VW v Protective Commissioner [2006] NSWADT 230

CITATION: VW v Protective Commissioner [2006] NSWADT 230

DIVISION: General Division

APPLICANT PARTIES: VW RESPONDENT Protective Commissioner

FILE NUMBER: 063066

HEARING DATES: 19/05/06, 02/06/06, 19/07/06

SUBMISSIONS CLOSED: 07/19/2006

DATE OF DECISION: 08/03/2006

BEFORE: Hennessy N - Magistrate (Deputy President)

CATCHWORDS: Protected Estates Act - Protective Commissioner - powers as to property - Protective Commissioner - powers as to property

MATTER FOR DECISION: Principal matter

Administrative Decisions Tribunal Act 1997 LEGISLATION CITED : Guardianship Act 1987 Protected Estates Act 1983

APPLICANT In person REPRESENTATION: RESPONDENT T Tunbridge, solicitor

ORDERS: The decision of the Protective Commissioner to sell the Palm Beach property is affirmed.

REASONS FOR DECISION Introduction 1 Mrs A is an elderly woman with dementia who lives with her husband Dr A, in their family home. In 1981 Mrs A established a trust for the benefit of herself and her family. The properties and other assets owned by the trust are currently valued at in excess of $10 million. The beneficiaries of the trust are Mrs A, Dr A, their two adult sons, VW and YW, and VW's three infant children. The trustee is a company, Pyroclastic Pty Ltd, the directors of which were originally Dr A, Mrs A and their son VW. A dispute arose between Dr A and Mrs A about Dr A's entitlement to be paid $875,000 from trust funds. VW agreed with his mother's position and Mrs A granted VW a power of attorney. The effect of that appointment was that VW was in a position to control the trust and deny payment of the amount to which Dr A said he was entitled. In 2003, following an application by Dr A, the Supreme Court appointed the Protective Commissioner to be the manager of Mrs A's financial affairs and declared, among other things, that the power of attorney granted by Mrs A to VW was invalid. The proceedings in relation to the claim for $875,000 have not been determined. 2 In 2005, the Protective Commissioner appointed Mr Paterson to replace Mrs A as a director of the trustee company. Mr Paterson was appointed to bring a professional approach to the administration and management of the trust and to act as an intermediary between VW and his father. Since Mr Paterson's appointment the trust has been well managed. The trust assets include both residential and commercial property including a building in Bellevue Hill with an estimated value of $4 – $5 million, three retail properties in Rose Bay with an estimated value of $2 million, four blocks of land in Carrington in Western Australia with an estimated value of $1 million, a residential property, in Moss Vale with an estimated value of $2 -$3 million and the family vault. Mr Paterson has drafted a plan (the draft plan) which involves selling some of the properties and repairing and upgrading others. However, selling and/or upgrading these properties takes time and the income generated by the trust to date have been insufficient to meet all Mrs A's financial liabilities. 3 Mrs A owns a house at Palm Beach valued at $2.7 million which is not part of the trust. The Protective Commissioner has decided to sell that property to meet her financial needs. VW, who stands to inherit the Palm Beach property when Mrs A passes on, has applied to the Tribunal for a review of that decision. He points out that the trust was established to provide for Mrs A and her children and grandchildren and that the assets held by the trust are more than sufficient to provide for Mrs A's needs. Issue 4 The issue is whether the decision of the Protective Commissioner to sell the Palm Beach property is the correct and preferable decision: Administrative Decisions Tribunal Act 1997 (ADT Act) s 63. In determining that issue, Mrs A's welfare and interests are to be given paramount consideration: Guardianship Act 1987, s 4. Other considerations include Mrs A's views, the views of her family and the reliability and adequacy of trust funds to meet Mrs A's financial needs. Mrs A's welfare and interests 5 Mrs A is being looked after in her home by Dr A with the help of a carer from Dial-An-Angel, who is employed for four hours a day during the week. The Protective Commissioner is paying Dr A $500 a week to cover Mrs A's expenses as well as $1,190 a week for the services of Dial-An-Angel. Mrs A has previously said that she wants to remain in her own home for as long as possible and only move to a nursing home as a last resort. If Mrs A's health deteriorates, or Dr A is unable to continue to look after her, one option is for full-time carers to be employed to look after Mrs A in her home. The Protective Commissioner estimates that Mrs A's expenses would then increase to more than $5,000 per week for 24 hour care with an additional amount of $10,000 necessary to modify the home to permit a live-in carer to be accommodated. 6 The last resort, if there were insufficient funds to provide in-home care, would be for Mrs A to move to a nursing home. That would require payment of an admission bond of between $275,000 and $400,000 as well as annual costs of approximately $120,000. Dr A said that he has funds from the sale of his surgery which could be used if Mrs A urgently needs to go into a nursing home and funds are not available from any other source. He added that he does not have sufficient funds to pay for Mrs A's care in a nursing home indefinitely. VW says that there is no need for his mother to go into a nursing home because he and his wife would be able to look after her if Dr A was unable to do so. Although I accept that VW is willing to look after his mother in his home, Dr A says that he would not allow his wife to live with VW because he feels she would not receive as much attention as she does at the moment. 