| JURISDICTION : STATE ADMINISTRATIVE TRIBUNAL STREAM : HUMAN RIGHTS ACT : GUARDIANSHIP AND ADMINISTRATION ACT 1990 (WA) CITATION : MG [2013] WASAT 48 MEMBER : MS F CHILD (MEMBER) HEARD : 18 MAY 2012, 18 AUGUST 2012, 13 NOVEMBER 2012 AND 11 JANUARY 2013 DELIVERED : 11 APRIL 2013 FILE NO/S : GAA 894 of 2012 MATTER : MG Catchwords: Guardianship and administration - Review of limited administration order appointing Public Trustee - Brother proposed for appointment as administrator - Conflict of interest - Potential breach of duty as trustee - Brother not suitable for appointment - Order confirmed Legislation: Guardianship and Administration Act 1990 (WA), s 68, s 70, s 80, s 86 Result: Order confirmed
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Summary of Tribunal's decision: Following a requested review, the Tribunal confirmed an administration order made in 2010 which appointed the Public Trustee as limited administrator of the estate of a woman with a long standing psychiatric disability. The order had originally been made on the woman's application because of dissatisfaction with the way her brother was informally managing her shareholdings. However, in an application filed in 2012 she sought review of the order and proposed her brother for appointment as administrator. The administration order was limited and although it included the powers of a plenary administrator it excluded the woman's pension income, which she managed herself. Following the appointment of the Public Trustee, the brother refused to transfer shares to the woman, purchased for her in the name of a company he controlled. In the course of the proceedings the brother gave various reasons why the shares could not be transferred. He said he would not apply for the franking credits available on the shares unless he was appointed administrator of his sister's estate.
The Tribunal found that the brother was trustee of the represented person's shareholdings held in the name of his company but that this did not arise from what he said was a declaration of a bare trust but from his actions as an executor of their late mother's will which had been the source of the funds for the purchase of shares in question. The Tribunal found that he had breached his obligations as trustee in his lack of cooperation and provision of information to the Public Trustee (the lawfully appointed administrator of his sister's estate) and by his failure to act fairly between his sister who he said was an income beneficiary of the trust, and other beneficiaries, including himself. The Tribunal found that as the beneficiary of the capital of the deceased estate he was in a position of conflict with the interests of the represented person because of his refusal to claim the franking credits available on the shares held in the name of the company he controlled.
The Tribunal recognises that the Public Trustee's fees for the management of the woman's estate are high, particularly in the context of the limited role played. However, it found that the brother was unsuitable for appointment as an administrator and so confirmed the appointment of the Public Trustee.
Category: B
Representation: Counsel: (Page 3)
Solicitors:
Case(s) referred to in decision(s):
Nil
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REASONS FOR DECISION OF THE TRIBUNAL:
Introduction 1 These reasons relate to the determination of an application for review made by MG, the represented person, of an administration order dated 2 July 2010 by which the Public Trustee is appointed limited administrator of her estate with all the powers and duties of a plenary administrator, except for the collection and management of her income from her Centrelink pension.
Background 2 The Public Trustee was appointed administrator of the estate in 2010 following an application made by the represented person and supported by the staff of a mental health clinic of which she was then a patient. 3 A letter from the mental health clinic's social worker filed with the original application sets out the background. The letter notes that the represented person has a longstanding mental illness and states: … she is a vulnerable person (due in part to her mental disability) and she recognises that this is especially the case with financial matters. [The represented person] is aware of this and has enlisted the support of Centrepay (who manage bill payments from her Disability Pension), and her brother [PG], to manage a trust fund of investment shares which provides her with some income and access to funds as needed. Sadly, the arrangement with [PG] as effective administrator of her trust fund appears to have become a recurrent source of distress for [the represented person] and for clinic staff wishing to support her in the community with dignity and respect. He is a very capable man, [retired professional] and no doubt a good financial planner and prudent investor. However, this appears to have come well ahead of the more pressing needs which his sister has for a more generous and responsive use of her trust fund monies. His intentions are worthy (he wishes to ensure she has funds right up until her 80's he has said), but he seems to ignore the present plight that she is in and refuses to release sufficient to meet those needs in preference for "preserving the capital for long term gain". We, of course, value such prudence and wish [the represented person's] trust funds to be managed responsibly for the long term. However, we are concerned that the combined effects of insufficient funds and the lack of response to her needs, plus the verbal conflict that results in her request for assistance from [PG], are greatly undermining [the represented person's] health and wellbeing. For example, [PG] has refused to pay for spectacles, [veterinary] bills or even a new washing machine (the latter he tried to repair himself but did not complete the work, leaving the (Page 5)
