Application of O'Hara; Re M [1999] NSWSC 209

Reported Decision : [1999] 9 BPR 17,103

New South Wales Supreme Court CITATION : Application of O'Hara; Re M [1999] NSWSC 209 CURRENT JURISDICTION : Equity Division Protective List FILE NUMBER(S) : 99/1998 HEARING DATE(S) : 8 March 1999 JUDGMENT DATE : 8 March 1999

PARTIES : (Parties names suppressed in Protective Division) JUDGMENT OF : Young J

COUNSEL : Solicitor for Plaintiff: C Poulden (Beilby Poulden Costello) Counsel for Defendants: M S Willmott SOLICITORS : Plaintiff: Beilby Poulden Costello Defendants: A P Sparke & Broad CATCHWORDS : Mental Health [8]; Management of affairs; Whether preferable that enduring power of attorney continue or Protective Commissioner manage; Procedure [591]; Costs; Protective List; Application for management of incapable person; General rule does not apply; How discretion as to costs exercised Protected Estates Act 1983 (NSW) s 76 ACTS CITED : Conveyancing Act 1919 (NSW) ss 160 163G DECISION : First defendant declared incapable of managing her affairs but no manager appointed

THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION PROTECTIVE LIST

YOUNG, J

MONDAY 8 MARCH 1999

99/1998 - APPLICATION OF O'HARA; RE M

JUDGMENT 1 HIS HONOUR : This is an application made by a stranger to the first defendant's family for a declaration that the first defendant is incapable of managing her affairs and an order that the Protective Commissioner be appointed manager of her estate. 2 The first defendant is clearly a person who is unable to manage her affairs. She is suffering from severely advanced dementia of the Alzheimer's type and she has for some years been living in the Mayflower Nursing Home at Westmead. She is now some 94 years of age. 3 The question that has taken the time in this case is whether the existing administration of the first defendant's affairs by the second defendant under an enduring power of attorney made 6 September 1990 should continue, or whether the Protective Commissioner should take over the administration under the Protected Estates Act 1983. 4 There is very little precedent as to the relationship between administration under powers of attorney and administration under the Protected Estates Act. 5 However, s 76 of the Protected Estates Act makes it clear that it is subject to s 160 of the Conveyancing Act 1919 and s 160 was a deliberate legislative reform in 1983 to permit people to appoint attorneys to look after their affairs, so that the authority would continue after supervening mental illness. Moreover, s 163G of the Conveyancing Act empowers the court to adjust matters should there be problems with the exercise of the power after incapacity sinks in. 6 Accordingly, it seems to me the general flavour of the two Acts is that the power of attorney administration should continue. 7 Mr Poulden for the plaintiff pointed to the decision of Cohen J in Miner v Anderson, 30 November 1998, unreported, where his Honour was concerned that the attorney appointed under power was a solicitor who would have conflicts of interest and difficulties in getting instructions as to how to act. He would also have difficulties in fixing his own fees. 8 At p 6 of the judgment Cohen J seems to have taken the general intention of the legislation as indicating that having a continuing power of attorney has much in its favour However, he considered in that case that the conflict meant that there should be an administration by the Protective Commissioner. 9 In the instant case, there is a conflict in one sense and that is because there was a transaction in 1992 which an independent person might consider was appropriate for him to investigate and move to set it aside. 10 The first defendant owned a property at Currarong near or on Jervis Bay and in 1992 she conveyed that property to the attorney for $1. It was clearly a gift. The medical evidence that has been tendered by the plaintiff shows that from 15 October 1990 for about a year the first defendant was in a generally confused state. However, the attorney says that whilst he acknowledges this, the first defendant's problem was mainly caused by consuming a mixture of brandy and Valium, and once she had been weaned off the brandy she substantially recovered, so that by 1992 she was sufficiently competent to enter into the transaction. According to the attorney she did in fact know what she was doing. That of itself might not be enough to allay suspicion, but the documents show that she consulted an experienced solicitor in Nowra, who was both her own and her husband's solicitor, as well as the attorney's solicitor, and that she herself signed the transfer and not the attorney. 11 There is still a little suspicion about the transaction because the witness to the document was a mutual friend and there was nothing on the face of the document which would show that it was the free and voluntary act of the first defendant. Against that, it was prepared by a solicitor; it was done openly; it was, on the majority of the evidence, something that the first defendant had said she was going to do at some time or other, and it in fact carries out a devise that is in her latest will, which was made on 6 September 1990. 12 The transaction having taken place in March 1992, is now seven years old, and furthermore the attorney would have the advantage of indefeasibility provisions of the Torrens Act. Accordingly, although there must be something suspicious about the transaction, it seems to me that a reasonable person with an estate of about $40,000 would probably not risk that $40,000 on the chance that that particular transaction could now be upset. 