MFL (Administration)
[2013] TASGAB 18
•30 August 2013
GUARDIANSHIP AND ADMINISTRATION BOARD
HOBART
MFL an application for appointment of an administrator by NBL
Neutral citation: MFL (Administration) [2013] TASGAB 18
REASONS FOR DECISION
Anita Smith (President)
Elizabeth Love (Member)
Juanita Westbury (Member)
Date of hearing: 30 August 2013
Administration – eligibility for appointment as administrator – not acting in best interests of represented person – reliance on advice that recommends substantial ‘gift’ for proposed administrator from represented person’s estate – possible misrepresentation to Commonwealth authorities regarding nature of ‘gift’ or ‘trust’ - in a position where proposed administrator’s interests conflict with represented person’s interest – acting as attorney under power of attorney for represented person’s spouse, conflict with duties as attorney for spouse - lack of expertise for appointment
Guardianship and Administration Act 1995 s.51, 54
Powers of Attorney Act 2000 s.32
Miller v Cameron (1936) 54 CLR 572
MFL (the proposed represented person) is an 82 year old man who has recently moved into an Aged Care Facility where his wife, CGL, also lives. One of his two sons, NBL, has applied for appointment as his administrator.
Section 51 of the Guardianship and Administration Act 1995 (the Act) provides that if, after a hearing, the Board is satisfied that the proposed represented person (a) is a person with a disability, (b) is unable by reason of the disability to make reasonable judgments in respect of matters relating to all or any part of his estate, and (c) is in need of an administrator of his estate - the Board may make an order appointing an administrator of his estate.
The application was heard on 30 August 2013. In attendance at the hearing were:
NBL – applicant and son
QL – son
IL – daughter in law, married to NBL
KH – representing NBL and QL
Mr. Edward Kempa – representing the Public Trustee
Ms. Elizabeth Dalgleish – GAB Investigator
Mr. Nick Mackey – GAB Investigator
According to a medical report, the proposed represented person was unlikely to be able to follow proceedings or gain any benefit from attending. Although he was notified of the hearing, he did not attend.
Is MFL a person with a disability and incapable of making reasonable judgments about his estate?
A pro forma Health Care Professional Report completed by Dr. Martin Morrissey, Old Age Psychiatrist, was received by the Board on 22 July 2013. Dr. Morrissey’s report states that he examined the proposed represented person on 21 May 2013. This report confirmed that the proposed represented person has dementia and has experienced “cognitive decline over 12+ months.” Dr. Morrissey’s report also stated that the proposed represented person would be unable to make major financial decisions (e.g. more significant than a simple transaction such as purchase a food item from a shop) due to his inability to weigh up complex choices. This assessment is consistent with the Aged Care Assessment Team assessment dated 8 May 2013 to the effect that he had cognitive impairment.
When interviewed by the GAB Investigator prior to the hearing, the proposed represented person asserted that he did not need assistance managing his finances and was proud that he had saved money for his retirement and remained debt free. The proposed represented person’s family explained at the hearing that the proposed represented person has been distrustful of banks and financial institutions for some time. They also spoke of a long held concern (arising from his experiences living in war time Germany) that his RBF pension would be taken from him if he did not spend it. When questioned, the family members also explained that the proposed represented person would be incapable of acknowledging that his wife has any interest in his estate beyond the relatively small allowance he pays her and the fractional proportion that is held in her name. The contents of Dr. Morrissey’s report were not challenged at the hearing. The Board accepted Dr. Morrissey’s report as evidence that the proposed represented person is a person with a disability and because of that disability he is incapable of making reasonable judgments in respect of his estate.
Is MFL in need of an administrator?
According to the applicant, the proposed represented person is in need of an administrator because he had hoarded $200,000.00 in cash in his home, withdrawn in $2000.00 lots from the bank each time he visited (in line with the distrust mentioned above). He has become forgetful and confused. In particular the payment of an Aged Care bond was beyond the proposed represented person’s comprehension. According to a Statement of Financial Advice prepared by Hillross Professional Wealth Management on 25 July 2013, the estate owned by the proposed represented person and his wife has a total net worth of $865,952.00. This is a significant estate which is comprised of the family home, bank accounts and term deposits, some investments and the cash found in his home. The Board was satisfied that the proposed represented person is in need of an administrator to manage his share of that estate. The estate is large and consists of various asset classes. It is not possible to limit the terms of the order and a full order is required.
