ST and EPP
[2011] WASAT 62
•15 APRIL 2011
JURISDICTION : STATE ADMINISTRATIVE TRIBUNAL
STREAM: HUMAN RIGHTS
ACT: GUARDIANSHIP AND ADMINISTRATION ACT 1990 (WA)
CITATION: ST and EPP [2011] WASAT 62
MEMBER: MR J MANSVELD (MEMBER)
MS D DEAN (SENIOR SESSIONAL MEMBER)
MR J JAMES (SENIOR SESSIONAL MEMBER)
HEARD: 16 NOVEMBER 2010
DELIVERED : 15 APRIL 2011
FILE NO/S: GAA 1610 of 2010
BETWEEN: ST
Applicant
AND
EPP
Represented personPP
Spouse of represented person
Catchwords:
Administration - Need for an administrator - Enduring power of attorney - Private company limited by shares - Governing director - Controlling shareholder - Minority shareholder - Attorney as a fiduciary - Role of attorney in conflict with exercise of authority as governing director - Administrator appointed - Enduring power of attorney revoked
Legislation:
Corporations Act 2001 (Cth)
Guardianship and Administration Act 1990 (WA), s 3, s 4, s 64(1), s 64(1)(a) s 68, s 97(1)(b)(i), s 97(1)(b)(iii), s107, s 108(1a)(a), s 109(1), s 109(1)(c)
Income Tax Assessment Act 1936 (Cth), Div 7A
Result:
The Public Trustee is appointed administrator
Category: B
Representation:
Counsel:
Applicant: Self-represented
Represented person : N/A
Spouse of represented person : Mr I Curlewis
Solicitors:
Applicant: N/A
Represented person : N/A
Spouse of represented person : Lavan Legal
Case(s) referred to in decision(s):
Charlton v Baber [2003] NSWSC 745
Public Trustee v Blackwood [1998] 8 Tas R 256
REASONS FOR DECISION OF THE TRIBUNAL:
The represented person was an elderly woman in the advanced stages of Alzheimer's dementia. She had lived in a nursing home since late 2003.
The represented person's estate consisted of her interests in a private company which she had established with her spouse in 1971. The company was the means by which their business and private interests had been owned and managed.
The spouse had, since the incorporation of the company, been the governing director and controlling shareholder. This had not affected the represented person's interests because the company had been managed as a family entity.
The spouse had been appointed the represented person's attorney under an enduring power of attorney in 1998.
For a period in 2010 the nursing home fees for the represented person were unpaid. The nursing home was unsuccessful in contacting the spouse about the accrued debt and, as a consequence, made an application for the Public Trustee to be appointed as the administrator of the estate of the represented person. The nursing home also made an application for the Tribunal to revoke the enduring power of attorney.
The represented person's daughter, who was also a shareholder in the company, supported the applications of the nursing home. She submitted that the spouse had been operating the company mostly for his own interests and to the detriment of the interests of both herself and the represented person.
The spouse said that the nursing home debt had been settled, he had arranged for the fees to be paid by way of direct debit and would personally guarantee payment of the fees into the future. He submitted that the nursing home fees had been paid since 2003 by the use of his governing director's discretion to declare dividends from the company to the represented person. In this way, all her needs had been met.
The Tribunal disagreed with the spouse. The Tribunal found that in accounting for the interests of the represented person, the spouse, as her attorney, had not wholly responded to her changed circumstances. His role as attorney had come into conflict with the way he had exercised his authority as governing director of the company.
The Tribunal found that it could not be the case that the interests of the represented person in the company had a reduced standing because she was now incapable and could not agitate for those interests herself. Someone had to protect all of her financial interests in a separate and independent way.
The Tribunal decided to appoint the Public Trustee as the represented person's administrator and to revoke the enduring power of attorney.
Background
EPP (represented person) is an elderly woman who resides in a nursing home. She has been diagnosed as suffering from Alzheimer's disease, a consequence of which she has a severe cognitive impairment. She has lived in a nursing home since late 2003.
The represented person has a spouse, PP and a daughter PC. The spouse and daughter are in conflict over matters to do with their relationship and also about the represented person. The conflict is essentially about financial matters.
An application for an administration order (application) has been made by ST, a social worker at the nursing home in which the represented person lives (applicant).
The applicant says that the nursing home fees were not paid for a period in 2010 and that PP failed to make early contact with the nursing home about the resultant debt. A similar situation is said to have arisen in 2005, where PP challenged some of the fees charged but for a time did not make any payment. That matter was finally resolved in 2007 but not before the accumulation of a sizable debt. PP does not accept the applicant's interpretation of how the 2005 debt arose but largely accepts the basis of the 2010 debt which has been paid.
At the time of the hearing the nursing home fees were up to date and PP has arranged for future fees to be paid by way of a direct bank debit. He has also personally guaranteed payment of the fees.
The application proceeded because the applicant states she could not be sure, based on the history of PP's relationship with the nursing home, that fees would be paid into the future.
PC submits that aside from the question of the nursing home fees, PP has not been managing the estate of the represented person in her best interests. PC says that PP, as governing director and controlling shareholder, has been operating a private company (company) in which the represented person holds shares, mainly for his own interests, to the detriment of the represented person (and PC).
PP is the attorney for the represented person under an enduring power of attorney executed on 27 October 1998.
The applicant has also applied to have the enduring power of attorney revoked by the Tribunal.
The substantive hearing was held on 16 November 2010 and the decision reserved.
PC has made further submissions to the Tribunal to which PP has responded. The final submissions were received from PC on 7 February 2011 and from PP on 2 March 2011.
Relevant legislation
The applications before the Tribunal are determined pursuant the provisions of the Guardianship and Administration Act 1990 (WA) (GA Act).
Before it can make an administration order, the Tribunal must be satisfied that the represented person is unable, by reason of a mental disability, to make reasonable judgments in respect of matters relating to all or any part of her estate and is in need of an administrator (s 64(1) of the GA Act).
Mental disability is defined to include dementia, acquired brain injury, psychiatric illness and intellectual disability (s 3 of the GA Act).
The determination of capacity and need are made subject to the principles of the GA Act as stated in s 4. They are, relevantly, that the primary concern of the Tribunal shall be the best interests of the represented person; that she shall be presumed capable of making reasonable judgements in respect of matters relating to her estate until the contrary is proved to the satisfaction of the Tribunal; that an administration order shall not be made if the needs of the represented person can be met by other means less restrictive of her freedom of decision and action and, in considering any matter relating to the represented person, the Tribunal shall, as far as possible, seek to ascertain her views and wishes.
If an administrator is to be appointed, the Tribunal must be satisfied that the proposed appointee will act in the represented person's best interests and is otherwise suitable to act as administrator of her estate. In this determination, the Tribunal shall take into account, as far as possible, the compatibility of the proposed appointee with the represented person, the wishes of the represented person and whether the proposed appointee will be able to perform the functions proposed to be vested in the administrator (s 68 of the GA Act).
Under s 109(1)(c) of the GA Act, a person who has a proper interest in the matter may apply to the Tribunal for an order revoking an enduring power of attorney.
Under s 107 of the GA Act, an attorney, under an enduring power of attorney, must exercise his powers as attorney with reasonable diligence to protect the interests of the donor and, if he fails to do so, he is liable to the donor for any loss occasioned by the failure. He must also keep and preserve accurate records and accounts of all dealings and transactions made under the power; may not renounce a power during any period of legal incapacity of the donor and must, if he becomes bankrupt, report the bankruptcy to the Tribunal.
Represented person's capacity
The Tribunal has before it the reports from the represented person's general practitioner, and ST, a social worker from the organisation which operates the nursing home. ST attended the hearing.
The general practitioner states that the represented person suffers from Alzheimer's disease and is unable to make any reasonable decisions about her personal or financial affairs. The general practitioner assesses the represented person as not being able to make any contribution to the proceedings.
