| JURISDICTION : STATE ADMINISTRATIVE TRIBUNAL STREAM : HUMAN RIGHTS ACT : GUARDIANSHIP AND ADMINISTRATION ACT 1990 (WA) CITATION : PUBLIC TRUSTEE and GB [2013] WASAT 97 MEMBER : MR M ALLEN (SENIOR MEMBER) HEARD : 8 AUGUST 2012, 2 OCTOBER 2012 AND 10 JANUARY 2013 LAST SUBMISSIONS FILED ON 1 MARCH 2013 DELIVERED : 26 JUNE 2013 FILE NO/S : GAA 1790 of 2012 BETWEEN : PUBLIC TRUSTEE Applicant
AND
GB
Represented Person
Catchwords: Guardianship and administration - Review of administration for elderly lady on application by the Public Trustee because administrator's accounts not lodged on time - Administrator not seeking reappointment - Represented person the governing director and a shareholder of a proprietary company, and the trustee/guardian/beneficiary of a discretionary trust, in which the represented person's two adult children are shareholders and beneficiaries respectively - Consideration whether two children should be appointed as joint administrators - Conclusion that the Public Trustee should be appointed as administrator for one
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year having regard to the represented person's previously stated views and the potential differences in the interests of the represented person and the two children should steps be taken to terminate or wind up the company and the discretionary trust. Legislation: Corporations Act 2001 (Cth), s135, s 201F, s 201H
Guardianship and Administration Act 1990 (WA), s 4, s 68, s 72(3), s 84, s 86, Sch 2, Pt B Result: Administration order revoked and new administration order made
Summary of Tribunal's decision: The Tribunal reviewed an administration order made in 2008 for an elderly woman suffering from dementia on the application of the Public Trustee because the administrator had failed to lodge accounts on time. Two adult children of the represented person sought to be appointed and the administrator ultimately decided he would not seek reappointment.
The represented person's personal estate consisted of cash and other investments. She is the governing shareholder and governing director of a proprietary company, and she is also a trustee and guardian of a discretionary trust of which she is also a beneficiary. The two children are also shareholders of the company, although their interests are not identical due to the differing entitlements of the shares held by them on a winding up of the company, and they are also beneficiaries under the trust. The administrator had previously been appointed (by the represented person) as a director of the company and a trustee of the trust.
The Tribunal considered whether the two children should be appointed as joint administrators, but concluded that would not be appropriate. The Public Trustee was appointed administrator for a period of one year. The Tribunal considered this to be the appropriate outcome having regard to the previously stated views of the represented person and her late husband and the actions taken by them as reflected in the governing structures of the company and the trust; and the fact that the interests of the represented person and the two children did not coincide. Decisions about the current management of the company and the trust, particularly in relation to current policies regarding distributions to shareholders or beneficiaries, and in relation to the possible winding up or termination of the trust and the company will need to be made
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and will require choices to be made concerning whether income or capital might flow to the represented person or one or both of the children.
The Tribunal also ordered that the Public Trustee, as administrator, should have authority to exercise the powers of the represented person as trustee and guardian of the trust. The administrator was also ordered to keep the two children informed of any consideration given to how the personal affairs of the represented person and those of the company and the trust were to be managed and organised in the future, and to consult with the two children and to take their views and wishes into account in relation to such matters.
The administration order is to be reviewed after one year.
