not implemented, and

3. those described in 22(5) – here the attorneys say that EWT’s music career effectively ended over 40 years ago, and there have been over recent years very few royalties, most of which were in any event referrable to a single documentary film made concerning the group of which he was a member.

24. However, certain other matters which were raised, either by the Applicant herself or the attorneys in their responses, gave the Tribunal serious concerns as to the management by them of EWT’s affairs. The Tribunal considers that the approach adopted by the attorneys in the discharge of their responsibilities can best be described as a generally benevolent and paternalistic lack of rigour, informed by a tacit assumption that certain standards which the law demands of fiduciaries generally do not apply to the attorneys because of their good intentions. The effect of these deficiencies in conduct has been:

1. In one specific instance, in all likelihood to work against EWT’s best interests; and

2. More generally, to expose his assets to unnecessary risks.

Three particular aspects of their management of his affairs are sources of concern to the Tribunal.

25. The first is that when SAK (as attorney) completed the statement for Centrelink concerning EWT’s income and assets, he deliberately understated EWT’s assets with a view to obtaining a full pension rather than the lower rate of aged pension which his assets in fact justified:

1. In his statement to the Tribunal received on 15 June 2020, SAK says as follows:

“I made a serious error in omitting details of the funds held by [JYK] on behalf of [EWT], from his Mother, [Mrs U]’s Estate. I guess this was to try to stretch [EWT]’s $$$$ as far as possible. We knew that [EWT]’s father, Henry, had died at 88 years with his mother [Mrs U] at 96 years. While we recognise that [EWT] doesn’t enjoy the health of his parents, we have no idea how long the $100,000 available for his care would last, especially as his health deteriorates more as the years go bye [sic], and his personal need for support escalates. Still this was wrong and I apologise for this error”.

2. A deliberately misleading omission of relevant matters from an application to the Commonwealth of Australia for pension income, designed to produce for EWT a better financial outcome than that to which he was entitled, is a very serious matter which in itself is in the Tribunal’s view sufficient to justify suspension of the operation of the EPA by the appointment of a financial manager. If by SAK’s own admission he did not deal honestly with the Commonwealth Government in relation to EWT’s affairs, the Tribunal can have no confidence that SAK would not behave with a similar lack of honesty in relation to other aspects of the management of his affairs.

3. That his motivation in this instance may have been benevolent (at least so far as EWT is concerned, if not the Australian taxpayer) does not alter that conclusion. SAK, both as a certified public accountant and, as he made clear on several occasions during the hearing, a devout Christian, could reasonably be expected to appreciate the ethical dimensions of such dealings, but instead demonstrated ethical blindness (or at least selectivity). This leaves the Tribunal with little alternative but to ensure that he no longer plays a role in the management of EWT’s affairs.

4. It may be said that the conduct was that of SAK only, so that the Tribunal should not suspend the operation of JYK’s functions as attorney under the EPA. The Tribunal’s assessment of the relationship between the two attorneys in relation to the performance of their duties as EWT’s attorneys is that, in view of his professional background and experience, JYK looked to SAK to make all decisions and establish all relevant arrangements, and that even if his authority alone were suspended the relationship would practically continue in this way so that he would de facto continue as financial decision maker for EWT.

5. Moreover, the attorneys’ conduct was seemingly not without practical consequences for EWT. By understating his assets, they represented him to potential accommodation providers as a concessional aged care resident, rather than one whose accommodation would – in part at least – be funded through the payment of a residential accommodation deposit. The effect of doing so was to limit accommodation places to those fully funded by the Commonwealth Government, which as the Applicant pointed out are fewer and harder to secure than places which are fully or partly funded by private contributions. The Applicant was firmly of the professional opinion that this made it unnecessarily difficult to secure suitable accommodation for EWT.

26. The second area of concern is the arrangements under which EWT’s inheritance is held and managed on his behalf by the attorneys. The attorneys say that moneys attributable to his inheritance are held in bank accounts in their names where they are blended in a single fund with the attorneys’ own personal moneys. Despite this absence of segregation, they say, they can identify EWT’s entitlements through ledger accounts which SAK maintains, and of which copies were provided to the Tribunal. There are several comments to be made about this:

1. The first is that as EWT’s attorneys they are in a fiduciary relationship with him, and are thus legally required to maintain a clear distinction between their personal assets and those of third parties (such as EWT) over which they exercise authority. Self-evidently, the arrangements described above fall well short of this distinction, and it is questionable whether the system of ledger accounts to which they refer is sufficient to remedy the deficiency. The accuracy of the accounts is a direct function of the care with which they are maintained, and since there is no clear method of testing this, the reliability of the ledger accounts is necessarily open to question. This would not have arisen had the attorneys maintained separate bank accounts for EWT’s moneys.

2. The second is that the attorneys appear to be somewhat confused as to what their role is in the management of EWT’s affairs. By paying his money into their accounts, it is unclear whether they seek to characterise themselves as debtors to EWT, as well as his attorneys, or as trustees of the moneys for him.

