TQS (Administration)
[2009] TASGAB 16
•18 August 2009
GUARDIANSHIP AND ADMINISTRATION BOARD
HOBART
TQS – Application to review administration order
Neutral Citation: TQS (Administration) [2009] TASGAB 16
REASONS FOR DECISION
Anita Smith (President)
18 August 2009
Administration – review of longstanding order – represented person’s mother proposed as alternative administrator – conflict of interests – represented person’s property in need of significant refurbishment - fall in value of estate due to market – decision of administrator whether or not to expend balance of estate on making property suitable or other options
Guardianship and Administration Act 1995 – ss 51, 54 and 67
TQS is a 31 year old woman who has been the subject of an administration order in Tasmania since 1999 when her mother was appointed as administrator. In 2003, when TQS received compensation monies, the Public Trustee was appointed as administrator. This application concerns the expiry of the current order on 24 August 2009. TQS’s mother, OQ is seeking appointment as administrator in the next term of the order.
OQ’s application for appointment as administrator arises from concerns that the Public Trustee has been inactive in the administration of the estate and that capital works needed in TQS’s home have taken too long and been treated in an excessively complex manner by the Trustee.
History of the Administration:
In 1999 TQS was the victim of a motorcycle accident which occasioned a number of injuries including a closed head injury. She has had a lifelong interest in horses and was, at the time of the accident, an apprentice jockey although she had been on worker’s compensation for three years before the accident following a fall on the track. She shares her interest in horses with her mother and her mother’s partner CN who train horses.
OQ was appointed administrator in 1999 subject to the following conditions:
“2. That the powers and duties of the administrator be those conferred by Division 4 of Part 7 of the Guardianship and Administration Act 1995.
3. That in the event:
(i) that any civil action by the represented person is finalised and compensation or damages are payable to the represented person and;
(ii) that money is paid to the administrator, on behalf of the represented person, the administrator is directed to:
(i) deposit the said monies received with a recognised financial institution, a trustee company or a solicitor pending approval by the Board of a Plan of Management, and;
(ii) prepare a Plan of Management of the represented person’s estate and forward the plan to the Board for approval within twelve (12) weeks of the date of settlement of the action.”In 2003, the Board reviewed that order. It was of concern to the Board in that review that during the course of the order TQS had received a workers compensation award of which $40,000.00 had been applied to the purchase of a property interstate jointly held by TQS, OQ and CN. In doing so, the terms of the 1999 order had not been complied with; in that approval had not been sought from the Board and no plan of management had been submitted. However, the Board extended OQ’s appointment for a further 3 years with the following conditions:
“2.That the powers and duties of the administrator are limited to the conduct of Supreme Court Action No. xxx of 2001 (hereinafter ‘the action’) including the power to settle or compromise the action and do all matters necessary and incidental thereto.
3. That in the event the action is settled and monies are payable to the represented person the administrator is directed to apply to the Board for a review or variation of this order.”On 1 August 2003 the Board was notified by TQS’s solicitor that her compensation claim for the motorcycle accident had been compromised in the sum of $630,000.00. The administration order was reviewed later that month and the Public Trustee was appointed. After disbursements and costs, the compensation sum ultimately paid to the Public Trustee was $531,719.00.
In its March 2006 report to the Board, the Public Trustee noted the sale proceeds from the property interstate as $212,122.58 (from which came approximately $125,000.00 in repayment of liabilities against that property) and purchase of property in Southern Tasmania together with legal and renovation costs as $383,988.34. TQS received $17,120.00 in allowances. The Trustee’s fees were nearly $20,000.00. The Trustee stated:
“As reported in the last account, The Public Trustee has facilitated the purchase of the property in Southern Tasmania. The property was in need of considerable repair and appropriate renovations were made. The Public Trustee has communicated with OQ about extensions to the house to providing a separate area for TQS. The Public Trustee has also agreed to provide funds for improvements to the property from which a rental agreement will be negotiated with OQ and CN.”
The balance of funds in TQS’s account at that stage was $195,690.69.
