CITATION: LK v NSW Trustee and Guardian [2009] NSWADT 224 DIVISION: General Division APPLICANT LK PARTIES: FIRST RESPONDENT NSW Trustee and Guardian SECOND RESPONDENT MS FILE NUMBER: 093018 HEARING DATES: 27 May 2009 SUBMISSIONS CLOSED: 22 June 2009 DATE OF DECISION: 25 August 2009 BEFORE: Britton A - Deputy President CATCHWORDS: NSW Trustee-disposition of property NSW Trustee and Guardian Act 2009 LEGISLATION CITED : Administrative Decisions Tribunal Act 1997 Protected Estates Act 1983 CASES CITED: YG & GG v Minister for Community Services [2002] NSWCA 247 McDonald v Guardianship Administration Board [1993] 1 VR 521 APPLICANT T Cardillo, solicitor REPRESENTATION: FIRST RESPONDENT T Tunbridge, solicitor SECOND RESPONDENT No appearance ORDERS: The Trustee's decision to sell the subject property is affirmed. REASONS FOR DECISION 1 LK, the applicant in these proceedings, applies to the Administrative Decisions Tribunal for review of the decision made by the NSW Trustee and Guardian (formerly the Protective Commissioner) to sell his mother's house. In February 2008, the Guardianship Tribunal made orders that the estate of LK's mother be committed to the management of the NSW Trustee. 2 LK submits that the NSW Trustee and Guardian has not established that his mother's estate would benefit if the property was sold. He contends that his mother's interests would be best served if the property was to be rented. He also argues that regard ought be given to the sentimental value the property holds for him. 3 LK's brother, MS, sought and was granted leave to be joined to these proceedings. He strongly supports the decision to sell the house and contends that his brother's opposition to the sale is motivated by self-interest. 4 When the application for review was lodged by LK, the Tribunal's jurisdiction to review the decision to sell the property was conferred by the Protected Estates Act 1983, s 28A. That Act has now been repealed with effect from 1 July 2009 and replaced by the NSW Trustee and Guardian Act 2009 (the Trustee Act). Among other things, the Trustee Act abolished the office of Protective Commissioner and replaced it with the office of NSW Trustee and Guardian, which is referred to in that Act as the 'NSW Trustee'. The Tribunal's jurisdiction to review the subject decision is now contained in s 70 of the Trustee Act. 5 The savings and transitional provisions provide that anything done prior to the commencement of the Trustee Act under a corresponding provision of the former Act is taken to be done under the new Act. Similarly anything done by the Protective Commissioner is taken to have been done by the NSW Trustee and Guardian (Sched 1, cll 4 and 5). For convenience in these reasons I refer to both the old and new office as 'the Trustee'. Proceedings before the Tribunal 6 The matter was listed for hearing in Newcastle on 27 May 2009. The applicant and the Trustee each appeared and filed written submissions on 16 April 2009. The applicant's mother did not participate in these proceedings. 7 MS lives in Melbourne and was unable to attend in person. He made written submissions but did not, as directed, provide them to the parties before the hearing. Accordingly, the Tribunal invited the parties to make further written submissions after considering those provided by MS. The applicant filed written submissions in reply to those provided by MS. Review decision 8 By way of letter dated 1 October 2008, the Trustee notified the applicant that a decision had been made to sell his mother's house. The property, a two-bedroom weatherboard and tile house located in Newcastle, had been the mother's place of residence until she moved to a nursing home in June 2007. The property is described in a market valuation report obtained by the Trustee as in reasonable condition with 'average to below average presentation'. 9 At the request of the applicant an internal review was conducted. The review was undertaken by Mr John Neely, Assistant Director, Client Services Division, Trustee. In a decision dated 23 December 2008, Mr Neely affirmed the original decision giving two main reasons: First, the mother's wish that the property be sold; and Second, the opinion of the Trustee's Financial Planning Unit that the sale would provide the mother with increased liquidity, flexibility and regular income. 10 Mother's wishes Included in the documents lodged under s 58 of the Administrative Decisions Tribunal Act 1997 ('the section 58 documents') was a file note made by an officer of the Trustee recording details of a phone conversation with Michelle Clarence, Residential Liaison officer of the nursing home where the mother resided in September 2008. It states: [C]lient is sure about her property being sold. Her relationship with [LK] has been estranged for some time and she does not want [LK] to contact her. Michelle said the reason for the order was because [LK] bullied and intimidated her [sic] mother and also had been physically violent. Michelle said client would not want OPC holding off selling the property because of [LK's] objection. 11 Financial advice Mr Neely had before him advice provided by the Financial Planning Unit. In a report dated 29 July 2008, financial planner, Krishna Kumar, compared the mother's projected financial position if the property was sold, as opposed to leased. He made the following assumptions: That the mother has about $60,000 cash on call; She receives a German and Australian pension. If the property were sold — the German pension would remain unchanged — the Australian pension would decrease by about $3,500 pa; The property would net on sale approximately $180,000; The property would rent for approximately $205 per week; Any cash assets would earn interest of about 5.99% pa. 12 He concluded that the result under either proposal would be 'almost similar'. He calculated that both options would return an annual surplus— if rented — $1,704, if sold — $1,567. He favoured the sale option, as it gave 'additional liquidity, flexibility and regular income'. 