Category: B
Representation: Counsel:
Applicant : N/A
Represented Person : N/A
Solicitors:
Applicant : N/A
Represented Person : N/A
Case(s) referred to in decision(s):
Nil
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REASONS FOR DECISION OF THE TRIBUNAL:
Introduction 1 GB (referred to in these reasons as Mrs B) is an 87yearold woman who has been a widow since 2005. She has two adopted adult children, a daughter (JD) and a son (DB). 2 Orders concerning Mrs B under the Guardianship and Administration Act 1990 (WA) (GA Act) have previously been made by the Tribunal as follows: 3 The current proceedings commenced in mid2012 when the Public Trustee made an application under s 86 of the GA Act for review of the administration order because the Public Trustee was concerned that the administrator's accounts for the 12 month period to 30 June 2011 had not been filed, despite reminders and the granting of extensions of time. 4 At a hearing on 8 August 2012 the review of the administration order was adjourned and the administrator, GH, gave undertakings to the Tribunal that the accounts required for the periods ending 30 June 2011 and 30 June 2012 would be submitted to the Public Trustee by 5 September 2012 and that, until further order of the Tribunal, the (Page 5)
administrator would not alter any of the current arrangements for the management of Mrs B's investments or make payments from any bank account of hers other than regular payments in respect of nursing home accommodation and pharmacy expenses. 5 At a further hearing on 2 October 2012 the Tribunal made further orders regarding the lodgement by the administrator of further documents relating to Mrs B's financial affairs, including documents relating to a proprietary limited company (the Company) and a discretionary trust (the Trust), in both of which Mrs B has a significant interest. The Tribunal also ordered that a review of the guardianship order be commenced pursuant to s 84 of the GA Act. 6 A final hearing was held on 10 January 2013 to review the guardianship order and to consider further the review of the administration order. As a result of the evidence given on that day, and with the agreement of all parties, the Tribunal was satisfied that the guardianship order should be revoked and be replaced by a new guardianship order in which DB was appointed as Mrs B's limited guardian for the purposes of making decisions about medical treatment. The Tribunal was advised that Mrs B had, for the last few years, resided in a nursing home in a regional city in which DB lives and that DB was the person who mostly dealt with the nursing home regarding Mrs B's welfare. It is not necessary to refer further to that matter in these reasons. 7 On 10 January 2013 the Tribunal ordered that the parties be provided with copies of various documents that had been lodged with the Tribunal, that the parties could lodge final submissions concerning the administration order, and that upon the receipt of those submissions the Tribunal would determine the matter. These reasons set out the Tribunal's decision and the reasons for it.
Principles to be applied by the Tribunal 8 The principles to be applied by the Tribunal in determining matters such as the present are set out in s 4 of the GA Act. They can be summarised as follows: (Page 6)
Mrs B's capacity to make decisions about her financial affairs 9 To continue an administration order on review the Tribunal must be satisfied that Mrs B is not able to make reasonable judgments about her financial affairs by reason of a mental disability. All the persons who attended the hearings concerning Mrs B considered that she was so unable and I am satisfied that that is the case. A report was provided to the Tribunal from the nursing home in which Mrs B now resides. She was said to suffer from dementia and depression and that she is 'very apathetic', has limited cognitive ability, and seldom converses. All the parties agreed that Mrs B presently has no capacity to understand or make decisions about her financial affairs and I find that she is a person who is unable to make reasonable judgments about her financial affairs by reason of the mental disabilities of dementia and depression. She is, therefore, a person in respect of whom an administration order could be made or can continue.
Need for an administration order 10 Again, all parties agreed that Mrs B continues to need a person who can make decisions about and manage all of her financial affairs and that the need could not be met by any means less restrictive than the continuation of the administration order. 11 I am satisfied that that is the case because Mrs B's financial affairs are complex and extensive. Further information regarding those affairs is set out below in these reasons. I am also satisfied that whoever is appointed to that role will require plenary powers to deal with her affairs.
Details of Mrs B’s estate 12 Before addressing the question of who should be the administrator of Mrs B's estate, it is necessary to set out some details of that estate and (Page 7)
how it has been managed. In essence, Mrs B's financial situation reflects the financial arrangements that were put in place many years ago by her late husband (whom I will refer to as Mr B) and are organised in three areas as described below. The various investment portfolios are managed by a professional investment manager, the principal of which (Mr P) attended the final hearing, and the taxation and general financial affairs of Mrs B, the Trust and the Company are managed by a firm of accountants, a principal of which (Mr GB) attended the final hearing.
Personal assets 13 At the end of November 2012 Mrs B had as her main personal assets an investment portfolio of shares, cash and other fixed interest securities and bank accounts of approximately $500,000; an accommodation bond at the nursing home of approximately $340,000; a loan to the Company of approximately $15,700; and a loan to the Trust of approximately $123,500. Mrs B receives interest and dividends from these investments as well as a Veteran's Affairs pension.