The Board was satisfied that there is no less restrictive alternative to the appointment of an administrator and that an order is in the proposed represented person’s best interests. Accordingly, all the criteria for the appointment of an administrator were met. What remained was for the Board to assess the eligibility of the applicant for appointment.
Is the applicant eligible for appointment as administrator?
When hearing an application for administration, the appointment of one of the three statutory agencies lies as a default option for the Board, meaning that the Board does not need to assess the eligibility of the three statutory agencies named in section 54(1)(a),(b), or (c), nor seek their consent to appointment. The Board can appoint a person other than the three statutory agencies if that person meets the criteria in section 54(1)(d) and (2) of the Act. These criteria are:
· That the person consents to act as administrator (s.54(1)(d)),
· The Board is satisfied that the person will act in the best interests of the proposed represented person (s.54(1)(d)(i)),
· The Board is satisfied that the person is not in a position where his or her interests conflict or may conflict with the interests of the proposed represented person (s.54(1)(d)(ii)),
· The Board is satisfied that the person is a suitable person (as defined in section 54(2)) to act as the administrator of the estate of the proposed represented person (s.54(1)(d)(iii)), and
· The Board is satisfied that the person has sufficient expertise to administer the estate. (s.54(1)(d)(iv)).
After consideration of the evidence, the Board:
- Was not satisfied that the applicant would act in the best interests of the proposed represented person.
- Could not satisfy itself that the applicant was not in a position where his interests conflict or may conflict with the interests of the proposed represented person.
- Was not satisfied that the applicant had sufficient expertise to administer the estate.
Following are the reasons why:
According to evidence given by the family members at the hearing, when the proposed represented person was admitted to Aged Care, he advised his two sons of bundles of cash that he had hidden in his house. His sons retrieved the hidden cash that evening. The proposed represented person had tagged the bundles with the names of NBL, QL and CGL as a rudimentary form of testamentary disposition. On the kitchen table, they sorted the bundles according to the nominated person. NBL and QL then deposited half each to their personal bank accounts. What became of CGL’s share of the bundles of cash, or what was the relative value attributed to each of the nominated persons is unclear. Why the funds had to be split is also unclear. The reason given for not depositing the funds to one of the proposed represented person’s accounts was simply that the proposed represented person did not trust the banks. It does not appear that any consideration was given to depositing the funds to CGL’s account.
In an effort to “make it legal” NBL and QL signed a “receipt”. The “receipt” states:
“Dad 28.5.13
QL and NBL counted up and are holding $212,550 between them to invest safely it is being held in trust for you and mum.
QL NBL”
QL stated that when their father was presented with the “receipt” he returned it to his sons saying that they should spend it, but they were “unsure” of his capacity at that point. QL stated that, although the ACAT report in May noted that his father had a cognitive impairment, it wasn’t until they received Dr. Morrissey’s opinion in July that they could be “sure” that he lacked capacity. However, as they were involved in arranging the assessment, it is clear that they were on notice that his capacity was questionable. Each of the witnesses gave clear evidence that their intention was to use the money for the proposed represented person’s benefit or the benefit of his wife, “if they should need it.”
In the application signed by the applicant on 18 July 2013, the applicant stated that the proposed represented person had “forgotten” that he had that cash (answer to question 4.2) and that it had been banked “in trust” for him.
In a statement of financial advice prepared by Glen Penno of Hillross Professional Wealth Management (Hillross) on 25 July 2013 following a consultation on 26 June 2013 with NBL and QL, the author considers the benefits of paying a “bonus bond” and concludes as follows:
“This appears to be a reasonably attractive return however relies upon firstly XXXX agreeing to such a negotiated outcome, and secondly the only way such as bonus Bond could be funded is for NBL and QL to return the $200,000 recently gifted to them by MFL.