13 Mr Neely also had regard to concerns raised by the applicant about a drop in house prices in the area where the subject property was located. He concluded based on information provided from the property information service, RP Data Ltd, that while values had dropped since 2004, they had not decreased to the extent suggested by the applicant. 14 Updated financial information In response to an analysis prepared by the applicant (see applicant's submissions, filed 16 April 2009), Mr Kumar revised his analysis. In an updated report dated 6 May 2009 he: Accepted the applicant's contention that sale costs of approximately $12,000 would be incurred; Included a cost for rental management ― slightly higher than that used by the applicant; Reduced the estimated interest rate on cash assets to 4% pa (previou s estimate ― 5.99%); Increased the estimated market value of the property to $232,500 (previous estimate — $190,000); Increased the estimated rental income to $275 per week approx (previous estimate — $200 to $210 per week) 15 Mr Kumar did not accept all of the propositions advanced by the appellant. For example he believed that the applicant had underestimated the Centrelink benefit payable if the sale were to proceed by about $4,000 and the fees that would be payable to the Trustee under the rental proposal. 16 Comparison of options The parties agree on the market valuation and rental appraisal of the subject property. Both estimate a surplus, however as the summary below reveals the applicant estimates that a higher surplus would be achieved under the sale option. Trustee's Revised Trustee's Revised Applicant's Applicant's Rental Estimate Sale Estimate Rental Sale Estimate Estimate Annual surplus $2,541 $550 $7,286 $2,740 17 The discrepancy in these estimates is largely because of different assumptions used by the parties about interest rates, pension entitlements and management fees: Interest rates — the Trustee assumes a uniform rate — the applicant assumes a lower rate under the sale option; Centrelink benefit under the sale option — the applicant estimates an annual benefit of $10,712 — the Trustee estimates ― $12,740; Management fees — the applicant assumes they would be about $2,000 less under the rental option — the Trustee assumes a uniform fee. 18 I prefer the assumptions used by the Trustee and adopt for the reasons given by Mr Kumar in his report dated 6 May 2009. The applicant's submissions 19 The solicitor for the applicant, Mr Cardillo argued that the sale should not proceed because need has not been established and furthermore, it would be to the mother's ultimate financial detriment. 20 He asserted that little weight should be given to the mother's purported view given her level of cognitive impairment. He stated that she was incapable of forming a view, pointing to his own observations and the findings of the Guardianship Tribunal. He claimed that when he visited the mother in mid-2007 to prepare a will, he concluded, based on the advice received from professionals charged with her care, that she was incapable of providing instructions. He also pointed to the finding made by the Guardianship Tribunal in February 2008, that she was extremely vulnerable to duress, may agree to certain actions to 'limit conflict', and was in need of a guardian and incapable of managing her affairs. 21 He contended that a case for the need to sell the property had not been established. He pointed out that the mother has a strong income stream, all expenses are currently met from income and a $60,000 cash buffer is available to meet any future contingency. He accepted that there is little material difference between the results of the analysis undertaken by the parties but pointed out that the Trustee's model fails to take account of the potential for capital gain. He also contended that it would not be prudent to sell at this time because of the depressed property market. In support he pointed to a report prepared by Residex about property values in the local area (Exhibit A1). The report contained a list of properties recently sold within a one-kilometre radius of the subject property, and a brief description of each property and its sale price. 22 Mr Cardillo also contended that the Trustee has not maintained the property and by allowing it to remain vacant, over twelve months rental income had been lost. He also argued that while it might be convenient to the Trustee to sell the property — as this would make the task of managing the estate simpler — it is not in the mother's best interest that the property be sold. 23 The Trustee's submissions The Trustee contends that the decision to sell the property should be affirmed because it is in accordance with the mother's wishes and provides her with greater financial flexibility and certainty. 24 MS' submissions MS contends that given the age of the property, rental is not a feasible option, as any damage would be prohibitively expensive to repair. He made a number of broad ranging and serious allegations about his brother and argues that his opposition to the sale is entirely motivated by self-interest rather than any genuine concern for their mother. Findings and conclusions 25 In reviewing the subject decision the Tribunal 'stands in the shoes' of the Trustee and is required to make the 'correct and preferable decision' having regard to any relevant factual material and any applicable written or unwritten law (Administrative Decisions Tribunal Act, s 63). This includes any material that postdates that decision (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. On review the Tribunal may exercise all of the functions that are vested in the Trustee. 26 It is not in issue that the Trustee has power to sell the subject property: ss 16 and 56 of the Trustee Act. Nor is it in issue that the Trustee in exercising its functions under Chapter 4 of the Trustee Act, and the Tribunal in exercising its power on review, must give paramount consideration to the interests of the mother. Section 39 of the Trustee Act provides that it is the duty of everyone exercising functions under Chapter 4 of the Act (management functions relating to persons incapable of managing their affairs) to observe the following principles: (a) the welfare and interests of such persons should be given paramount consideration, (b) the freedom of decision and freedom of action of such persons should be restricted as little as possible, (c) such persons should be encouraged, as far as possible, to live a normal life in the community, (d) the views of such persons in relation to the exercise of those functions should be taken into consideration, (e) the importance of preserving the family relationships and the cultural and linguistic environments of such persons should be recognised, (f) such persons should be encouraged, as far as possible, to be self-reliant in matters relating to their personal, domestic and financial affairs, (g) such persons should be protected from neglect, abuse and exploitation.' 27 Before deciding the correct and preferable decision it is necessary to dispose of two issues: the allegations made by MS and the wishes of the subject person. 28 Allegations against the applicant In submissions MS made a number of wide-ranging, serious and unsupported allegations about his brother's conduct towards their mother and his motives for opposing the sale. All are denied. From the material before me I am unable to determine the truth or otherwise of these claims. In my opinion the prejudicial nature of these claims outweighs their probative value. For that reason I have disregarded them, except to note, that they support the observations of the Guardianship Tribunal and those who now care for the mother, that the relationship between the sons is at best acrimonious and has been, and continues to be, the source of much distress to their mother. 29 Wishes of subject person I accept the argument put for the Trustee that a person found by the Guardianship Tribunal to be incapable of managing their affairs may nonetheless be capable of forming a view about a decision that relates to the management of their estate, such as the one the subject of these proceedings. However in this matter I have decided to give no weight to the mother's reported views because — first, there is conflicting evidence about her ability to hold an informed view and, second, there is a lack of reliable evidence that she supports the sale. The evidence about her opinion consists largely of a file note made by an officer of the Trustee following a phone conversation with an employee of the nursing home where she now resides. It is not apparent from that note, what questions were asked of the subject person, what words she used, her state of health at the time, whether she was medicated or not, who was present at the interview or the qualifications and experience of the person who reported the conversation. Without better evidence I could not be satisfied of the reliability of the report. Conversely, I do not accept the suggestion put by the applicant that if his mother were able to express a view she would not wish to see the property sold. I proceed on the basis that there is no reliable evidence one way or the other about the mother's view of the proposed sale. 30 Conclusion It is trite to note that there will always be a degree of speculation and guess work in deciding whether it is prudent to dispose of real estate. In this case, diverse factors such as the general economic climate, movements in interest rates and house prices, government policy, the subject person's life expectancy and future health care costs, could impact on the mother's ultimate financial position under either proposal. It goes without saying that these factors are to an extent, unpredictable. 31 That said, leaving to one side the issue of capital gain, on the apparently reasonable assumptions employed by the parties, there would be little material difference to the mother's 'bottom line' if the property were sold or rented. 32 The applicant contends that it would be overly simplistic to compare the two options in isolation from a consideration of movement in property prices and the potential for capital gain. He argues that the rental option deprives his mother of capital gain, which he submits could be significant. An assessment of capital gain is of course inherently speculative. While it is possible that property prices in the relevant area might increase, equally they could decrease or remain unchanged. The data relied upon by the Trustee reveals that the pattern in property price movement has been uneven in the years 2004 to 2008. 33 I agree with the argument put for the applicant that the convenience to the Trustee is irrelevant to my decision. Whether it was in the mother's best interest to leave the property vacant for an extended period, is not the issue I am required to determine — rather, the issue is whether the correct and preferable decision having regard to the circumstances that exist today, is to sell the property. 34 While the considerations are finely balanced I have concluded that the decision should be affirmed for these reasons. First, as agreed by all parties, there is no reasonable prospect that the subject person will return to live in the property and accordingly there is no need for it to be retained to provide her with an accommodation option. Second, the sale option has the advantage of minimising risk. Given the age and condition of the property there is a risk that if rented it might be damaged or at least, not well cared for. This could adversely affect the ultimate sale price. Third, the evidence reveals that the dispute between the sons over the property has been, the source of significant distress to their mother. It is not in her interest that that dispute continue. Fourth, I agree with the Trustee's assessment that the sale proposal brings with it a degree of flexibility and certainty, which would be of benefit to the subject person. 35 In reaching this decision I have had regard to the views of the applicant to whom the property apparently holds significant sentimental value. While I am sympathetic to that view, it cannot be considered determinative. 36 I am satisfied that it is in the mother's best interests that the sale proceed and therefore affirm the decision. 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.