In a report dated 24 July 2006, the Public Trustee noted that some sheds had been purchased for $11,355.00 with the intention of providing cover for horses trained by OQ and CN who would pay rent for the use of the sheds and the improvements to the property that they use for training. The sheds had not been erected and the Public Trustee noted that there were insufficient funds to continue paying a weekly allowance to TQS and complete the capital works. OQ had suggested that it would be cheaper to complete the works on an ‘owner builder’ basis. The Board advised the Public Trustee to seek internal legal advice regarding the appropriateness of such an arrangement. That issue did not proceed.
In its annual report to 31 July 2007 the Public Trustee reported the following:
Expenses - $20,193.34 (Including allowances $11,600.00)
Income account: $45,001.84
PT No.2 Fund $145,543.46
House value $250,000.00
In its 2008 annual report the Public Trustee reported:
Expenses - $22,728.14 (Including allowances $10,800.00)
Income account: $39,309.92
PT No.2 Fund $118,518.51
House value $250,000.00
The value of the No.2 fund has dropped because of a drop in unit price. The report notes:
“OQ is still looking at quotes towards improvements towards the bathroom and possible additional living quarters for TQS” and
“As previously mentioned, The Public Trustee will determine the possibility of any further renovations in line with TQS’s current income levels and future needs.”
Current situation:
In 2009 the building works remain unfinished. A report from an architect suggests that costs might be $109,500.00 or $64,500.00 depending upon whether the capital works are an improvement to current housing or the establishment of a separate living area for TQS. Current accounts note:
Expenses - $21,911.69 (Including allowances $9200.00)
Income account: $23,622.12
PT No.2 Fund $99,168.55
House value $250,000.00
TQS’s unequivocal wishes are to have an independent unit built on the property which, on the present quote, will almost extinguish the fund.
In 2009 the preclusion period on welfare benefits has expired and TQS is now eligible for a Centrelink benefit. Therefore, the reliance upon the Public Trustee to pay annual allowances of between $9,000.00 and $18,000.00 may not be so great. Additionally, the proposed income from rental of the sheds and training area has not been levied against OQ and CN, so there is a potential source of income there also.
The Issues:
The Southern Tasmania property required a substantial amount of extra investment when it was first purchased. Indeed over 60% of the value of the estate was expended in purchasing and renovating the property in its first year. With hindsight that appears to have been a very poor investment, especially because important aspects the property, such as the bathroom facilities, have never been appropriately accessible for TQS. The property seems to have attracted the family as buyer because of its suitability for horses, but even the facilities for the horses remain unfinished. It is a pity that immediate accessibility for TQS did not take a higher priority at the time of purchase.
Whether the disproportionate level of early investment in the property was a deliberate exercise or one of necessity by the administrator, the result is that the house is TQS’s only significant asset. It was intended to generate income for TQS at the time of purchase, but such income has not resulted. Unfortunately, for a range of reasons the administrator appears to have been confounded by the effects of the poor investment and has delayed making further decisions about the estate. As a result, TQS has been forced to live in unsuitable conditions for too long.
It appears to the Board that the administrator has these choices:
(a) Do nothing except continue to pay allowances and expenses, or
(b) Sell the property and re-invest in a more suitable property, or
(c) Upgrade the property with remaining funds, which also involves a decision about:
(i)Constructing a separate housing area for TQS, or
(ii)Refurbishing existing structures in the house, and
(iii)The extent of other capital works such as repair of retaining walls and driveways, and
(iv)How to fund ongoing maintenance costs in the estate, and
(v)Whether to levy rental income from CN and OQ, and
(vi)Whether an allowance remains viable for TQS, and
(vii)Whether CN and OQ can raise funds to contribute to some of the capital works in exchange for an equitable interest in the property, and
(viii)Whether to reach an agreement with CN and OQ regarding contributions to the ongoing maintenance and expenses.
Option 16(a) is not favoured by TQS or her family. They believe that TQS’s difficulties in day to day living arrangements ought to be addressed by capital works to the existing property. TQS has selected a particular stand-alone facility that she wants to live in and appears to have been encouraged in that view by her family. However, a distinct advantage of option 16(a) is that the value of the No.2 Fund is likely to increase in the near future with the rest of the market. To cash in the investment in the No.2 fund would be to sell TQS’s units in that fund at their lowest price for the duration of TQS’s investment.
But for the untenable living conditions that TQS presently lives in, the Board would approve option 16(a) because waiting for the market to improve will provide TQS with a greater range of options for renovating the existing structure, constructing a new structure or relocating.