7 I am satisfied that Mrs A's welfare would be best served by her remaining in her own home and having full-time carers if Dr A is unable to look after her. That situation may change depending on Mrs A's health and other needs and Dr A's attitude to Mrs A living with VW. Consideration of what is in Mrs A's financial interests depends on her views and her financial position. Mrs A's views on the sale of the Palm Beach property 8 Mrs A bought the Palm Beach property from her own funds in the early 1970s. The family used it as a holiday house for many years. Because she has dementia, Mrs A is not in a position to give an informed view as to whether or not the Palm Beach property should be sold. However, there was some evidence about what her views were in the past. Two wills signed by Mrs A (one dated 13 June 1995 and one dated 28 February 2002) leave the Palm Beach property to VW, subject to some conditions about casual occupancy by others during their lifetime. Mrs A's intention to leave VW the Palm Beach property is supported by numerous conversations VW says he has had with his mother. 9 Dr A said that Mrs A told him when they visited the Palm Beach property in 2001 that she didn't feel like going there any more. He added in his oral evidence that Mrs A had said to him, "Why don't you sell it?" Mrs A may have made that statement, but even if she did, I don't believe it reflects her views. A year after that conversation, Mrs A made a will leaving the property to VW. There was no evidence, apart from one casual remark, which suggests that she wants to sell the property. Based on her past behaviour, Mrs A's preference would be for the trust to meet her financial needs if possible, and for the Palm Beach property to be sold only as a last resort. Views of other family members on the sale of the Palm Beach property 10 The view of Dr A is that the Palm Beach property should be sold. It is in Dr A's financial interests that the property be sold because the money she owes him for legal costs could be repaid and his claims for past gratuitous care and for ongoing care could be considered by the Protective Commissioner. VW's view is that it should not be sold because the trust was established to provide for Mrs A and her children and grandchildren. According to VW, the assets held by the trust are more than sufficient to provide for Mrs A's needs. It is in VW's interests that the Palm Beach property not be sold as he stands to inherit it when his mother passes away. Mrs A's assets and income 11 Apart from her beneficial interest under the trust, Mrs A's assets comprise the matrimonial home jointly owned with her husband (valued at $2,000,000) and the Palm Beach property (valued at $2,700,000). Mrs A is also entitled to an allocated pension from a private Superannuation Fund. The balance in the Superannuation Fund is $370,717.00. Three redemptions have been made from the Fund, one of $16,665.00 in June 2004, one of $30,759.00 in July 2005 and another of $38,028.00 in December 2005. As of 19 July 2006 there was only $322.90 in Mrs A's account held by the Protective Commissioner. That amount has since been boosted to $50,210.97 following the payment of a deposit for the sale of the Moss Vale property, one of the trust properties. Mrs A's income in the last 12 months has been $89,316.38. Mrs A's current expenditure 12 Mrs A's current fortnightly expenses are as follows: Protective Commissioner fees $ 125.00 Living allowance $1,000.00 ­Dial an Angel: $2,380.00 Total $3,505.00 Mrs A's debts and potential liabilities 13 Mrs A's liabilities are: $138,990 for legal costs owing to Dr A pursuant to a Supreme Court Order on 18/12/03; $38,832 for legal costs owing to Dr A pursuant to Supreme Court Order of 12/9/05; and $32,000 (approximately) for legal costs owing to the Protective Commissioner pursuant to Supreme Court Order of 12/9/05. 14 In addition, Dr A has made a claim to the Protective Commissioner for $375,000 to re-imburse him for the gratuitous care he has provided to Mrs A in the past. He has also claimed an ongoing amount of $70,000 a year for carer's wages. The Protective Commissioner has said that no decision would be taken with respect to meeting those claims unless and until funds are available and Mrs A's needs are met as a priority from such funds. Dr A also has a claim in the Supreme Court against Mrs A's estate in the sum of $875,000 plus interest. That claim relates to the sale of the Moss Vale property by Dr and Mrs A to the trustee company. Options to meet expenses 15 Two options the Protective Commissioner has to meet these expenses are to use income or assets distributed to Mrs A by the trustee company together with any available superannuation payments, or to sell the Palm Beach property. The Protective Commissioner has considered renting the Palm Beach property as a source of income. A leasing report suggests that it would not be viable to rent the Palm Beach property because of the high cost of repairing the property and maintaining it in a rentable condition. I accept that assessment and have not considered rental of the Palm Beach property as an option. The family trust 16 Mr Paterson, the independent director of the trustee company, explained in correspondence with the Protective Commissioner that the trust has "very serious cash flow problems" which will ". . . improve over time as the Trust reaps the benefit of the work that has been done, and continues to be done, to improve the return on its investments." Mr Paterson's draft plan includes selling three trust properties, the Moss Vale property, the Carrington land in Western Australia and the family vault. Contracts have recently been exchanged on the Moss Vale property for a sum of $1,670,000. The purchaser has paid a deposit of $83,750 and a few days after the hearing, the trustee company paid $50,000 to the Protective Commissioner on behalf of Mrs A. Final settlement on the Moss Vale property is