Application of J & K [2009] NSWSC 1453

New South Wales Supreme Court

CITATION : Application of J & K [2009] NSWSC 1453

HEARING DATE(S) : 30/11/09

JUDGMENT DATE : 2 December 2009

JURISDICTION : Equity

JUDGMENT OF : White J

EX TEMPORE JUDGMENT DATE : 2 December 2009

DECISION : Counsel for the parties to bring in short minutes of order in accordance with reasons.

CATCHWORDS : MENTAL HEALTH - management and administration of property – application for removal of NSW Trustee and Guardian as manager of estate of managed person and appointment instead of managed person's father and sister – in best interests of managed person that his father and sister be entrusted with management of his estate

Protected Estates Act 1983 (NSW) LEGISLATION CITED : NSW Trustee and Guardian Act 2009 (NSW) Interpretation Act 1987 (NSW)

CATEGORY : Principal judgment

MB v Protective Commissioner [2000] NSWSC 717; 50 NSWLR 24 CASES CITED : Holt v Protective Commissioner (1993) 31 NSWLR 227 Re L [2000] NSWSC 721

PARTIES : Application of J & K

FILE NUMBER(S) : SC P44/96

COUNSEL : Applicants: L Ellison SC with J Velosky Respondent: J Trebeck

SOLICITORS : Applicants: Marsdens Law Group Respondent: NSW Trustee and Guardian

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION PROTECTIVE LIST

WHITE J

Wednesday, 2 December 2009

P44/96 Application of J & K JUDGMENT 1 HIS HONOUR: This is an application for the removal of the New South Wales Trustee and Guardian ("New South Wales Trustee") as manager of the estate of a managed person (whom I will call "G"), and for the appointment of G's father and one of his sisters in its place. The New South Wales Trustee neither consents to nor opposes the application, but puts forward various matters material to it. 2 On 11 March 1989 G, then aged 29, was severely injured in a car accident. His injuries included injuries to his brain. He remains incapable of managing his estate. On 12 July 1996 the Protective Commissioner was appointed receiver and manager of G's estate until further order. On 19 November 1996 the Protective Commissioner received for G an amount of about $3,091,000 pursuant to a damages award or settlement. 3 On 24 June 1999 the appointment of the Protective Commissioner as receiver and manager of G's estate was terminated. An order was then made pursuant to s 13 of the Protected Estates Act 1983 (NSW) that G's estate be subject to management under that Act. An order was made pursuant to s 22 that the management of his estate was committed to the Protective Commissioner. 4 No issue is raised as to the power of the court to remove the New South Wales Trustee as manager of G's estate and to appoint the applicants in its stead. (See s 41(2) of the NSW Trustee and Guardian Act 2009 (NSW); s 47(1)(b) of the Interpretation Act 1987 (NSW); and MB v Protective Commissioner [2000] NSWSC 717; 50 NSWLR 24.) The power is to be exercised according to what the court perceives to be the best interests of G having regard to the general principles in s 39 of the NSW Trustee and Guardian Act. The welfare and interest of G is the paramount consideration. Also relevant to this case are the matters in s 39(d), (e), (f) and (g). 5 It is not necessary for the applicants to establish that the Protective Commissioner (now the NSW Trustee) has misconducted itself or has not acted competently in the management of the estate. (See Holt v Protective Commissioner (1993) 31 NSWLR 227 at 237-238.) No such charge is made against the NSW Trustee. In exercising the discretion in what I perceive to be the best interests of G, I bear in mind the considerations outlined by Kirby P in Holt v Protective Commissioner at 241-243. 6 G is of Indian descent and currently lives with his parents. His mother was also seriously injured in the accident and his father cares for them both. G was married at the time of the accident, but he and his wife separated in 1990 and were later divorced. In 2007 he remarried in India. 7 The applicant's father, (whom I will call "K"), is 75. G has various siblings. One of them is his sister, J, the other applicant. She is 44. K is an experienced businessman. He owned a profitable timber business and other businesses in India through which he was able to educate all of his children to tertiary level. J is a high school teacher. She teaches mathematics. 8 By at least 2001 or earlier the position was reached that G did not need carers from outside the family. His family, in particular his father, has provided unpaid care for him. That position is expected to continue. 9 At the suggestion of K, the Office of the Protective Commissioner purchased land at Denham Court for G for the purpose of building a large and purpose-built house. That house has now been built. In November 2008 G and his parents moved into it. 10 At the time of the accident G was the registered proprietor of a property at Glenfield on which a house was built. J deposes that in 1986 the "family" purchased the block of land at Glenfield and later constructed a house on the property. She says that the property was purchased in the name of G as he was then the only family member in employment and the bank would only lend to someone employed. She deposes that the balance of the funds was provided by K, and the family contributed to the mortgage payments until 1996 when the balance of the mortgage, (she says of about $23,708), was discharged by the Protective Commissioner from G's compensation money. This evidence is corroborated in general terms by K and by G. K regards the Glenfield property as belonging to the family, but not to any single member of it. 11 A question is raised on this application as to what should happen to the Glenfield property. In 2006 the Protective Commissioner provided a report to the court that recommended that up to $1.3 million be spent on the construction of the residence at the Denham Court property, but that amount was recommended only on the basis that the Glenfield property be sold. The stated reason for that recommendation was that the estimated rental yield for the property was likely to be only 1.28 percent per annum, or $3,308 after rates, land tax (estimated to be $5,200 per annum), and maintenance (estimated to be $5,000 per annum). 