The Trust 14 The Trust was established in 1987 by Mr and Mrs B. It currently holds assets of approximately $135,000 invested in a portfolio managed by Mr P. It is owed $8,840 by DB's son (school fees paid which could not be treated as an income distribution) and it owes the sum referred to above to Mrs B. Its net assets are, therefore, relatively small. Mrs B is a primary and secondary beneficiary of the Trust and, since the death of Mr B, she is the appointor and guardian under the terms of the trust deed as well as a trustee. In December 2005 Mrs B, in her capacity as appointor, appointed GH as an additional trustee. It appears from information provided to the Tribunal by Mr GB that until 2005 the net income of the Trust was distributed primarily to Mr and Mrs B, but that since then it has only been distributed to Mrs B. DB and JD and their children are also secondary beneficiaries under the Trust and it appears they have, in one form or another, received various distributions in the past.
The Company 15 The Company was established in 1967, originally to hold an interest in a business and to own real estate on which that business operated. During his lifetime Mr B was the governing director by virtue of holding A class shares giving him the ability to exercise all directors' powers, appoint and remove other directors, and control how dividends and capital (Page 8)
returns are paid. On Mr B's death Mrs B became governing director with all those powers, and she will continue to be so until her death. On Mrs B's death shares held by JD become cumulative preference shares with fixed income and capital entitlements and the shares held by DB become ordinary voting shares with entitlements to all residual income and capital on a winding up. 16 Mr GB informed the Tribunal that notes and other documents in the Company's file, including the capital structure outlined above, indicate that the original intention was to transfer ownership and control of the Company and the underlying business and real estate from Mr and Mrs B (after their death) to DB. It appears the subsequent proceeds of sale of the business and the real estate were retained within the Company for investment, rather than distributed to shareholders due to tax considerations. The Company's investment portfolio and cash now approximate $193,000, and, as noted above, it owes Mrs B $15,700. 17 GH was also appointed as a director of the Company in November 2005.
Who should be appointed as the administrator? 18 This proved to be the most contentious issue to be determined by the Tribunal in the proceeding. As noted above, the review of the administration order resulted from an application by the Public Trustee because the administrator, GH, had not lodged accounts in a timely way. At the hearings and in their written submissions JD and DB contended that they should be appointed to manage their mother's affairs and the affairs of the Company and the Trust. At the hearings GH said that he wanted to continue as administrator, but in his written submission lodged after the final hearing he said that, in light of the complete breakdown of communication and trust between himself and JD, he had decided that he wished to resign as administrator. He thought that if JD and DB were appointed jointly then DB would be 'manipulated' by JD to go along with whatever she wanted. GH also advised the Tribunal that he would resign as both a trustee of the Trust and as a director of the Company. 19 In view of GH's intentions, it is not necessary to examine in great detail whether GH has rendered himself unsuitable to continue to be the administrator. It is, however, clear that despite the involvement of Mr P and Mr GB in the management of the affairs of Mrs B, the Trust and the Company, including the preparation of financial accounts and taxation returns, GH did not devote sufficient time to ensuring that the accounts required to be lodged with the Public Trustee were so lodged. I accept (Page 9)
GH's evidence that he had health and other personal reasons for this inattention. 20 It is also clear, however, that GH's approach to his roles (as administrator, trustee and director) has been a relatively 'hands off' one, with all investment decisions being delegated (without any evidence of significant review or input by GH), an overall reliance on advice (reflecting taxation considerations) regarding any distributions from either the Trust or the Company, a reluctance to make any distributions from the Trust or the Company to anyone other than Mrs B, and a general 'blurring' of the personal affairs of Mrs B with those of the other two entities. For example, JD and DB both said that prior to his death Mr B had ensured that regular distributions of income had been made to them both (they both have disabled children) but that GH had failed to carry on this practice. I note also that various expenses of the Trust and the Company have been paid from Mrs B's personal funds, without any authority of the Tribunal being obtained under s 72(3) of the GA Act. 21 It is also not clear what powers may have been exercised by GH in connection with the Trust or the Company. Clause 13 of the Trust Deed for the Trust requires trustees to act jointly but given Mrs B's severe incapacity in recent years it would seem unlikely that she has been able to participate in decisionmaking, and no application has been made to the Tribunal seeking authority under Sch 2 Pt B of the GA Act for GH as Mrs B's administrator to exercise any of her powers as trustee or guardian of the Trust. 22 In these circumstances I am satisfied that GH should not continue to be Mrs B's administrator, even were he to be willing to continue. The next question is whether JD and DB, or some other person, should be appointed. 23 Section 68 of the GA Act relevantly provides that one or more persons should be appointed as administrator only if the Tribunal is satisfied that the persons will act in the best interests of the represented person and are otherwise suitable to act in the role the latter requirement involving the Tribunal taking into account 'as far as possible' the compatibility of the proposed appointees with the represented person and any guardian, the wishes of the represented person, and whether or not the proposed appointees will be able to perform the functions to be vested in them. (Page 10)