Option 16(b) did not appear to have the interest of TQS and her family or the administrator. However, it is likely that even with its current deficits the property has increased from its original purchase price of $250,000.00 in 2003. The Board understands that the property has benefits for TQS and her family in that it has land to run and train the horses. However, an administrator could reasonably make a decision to liquidate the asset in favour of a purchasing or renting a smaller home which is actually accessible to TQS and which might make possible other options for running and training horses, such as the joint lease of another property by OQ, CN and TQS.
The Board would approve option 16(b) on the condition that following prudent calculations of the change-over costs, the sale value of the property, the purchase price or rental costs of an alternative property and availability of support services in a new premises meant that TQS’s estate would appropriately fund her for a significant term.
Option 16(c) seems to be the assumed choice of the administrator and TQS’s family. However, they have been unable to agree on the details within that option. If the administrator proceeded immediately with either of the choice of capital works, it is possible that the cost will completely or significantly extinguish TQS’s investment. This means that there will be no funds to generate income from her estate and pay ongoing allowances and expenses. OQ is strongly opposed to proceeding on the basis of current quotes and believes that she can find cheaper prices elsewhere.
Option (c) is acceptable to the Board on the condition that, if the capital works extinguish all or most of TQS’s funds, an arrangement is reached to generate rental income or a contribution from CN and OQ to ensure that, together with income from benefits, TQS can afford future maintenance of the estate and personal expenses.
From the Board’s perspective the pressure that TQS’s family has put on the administrator to, on one hand, renovate as quickly as possible but, on the other hand, at the cheapest possible price that has slowed down progress on the house. The options that they have presented to the Public Trustee have been unrealistic for a professional administrator to accept, such as constructing under an owner builder arrangement or compromising on external repairs and essential maintenance. While time has been spent exploring these options, the value of the No. 2 Fund has experienced the effects of the global financial crisis which reduces flexibility in the estate.
Put simply, TQS and her family cannot have it all. It is not possible to increase the value of TQS’s funds without waiting for the unit price of the No.2 Fund to increase as the markets recover from the global financial crisis. It will also not be possible to (i) build a separate unit for TQS, (ii) undertake necessary external repairs and maintenance, (iii) continue paying an allowance to TQS, and (iv) continue meeting all housing, fencing and vehicle costs from TQS’s fund without some significant extra contribution, such as payment of rental or some other form of compromise by CN and OQ.
The present administrator cannot now reverse the decision to have invested so heavily in the property. What must be done now is to negotiate a way forward that means that TQS can live appropriately in her home, wherever that home may be. That must be the priority for the administrator and interests of her parents, her family or the arrangements for horses will be secondary to that.
The conclusion:
The decisions left in this estate are urgent and complex. In a number of respects they involve considerations of the interests of OQ. For that reason, she is ineligible for appointment pursuant to section 54(1)(d)(ii) of the Guardianship and Administration Act 1995. Accordingly, it is appropriate to renew the administration order for a further 3 years.
In light of the range of decisions that have been pending in this estate for some time, the administrator is directed to prepare costed options for the future management of the estate and deliver a copy of the options to TQS, OQ and CN within 2 months of the date of this order.
Following delivery of the costed options, the administrator is to convene a meeting of the abovenamed persons to select a preference amongst available options. The administrator has the authority to decide whose quotes to seek and whose to accept. It is not incumbent upon a professional administrator to accept the advice and urging of an unqualified person or persons to find cheaper and less comprehensive alternatives. Therefore the purpose of the meeting is not to allow the abovenamed persons to dispute pricing or quotes or to source a range of alternatives. It is to agree a future strategy to ensure that TQS lives in appropriate housing.
The administrator is to report to the Board on the administrator’s decision about the future management of the estate within 6 months.
THE BOARD ORDERS:
That The Public Trustee be appointed as the represented person’s administrator.
That the powers and duties of the administrator be those conferred by Division 4 of Part 7 of the Guardianship and Administration Act 1995.
That the administrator prepare a range of costed options for the future management of the estate and deliver a copy of those options to the represented person, OQ and CN within 2 months and thereafter convene a meeting with those persons.
That the administrator report to the Board on its decision regarding the future management of the estate within 6 months.
Anita Smith
PRESIDENT
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