represented person to walk over two kilometres to the nearest Laundromat, all because he does not believe these items are worth purchasing. [The represented person] is an adult, and while her choices may not be the same as his, we feel they are nonetheless reasonable choices which she is entitled to make and that will keep her active and autonomous in the community. [PG], it seems makes harsh value judgments on [the represented person's] choices in that regard which causes her some distress due to the arguments that follow as well as the financial difficulties it brings when funds are not released by him despite her requests to do so. While this has been an [ongoing] problem for some years, it has reached a critical point now because the represented person is at the start of extensive chemotherapy following a mastectomy. … We had hoped that [PG] would be willing to compromise his standards of high investment returns for the pressing needs [the represented person] now has for a more comfortable and supportive life (which some additional funds can provide) but unfortunately this is not the case. In our opinion, [PG] has not shown the more responsive, realistic and supportive approach to his sister's immediate need that is required.' 4 It is noted that the brother rejects the propositions put by the social worker and says that his sister had been persuaded to sign the original application. The Tribunal does not accept this. Although it is clear that the social worker was driving the application, the represented person met with officers of the Public Trustee during an adjournment of the proceeding and before the appointment of the Public Trustee and her dissatisfaction with the existing arrangements was clear. The brother left both hearings of the original application before they had concluded and did not hear his sister's agreement that the Public Trustee be appointed.
Review 5 On 13 March 2012, the Tribunal received an application from the represented person pursuant to s 86 of the Guardianship and Administration Act 1990 (WA), (GA Act) seeking review of the appointment of the Public Trustee. In the written application, and in subsequent documents filed with the Tribunal (in which it is clear her brother has assisted her) the represented person proposes that the Public Trustee's appointment be terminated and her brother, PG, be appointed for five years. She says she wishes to give her reasons orally at the hearing. 6 The hearing was convened on 18 May 2012 and when asked what orders she wished the Tribunal to make, the represented person said the Public Trustee refused every request she made for money and that she (Page 6)
wanted her allowance to be increased. She also said she wanted new furniture and her flat painted and a new pair of glasses although she conceded she may not have directly asked the Public Trustee for glasses. She said she was experiencing financial hardship because she was now paying for medications which had previously been provided by the mental health clinic. She said her brother could make glasses for her for free, but would not make the kind she wanted.
The Public Trustee 7 The Public Trustee reports that the represented person has 1,438 CBA shares managed by the Public Trustee and a further 455 NAB shares, and 90 CBA shares which are in the name of PG's company, [H] Pty Ltd. When appointed administrator the Public Trustee requested that PG transfer the shares into the name of the represented person. However, he had refused because he is reported to have said there may be capital gains implications arising from the transfer and asked the Public Trustee to accept all liability for all tax obligations incurred in the proposed share transaction. 8 The Public Trustee reports that PG said that he had set up a bare trust and it is through this trust that the shares are held by H Pty Ltd. Despite requests, he had not provided any documentation in relation to the bare trust to the Public Trustee. The report advises that PG says that there are franking credits available in respect of the shares held by H Pty Ltd but he has declined to provide the necessary information unless the Public Trustee pays him for his time. 9 In a letter from the solicitor for the Public Trustee, it is said that the Public Trustee's legal section does not support the appointment of PG as the administrator of the represented person's estate. It asserts PG has an apparent conflict of interest in relation to the represented person's financial affairs and to allow him to have control of the represented person's affairs, as appointed administrator, subject only to the annual review of the financial statements prepared by him, could cause detriment to the represented person. It is argued that this is of particular concern given that the entity controlled by him is the 'registered owner of a proportion of the represented person's realisable assets and his negative and unhelpful response to the previous request for information'. 10 The Public Trustee sought orders from the Tribunal for the production of records from H Pty Ltd because PG had not cooperated with requests to provide information about the represented person's financial affairs. Orders were made for the production of records to enable the (Page 7)
Public Trustee to ascertain the extent of the estate of the represented person.