24 Both JD and DB have a history of some involvement in the finance and banking sectors, and both demonstrated a reasonable knowledge of the history and the affairs of their mother, the Trust and the Company. It appears this knowledge was gained mostly when Mr B was alive and not since GH was appointed. Overall, I am inclined to the view that JD and DB could perform the role of administrators for their mother and that they would attempt to act in her best interests. However, for the reasons explained below, I am not satisfied that it would be appropriate or in Mrs B's best interests to appoint them at the present time. 25 My first reason for this view relates to the wishes of Mrs B and, at an earlier time, the wishes of Mr B. It is clear, although the reasons for this are by no means apparent, that Mr and Mrs B chose not to have their two children formally involved in the management of their personal affairs or the affairs of the Trust or the Company. The Tribunal was advised at the hearing in November 2008 by GH that both Mr and Mrs B had executed enduring powers of attorney in favour of GH sometime before Mr B died, but that the documents could not be located in 2008. GR told the Tribunal at that time that Mr B had told him prior to his death that he did not want to appoint either JD or DB as the executor of the wills of Mr or Mrs B, and that Mrs B had told him in the past that she did not want JD involved in the management of her estate or her funds. I have no reason to doubt any of that evidence. 26 The Public Advocate's representative at the 2008 hearing informed the Tribunal that in a recent interview Mrs B had said that she was happy for the orders sought to be made, but she said clearly that she wanted GH appointed and she did not want either of her children to be involved in any decisionmaking. 27 Although, by 2008, Mrs B's views may have been affected by a degree of delusional thought and dementia, they are consistent with views expressed and actions taken some years prior to that by both Mr and Mrs B. I must accord considerable weight to those views regarding who should manage Mrs B's affairs. 28 My second reason for not appointing JD or DB as administrator relates to the interconnections between Mrs B's personal financial affairs and the affairs of the Trust and the Company and the potential differences in the interests of Mrs B, JD and DB. Mr GB's evidence to the Tribunal was that the time had come to give consideration to the future of the Trust and the Company, given that there were relatively small amounts of capital at stake, the ongoing management and administration (Page 11)
expenses involved, and the possible taxation benefits of terminating these entities. Any consideration of those issues will highlight the various interests that may be in conflict. For example, it is already the case that a trustee of the Trust will need to consider whether to distribute income to Mrs B or to one or both of JD or DB, or to their children, and any termination of the Trust would require consideration of the distribution of capital to the various potential beneficiaries. 29 Similarly, any decisions now to declare dividends from the Company involves choosing between the interests of Mrs B and other shareholders, and any winding up of the Company would fix the value of JD's shareholding interest, whereas DB would be entitled to all residual assets of the company on a winding up. Mrs B's interests differ from those of her children, and the two children's interests differ as between themselves. 30 In general terms, an administrator of an individual cannot, by virtue of that role, act as the director of a company or as the trustee of a trust in the place of the represented person (subject to the Tribunal's powers to authorise and administrator to exercise the powers of a trustee or guardian of a trust). In the present case, and regardless of who is appointed as administrator of Mrs B's personal estate, there is uncertainty now as to just how the Trust and the Company are to be managed in the sense of who currently can in fact make decisions on behalf of those entities. I have already mentioned the need for the two trustees to act jointly. GH was not able to state definitively in what capacity he made decisions on behalf of the Company as a director or as the administrator of Mrs B. 31 In the case of the Company, it is not clear what the impact of Mrs B's incapacity is on her ability to act as a governing director. None of the parties made any submissions regarding this issue. The copy of the Company's Articles of Association (Articles) provided to the Tribunal show clearly the age of the Company, with a number of the provisions of Table A of companies legislation (prior to 1998) stated to be applicable. Importantly, however, it appears from Article 6 of the Company's Articles that regulation 65 of Table A is excluded from operation for so long as Mr or Mrs B hold office as a governing director (but is not excluded once they are deceased and there is no governing director). Regulation 65 of Table A provided that a director's office is automatically vacated if the director becomes of unsound mind or if the director or her estate becomes liable to be dealt with under the law relating to mental health. Section 201F of the Corporations Act 2001 (Cth) (Corporations Act) (which permits the personal representative of a person who is a director of a single director company and who has lost capacity) to appoint a director (Page 12)