Both NBL and QL have indicated that they could put these funds to use paying down personal debts that currently accrue interest payable at approximately 7% per annum (after tax). This delivers a significantly higher financial advantage, without compromising the overall family objective of providing the funding mechanisms to ensure both MFL and CGL receive quality care at this stage of their lives.” (Emphasis added.)
How the cash funds have reduced from $212,550 to $200,000 in the report by Hillross is not explained. The intention for the use of the funds described in this advice is contrary to the explanation given by NBL, IL and QL at the hearing. The discrepancy was explained as being “for Centrelink purposes,” presumably meaning that they would represent the funds as a gift for the purposes of an assessment for the Aged Pension and Aged Care payments but that it would still remain the proposed represented person’s asset.
This is something of a cleft stick, because - on one hand, if the funds are gifted by a man with questionable capacity, the recipients of the gift appear not to be acting in his best interests – on the other hand, if the funds are being held in trust, the trustees do not appear suitable for appointment because they are attempting to mislead Commonwealth authorities as to the ownership of those funds. At the hearing, the applicant asserted that they were merely confused as to the meanings of the words “gift” and “trust” and that the issue was semantic. The Board does not agree.
The advice itself had this effect:
·There would be a gift to NBL and QL of $190,000 in 2012/13 and $10,000 in 2013/14.
·The benefit of this gift would be that the proposed represented person would receive a reduction in annual Aged Care fees of $350 per year and that the proposed represented person and his wife could than apply for an Aged Pension which would create $19,448 additional income per year.
The applicant, his brother and his wife considered that this was sound advice. The Board noted at the hearing that the proposed represented person would have to survive for 10 years to recoup the benefit of the initial investment of $200,000 (compared with, say, investing it in an account with compound interest for 10 years where it might earn an additional $129,402 if interest rates were 5% p.a.) . The Board asked the applicant how the loss of $200,000 to the proposed represented person’s estate was of benefit to him on a number of occasions, but did not receive a coherent answer other than reliance on the advice. The applicant’s legal representative suggested it was bad advice, but even then IL disagreed and continued to insist that it was good advice.
It was only at the hearing when the Board suggested that the applicant was ineligible to be appointed as administrator unless he returned the funds (due to a possible conflict of interests) that he agreed that he should return the funds “if it’s going to cause a problem”. Even then, the applicant still expressed an interest in receiving gifts of $10,000 per year from his father’s estate and said that he would seek additional advice from Hillross to that effect.
The Board was left with the impression that, although they protested that the money would be available for the proposed represented person’s benefit, each of his sons felt an entitlement to at least some of the cash and that the presence of the large amount of cash had presented them with a high level of temptation with respect to their personal financial wellbeing. While all witnesses said that the funds would be available if the proposed represented person or his wife needed it, none of them said it would not be used for their own personal enjoyment while it was not so needed. Latham C.J. in Miller v Cameron (1936) 54 CLR 572 at 575 noted the authority of a Court to remove a trustee where, by reason of the trustee’s impecuniosity, he will be subject to particularly strong temptation to misapply the trust funds. In this case, the banking of funds to personal accounts, the Hillross financial advice and the applicant’s evidence that he would still pursue a $10,000 gift from the estate is evidence that the temptation is very strong indeed. If such temptation is grounds for removal of a trustee, the Board would be remiss in appointing an administrator where such temptation has already been demonstrated.
QL explained to the Board that there were ways that they could have deposited the cash into smaller accounts which would not have been reportable under the “Cash Transactions Act” if they had been minded to hide the money. None of the family members appeared to genuinely entertain the idea that receiving the funds to their personal accounts or seeking advice about receiving the funds as ‘gifts’ was in any way improper. Neither son appeared to understand that the payment of funds into their personal accounts was done with questionable authority and that no amount of financial advice obtained by them could address a want of authority for that payment.
