CITATION: WB v Protective Commissioner [2006] NSWADT 292 DIVISION: General Division APPLICANT PARTIES: WB RESPONDENT Protective Commissioner FILE NUMBER: 063107 HEARING DATES: 21/06/2006 and 27/06/2006 SUBMISSIONS CLOSED: 09/21/2006 DATE OF DECISION: 10/05/2006 BEFORE: Britton A - Judicial Member CATCHWORDS: Protected Estates Act - Protective Commissioner - powers as to property - Protective Commissioner - powers as to property MATTER FOR DECISION: Principal matter Administrative Decisions Legislation Amendment Act 1997 LEGISLATION CITED : Guardianship Act 1987 Protected Estates Act 1983 GG v Minister for Community Services [2002] NSWCA 247 CASES CITED: KY, KX and KW v Protective Commissioner [2006] NSWADT 197 McDonald v Guardianship Administration Board [1993] 1 VR 521 Suzanne Frugtniet v Administrative Decisions Tribunal (Appeal Panel) & Anor; Brian Frugtniet v Administrative Decisions Tribunal (Appeal Panel) & Anor [2005] NSWCA 257 APPLICANT In person REPRESENTATION: RESPONDENT C Phang, legal officer ORDERS: Pursuant to s 63(3)(d) of the Administrative Decisions Tribunal Act 1997 the decision not to sell the property the subject of this application is remitted for reconsideration by the Protective Commissioner in accordance with the following recommendations:; i. That the Protective Commissioner conduct further research into the anticipated values of properties located in south west Sydney, over the next five years; ii. In the event that that evidence reveals that property values will probably decline or not increase in line with expected movements in inflation, then the decision to sell the property should be revisited having regard to the expected medium term return on cash investments; iii. That in the event the decision is made not to sell the property the subject of this review, that an annual review be conducted having regard to among other things, estimated short and medium term interest rates, rental returns and, trends within the Sydney property market Section 126 of the Administrative Decisions Tribunal Act 1997 applies to this decision. Section 126 provides (1A) This section applies only to the following: (a) proceedings in the Community Services Division of the Tribunal, (b) appeals to an Appeal Panel from a decision made by the Tribunal in the Community Services Division, (b1) proceedings in relation to an external appeal made under section 67A of the Guardianship Act 1987 or section 21A of the Protected Estates Act 1983, (b2) proceedings in relation to a reviewable decision made under the Guardianship Act 1987 or the Protected Estates Act 1983 (c) such other proceedings (or class or classes of proceedings) as may be prescribed by the regulations for the purposes of this section. (1) A person must not, except with the consent of the Tribunal, publish or broadcast the name of any person: (a) who appears as a witness before the Tribunal in any proceedings, or (b) to whom any proceedings before the Tribunal relate, or (c) who is mentioned or otherwise involved in any proceedings before the Tribunal, whether before or after the proceedings are disposed of. Maximum penalty: 10 penalty units or imprisonment for 12 months, or both. (2) This section does not prohibit the publication or broadcasting of an official report of the proceedings that includes the name of any person the publication or broadcasting of which would otherwise be prohibited by this section. (3) For the purposes of this section, a reference to the name of a person includes a reference to any information, picture or other material that identifies the person or is likely to lead to the identification of the person. REASONS FOR DECISION 1 YL is an 81-year-old woman who suffers from advanced dementia. For just over twelve months her estate has been under the management of the Protective Commissioner pursuant to the Protected Estates Act 1983 (Protected Estates Act). 2 Since April 2005 YL has lived in a nursing home, Scalibrini Village. Immediately before moving to the Village, YL lived in her own home and was cared for by her daughter, YM. She will never be able to return home or live independently. 3 In September 2005 the Protective Commissioner made a decision to sell YL's home, in which YM and her two adult sons continue to live. YM opposed that decision. On her request the Protective Commissioner reviewed and reversed the decision not to sell the property. 4 WB, YL's son, is the applicant in these proceedings. He has applied to the Administrative Decisions Tribunal for a review of the Protective Commissioner's most recent decision not to sell the property. He contends that it is not in his mother's best interests to retain the property and that a higher rate of return could be achieved if it was sold and the proceeds of sale invested. His sister continues to maintain that the property should not be sold. 5 At the close of submissions I made my own enquiries of Centrelink concerning pension entitlements and invited the parties to make further written submissions on the information obtained. Both parties made further written submissions. Background 6 In a letter dated 29 September 2005, Anne Gent, a Senior Estate Manager with the Protective Commissioner, notified the applicant that a decision had been made to sell his mother's property in south west Sydney. Ms Gent wrote that the Commissioner was obliged to make YL's "[m]oney work for her and be used in the best way possible ... for as long as possible". Ms Gent stated that, among other things, the decision was based on the views of YL's children and the "[f]act that capital funds needed to be raised to pay the balance of the accommodation bond". 