ST states that the represented person is nonverbal and that her communication is restricted to limited facial expressions and a functional, oral reflex when taking food or medication. The represented person no longer vocalises.
It is common ground that the represented person is severely disabled such that she is unable to make any decision in her life. She is in the advanced stages of her dementia, which is a progressive and terminal condition.
The Tribunal is satisfied that the represented person has a mental disability (the dementia) and, by reason of that disability, is unable to make reasonable judgments about all of her estate (s 64(1)(a) of the GA Act).
The estate of the represented person
PP states that the whole of the represented person's estate consists of her shareholding and loan account in the company. It is from the company that she derives her income. She is not currently in receipt of any Centrelink pension.
The company
The company is a private company limited by shares and was incorporated on 20 October 1971. It may be described as a 'family company', in that it is the vehicle through which PP and the represented person arranged their personal and business affairs.
The primary business of the company is the operation of two care facilities.
On incorporation, PP was issued with the 'A' class share and the represented person with the 'B' class share. The 'A' class share has sole voting rights and, with PP appointed as the governing director, he was given effective control of the operations of the company. Under the original Memorandum and Articles of Association (Articles of Association), the represented person would assume that control upon the death of PP were she still married to him. Both the 'A' class share and 'B' class share had no right to participate in any distribution or surplus on a winding up of the company.
Since incorporation, the powers present in the Articles of Association have been amended so that the current Constitution of the company does not provide for the represented person to take control of the company upon the death of PP. If there ceases to be a governing director, all the shares, other than the 'A' class share, rank equally (subject to any special conditions attaching to a class of shares)
Since incorporation, further shares have been issued in the company. During the proceedings there was some confusion as to the current shareholding of the company but the Tribunal accepts on the advice of the company accountant in a letter before the Tribunal, that the shareholding is as follows:
PP1 'A' class share
1665 'E' class shares
1669 Ordinary shares
PC3001 'C' class shares
Represented person 1 'B' class share
3334 'E'class shares
The financial statements of the company for the years 2002/2003 to 2008/2009 are before the Tribunal. They show that the company paid the following dividends:
2002/03$90,000
2003/04$50,000
2004/05$62,900
2005/06$117,120
2006/07$119,907
2007/08$146,089
2008/09$253,389
Dividend statements also before the Tribunal show that the represented person was paid one third of the total dividend from 2004/05 to 2008/09. If the dividends for 2002/03 and 2003/04 were also distributed in this way then the total dividend income received by the represented person in the seven years for which financial statements were provided was approximately $280,000. For the period from which the represented person entered nursing home care (from the 2003/04 year), the dividend income was about $250,000.
The available financial statements show that the shareholders paid interest to the company although what each shareholder paid is not detailed. In a letter to the Public Advocate of 20 September 2010, the solicitor for PP states that the represented person has paid $70,671 in interest to the company in respect of loans owing by her, in accordance with the requirements of Div 7A of the Income Tax Assessment Act 1936 (Cth) (Income Tax Act). That amount is based on an allocation of one third of the total interest paid to the company by the three shareholders.
The Tribunal did not have the benefit of the represented person's income taxation returns for the above years.
The financial statements for the 2006/07 year detail that an aircraft and hanger were purchased by the company, the total initial cost is shown as $269,693. In the month after the end of that financial year, $354,511 was paid from the company and allocated to PP's loan account to facilitate the purchase of an overseas property in the joint names of PP and his de facto partner.
The exact value of the represented person's loan account with the company has not been able to be determined for the purposes of the proceedings before the Tribunal. The solicitor for PP, in the letter of 20 September 2010, states:
Unfortunately the loan accounts of [PC], [PP], and [the represented person] were amalgamated … Based on [the external accountant's] investigations to date, it is apparent that the amalgamation of the loan accounts was not directed by [PP] but carried out for a collective purpose as the […] family was considered to be one effective unit for cash drawdown purposes. This was a long-standing practice dating back to when [the company] was formed in the early 70's.
… It was clearly a long-standing practice for [the company] bank account to be used for private family expenses and these then allocated to a loan account to be later offset by dividends.