13 Apart from that transaction, there is no criticism of the attorney's care of the first defendant's funds. I should note that I appreciate that the transaction was not only the conveyance of the property but carries with it the conveyance of the fruits of the property so that the rents have been passing to the attorney rather than the first defendant for the last seven years. 14 The question that I have to decide is whether it is best in the interests of the first defendant that her affairs be continued to be administered by the attorney, or whether it would be better for an independent person, such as the Protective Commissioner, to take that role. 15 On this issue Mr Willmott for the defendants submits that the court should follow the wishes of the first defendant and permit her nominated attorney to manage her affairs. Mr Poulden submits that in view of possible conflicts, the Protective Commissioner, a completely independent expert person, should be appointed. 16 In working out what is good for the first defendant I must take into account her expressed wishes when she was compos mentis, and that undoubtedly was that the attorney was a person who she would like to administer her affairs. 17 The attorney under the will gets the property, which he has already taken in 1992 under the transfer. A person other than the plaintiff gets the balance of the estate and that person has filed an affidavit for the attorney. 18 The Protective Commissioner has expertise and, as Kirby P said in Holt v Protective Commissioner (1993) 31 NSWLR 227, administration by the Protective Commissioner has a number of advantages, including manifest independence and a dispassionate and neutral approach. However, administration is a matter that comes at some cost and at the moment, perhaps partly as a result of the gift, the attorney is doing the administration without cost. 19 In my view, it is better to leave the matter with the second defendant, the attorney, and accordingly, I decline to exercise my discretion to appoint the Protective Commissioner as manager. 20 Accordingly, I will make the declaration that the first defendant is incapable of managing her affairs, but I make no other order other than an order for costs. COUNSEL ADDRESSED ON COSTS 21 As to costs, Mr Poulden has said that the proper order is that each side's costs should come out of the estate. He says that that should flow because both parties have acted in the interests of the incapable person and the plaintiff has obtained the appropriate declaration of incapacity. 22 He refers to the decision of Powell J in M v K - 24 April 1989, where his Honour points out that in contrast with the principle that applies in most parts of the court, in the Protective List it is not the general rule that in the absence of special circumstances costs follow the event. His Honour said: "On the contrary, the principle upon which, in cases such as these, the Court is accustomed to act is: what, in all the circumstances, is the order which is proper to make?" 23 The application in M v K was brought by a social worker employed by a hospital. However, the main protagonist was the second defendant "C", who was a daughter of the incapable person. Although "C" failed in her application, Powell J said in that case: "I am satisfied that that application was not brought out of any conscious desire to advantage herself and her children, but was prompted by her attachment to her mother, her concern to ensure that K is well cared for and her sense of duty to her mother and her late father". 24 Each case will depend on its facts. The difference between this case and M v K is that the plaintiff was really a stranger in every sense. 25 Mr Poulden objects to me saying this because he says that the plaintiff was the husband of a person who was treated by the incapable person as a niece. However, he was no blood relative. 26 The Protected Estates Act would not work if people were dissuaded from making applications for fear of incurring costs, and so, almost as of course, a social worker attached to a hospital, or the like, who acted in the course of their occupation would not be at risk as to costs, even though the application is unsuccessful, and may even be entitled to costs. 27 However, one has to draw the line somewhere. The plaintiff is not a relative. He is an old acquaintance of the incapable person and he seems to have thought that something was amiss. 28 The estate is only a relatively modest one. As I said earlier, somewhere in the vicinity of $40,000. The costs of preparing and presenting an application of this nature would normally be in the five figure range, and the effect of ordering both parties' costs out of the estate would be to leave the incapable person with relatively little. I think that I need to take that into account when working out what is the proper order to make. 29 In my view, a stranger who takes it upon himself to make an application of this nature, which is partially successful, or which fails, runs the risk of at least having to pay his or her own costs. 30 I think that what should happen in this case is that the second defendant's costs should come out of the estate, as he was brought here. I have thought of the possibility of ordering the plaintiff to pay those costs, but it seems to me that such an order would run against the policy of encouraging people to make proper applications to the court. 31 Accordingly, I make no order as to the plaintiff's costs and order that the defendants' costs should be paid out of the estate of the first defendant. The exhibits may be returned.