7 At the time that decision was made, the Commissioner held less than $10,000 in cash in trust for YL and a further $17,000 was needed to pay the balance of the accommodation bond charged by the Village. 8 YM requested a review of that decision. In a decision dated 14 February 2006, John Neeley, Acting Assistant Director Estate Management Branch reversed the decision to sell the property. 9 Mr Neeley gave detailed reasons for that decision. He noted that in addition to the information available to the original decision maker, Ms Gent, he had before him reports about the value and condition of the property and submissions prepared by YM. He also noted that in December 2005 the Commissioner received about $115,000 representing the redemption of three cash investments that had been held by YL. No reference was made to these investments in the original decision and it would seem that the Commissioner had no knowledge of them before December 2005. 10 Based on this information, Mr Neeley concluded that YL's net income was about $170 per fortnight. He noted that from April 2007 Centrelink would count the south west Sydney property as an asset and, as such, YL would lose her pension entitlement (and other benefits), her expenditure would exceed income and "capital will then be needed to meet ongoing needs". 11 Mr Neeley noted that a recent valuation gave the property an estimated value of between $365,000 and $370,000. The market rent was estimated to be just over that being paid by YM, that is, $260 to $270 per week. He noted that the agents who were managing the property reported that the house and garden were in excellent condition. 12 Mr Neeley also recorded that Centrelink had recently advised that the pension received by YL had been incorrectly calculated and the correct figure was about $160 per fortnight less and, as a consequence, a refund was owed to Centrelink. 13 In addition to the south west Sydney property, YL's estate consisted of $112,000 held in trust by the Protective Commissioner, an accommodation bond of $100,000 held by the Village and fortnightly income of about $1,050 made up as follows: Centrelink pension: $336 Interest on trust funds (estimated rate of return 5% pa): $215 Rent: $500 Total: $1,050 14 He estimated that her fortnightly expenditure was about $880, broken down as follows: Commissioner's fees $212 Care Fees payable to the Village: $400 Income tested fees $100 'Comforts' $25 Chemist $20 Rates and Insurance $122 Total $880 (Note figures are approximate and rounded). 15 He also noted that YM had been YL's carer for two and half years before she moved to the Village. 16 The decision was as follows: 5.1 The decision to sell property … is set aside 5.2 In its place is approved for the property … to be formally rented to YM at $250.00 per week and she is to sign a Residential Tenancy Agreement through Century 21, Campbell Real Estate Agents, Campbelltown, who are to manage the property on behalf of YL for the OPC. The rental arrangements to be reviewed at any time it is advised the property is not being maintained in the best interests of YL or there is a need to raise additional funds for her Submissions by the applicant 17 The applicant contends that the decision not to sell the property is not in the best interests of his mother. He relies on a report prepared by accountant, Rod Burke, which is to effect that a better rate of return could be achieved from cash investments. 18 He asserted that the figures relied on by the Commissioner understated the real costs of retaining the property and made no allowance for the cost of maintenance and repairs. He also asserted that before she became ill, his mother told him that if she was forced to move to a nursing home she would not wish to keep her home. Evidence of Rod Burke 19 The applicant tendered a report prepared by accountant, Rod Burke. Mr Burke also gave oral evidence. 20 In his report, Mr Burke addressed the relative merits of renting the south west Sydney property as opposed to selling it and investing the proceeds of sale. He essentially adopted the figures relied upon by Mr Neely but also made allowances for annual agency fees ($1000) and depreciation ($2750). He favoured selling the property and investing in a secure cash investment. He estimated that the rental return on the property would be about 1.6%. In contrast he estimated that a return of about 6% could be achieved if the proceeds of sale were invested in a secure cash investment. Using those figures he asserted that if the property continued to be rented out under the current arrangements, YL's annual expenditure would exceed income by about $7000. In contrast, if the property was sold and the proceeds invested the figures would be reversed and income ($26,590) would exceed expenditure by about $8000. 21 Mr Burke said that rental properties are only attractive as long-term investments where the market has potential to achieve capital gain. At the moment, according to Mr Burke, Sydney rental properties do not show a reasonable rate of return and have not done so for a number of years. He asserts there is little evidence to indicate that the market will improve. Report prepared by Goodwin Financial Services 22 The applicant also tendered in these proceedings a report prepared by financial planner, Brian Beazley of Goodwin Financial Services. Mr Beazley endorsed Mr Burke's recommendation. He also recommended a strategy that involved reducing YL's assets by about $50,000 and investing that sum in an annuity. This, he contended, would result in the maximisation of YL's pension entitlements. (The parties agreed that the changes to social security rules announced by the Federal Government in the 2006 budget meant that it was no longer necessary for YL's assets to be reduced to maximise her pension entitlements. Accordingly, in these reasons I make no further reference to the annuity proposal.) Report prepared by Annette Woods 23 The respondent filed in these proceedings an affidavit sworn by Annette Woods, Senior Financial Planner with the Protective Commissioner. Ms Woods provided an analysis of the investment options endorsed by Messrs Burke and Beazley. She also provided an estimate of YL's projected expenditure and income over the next three years. While the applicant took issue with the ultimate recommendation made by Ms Woods, namely not to sell the property, there was no material dispute about the figures she used. (In the course of the hearing Ms Wood amended some of the figures set out in Attachments A and B to her affidavit. The revised figures are the figures referred to in these reasons.) 24 According to Ms Woods, two dates will affect YL's financial position for the next three years. On 8 April 2007, the second anniversary of entering supervised accommodation, Centrelink will deem YL's south west Sydney property to be an asset for the purpose of calculating pension entitlements and, as a consequence, she will lose those entitlements and the care fees payable to the Village will increase. According to Ms Wood, this change will be short-lived and in September 2007, as a consequence of recent changes announced by the Federal Government, YL will receive a part pension and the care fees payable to the Village will be reduced. 25 Taking those changes into account, Ms Wood anticipates that in April 2007 YL's annual income will drop from $4000 to $3400 and increase to about +$200 in September 2007. In comparison, if the south west Sydney property was sold, she estimated YL's annual income would be just under $3000 from April 2007, increasing to $8000 in September 2007. 26 In Ms Woods' opinion, the property should be retained for the following reasons: YL does not have a cash flow problem. There will only be a short period (April to September 2007) where her expenditure will exceed her income. YL has ample cash assets to meet any unforseen costs. Given the depressed state of the Sydney property market a sale today would result in a capital loss. The property was purchased in October 2003 for $362,500 and would be expected to sell for about $345,000 (net). The property is well maintained and cared for. YL's wishes 27 It is not in issue that YL is not in position to express a view on whether the south west Sydney property should or should not be sold. 28 The applicant contended that his mother had made clear to him that when she reached the point where she was unable to remain at home that she wished to move to Scalibrini Vilage and for her house to be sold and the proceeds invested. He argued that his mother had no sentimental attachment to the property as she had lived there for only a relatively short period and had early signs on dementia when she moved in. 29 He tendered a letter dated 10 February 2001 "To whom it may concern". It bears what purports to be the signature of YL. It reads in part: [t]his is a good time to express my future financial needs. My home at … should be sold [if I ever need to go into a nursing home] and the proceeds of the sale put into a trust fund organised by my solicitor...I am aware of all the complications and risks if I have to deal with if I rent my home out and feel its not worth it. 30 The letter was not provided to the applicant's sister or the Protective Commissioner until the commencement of these proceedings. YM disputes its authenticity. She claims that her mother could not have written in such a "scholarly" style as her first language was not English and she had left school early. According to YM it was her mother's wish that she remain in the home and buy out her brother. 31 The applicant claims that his mother had made it clear to him that she did want her house rented out if she was forced to move to a nursing home. He claims that he drafted the letter at his mother's request. He testified that his mother had never discussed with him what she wanted to do with the south west Sydney property as by the time she moved there she already had advanced dementia. He claimed that his mother always dealt with his children fairly and would not have approved of one child remaining in the home. Reasonable allowance? 32 The Protective Commissioner estimates YL's annual expenditure to be about $11,000. Of this, an amount of $1300 has been allocated for discretionary expenditure ('comforts'). The applicant contends that this amount is insufficient. He claimed that his mother took pride in her appearance and now had insufficient funds to visit a hairdresser on a regular basis as she used to do before she entered the Village. He also pointed out that his mother's wardrobe needed to be replenished but despite making requests to the Commissioner this had not occurred. He claimed to have phoned the Commissioner on at least six occasions this year requesting that new clothes be purchased for his mother but this had not occurred. He also claimed that his mother needed new dentures but to date nothing had happened. He claimed that he had been told by the staff at the Village that they had been advised that there were no funds available for such purchases. 33 In evidence, Ms Wood said she was unaware of any policy or practice of the Protective Commissioner, which required staff charged with the daily approval of expenditure (case managers) to remain within the allocated budget. 34 Tina Baker, YL's case manager, gave evidence that she had been informed by the Village that $1300 per year was an appropriate figure to cover any incidental expenses incurred by YL such as hairdresser fees and toiletries. She said she was unaware of any request for expenditure having been made on behalf of YL that had been refused. She said that the practice within the Office was to attempt, as far as possible, to keep a client's expenditure within budget. Standing 35 Section 28 A(3) of the Protected Estates Act provides that the following people may apply to the ADT for a review of a decision of the Protective Commissioner: (a) a protected person in respect of whose estate the decision was made, or (b) the spouse of a protected person or protected missing person in respect of whose estate the decision was made, or (c) any other person whose interests are, in the opinion of the ADT, adversely affected by the decision. 36 The Protective Commissioner contends that the applicant has failed to point to any interest of his that might be adversely affected by the decision the subject of this review. It contends that it was not enough for a family member to assert that they were concerned that the interests of a relative might be adversely affected to fall within the scope of s 28A(3)(c). Had Parliament intended to automatically give family members a right of review, the class of persons automatically entitled to seek review would not have been restricted to the subject person and the spouse. Without identifying a relevant interest of the applicant, it follows, argues the Commissioner, that the application cannot proceed. 37 When this matter was first raised, the applicant conceded that he had no direct pecuniary or material interest in the outcome of the decision the subject of review. He cited his main interest was his concern for his mother's well-being. On the final day of hearing, he advised the Tribunal that he had received legal advice to the effect that as the beneficiary of his mother's will he had a pecuniary interest in the outcome of the proceedings. 38 The operation of s 28A(3) was discussed in the recent decision of KY, KX and KW v Protective Commissioner [2006] NSWADT 197 at [31] –[32]. In that decision Judicial Member Rees examined a number of decisions which have looked at the standing test of "interests affected" under Australian administrative law. He concluded that those words should be read broadly and there was no warrant to read them down to mean proprietary, legal or equitable interests. 39 Where, as in this case, there are close family ties between the applicant and the subject person, their respective interests can be said to be inextricably linked. In my view the applicant has familial interests which could be adversely affected by the decision under review. It could also be argued that he has a potential financial interest as a beneficiary of his mother's estate. 40 I am satisfied that the applicant's interests could be adversely affected by the decision under review and therefore he may apply to the Tribunal for a review of the decision of the Protective Commissioner. Findings and Conclusions 41 In reviewing the decision not to sell the south west Sydney property, the Tribunal "stands in the shoes" of the Protective Commissioner and is required to make the "correct and preferable decision" having regard to the material before it (Administrative Decisions Tribunal Act 1997, s 63). This includes not only that material available to Commissioner when the original decision was made but any material that postdates that decision ((Suzanne Frugtniet v Administrative Decisions Tribunal (Appeal Panel) & Anor; Brian Frugtniet v Administrative Decisions Tribunal (Appeal Panel) & Anor [2005] NSWCA 257 at [45]) YG & GG v Minister for Community Services [2002] NSWCA 247 at [25]). The review is to be conducted "without any presumption as to the correctness of the decision": McDonald v Guardianship Administration Board [1993] 1 VR 521 at 530 (SupCtVic, Appeal Div). 42 It is not in issue that the Commissioner has the power to sell (or not sell) the south west Sydney property (s 24 of the Protected Estates Act). The Protected Estates Act gives no express guidance on the principles to be observed by the OPC, when exercising its function under s 24 of the Act. However, it is apparent given the protective nature of this jurisdiction, that in exercising its functions, the interests of the protected person whose estate has been committed to the management must be paramount. 43 The following extract taken from Fact Sheet Number 3 published by the Commissioner, sets out the principles said to guide the Commissioner staff when making "substitute decisions". They are the clients' [subject person's]: 1. wishes 2. immediate and long term needs 3. financial resources 4. requests, plans and objectives from their family, close friends or guardian 5. previous, current and desired lifestyle 6. family commitments or obligations 7. previous arrangements 8. rights and views of probable beneficiaries after their death Outlined below are the general principles of the Guardianship Act 1. The welfare and interests of people with impaired decision-making ability should be given paramount consideration 2. Their freedom of decision and freedom of action should be restricted as little as possible 3. They should be encouraged, as far as possible, to live a normal life in the community 4. Their views should be taken into consideration 5. The importance of preserving family relationships and cultural and linguistic environments should be recognised 6. They should be encouraged, as far as possible, to be self reliant in matters relating to their personal, domestic and financial affairs 7. They should be protected from neglect, abuse and exploitation 8. The community should be encouraged to apply and promote these principles. 44 While not determinative, the starting point in an examination of YL's best interests, must be her views about the retention of the property. It is not in issue that she no longer has the capacity to express a view. Her children offer conflicting opinions about her wishes. Both have an interest in the outcome of these proceedings and neither is able to give an independent account of the discussions each claim to have had with their mother. 45 Little weight, in my view, can be given to the letter tendered by the applicant. Leaving aside the issue of authenticity, it purports to express YL's wishes about circumstances that no longer exist. It purports to be written at a time when YL was still living in the family home of over 50 years in the Canterbury/Bankstown area, before the purchase of the south west Sydney property was even considered. At its highest it indicates what she wished to happen if she were to move to a nursing home. 46 In my view there is no reliable evidence before me that discloses what YL's wishes were or might be had she the capacity to express them today. 47 It is apparent from the evidence, that the applicant was displeased with what he characterised as the favourable treatment afforded to his sister by the Protective Commissioner. For some time, she had been paying significantly less than market rent. That has now been rectified and the rent is now close to the market rate. Given that on all reports she is an excellent tenant and ensures 100 per cent occupancy, the arrangement in my view could not be considered to be to YL's economic disadvantage. The real issue is not whether the rental arrangement is fair and reasonable but whether it is in YL's best interest to retain the property. 48 From a reading of the reasons given by the decision maker who conducted the internal review, Mr Neeley, it is apparent that one of the factors taken into account was the position of the applicant's daughter. It was noted that she had been the primary carer of the YL and, if the original decision was upheld, she and her two sons would be forced to vacate the property. As I read it, Mr Neeley took the view that without a pressing reason, in deference to the daughter, the status quo ought not be disturbed. While not expressly stated, Mr Neeley seems to have considered that the daughter had in effect an equitable interest in the property as a consequence of her role as carer. 49 I have some concerns with this approach. The Commissioner is required to act in the best interests of the person whose estate is committed to management. Subject to any countervailing factors, this means that the Commissioner must endeavour to preserve the estate and at the same time maximise income, within of course conservative investment parameters. In the event that there is a conflict between the interests of the subject person and a family member or former carer, the interests of the former must prevail. This is not to suggest that the Commissioner should be guided by financial concerns alone. There will be circumstances where it would be entirely proper to take account of non-financial factors. These would include the wishes of the subject person; and any non-financial benefit that they might obtain from the retention or disposition of a particular asset. In this case, for example, if there was some evidence that YL had an attachment to the south west Sydney property and enjoyed visiting it, even occasionally, these would be proper factors to be taken account. 