In her most recent submission PC states that as a guarantor for the bank borrowings of the company, she received a default notice from the bank in February 2011. One of the demands of the bank is that two particular properties owned by the company be sold; the former family home of PP and the represented person and the holiday home they purchased through the company many years ago.
In response PP states that the company continues to maintain a proper working relationship with the bank and that the company has implemented appropriate procedures for the prospective sale of the named properties.
The applicant
As already mentioned in these reasons, the applicant cites a time in 2005 and a time in 2010 when she says the nursing home fees of the represented person were in significant arrears when under the stewardship of PP.
In late 2005 arrears of fees began to accumulate and remained unpaid until March 2007 when PC took control of the payments in her then employment with the company. During this period PP was reported to be of the view that the represented person was being overcharged and was in discussions with Centrelink about the correct rate of daily fees. There was an eventual reimbursement of fees charged of about $5,000 but not before the unpaid fees had accumulated to nearly $23,000. The applicant had by that time referred the debt to a debt collection agency.
In January 2010 PC informed the applicant that she would no longer be able to arrange payment of the represented person's fees through the company. The fees fell into arrears and many attempts were made by the applicant to contact PP but without success. On 20 May 2010, the applicant wrote to PP by registered mail advising him that if the debt was not paid by 28 May 2010 and a direct debit arrangement entered into, then applications would be made to the Tribunal for revocation of the enduring power of attorney and for the appointment of an administrator. The debt which included monthly fees in advance was about $10,200.
Payment was not made by the due date and applications were lodged with the Tribunal.
As it was, PP had arranged a direct payment to the applicant's bank for just over $5,100 on 3 June 2010 leaving a balance of around the same amount. A further payment of $10,400 was made on 13 July 2010, which brought the fees into advance. The applicant was asked to withdraw the application by PP but by that time had come to the view that the Tribunal should decide whether PP should continue to manage the financial affairs of the represented person as her attorney under the enduring power of attorney.
The applicant states that in 2010 when the represented person's account was in arrears, she initially lost the opportunity to be transferred to a more suitable high care facility that caters for immobile residents. The transfer was able to take place when the fees debt was settled.
PC (the daughter)
It is the principal argument of PC that PP, as the attorney for the represented person, is not managing the represented person's estate in her best interests because in controlling the operation of the company (in which the estate of the represented person resides), PP favours his own interests.
PC states that in the late 1990's, when the represented person was in the early stages of dementia, she made a decision to return from a successful overseas career to ensure the represented person was well looked after. She did this because she '… had good reasons to believe [PP] would not look after [the represented person]'s best interests', (letter to Tribunal dated 26 July 2010).
In 2000 PC was appointed the chief executive officer of the company at a time, she says, when the business was in crisis in having to change to higher accreditation standards. In 2010 PC states that her employment was terminated by PP because she disagreed with the decisions he made as governing director of the company. She says she had the view that too much money was being taken from the business operations which meant the company was being depleted of cash reserves. This, in the view of PC, necessitated a sale of surplus assets. PP is alleged to have said that it was PC's poor management which led to the situation just described.
PC and PP are in ongoing dispute about the dismissal and about the past and present management of the company.
PC states that when the nursing home fees have not been paid by PP, she has been contacted by the nursing home and she has ensured that the debt has been settled. She is, however, no longer in a position to monitor the payments because she is not in a managerial position with the company. She questions whether the fees will again fall into arrears.
PC submits that when the nursing home fees have not been paid, it is because PP has not wanted to pay.
PC contends that PP has mismanaged the represented person's income taxation affairs. She states that PP initially failed to ensure that the 2008 taxation return was lodged for the represented person. When the taxation was finally assessed the represented person was left with a debt of nearly $36,000 which included an interest charge of $7,500. PC submits that the interest charged was unnecessary and was equivalent to three months of the represented person's nursing home fees.
PC also questions whether the appropriate agreements are in place between the company and shareholders that deal with loans that are subject to Div 7A of the Income Tax Act. She says she is concerned that the represented person might be subject to a significant income tax liability if the agreements are not correct.
PC states that there are a number of nonincome producing assets in the company from which some shareholders privately benefit but because of her illness the represented person cannot enjoy. These include the holiday home, the former family home which PC says is now used exclusively by PP and his de facto partner and a light aircraft and hanger. PC accepts that all shareholders might benefit from a capital appreciation of these assets but because the represented person cannot otherwise benefit from their use then the cost of her basic welfare should be given priority.
PC states that the overseas property, purchased with a loan from the company in July 2007, is owned equally by PP and his de facto partner.
PC states that about four years ago PP told her he was considering divorcing the represented person because he wanted to reduce the amount of nursing home fees. He is said to have speculated that if divorced, the represented person's care fees would be calculated on her income alone and therefore not be as high as was then being charged. PC says she believes that PP did not proceed with a divorce because it may have led to a challenge to the enduring power of attorney he holds.
PC says that the shareholders of the company should consider winding up the company because the business is not providing for family members as was intended when the company was formed. She submits that the represented person should have independent representation in this situation to ensure her best interests are promoted.
PP (the spouse)
PP states that he and the represented person married in March 1964. After a time (and after the birth of PC in 1966), they bought, developed and sold small blocks of units whilst the represented person continued her nursing career. In a letter to the Tribunal dated 12 November 2010, PP states:
Our individual finances were pooled then as they are now. In terms of finance there was no 'mine' or 'yours' it was 'ours' to share and enjoy, and that is what we endeavoured to do.
From 1982 to 1987 PP and the represented person established and operated a psychiatric hostel. When the hostel was sold they commenced the business which the company still operates today.
It was during the year 2000 when on an overseas holiday that the represented person began to display signs of her subsequently diagnosed dementia. She had to stop work in the business and was only able to live in the newly built family home with the provision of care services. Eventually her care needs were such that she needed care in an aged care facility and she entered the nursing home in November 2003.
PP states that the decision to place the represented person into care was the most difficult he has ever had to make. He states in the letter of 12 November 2010:
[The represented person]'s dementia has increased significantly over the past seven years. I stopped visiting regularly when one day I realised that the person I was talking to was not the lady I had married, whom I loved and respected more than any being on this planet and that she did not have the faintest idea who I was, or what I was doing trying to talk to her. The realisation was more than I could bear.
PP states that prior to the diagnosis of dementia, he and the represented person had discussed the possibility of PC joining the company and eventually taking control of its management. PC agreed with this plan.
PP says that with his assistance PC managed the company reasonably well. He decided then to retire, however in late 2008 the company accountant alerted him to financial problems with the company. PC is said to have assured him that all was well.
PP states that in the latter part of 2009 PC advised him that the company had excessive debt and that all of the nonincome producing assets of the business should be sold to settle that debt. The assets PC referred to were the family home, the holiday home and the light aircraft and hanger.
PP says he believed he had left the company in a sound financial position when PC assumed the management role. He began an investigation into the financial position of the company, the preliminary findings of which he says will form the basis of future litigation against PC for recovery of payments he alleges PC received from the company to which she was not entitled.
PP states that he resumed fulltime management of the company in May 2010 and the role of PC as director and manager of the company was terminated.
The issue of the unpaid nursing home fees raised by the applicant is explained by PP as follows. In 2005 PP says he was in dispute with the nursing home about the amount of fees being charged. No one at the nursing home would listen to him and the represented person's account continued to be charged with the incorrect fee. PP says he 'slowed' the payments to the nursing home but that the matter was finally resolved when the represented person's account was credited with $20,000 of wrongly charged fees and he paid the balance of the debt.
PP says that the represented person's account with the nursing home fell into arrears in 2010 because of significant cash flow problems at the time which to some extent have been rectified. PP states that the capacity of the company to pay the expenses of shareholders is currently much diminished because of what he says is the precarious financial position in which the company has been left by PC. Despite this, PP states that he has arranged for the nursing home fees to be paid directly from the company's bank account. He has also personally guaranteed payment of the fees.
PP states that the income taxation liability of the represented person is being paid through an arrangement with the Australian Taxation Office.
As regards the shareholder loans with the company, PP states that he has recently engaged external accountants to undertake the accounting and taxation work for the company (including the disaggregation of the loan accounts). The preliminary view of the accounting firm is that all of the loans conform to the minimum requirements as set out in Div 7A of the Income Tax Act.
With respect to the issue of the private or nonincome producing assets of the company, PP states that their capital value has appreciated significantly since purchase and, as a shareholder, the represented person benefits from this increase in value. PP states that the loan advanced to him by the company to purchase the overseas property is an unsecured loan and is to be dealt with as a loan, offset by future dividends, subject to Div 7A of the Income Tax Act.
Responding specifically to the question of whether the represented person should have an administrator of her estate appointed by the Tribunal, PP submits as follows:
•Apart from her personal clothing and belongings, the sole asset of the represented person is her ownership of the shares in the company. Her sole income is that of dividends declared and paid from time to time by the company.
•The declaration of any dividend is, pursuant to the constitution of the company, solely within the discretion of PP as its governing director.
•From 22 November 2003 to 21 June 2010, the nursing home received $223,442.10 from the company for the represented person's care and accommodation.
•Prior to PC being removed as a director and employee of the company, she never queried nor contested how the represented person was cared for by PP through the company. PC was herself a party to the way the represented person was provided for in that as a director of the company she had access to the records of the company.
•There is no cogent evidence before the Tribunal that the represented person has, in the past or now been neglected in any way or her interests not provided for by PP.
•To make orders appointing an administrator and revoking the enduring power of attorney will be of no practical value as PP controls the company and the dividend flow entirely. That has been the position since 1971 when PP has been the governing director of the company. The Tribunal has no jurisdiction to make any orders that apply to the company. It is a completely separate legal entity from the represented person and PP.
•To appoint an administrator will not change anything for the represented person. The cost of the administrator would also be an impost on the resources of the represented person which are very limited in any event. The represented person has no capacity to pay the costs of an administrator at this time.
•An administrator representing the represented person will have no more rights than the represented person currently has as a shareholder of the company.
•The appointment of an administrator will have no direct benefit to the represented person other than increasing her costs. The company cannot be forced to pay the private expenses of any of its shareholders, including the represented person. An administrator has no capacity to dictate the management or operations of the company nor to direct PP to manage the company in any particular way.
•The represented person's interests are being positively and effectively looked after by PP. The matter of the unpaid nursing home fees which was the motivation for the application for an administration order by the applicant has been resolved. There is no basis or need for an administrator to be appointed nor for the enduring power of attorney to be revoked.
•If the Tribunal is minded to appoint an administrator, PP consents to such an appointment.
In his letter to the Tribunal of 12 November 2010, PP states:
My wife [the represented person], as I did for her, entrusted her entire worldly assets to me when she appointed me as her Attorney so many years ago. She knew that I would never abuse that trust.
The Public Advocate
The application for an administration order was referred to the Public Advocate pursuant to s 97(1)(b)(iii) of the GA Act. Her role in these proceedings is to advance the best interests of the represented person (s 97(1)(b)(i)).
The Public Advocate submits that whilst the accounting practices that led to a merging of shareholder loan accounts in the company and discretionary payments to shareholders were put in place when the represented person was able to be involved in the business, the environment for such practices has changed since she lost capacity.
This, the Public Advocate submits, has resulted in PP having a clear conflict of interest in controlling the company and being responsible for the represented person's estate by way of the enduring power of attorney.
The Public Advocate refers to the loan given to PP by the company for the purchase of the overseas property with his de facto partner; the private (nonincome producing) assets from which the represented person derives no direct use and the reported poor cash position of the company which requires decisions about the priority to be given to the payment of accounts (including the nursing home fees).
The Public Advocate submits that the enduring power of attorney should be revoked and an independent administrator appointed for the estate of the represented person. The role of the administrator should include not only the management of the represented person's finances, in so far as that is possible under the company structure, but also to oversee company transactions or pose questions about those transactions that the represented person would be entitled to do were she capable.