scheduled to be in five weeks' time. The balance of the purchase price is $1,620,000. Prior to the sale of the Moss Vale property, only two distributions had been made to Mrs A from the trust: one of $1,000.00 on 11 February 2004 and one of $20,000.00 in April 2006. Neither the Carrington land, nor the family vault has been sold. 17 The draft plan proposes that the proceeds of sale of these properties would be applied to pay debts and liabilities including outstanding legal costs owed by various trust beneficiaries and re-imbursement of Dr A's claim for past care if approved by the Protective Commissioner ($375,000). The plan also includes a payment of $70,000 to Mrs A in the 2005/2006 financial year and $144,000 the following year. The $70,000 has been paid, although not all of it in the 2005/2006 financial year. The draft plan also set aside $326,000 as a contingency capital sum for the future care of Mrs A. Mr Paterson advised that a more exact "contingency amount" cannot be determined until after the three properties have been sold and the final costs of the building works on the Rose Bay retail properties and the property in Bellevue Hill is known. 18 Payments to Mrs A from the trust are at the discretion of the trustee company. There are competing claims from other beneficiaries and for the repayment of loans, but Mr Paterson has indicated a willingness to provide for Mrs A's needs and pay her debts in accordance with the draft plan. Superannuation entitlements 19 Financial advisors at the Protective Commissioner have said that in the current financial year, Mrs A should take the minimum distribution from her Superannuation Fund giving her a net pension amount of $33,071.00. Palm Beach property 20 The Palm Beach property is valued at $2,700,000. There was evidence from VW and Dr A as to the amount of money each of them and the trust has spent maintaining the property over the years. The only relevance of that evidence is that VW claims that he has an equitable interest in the property. That is a matter VW may or may not decide to press, should the property be put up for sale. Conclusion 21 If the status quo remains over the next six months, Mrs A's expenses will be approximately $46,000 ($13,000 in living expenses, $31,000 for Dial-An-Angel, and $2,000 in fees to the Protective Commissioner). There is currently over $50,000 in Mrs A's account which would just cover those expenses. Mrs A is also entitled to a payment of approximately $33,000 in superannuation this financial year. Mrs A owes a total of approximately $230,000 to Dr A and the Protective Commissioner for legal costs. She also has claims against her estate from Dr A for compensation for past and ongoing care and for $875,000 in relation to proceedings in the Supreme Court. The chances of any of Mrs A's debts being paid from trust funds in the short to medium term is difficult to assess. There was very little reliable evidence about when the Carrington land in Western Australia or the family vault are likely to be sold. If the sale of the Moss Vale property goes through and the other properties are sold, then the money is likely to be distributed according to Mr Paterson's draft plan. 22 The draft plan proposes to distribute $144,000 to Mrs A in the current financial year and to pay outstanding legal costs owed by various trust beneficiaries, re-imbursement of Dr A's claim for past care if approved by the Protective Commissioner ($375,000). The draft plan also sets aside $326,000 as a contingency capital sum for the future carer of Mrs A. There is no clear indication as to when the Western Australian land in Carrington or the family vault will be sold. If they are sold in the next few months for a price equal to or above their valuations, the plan appears to provide adequately for Mrs A's financial needs, at least for the next 12 months. If the sale of the Moss Vale property does not proceed, or the other properties are not sold relatively soon, then Mrs A will continue to be unable to pay the legal fees she owes and Dr A will be out of pocket if he has to pay for his wife to be cared for full-time at home or in a nursing home. 23 Dr A and the Protective Commissioner have waited for re-payment of their legal costs for some years. Dr A is also waiting for his claim for past and ongoing gratuitous care to be assessed. Mrs A may need to receive full-time care at home or in a nursing home and there are insufficient funds to cover those expenses at the moment. Dr A is not prepared to continue to meet his wife's expenses from his own funds if there are other sources of funds available. That is his prerogative. It is in Mrs A's interests that her debts be paid and that provision is made for her to be cared for full-time at home if necessary. On balance, because the trust is not generating sufficient income to meet Mrs A's financial needs, the correct decision as of today is to sell the Palm Beach property. 24 The decision to sell the Palm Beach property is one I have come to reluctantly, as the last resort. I am satisfied that Mrs A envisaged that the income from the trust would be more than sufficient to meet her needs and the needs of the other beneficiaries. She intended to leave the Palm Beach property to her son, VW. Given that the decision is one of last resort, the Protective Commissioner may wish to make further inquiries of Mr Paterson about the likelihood of the Carrington land and the family vault being sold in the short term and the progress of repair work on the Rose Bay retail properties and the building in Bellevue Hill. If adequate funds are likely to become available in the short term, then I recommend that the Protective Commissioner not sell the Palm Beach property. However, that recommendation is not binding on the Protective Commissioner. It is a matter for him as to whether the Palm Beach property is ultimately sold.