50 Another reason cited by Mr Neeley for not selling is the absence of any "need" to do so to meet YL's expenses. In my view this is an irrelevant consideration. The Commissioner is required to manage YL's estate in a professional and diligent fashion. Decisions such as to whether to dispose of a significant asset ought be based on sound financial grounds, having regard to, among other things, the expected income of, and capital growth of the asset. The decision ought not rest on the presumption that no action should be taken unless a need to act is made out. 51 While unlikely, it may be that YL will need to call upon her assets to meet unknown future costs. For this reason, among others, it is important that the value of her estate be maintained. 52 Applying these principles, the first issue to be determined is how the two options favoured by the parties compare. It is not in issue that the option favoured by the applicant would deliver a higher rate of return. Invested conservatively, it is agreed that a rate of about 5% a year could be expected. In contrast, if the property continues to be rented out under the current arrangements it will at best return about 1%. Based on the figures used by the Protective Commissioner there will be a five-month period when expenditure will exceed income and even when, in September 2007, this improves, it is likely that that there will continue to be a shortfall between income and expenditure. (While the Commissioner's figures shows an annual surplus of about $200 from September 2007 they make no allowance for any repairs to the property or unforseen expenses.) 53 Ms Wood does not challenge the proposition that the cash investment option for the foreseeable future offers a better deal in terms of income. Her point is however is that this represents only one part of a complex equation and regard must also be had to capital growth. She correctly points out that if the property were to be sold today, there would be a capital loss. In her view, given that YL does need to realise the asset at this time it would not be in her best interests to do so at this point in time. 54 It is no easy task to determine the best option for YL. In deciding what is the correct and preferable decision, a degree of crystal-ball gazing is required. A number of unknown factors will determine how the two options will ultimately compare over the medium to long term. These include YL's life expectancy; future movements in interest rates; real estate values in South Western Sydney and any changes to the pension eligibility rules. 55 There is some strength in Ms Wood's contention that to sell now would realise a capital loss. In her opinion, the history of the Sydney property market shows that it is in general resilient. It is not possible to say with any degree of certainty whether that remains the case and if that generalisation can be applied to the properties in the area where YL's property is located. However if the value of the property remains unchanged over the next, say, five years the value of the estate will have been significantly diminished. 56 I believe that further research ought to be conducted about the trends in the property market in southwest Sydney before any final decision is made. If there is some reliable evidence to support the proposition that in the medium term the property values in this area might pick up, then it could be that the retention of the property is the better of the two options. Without such evidence it is difficult to see how it could be maintained that an investment option which delivered at best a nil return, on an asset that was declining in value, could be supported over a cash investment which on current figures is returning about 5-6%. This is especially the case given that while no formal policy might exist the Commissioner's officers charged with the day to day responsibility of approving expenditure might be hesitant in approving additional non urgent expenditure where the subject person has nil income but considerable assets. As WB has pointed out the amount of discretionary expenditure available to Mrs YL on a weekly basis is extremely modest. 57 I have decided pursuant to s 63(3)(d) of the Administrative Decisions Tribunal Act 1997 to set aside the decision not to sell the property and to remit the matter for reconsideration by the Protective Commissioner in accordance with the following recommendations: i. That the Protective Commissioner conduct further research into the anticipated values of properties located in south west Sydney, over the next five years. ii. In the event that that evidence reveals that property values will probably decline or not increase in line with expected movements in inflation, then the decision to sell the property should be revisited having regard to the expected medium term return on cash investments. iii. That in the event the decision is made not to sell the property the subject of this review, that an annual review be conducted having regard to among other things, estimated short and medium term interest rates, rental returns and trends within the Sydney property market. DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.