The Public Advocate notes that the Constitution of the company allows for a process for shareholders to 'opt out' of the company and that the provisions of the Corporations Act 2001 (Cth) provide some relief to minority shareholders in certain circumstances. The Public Advocate would have the administrator explore the viability of these courses of action in determining what is in the best interests of the represented person.
The wishes of the represented person
Due to the advanced stage of her illness, the represented person is unable to articulate in any way what are her current views and wishes in respect to the application before the Tribunal. The only clear expression of her intent as to who it is that should manage her estate in the event of her incapacity is the enduring power of attorney she executed in 1998 in favour of PP.
The decision of the Tribunal
The primary concern of the Tribunal is the best interests of the represented person.
Fundamentally, the expression 'best interests' in the context of a protective jurisdiction, reinforces the idea that the paramount concern is the overall interest of the person to whom the protection is directed (Public Trustee v Blackwood [1998] 8 Tas R 256. Put another way, the expression is concerned with the person's 'separate and independent welfare' (Charlton v Baber [2003] NSWSC 745 at [52]).
The current circumstances of the represented person are tragic. Her illness has advanced to the stage where she is bed bound, noncommunicative and no longer able to recognise her family. She relies wholly on carers for even the most basic of her daily activities. PP describes a person who was once very active in the conduct of the family business but who, from about the year 2000, became progressively incapable of contributing to the demands of the business and finally to her own needs.
The represented person has, for a long time, not been able to decide questions that have arisen in respect to her estate. She is wholly reliant on others to ensure that her financial needs are met and her estate is managed and preserved.
The Tribunal is satisfied that the represented person is in need of an administrator of her estate. The need is for a decisionmaker who has the authority to advance her 'separate and independent welfare'.
PP submits that he has fulfilled this role as the spouse of the represented person and by way of the authority granted him by the represented person in the enduring power of attorney she executed in 1998.
The Tribunal does not accept the submission of PP for the following reasons.
The Tribunal finds that in accounting for the interests of the represented person, PP as her attorney, has not wholly responded to her changed circumstances. In this respect his role as attorney has come into conflict with the way he has exercised his authority as governing director of the company.
This is manifest in the way the company is and has been run. The Tribunal is satisfied on the evidence that PP manages the company, with its mixture of business and private assets, in the same way as when the represented person was actively involved. In this way the business operations of the company are interconnected with expenditure for the private interests of its shareholders. When the represented person was capable and part of the business, this management style benefited PP and the represented person, as founders of the business and as a married couple. For example, the company purchased and owned the family home and the holiday home. It would not have mattered in this arrangement that PP controlled the company as governing director because the company was essentially the vehicle for the business and private interests of the family.
The evidence shows that the loan accounts of the shareholders were aggregated which is consistent with the view of the company as a family entity when the represented person was active in the business.
When the represented person lost capacity, however, PP was bound, as her attorney, to advance her interests as her fiduciary. That responsibility came into conflict with the exercise of his role and authority as governing director of the company.
From at least the time the represented person entered the nursing home in late 2003, the company, so as far as the interests of the represented person were concerned, ceased to be the family entity it had been when she was benefiting directly from the use of its private assets.
It was essential for PP as the attorney for the represented person to be cognisant of that fact and act accordingly. The Tribunal finds on the evidence that PP's role as governing director has overshadowed his role as the attorney for the represented person.
For example, in the course of these proceedings the shareholder loan accounts in the company have not been disaggregated and it has not been possible to identify the transactions that form the loan account the represented person has with the company and the balance of that account. To fulfil his role as attorney under the enduring power of attorney, PP should be in a position to have a clear understanding of the represented person's estate which not only includes her shareholding in the company, but also her loan account and the likely effects of Div 7A of the Income Tax Act on that loan. The Tribunal is not satisfied that PP has that knowledge or understanding.