PG 11 PG says that the represented person's parcel of 1,438 CBA shares were purchased in her name in 1997 with money inherited from their late father. The other shares referred to by the Public Trustee, were purchased by him for the represented person in about 2001 with funds from their late mother's estate. These shares are in the name of H Pty Ltd, a company, of which he agrees he is the sole director and which is the trustee of his family trust and his selfmanaged superannuation fund. 12 PG says he was the executor of their mother's will and that the will provides that shares purchased were not to be put in the represented person's name. PG says that probate has not been granted for either parent's will and that his brother, who was also named as executor in his mother's will, has had no involvement. 13 At the first hearing PG said the difficulty with transferring the shares to the represented person was that he wanted to try and sort out the franking credits 'before and if they are going to be transferred' (T:15, 18.05.12). He said that if the franking credits could be claimed, the represented person would have income to do the 'bits and pieces she wants' (T:16, 18.05.12). 14 He says that when the Public Trustee sought to have the shares transferred from H Pty Ltd into the name of the represented person, this would effectively be a disposal and would trigger capital gains tax and, as trustee of the trust, the minimum he would expect was that the Public Trustee accepts any taxation liability. He asserts that the represented person would be liable for any capital gains tax payable. He later said that capital gains tax liability would not 'arise because one of them currently is not in a position of profit and the other one is, so they would probably balance each other out' (T:15, 18.05.12). 15 The advice received by the Public Trustee is that any capital gains tax payable on the transfer of shares from H Pty Ltd would be the responsibility of the company, not the represented person or the Public Trustee on her behalf. 16 PG says that he has been given verbal advice from the Australian Tax Office that taxation returns were required so that the franking credits could be claimed. He said, 'I've only recently found out that in order to (Page 8)
claim the unclaimed franking credits which amount to $3,600 …' that he had to 'complete 27 taxation returns' (T:13, 18.05.12). PG said '… there was a tremendous amount of work in that … ' and he was prepared to do it for nothing for [the represented person] but I am not prepared to work for the Public Trustee' (T:22, 18.05.12). When told the Public Trustee was the administrator of the represented person's estate and could deal with her taxation affairs, PG said it was a complicated legal position. He said that he may not have the records and stated: … the bank records only go back seven years. You have got - the dividends is what you've got to do. I'm not going to do that for them. They can go and look them up themselves if they want to do it. (T:20, 18.05.12). 17 Later, in relation to the dividend statements he said: I haven't kept them out separately. Maybe they're there, maybe they're not, but you can calculate them. (T:21, 18.5.2012). 18 He noted during the hearing that he had 'just found out then by reading [the Public Trustee's report] that the cost for the administration by the Public Trustee is $2,200 a year'. 19 PG says that he had run the represented person's affairs for 17 years and that the shares had increased in value and he was experienced with shares. He said he had not 'tried to persuade the represented person to make him "trustee". It was her idea not mine'. The represented person in response said this was 'because there was no one else' (T:16, 18 .5.2012). 20 PG said the Public Trustee was doing exactly what he had done only that they were charging for it. He objected to the Public Trustee preparing a will for the represented person despite accepting that she wanted to make one (T:23, 18.5.2012). 21 PG produced documents to the Tribunal following orders made, including a copy of a will dated 28 January 1983 of the late DG, (mother of the represented person and PG). The will appoints the sons ICG and PG as executors and trustees of her will. 22 The terms of the will include that the trustees pay to the represented person: (a) … an amount not exceeding THIRTY DOLLARS ($30.00) per week during [the represented person's] life from the income of 1/3rd of [the] net estate which shall be invested for that purpose by (Page 9)
[the] trustees or any such lesser amount of income from the said portion of [the] estate as shall be thereby generated. (b) Upon the death of [the represented person], [a] third share of [the] estate referred to in sub-clause (a) above for such of [the late DG's] sons the said ICG and PDG and RWG … as tenants in common in equal shares for their sole use and benefit ABSOLUTELY. 23 The trustees are also said to have 'absolute discretion [as to the power] to increase or decrease the amount of income payable' to the represented person. 24 An affidavit of PG dated 14 August 2012, prepared on his behalf by solicitors in Kalgoorlie, states at para 4 and para 5: For many years until the making of the [administration] order referred to above my company [H Pty Ltd] acting as trustee for my sister held shares and money on her behalf upon a barer [sic] trust. I hold many records evidencing the shares and monies held on her behalf and monies advanced to her from the investments and proceeds derived from the holder of those shares. On 28 November 2011 I asked [firm name] lawyers of [address] to prepare a formal Deed of Declaration of Bare Trust to further clarify the nature of the holding by H Pty Ltd which has never claimed and does not claim any equity in the monies or shares so held. H Pty Ltd also acts as trustee of [my] [selfmanaged] superannuation fund which is audited annually as required by law, and the affairs of my superannuation fund are kept totally separate from the shares and cash previously held on behalf of my sister. 