12 A financial planner from the Office of the Protective Commissioner recommended that the proceeds of sale be used to acquire Australian and international shares. On 13 June 2006 the court approved the recommendation that the Protective Commissioner use the amount of up to $1.3 million for the construction of the residence at Denham Court, including all plans, construction, landscaping, pool, furniture and contingencies, on the basis that the property at Glenfield be sold. 13 The applicants seek a variation of that order by removing the requirement that the property be sold. 14 The estate is reasonably substantial. G's assets currently comprise the following. First, there is the Denham Court property which is valued at about $1.2 million, although its cost, including the cost of construction, is in the vicinity of $2 million. Next there is the Glenfield property to which the NSW Trustee attributes a value of $320,000. Other members of G's family claim to be beneficially entitled to up to two thirds of that property. There is also a little in excess of $440,000 invested in superannuation. There is cash in a trust account of a little over $119,000, and investment funds of about $1,225,000. 15 Those funds are currently invested in the proportion of about 30 percent in cash, bonds and fixed interest, and 70 percent in Australian and international shares. The total value of the investment portfolio has declined by about $810,000 since November 2008, no doubt due to payments towards construction costs. The current allocation of the investment portfolio includes no exposure to the property sector. 16 In the year to 30 June 2008, G derived a gross income from interest, distribution from trusts, capital gains and foreign source income of $165,500. He had deductions of $65,860, including a $50,000 personal superannuation contribution. After that contribution his income after tax, but allowing for franking credits, was about $90,000. Until February 2008 G was paid $1,000 per week. From that time his "allowance" has been increased to $1,500 per week or $78,000 per year. From that he pays all the outgoings for his house and provides food and groceries. This benefits his parents, but his father provides him with daily care without charge. 17 Thus the estate is a reasonably substantial one. 18 Whilst K is an experienced businessman, neither he nor J themselves have qualifications for investing. Nor do they have the qualifications or experience of the NSW Trustee. But they have sought and obtained the advice of a financial planner, a Mr Nonnenmacher, who has 28 years' experience in that area. He or his firm have been recognised by the financial services industry by being nominated as a finalist in the Financial Planner of the Year Award in six of the last eight years. 19 Mr Nonnenmacher provided a detailed advice to J and his family on the management of the estate. His advice included the transfer of the investments and superannuation to investment and superannuation funds administered by the company or firm under the name Portfolio Care. That is the name of an administration service that provides access to a wide range of managed investment funds. 20 Mr Nonnenmacher's key recommendations were to change the proportion of growth and cash assets to 30 percent growth assets and 70 percent cash compared with the existing allocation of approximately 30 percent cash and 70 percent growth assets. He also recommended that G make a non-concessional superannuation contribution of $450,000 to a Portfolio Care Superannuation Fund into which the existing superannuation would also be rolled over. That fund would be invested in a mix of cash and growth assets, weighted to 70 percent cash and fixed interest, and would be used to provide a pension estimated at the time of the report to about $65,000 per annum. This would be possible, notwithstanding that G is not yet 60, if he is permanently disabled, which he would appear to be. 21 This course would provide considerable tax advantages, both in relation to income tax and capital gains tax. 22 Mr Nonnenmacher has the appropriate expertise and probity. He provides an outline plan as to how a secure income for G would be obtained in the long term, both by taking legitimate advantage of the taxation benefits of superannuation and by addressing likely growth rates for the projected classes of investment assets. His approach is not a "complicated scheme" to minimise tax (compare Re L [2000] NSWSC 721). Nor is the contrary suggested. 23 It is entirely proper that a financial planner consider the taxation implications of different modes of investment. Indeed, on 11 September 2007 a financial planner with the Office of the Protective Commissioner recommended that G commence to draw an allocated pension, albeit in an amount of $19,000, reflecting the then lower level of superannuation investments available to be applied for that purpose. To qualify for such a pension a medical certificate from G's doctor certifying his permanent disability is required. It appears that the appropriate form was sent to G's family prior to 5 March 2009 and again on that date, but is yet to be completed. 24 With that background, I address the principal matters which appear to me to be relevant to determining whether it is in G's best interest to change financial managers. They are: