GJP
[2015] QCAT 23
•27 January 2015
| CITATION: | GJP [2015] QCAT 23 |
| PARTIES: | GJP |
| APPLICATION NUMBER: | GAA020-15 |
| MATTER TYPE: | Guardianship and administration matters for adults |
| HEARING DATE: | On the papers |
| HEARD AT: | Brisbane |
| DECISION OF: | Acting Senior Member Endicott |
| DELIVERED ON: | 27 January 2015 |
| DELIVERED AT: | Brisbane |
| ORDERS MADE: | GF and GM as the appointed administrators for GJP are not authorised to enter the conflict transaction being the payment of up to $45,000 to GB as a loan from the funds of GJP. |
| CATCHWORDS: | ADMINISTRATION – where an adult with impaired capacity has administrators to make decisions about his finances – where the administrators are his parents and his brother CONFLICT OF INTEREST – where the administrators seek authorisation to lend funds to one of the administrators – where the loan would result in most of the adult’s cash assets being beyond his access for five years – whether the transaction accords with the prudent person rule Guardianship and Administration Act 2000 ss 35, 37(1), 50, 51(2), schedule 4 |
APPEARANCES:
This matter was heard and determined on the papers pursuant to s 32 of the Queensland Civil and Administrative Tribunal Act 2009 (Qld) (QCAT Act).
REASONS FOR DECISION
The Tribunal originally appointed the parents of GJP and his brother, GB, as his administrators for all financial matters on 20 August 2010. The Tribunal reviewed the appointment on 11 February 2013 and continued the appointment for three years.
GF and GM applied to the Tribunal for authorisation of a conflict transaction. They wanted authorisation to pay up to $45,000 from the funds of GJP as a loan to GB. GB intended to use the borrowed funds to assist him with the purchase of a house. The applicants proposed that GB would pay interest on the loan at above term deposits rates. GB also was willing to enter into a written loan agreement and a mortgage, if required, to secure the loan.
The Tribunal made directions for filing by the proposed borrower, GB, of further information about the proposed loan. He has informed the Tribunal that the purpose of the proposed loan is for a deposit for the purchase of a house by him and his partner. GB stated that the proposed loan is not required because of an inability to save funds required to purchase a property. GB and his partner are earning an annual after tax income of $120,000 and are saving $900 per week. They will be in a position to acquire a house before the end of 2015 even without the contribution from the proposed loan. GB has stated that the purchase could happen sooner with the proposed loan.
GB stated that interest payable over five years on funds borrowed from his brother would result in over $5,000 more in earnings than his brother would be paid if the funds remained in term deposits over that period. GB proposed that monthly repayments of principal and interest would be made over the five year period of the loan thereby releasing funds for further investment for GJP.
Any mortgage securing the loan would be subject to the requirements of a bank lending up to $500,000 in further funds for the purchase and the bank’s mortgage would take first priority by way of security.
The proposed loan constitutes a conflict transaction, as a decision by the administrators will result in the making of a loan from the funds of GJP to one of his administrators who is also a brother of GJP. The transaction carries with it a conflict between the duty of the administrators towards the adult and the personal interests of the administrators. An administrator may only enter into a conflict transaction if the tribunal authorises the transaction.[1]
[1]Guardianship and Administration Act 2000 s 37(1).
It is the duty of administrators to exercise their power for an adult with impaired capacity with reasonable diligence to protect the adult’s interests.[2] Administrators must keep their property separate from the adult’s property and are subject to a sanction if this requirement is not met.[3] Administrators must invest in authorised investments which are defined as investments akin to investments made under the Trusts Act 1973 or an investment authorised by the tribunal.[4]
[2]Ibid s 35.
[3]Ibid s 50.
[4]Ibid s 51(2), Schedule 4.
Administrators must exercise the care, diligence and skill a prudent person of business would exercise in managing the affairs of other persons.[5] The administrators have a duty to exercise their powers in the best interests of the adult with impaired capacity. Similarly to trustees, administrators are fiduciaries and cannot personally benefit from their exercise of power on behalf of the adult. The prudent person rule is set out in section 24(1) of the Trusts Act and require administrators to have regard to many factors when making investments including the desirability of diversifying investments and having regard to the risk of capital or income loss or depreciation.
[5]Trusts Act 1973 s 22(1)(b).
GJP has cash funds of about $47,500. The proposed loan will remove almost 95% of those assets from the use of the adult for five years. The scope for use of the funds for his immediate benefit or to enter into a favourable investment would be lost if the funds are tied up in real property owned by another person for five years. The funds would be concentrated into one asset and not diversified and would be beyond the access of the adult. The risk of capital loss is present in the event that GB has to sell the property for less than the amount outstanding on the mortgages to the bank and to the adult.
I am unable to find any reasonable basis to authorise an investment that is so demonstrably against the interests of the adult. The only positive ground put forward for the proposed loan was a potential gain of $5,000 over five years. Against that fact, 95% of the adult’s funds would be inaccessible for his direct and immediate use over five years. A fiduciary would gain a personal benefit which is described as being able to purchase a property sooner than he would otherwise be able to do.
The administrators are not authorised to enter into the transaction of making a loan of up to $45,000 from the funds of GJP to GB.
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