25 The Public Trustee says that because the represented person has limited funds, litigation against PG or H Pty Ltd for the transfer of shares was not appropriate and the state of the share market made it inappropriate to sell any shares to fund the action. 26 The Tribunal sent a draft order to the parties following the hearing on 16 August 2012, which provided for the appointment of PG as administrator and directed the administrator to demand from the director of H Pty Ltd, the transfer of shares held for the benefit of the represented person, and to file with the Public Trustee's private administrator's support team, evidence that he had complied with taxation reporting obligations of the represented person which arise from her beneficial interest in the shareholding previously held by H Pty Ltd. The Tribunal proposed that if the parties could agree with the orders proposed, the review would be finalised on the papers. (Page 10)
27 In response, PG said that he was unable to agree to the transfer of the shares to the represented person as the will of their late mother provided that the represented person was to receive income only and that on her death, the capital would be distributed to her siblings. He said he had a fiduciary obligation to ensure the terms of the will are carried out and that the Tribunal has no power to override the specific provisions of the will, that is, the rights of the ultimate beneficiaries of the capital of the estate of the late DG. 28 Following the hearing, the Tribunal received a letter from the represented person's oncologist which confirmed information, that she had reported in the hearing, that she had a recurrence of a cancer which had been diagnosed some years before and that her life expectancy was limited. 29 The Public Trustee reported on 4 January 2013 that they had received the refund of franking credits on the CBA shares held in the name of the represented person and that attempts would be made to sell some shares to allow the represented person to have access to increased funds in light of her changed circumstances. There had been an increase in fees due to increasing contact with the represented person as a result. The fees, as reported on 4 January 2013, are $66 per fortnight.
Relevant legislation 30 Section 68 of the GA Act sets out considerations relevant to the appointment of administrators. Section 68(3) provides that compatibility with the represented person, her wishes and ability to perform the functions proposed to be vested in the administrator are relevant to the suitability of the proposed appointee. Section 68(1)(c) requires satisfaction by the Tribunal that any proposed appointee will act in the best interests of the represented person. 31 The represented person does not appear to completely appreciate that to increase the availability of funds to her, that shares will have to be sold. Because of a deterioration of her health, the Public Trustee has sold shares to make more funds available. Her disappointment that the Public Trustee did not make more funds available on her requests in the past, results from her lack of appreciation of this and that the Public Trustee did not have control of her pension or the shares held on her behalf by her brother. It must be said that the represented person experienced the same disappointment when dealing with her brother when he had control of all of her shareholdings. (Page 11)
32 PG has given reasons why he cannot transfer the shares to the represented person. In the first instance, he said that the barrier was the completion of taxation obligations and the application for franking credits and that this needed to be resolved before the shares could be transferred. He later said that he would be in breach of his fiduciary obligations as the executor of the deceased estate of their late mother if he transferred the capital to the represented person. 33 It is accepted that PG is trustee for the shareholdings of the represented person held by his company, H Pty Ltd. The trustee's relationship does not arise from what he describes as a 'bare trust' to which his affidavit refers, and which is said to have been declared in November 2011. His trustee obligations arise from his acceptance of the role of executor of the deceased estate of their late mother and his dealings with the deceased estate. The represented person is a person under disability, which he knows, and is dependent on him in respect of his dealings with her interests in the deceased estate. Although PG says he has had legal advice, and says that the Public Trustee does not understand the bare trust, the Tribunal finds that the description of the shareholding arrangement by H Pty Ltd as a 'bare trust', on the facts of this case, is simply not correct. A bare trust is a term used to describe a trust in which the trustee has no active duties to perform and to which the beneficiary has absolute entitlement to the trust property; Jacobs' Law of Trusts in Australia (7th ed, 2006) at [315] (Jacobs'). 34 These circumstances do not apply to the arrangements by which PG was and is operating through his vehicle, H Pty Ltd, in relation to the shareholdings of the represented person, including the receipt and distribution of dividends or other matters referred to in his affidavit. 35 Because a grant of probate was not sought by the executors, it is now unclear what assets were held in the deceased estate of the represented person's late mother and therefore, it cannot be established with any certainty what the represented person's income entitlement, was, and is. The other aspect of this is that the provisions of the will give rise to the question of whether proper provision under the will had been made for the represented person, a person under disability, but this appears not to have been considered and PG says he distributed the deceased estate informally. This omission points to the inadequacy of the informal arrangements for management of the represented person's affairs which existed prior to the appointment of the Public Trustee. The lack of participation, according to PG, of the other executor, their brother, in this (Page 12)