is not applicable because the Company is not a single director company. Likewise, there is no evidence before the Tribunal that the Company has, for the purposes of s 135 of the Corporations Act, repealed its constitution and so the Company is not one that falls within the scope of s 201H of the Corporations Act (which permits the directors of a company to appoint another director to make up a quorum). 32 Inevitably, during Mrs B's lifetime, given her roles in relation to the Trust and the Company, whoever is her administrator will be called on to take an active part in deciding what steps (if any) are to be taken in relation to the Trust and the Company. Depending on what those steps are, the two children may be treated differently, and the effect of them could (but need not) involve diverting assets that could flow to Mrs B towards the two children. 33 In one sense it might appear that the above might not matter. All parties appear to have assumed that JD and DB would be the ultimate beneficiaries of Mrs B's deceased estate on her death, although the Tribunal was not provided with a copy of a will or told of the contents of a will. It appears GH was not appointed as the executor of either Mr B or Mrs B's wills. If it is the case that JD and DB are the only beneficiaries then that will be a factor that might influence what steps might be taken in Mrs B's lifetime to simplify her affairs, but any such steps must be taken in Mrs B's best interests rather than in the interests of the beneficiaries of her deceased estate by anticipating the estate that may pass to them on Mrs B's death. 34 Finally, I note that it is also the case that, as beneficiaries of the Trust and shareholders of the Company, JD and DB would be in a position to take steps on their own behalf to seek to have changes made to the management of those entities or even to have them terminated or wound up. In such a situation, for the reasons mentioned above, the interests of Mrs B may not coincide with those of JD or DB. 35 I have therefore concluded that the administration of Mrs B's affairs should be placed in the hands of someone other than JD and DB at least for a period of time to permit decisions to be made about how to organise those affairs for the future and to, perhaps, simplify them. No party proposed the appointment of any other person and, in the absence of a suitable alternative, I consider that it would be appropriate to appoint the Public Trustee as administrator. That will ensure that decisions will be made that will be impartial and with appropriate attention to Mrs B's interests. It will, in my view, be in Mrs B's best interests for that (Page 13)
appointment to be made notwithstanding the disadvantage that the Public Trustee is entitled to charge fees for performing this role. It will, however, be necessary for the administrator to keep JD and DB fully informed and to involve them in considering the options available and the actions that might be taken in the management of Mrs B's affairs. To assist in the management of the Trust the administrator should be authorised to exercise the powers that Mrs B may have as trustee or guardian of the Trust. 36 The orders made should be reviewed by the Tribunal under s 84 of the GA Act after one year. By then it should be clear what, if any, actions are to be taken regarding the Trust and the Company, and it will be possible at that stage to reconsider whether JD and DB should become responsible for managing their mother's financial affairs. 37 For the reasons set out above the orders to be made by the Tribunal will be to the following effect: 1. The administration order made on 20 November 2008 concerning the represented person is revoked and the following orders substituted for it. 2. The Public Trustee of 553 Hay Street, Perth, Western Australia is appointed plenary administrator of the estate of the represented person with all the powers and duties of a plenary administrator conferred by the Guardianship and Administration Act 1990 (WA). 3. The administrator is authorised to expend up to a total amount of $200 per annum on gifts on behalf of the represented person to charities of her choice. 4. Pursuant to cl (h) of Sch 2, Pt B of the Guardianship and Administration Act 1990 (WA), the administrator is authorised to exercise the powers vested in the represented person as trustee and guardian of the Trust under a deed of trust made on 17 June 1987 and a further deed made on 1 December 2005. 5. The administrator is directed to keep JD and DB informed of all consideration given to how the affairs of the represented person, the Trust and the Company should be managed and organised in future, and to (Page 14)
consult them and take their views and wishes into account when making any decisions on such matters. 6. This order is to be reviewed by 26 June 2014. |