TXU (Advice and Direction)

CITATION:	TXU (Advice and Direction) [2020] TASGAB 14
HEARING DATE(S):	6 February 2020 and 17 April 2020
DATE OF ORDER:	17 April 2020
DATE OF STATEMENT OF REASONS:	12 May 2020
BOARD:	Ms R Holder, (President) Mr C Lee, (Member) Ms M Williams, (Member)
APPLICATION:	Advice and Direction - Administrator
CATCHWORDS:	Application by Administrator for advice – conflict of interest
LEGISLATION CITED:	Guardianship and Administration Act 1995 (Tas) ss 51, 54, 61
CASES CITED:	Boardman & Anor v Phipps[1966] UKHL 2; [1967] 2 AC 46, Bray v Ford [1894] AC 44
PUBLICATION RESTRICTION:	This decision has been anonymised for the purpose of publication

Statement of Reasons

The Board’s Decision

On 6 February 2020 and 17 April 2020 the Guardianship and Administration Board (‘the Board’) heard and determined an Application for Advice and Direction concerning the financial estate of Mrs TXU. The initial Administration Order was made by the Board on 8 August 2019.
The Board appointed Mr VXU as administrator of the estate of Mrs TXU (‘the Represented Person’) for 3 years, until 7 August 2022. The Application for Advice and Direction (‘the Application’) was filed by the Administrator (Mr VXU).
The Application was made pursuant to section 61 of the Guardianship and Administration Act 1995 (‘the Act’).
At the conclusion of the hearing, the Board determined to vary the Administration Order, by appointing the Public Trustee as administrator in place of Mr VXU.
On 22 April 2020 Mr VXU requested a Statement of Reasons in relation to the Board’s determination.

The Hearing

The following persons attended the Hearing on the 6 February 2020 and 17 April 2020:
a.    Mr VXU; and
b.    Mrs JXU, [wife of Mr VXU].
The hearing on the 17 April 2020 was also attended by:
c.    Ms Rosemary Jurs from the Public Trustee (Tas).
In determining the matter, the Board had the following documentation before it:
a.     Application for Advice and Direction;
b.     Administration Order made by the Board dated 8 August 2019;
c.   Health Care Professional Report (‘HCPR’) from Dr Elizabeth Hatzistavrou dated 18 July 2019;
d.     Patient Health Summary from Dr Dimitrios Klonaris dated 9 January 2020;
e.     Discharge Summary from State-wide Mental Health Services dated 4 September 2019; and
f.   Discharge Summary - RHH Inpatient from Royal Hobart Hospital dated 26 June 2019.
For the Hearing on the 17 April 2020 the Board also had before it:
g.     Order of the Board dated 6 February 2020; and
h.     Valuation Report from National Property Valuers dated 19 February 2020.

Legislation

Section 61 of the Act provides for applications by administrators to the Board for advice and directions, as follows:
(1) An administrator may apply to the Board for advice or directions on any
matter relating to the scope of an administration order or the exercise of
any power by the administrator under it.
(2) The Board may require notice of the application under subsection (1) to
be given to any person that the Board directs and may exercise its
powers under this section without a hearing.
(3) The Board may –
(a) approve or disapprove of any act proposed to be done by the
administrator; and
(b) give such advice as it considers appropriate; and
(c) vary the administration order or make any other order that it could
      have made on the original application relating to the administration of
      the estate that it considers necessary.
(4) The Board of its own motion may direct, or offer advice to, an
administrator in respect of any matter.
(5) An administrator who contravenes a direction given to him or her under
this section is guilty of an offence and is liable on summary conviction to
     a fine not exceeding 20 penalty units.
When the Board determines an Application for Administration it applies the criteria in section 51 of the Act. When considering who is to be appointed as administrator the Board applies the criteria in section 54 of the Act, as follows:
(1) The Board may appoint as an administrator of the estate of a proposed
represented person –
(a) The Public Trustee; or
(b) the Public Guardian; or
(c) a trustee company within the meaning of the Trustee Companies Act
1953; or
(d) any other person, including the guardian of the proposed represented
person, who consents to act as administrator if the Board is satisfied that –
(i) the person will act in the best interests of the proposed represented
person; and
(ii) the person is not in a position where his or her interests conflict or
may conflict with the interests of the proposed represented person;
and
(iii) the person is a suitable person to act as the administrator of the
estate of the proposed represented person; and
(iv) the person has sufficient expertise to administer the estate.
(2) In determining whether a person is suitable to act as the administrator of
the estate of a proposed represented person, the Board must take into
account –
(a) the wishes of the proposed represented person, so far as they can be
ascertained; and
(b) the compatibility of the person proposed as administrator with the
proposed represented person and with his or her guardian, if any.