1. If the former, how can they as fiduciaries for him justify exposing his assets to the risk of their personal creditworthiness? If they were to become bankrupt, their accounts would be exposed initially to claims by their bank, as it sought to off-set liabilities they owe to the bank against credit balances in the accounts, at least some of which comprises money derived from EWT’s inheritance. After that, their trustees in bankruptcy would assert a claim to the remaining funds in the accounts for the benefit of the attorneys’ creditors generally, one of whom would be EWT. Depending on the number and value of other creditors, EWT could well then find himself involuntarily sharing what remained of his inheritance with the other creditors.

2. If the latter, by mixing trust money - EWT’s inheritance – with their own funds, they have both breached a fundamental obligation of trustees and again exposed EWT to risk in the event of their own insolvency. This risk could be avoided by using a formal trust instrument and clear procedures for segregating EWT’s funds from theirs. The attorneys, however, have not done so.

3. By exposing his assets to these risks, the attorneys’ management of EWT’s affairs is unsatisfactory. That the issue may be a theoretical one, because the attorneys may at present be in no obvious financial difficulty, is no answer.

27. The third concern lies in certain specific aspects of the attorneys’ management of the inheritance:

1. SAK said that the inheritance is in effect spread through several personal accounts of the attorneys. Most of these (representing about 2/3 in value of EWT’s inheritance) are denominated in Australian dollars, but one (representing about 1/3 in value of the inheritance) is an account held by them in Vanuatu (where they live) and denominated in Vanuatuan currency. The net effect is to expose EWT, whose life is in Australia and is conducted financially in Australian dollars, to an entirely unnecessary risk through currency fluctuations. It may well be that the Vanuatuan currency has held up well in relation to the Australian dollar; that is beside the point, since once EWT’s inheritance is denominated to a substantial extent in a currency other than Australian dollars the risk of its devaluation through currency fluctuations cannot be escaped.

2. SAK said that he and his wife credit EWT’s ledger accounts with notional interest on the amounts in their bank accounts referrable to his inheritance. He said that this interest was not determined by reference to actual market rates but had been calculated and credited at a rate which he had set some years previously, without any direct reference to then market rates. Again, it may well be that this rate is at present higher than commercially available rates; there was no evidence on the point, but the risks are self-evident: first, that EWT nominally earns income on his inheritance determined not at commercial rates but at one set in their discretion by his attorneys; and, secondly, that the earnings are nominal only, represented solely by entries in the ledger accounts but without any discernible relationship to income actually credited to the underlying bank accounts by reference to his share of the balances in those accounts.

3. The attorneys have debited to their ledger accounts with EWT travel expenditure incurred by them which they considered to be incurred on business associated with EWT. Sometimes this was the cost of travel from Vanuatu to regional NSW to visit EWT; sometimes it was merely domestic travel costs incurred in travelling to Northern NSW to visit him during trips from Vanuatu to Australia which were funded from other sources. The question whether, and if so in what circumstances and to what extent, fiduciaries are entitled to reimbursement of expenses from the funds which they control, is quite complex. The assumption which appears to have been adopted by the attorneys – that they are entitled to reimbursement from EWT’s funds for such expenditure as they consider to have been incurred by them directly in relation to EWT – is in the Tribunal’s view unjustified.

28. There is nothing unreasonable in the Tribunal’s criticisms. All of the matters raised:

1. Are within a common sense restatement of the duties of fiduciaries such as attorneys – put simply, if you look after someone else’s money, you must be able at all times to identify it, to keep it safe from personal claims against you by third parties, and to use it only for the benefit of the person concerned, not yourself; and

2. Can reasonably be expected to be within the broad professional knowledge of a qualified accountant such as SAK.

29. EWT himself expressed strong dissatisfaction with the attorneys’ approach to the management of his affairs, as did his sister, Ms Y and his brother, Mr Z. The attorneys themselves expressed support for the appointment of a financial manager.

30. The Tribunal was satisfied from all of this that:

1. there is a need to appoint someone to manage EWT’s affairs; and

2. it is in the best interests of EWT that a financial management order be made.

Who should be appointed as financial manager?

31. In appointing a financial manager, as in making all other orders under the Guardianship Act, the Tribunal must act with the interests of the person concerned as the paramount consideration and in accordance with the other principles set out in s 4 of the Guardianship Act.

32. Section 25M of the Guardianship Act provides that, if the Tribunal makes a financial management order, it may appoint a suitable person to manage the person’s estate or may commit the management of the estate to the NSW Trustee and Guardian.

33. Since:

1. The Tribunal has concerns as to various aspects of the attorneys’ management of EWT’s affairs; and

2. There were no private candidates for appointment as financial manager,

the Tribunal was satisfied that the estate of EWT should be committed to the NSW Trustee and Guardian.

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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: 23 August 2022