A further example is the reason given by PP for the nonpayment of nursing home fees for a period in 2010 which is that the company was experiencing cash flow problems. The Tribunal finds that PP failed to communicate with the nursing home because he did not separate his roles as company manager and as attorney for the represented person. In the latter role he should have actively engaged with the nursing home at an early stage about the difficulties he was experiencing in finding funds for the represented person's fees so as to ensure she would suffer no disadvantage. As it transpired the represented person missed an opportunity to be placed in a more appropriate care facility.
As governing director, PP continues to meet some of his private needs out of the business operations of the company other than through the payment of dividends. For example, the company has purchased an aircraft for his sole use and advanced him a substantial loan, on an unsecured basis, to purchase an overseas property with his de facto partner.
The existence of the de facto relationship which was not disputed by PP, places him in further conflict with his duties as attorney for the represented person because a question arises whether the marriage of the represented person and PP is at an end. If it is at an end, what implication might that have for the represented person's estate?
The Tribunal accepts that as governing director, PP controls the company and the dividend flow entirely, and that an attorney or administrator stands in no better position to the company than the represented person could in her own right as a minority shareholder. Despite this, it is critical that any person acting for the represented person promote her interests independently of other interests. This would mean engaging with the company to the extent that the represented person would be able to do. This might include seeking financial information from the company about its operations and ongoing viability in the context of the statutory rights of a minority shareholder. It might also mean, depending on the circumstances, a consideration of whether the represented person should retain her shareholding in the company.
This need for an independent role is also highlighted by the evidence of PP when he says that the capacity of the company to pay the expenses of shareholders is currently diminished. The information recently submitted that two of the properties owned by the company (the former family home and the holiday home) are required to be sold is further support for the need of an objective evaluation of the represented person's position in the company.
PP submits that he has and continues to positively and effectively look after the represented person's financial interests. The principal basis of that submission appears to be that the nursing home fees have been paid since the represented person entered the facility in late 2003 (a total amount of over $220,000 is mentioned) and that he has personally guaranteed payment of the fees into the future. On this view, all of the represented person's needs are embodied in the care she receives in the nursing home.
What this submission fails to take into account is that the represented person's financial interests are not limited to the payment of her nursing home fees although that is of primary importance to her. The interests of the represented person extend to her shareholding and loan account in the company. Although she is a minority shareholder she has a vital concern in the operations of the company as they impact on her shareholding. She also has a vital interest in the standing of her loan account which is potentially a source of funds or a debt. As already mentioned, at the time of these proceedings the status of represented person's loan account could not be ascertained.
It cannot be the case that these interests of the represented person have a reduced standing because she is now incapable and cannot agitate for those interests herself. Someone must protect all of her financial interests in a separate and independent way.
For all the reasons given above this person cannot be PP. The Tribunal has therefore decided that the Public Trustee should be appointed as the administrator of the estate of the represented person. The Public Trustee is to be given plenary powers because the represented person is unable to deal with any part of her estate.
The Tribunal accepts that this order is not consistent with the wish of the represented person as expressed in the enduring power of attorney she executed in 1998. The Tribunal is satisfied, however, that because the circumstances of the represented person have changed significantly since that time including PP forming a new relationship, her previous wish has been overtaken by events. In any case, the principle of best interests prevails and it is the Tribunal's position that this is satisfied by the appointment of an independent manager of her estate.
That being the Tribunal's position, the enduring power of attorney must be revoked because it is inconsistent with the functions given to the Public Trustee (s 108(1a)(a) of the GA Act).
The application made under s 109(1)(c) for revocation of the enduring power of attorney of the GA Act can therefore be dismissed.
The order will be reviewed by the Tribunal in 12 months.
Orders
1. The Public Trustee is appointed the plenary administrator of the estate of the represented person with all the powers and duties conferred by the Guardianship and Administration Act 1990 (WA).
2. The enduring power of attorney dated 27 October 1998 by which [the represented person] appointed [PP] to be her attorney is revoked.
I certify that this and the preceding [115] paragraphs comprise the reasons for decision of the State Administrative Tribunal.
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MR J MANSVELD, MEMBER
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