Evidence

The Board heard evidence that the Represented Person had moved into a Residential Aged Care Facility [in the Hobart area]. A daily accommodation payment (‘DAP’) of approximately $100 per day is being paid to [the Residential Aged Care Facility], while no refundable accommodation deposit (‘RAD’) has been paid.
The Applicant gave evidence that the Represented Person owns land at [the address in Hobart] and a property at [the address in the Hobart area]. The Represented Person is in receipt of an aged care pension and had approximately $1500.00 in a bank account. She has a debt with Centrelink of approximately $20,000, which is being repaid through automatic fortnightly deductions from her pension. Mr VXU advised he was the beneficiary of the Represented Person’s Will.
The Application was motivated by the following concerns:
a.     the need to pay a Residential Accommodation Deposit (RAD) of $250,000 to the aged care facility where the Represented Person is now residing;
b.     the proposed sale of [the land at the address in Hobart];
c.   rights for long term guardianship and administration; and
d.     approval for repairs and maintenance to [the property in the Hobart area].
Mr VXU stated that he sought to purchase the Represented Person’s land at [the address in Hobart], as it was the Represented Person’s wish to keep the land within the family as it had previously belonged to her deceased son and the intention was it could be passed onto one of Mr VXU’s sons. Mr VXU stated he intended to pay the RAD with the funds from the sale of land. Mr VXU stated he approached his solicitor to ‘do the paperwork’ and concerns about the value of the land were raised by his solicitor. Mrs JXU stated “we are hoping not to pay as much for the block of land. I don’t know whether you can help us out or not.” The Board has no such powers. In response to a question from the Board as to whether he intends to purchase the land if valued at a high sum Mr VXU stated “it means our stamp duty will be higher. It is not something I should be paying for, it will come down the line eventually.”
Mr VXU advised he had received financial advice from Shadforths, which he described as ‘terrible’ and rang up 2 other financial advisers, who were not able to provide the requested assistance.
As directed by the Board Mr VXU obtained a valuation for the [land at the address in Hobart] which indicated a value of $300,000.
Mr VXU stated that his sons are living in the property at [the address in the Hobart area] and at this point he has no intention of selling it. Mr VXU stated he was thinking he could ‘fix up the house at [the address in the Hobart area] and rent it out to fund it all.’ In response to a question from the Board, he confirmed his sons were living in the property rent free.
At the first hearing, the Board enquired of Mr VXU as to whether he believed he was conflicted in his role as administrator, and he responded:
Yes I should be conflicted in this. Yes of course I am the only son. I am just trying to work out how I can fund it. I am thinking if I pay the RAD we will get that payment back eventually. The house at [the address in the Hobart area] needs repairs – sunken floors and a whole lot of issues there. I don’t want to rent it out, that’s why I have the boys there. When I lease out my business I can get in there and fix it up a bit. If then we have to, we can rent it out. At the end of the day I would fund it for my Mother anyway. We need to get the RAD payment paid.
At the hearing on the 17 April 2020 Mr VXU denied he as administrator had a conflict stating:
I don’t think there is a conflict between me and my mother. I have spoken with her about this whole situation and she is quite happy to go on, with what we are doing.