process means that the only source of information regarding the value in the deceased estate and its distribution, is PG. 36 The original intention of the will of their mother appears to have been to protect the represented person against her vulnerabilities associated with her mental illness. This is now achieved through the appointment of an administrator of her estate. As acknowledged in the letter from the social worker filed with the original application, PG has provided, up until the appointment of the Public Trustee, protection against dissipation of the assets of the represented person and in fact, there has been a substantial increase in the value of the shareholdings. 37 However, conflict has arisen in the way that PG has managed the affairs of the represented person as trustee in the past. The criticism has been that he was unwilling to respond to the modest day to day requests of the represented person with a preference for the accumulation of capital. In the past this lead to difficulties in their relationship and raises concerns about his compatibility with the represented person, see GA Act s 68(3)(a). 38 PG's delay in and ultimately his refusal to apply for the franking credits on the parcels of shares held by H Pty Ltd, an entity controlled by him, to enable the represented person, as the income beneficiary to receive this benefit, is arguably a breach of his duty as trustee. Trustee's duties include the duty to act fairly between the different classes of beneficiaries of the trust; Jacobs' at [1711]. The represented person, who is an income beneficiary, is entitled to a portion of the value of the franking credits. If the franking credits are not claimed in the represented person's lifetime, the other beneficiaries, the remaindermen, will be unfairly advantaged. That PG is one of those beneficiaries places him in a position of acute conflict, which he appears unable to appreciate. 39 The position taken by PG is that he will only complete the outstanding taxation returns of H Pty Ltd and of the represented person, if he is appointed administrator of the represented person's estate, misreads the position of his current obligations as the director and secretary of H Pty Ltd and the trustee of the trust. That he puts his appointment as administrator as a condition on the performance of these obligations, misunderstands the obligations of the Tribunal to act in the best interests of the represented person. 40 As the Public Trustee has plenary functions in respect of the estate (save for the represented person's pension income) the Public Trustee (Page 13)
effectively stands in the shoes of the represented person in dealing with her interests in the trust. The lack of cooperation and the unwillingness of PG to assist the Public Trustee as administrator of the estate of the represented person including his refusal to provide information until compelled to do so might also be a breach of trust since a trustee is obliged to provide information to beneficiaries; Jacobs' at [1713]. 41 The Public Trustee's fees for the management of the estate of the represented person are high. The Tribunal considered the additional income which would be made available to the represented person, if the fees of the Public Trustee of $66 per fortnight, were not charged. These funds may be sufficient to cover the cost of medications, which the represented person now must meet herself, since they are no longer supplied by the mental health clinic. This issue is of some significance since the financial resources of the represented person are limited and her health is fragile. The Tribunal considered whether, if sufficient advocacy and support was available to her, that PG might be appointed as the administrator, if the conflict issue could be managed. However, the history does not support this, since, even when she had the benefit of the involvement of the social worker from the clinic, which appears now to have ceased, PG would not cooperate with the mental health team. 42 Despite her recent diagnosis and the expected prognosis for the represented person, the attitude of PG to the represented person, displayed in the hearings, leaves the Tribunal in doubt as to whether he is able to deal appropriately with her increasing needs. In dealing with the staff of the Public Trustee who attended the hearings before the Tribunal the represented person could expect and has received patient, courteous consideration, something which appears to be absent in her dealings with her brother, as observed in the hearings. 43 The representative of the Public Advocate did not support the appointment of PG as administrator and submits the reappointment of the Public Trustee is in the best interests of the represented person, despite the expressed wishes of the represented person and the fees charged by the Public Trustee. The Tribunal accepts this submission. The point made by the represented person that there is 'no one else', other than PG, does not persuade the Tribunal that such an appointment is in her best interests. 44 For all these reasons it is in the best interests of the represented person that the order is confirmed on review. (Page 14)
Orders 45 The order is confirmed as follows: |