The applicant had introduced his eligibility for appointment by reference to his “support network” in his brother, QL, and his wife, IL. QL and IL were very vocal during the hearing, often answering questions directed at the applicant on his behalf. It was clear that their views would be highly influential on his decision making. The Board was not satisfied that any of these persons (alone or collectively) were capable of making sound financial judgments because they lacked the expertise to read and analyse the financial advice. The financial advice is very clear that the benefit of the investment of $200,000 cash funds was to NBL and QL, not to the proposed represented person. Their mutual acceptance of that advice did not demonstrate the level of expertise expected of an administrator.
The Board was not satisfied that the applicant has sufficient expertise to administer the estate due to his lack of appreciation of his fiduciary responsibilities with respect to the funds collected from his father’s house. For the same reason, the Board was not satisfied that the applicant would act in the best interests of the proposed represented person.
The Public Trustee’s representative suggested that the applicant could be appointed if the Board issued directions regarding the return of the funds. The Board’s concern is that the concessions that the applicant had made during the hearing towards return of the funds were made only as a means to the end of being appointed. The Board had deep concerns that the applicant and his family have no understanding of fiduciary relationships and supervision and the imposition of directions by the Board could not mend that fundamental flaw in the applicant’s eligibility.
The Board considered that in receiving funds from the proposed represented person’s estate, the applicant had placed himself in a position of conflict of interests because he ought to return the funds and also demand the return of the funds from his brother. While the applicant and his wife offered to do this immediately if that was what it took to be appointed as administrator, QL indicated that he would be in some difficulty in doing so. This would possibly also create a conflict if the return of the funds proved difficult.
If there is a genuine need to reduce the size of the proposed represented person’s estate to reduce his aged care fees (note, no such need has been demonstrated) then it appeared to the Board that a lawful and more equitable means of doing so would be to recognise that the proposed represented person’s wife has an equitable interest in his estate and to reallocate assets on that basis. The Hillross advice notes that the assets of the marriage are held as follows:
Joint assets: $205,000 (including the bundles of cash)
MFL: $587,052
CGL: $73,900
Total: $865,952
Notably, all parties at the hearing referred to the cash as solely owned by the proposed represented person, but the advice names it as a joint asset.
The proposed represented person and his wife have had a very long marriage. The applicant believes it is appropriate that the vast majority of assets are held against the proposed represented person’s name and that he pays his wife a modest allowance for her needs. Their legal adviser suggested that it would take legal action in the Family Court or the Supreme Court to divide the assets. However, it would also be possible to come to an agreement between the couple if they both have capacity, therefore such an arrangement could also be arrived at between substitute decision makers on their behalf, in this case an administrator for the proposed represented person and an attorney for the proposed represented person’s wife.
The applicant is also CGL’s attorney under an enduring power of attorney executed on 2 July 2013. As her attorney, he is taken to be a trustee of her property and affairs must exercise his powers as attorney to protect her interests (section 32 Powers of Attorney Act 2000). He stated that he would leave all of the estate in the same position as currently and maybe reduce the spending allowance of $4000 per annum that his father pays his mother because she will now receive her own income. If he is adequately performing his duties as CGL’s attorney, he would at the very least be making a claim on her behalf for her share of the $200,000 cash. The Board could not satisfy itself that the applicant was not in a position where his interests as attorney conflict or may conflict with the interests of the proposed represented person in assessing whether an equitable division of assets between the couple is required.
A National Police Check supplied by the applicant at the Board’s request noted that he has a conviction for a dishonesty offence in 1978. The Board noted that the offence was committed when the applicant was very young with no recidivism. The Board did not give any weight to the conviction in its decision.
The applicant is not eligible for appointment. The Board considered that this is an appropriate case for the appointment of the Public Trustee as administrator.
CONCLUSION:
After hearing an application for an administration order in respect of MFL (hereinafter called the ‘represented person’)
The Board was satisfied that the represented person
is a person with a disability, and
is unable by reason of the disability to make reasonable judgements in respect of his estate; and
is in need of an administrator
THE BOARD ORDERS
That The Public Trustee be appointed as administrator of the estate of the represented person.
That the powers and duties of the administrator be those conferred by Division 4 of Part 7 of the Guardianship and Administration Act 1995.
That the order remains in effect until 29 August 2016.
Anita Smith Elizabeth Love Juanita Westbury
PRESIDENT MEMBER MEMBER
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