Decision

An administrator is appointed to protect the interests of and administer the estate of a Represented Person. The Act requires the Board to be satisfied that the proposed administrator is ‘not in a position where the person’s interest conflict or may conflict with the interests of the proposed represented person.’ Sometimes, a conflict or perceived conflict of interests is not evident at the time of an administrator’s appointment. A conflict may not be discovered until the Board reviews the order or hears an application for advice and direction, as is the case here. In such a situation it is appropriate for the Board to consider and apply the criteria set out in section 54(2) of the Act and address the issue of conflict.
The Act does not define conflict of interest. A conflict of interest is a situation where a person has a personal interest that is incompatible, or in conflict, with the duty they owe to the represented person as administrator – to act in the best interests of the represented person.
The relationship between an administrator and a Represented Person is a ‘fiduciary’ type of relationship. In Bray v Ford [1894] AC 44 Lord Herschell stated:
It is an inflexible rule of the court of equity that a person in a fiduciary position, such as the plaintiff’s, is not, unless otherwise expressly provided, entitled to make a profit; he is not allowed to put himself in a position where his interest and duty conflict. It does not appear to me that this rule is, as has been said, founded upon principles of morality. I regard it rather as based on the consideration that, human nature being what it is, there is danger, in such circumstances, of the person holding a fiduciary position being swayed by interest rather than by duty, and thus prejudicing those whom he was bound to protect. It has, therefore, been deemed expedient to lay down this positive rule.
Also, in Boardman & Anor v Phipps[1966] UKHL 2; [1967] 2 AC 46 at page 124 Lord Upjohn stated:
It is perhaps stated most highly against trustee or director in the celebrated speech of Lord Cranworth L.C. in Aberdeen Railway v Blaikie, where he said: “[a]nd it is a rule of universal application, that no one, having such duties to discharge, shall be allowed to enter into engagements in which he has, or can have, a personal interest conflicting, or which possibly may conflict, with the interests of those whom he is bound to protect.”
These same principles should be applied to administrators.
The Board identifies three areas where Mr VXU is in a position where his interests conflict or may conflict with the interests of the Represented Person.
Mr VXU is seeking to purchase land from the Represented Person. He has a personal interest to purchase the land at the lowest value possible, and on the most advantageous terms. At the first hearing, Mrs JXU’s statement that “we are hoping not to pay as much for the block of land. I don’t know whether you can help us or not” reflects a focus on their own personal interests. Mr VXU gave evidence that this land is to go to him and then to his eldest son. No other considerations, such as commercially renting the property or selling it outside of the family have been considered. Even if Mr VXU purchases the land at market value, there is no one independently looking at this decision from the Represented Person’s perspective and ensuring the protection of her rights.
Mr VXU gave evidence that his sons enjoy rent free accommodation at the Represented Person’s property. Maintaining this situation benefits his sons, to whom he is apparently close and no doubt wants to assist. It means that Mr VXU is unable to bring an independent mind to considering all viable options for the property, including the possible sale; or renting of the property at a commercial rate to another party, which would require his sons to find alternative accommodation; or imposing a commercial or some other amount of rent on his sons.
Mr VXU seeks to ‘fix up’ the property [at the address in Hobart] rather than consider selling or renting it at this stage. Any work on the property would have the potential of increasing the value of the property, which would form part of the estate or, if sold, the sale proceeds would form part of the estate that Mr VXU is set to inherit. It would also indirectly benefit Mr VXU’s sons who reside there. From Mr VXU’s evidence he is intending to do some of that work himself and is willing to mix his funds with his mother’s funds if required, to complete the work, thereby arguably giving him some interest in the property.
At hearing, Mr VXU repeatedly stated he was acting in accordance with his mother’s wishes, stating “I don’t understand the conflict because of her wishes”; and “I am going with my mother’s wishes. Assets are coming to me anyway.” If a conflict exists, or will exist then it must be taken into account. It cannot be ignored because it is said to represent the Represented Person’s wishes.
On the evidence before the Board, there is a clear and real possibility for conflict between Mr VXU’s personal interests and his duty to act in the best interests of the Represented Person in respect to the management of the Represented Person’s land and property. Decisions need to be made objectively and impartially, weighing up the Represented Person’s best interests and her wishes if ascertainable. An independent administrator is needed to ensure the protection of the Represented Person’s rights.
The Board is concerned that at the second hearing Mr VXU retracted his earlier comment that he felt he was conflicted to act as administrator and did not appear to understand or want to understand any possible conflict. An administrator needs to understand and identify possible conflict of interest situations and avoid these situations if possible or refer them to the Board, so as to perform their powers and functions appropriately. In this respect, Mr VXU’s failure to acknowledge the possibility of a conflict of interest arising calls his suitability to continue as administrator into question.[1] Further Mr VXU’s comments such as ‘it is coming to me anyway’ and ‘it is not something I should be paying for, it will come down the line eventually’ reflect a sense of entitlement and again call into question his suitability.
[1] Guardianship and Administration Act 1995 (Tas), s 54 (2)(d)(iii).
On this basis of finding the administrator has a conflict of interest with the interests of the Represented Person and is no longer suitable to act as administrator, the Board finds it appropriate to vary the Administration Order by appointing the Public Trustee in place of Mr VXU.

Conclusion

After hearing an Application for Advice and Direction, the Board Orders:
1.That the Administration Order dated 8 August 2019 is varied and from this day the Order is:
i.The Public Trustee (Tas) is appointed as Administrator of the estate of TXU.
ii.That the Administrator is authorised to distribute gifts from TXU’s estate to a maximum of $1000.00 per year. Such gifts are subject to the Administrator’s discretion.
2.The Order remains in effect until 7 August 2022.

[2020] TASGAB 14

17 April 2020