NSW Civil and Administrative Tribunal New South Wales Medium Neutral Citation: QFC (No 2) [2018] NSWCATGD 49 Hearing dates: 28 May 2018 Date of orders: 28 May 2018 Decision date: 28 May 2018 Jurisdiction: Guardianship Division Before: J Moir, Senior Member (Legal) W Longley, Senior Member (Professional) D R Sword, General Member (Community) Decision: The application for a financial management order is dismissed after hearing. In relation to the enduring power of attorney made by QFC on 19 February 2010 which appointed EZC and RBC as attorney the Tribunal determines: - to carry out a review of the operation and effect of the enduring power of attorney; - not to make an order under s 36 of the Powers of Attorney Act 2003 (NSW) and dismiss the application. Catchwords: FINANCIAL MANAGEMENT – application for a financial management order – no evidence to establish subject person not capable of managing her day-to-day finances – whether subject person has cognitive impairment – evidence insufficient to find subject person incapable of managing her affairs – whether subject person vulnerable to influence – subject person capable of rejecting proposals from attorney – application dismissed. REVIEW OF ENDURING POWER OF ATTORNEY – application to review operation and effect of enduring power of attorney – whether the Tribunal should make an order under s 36(4) of the Powers of Attorney Act - whether an order under s 36(4) of the Powers of Attorney Act would be in the subject person's best interests – whether attorney has a conflict of interest – where subject person has invested in company in which attorney involved – subject person capable of making decisions for themselves – subject person capable of making investment decisions - Tribunal not satisfied that an order under s 36(4) of the Powers of Attorney Act would be in subject person's best interests – no order made. Legislation Cited: Civil and Administrative Tribunal Act 2013 (NSW), s 64(1)(d) Guardianship Act 1987 (NSW), Pt 3A Powers of Attorney Act 2003 (NSW) ("POA Act"), ss 12(1), 36, 36(1)-(2) Cases Cited: P v NSW Trustee and Guardian [2015] NSWSC 579 Re R [2000] NSWSC 886 Susan Elizabeth Parker v Margaret Catherine Higgins & Ors [2012] NSWSC 1516 Texts Cited: Nil Category: Principal judgment Parties: 001: Financial Management Application QFC (the person) TAC (applicant) EZC (attorney) RBC (attorney) NSW Trustee and Guardian 002: Review of an Enduring Power of Attorney QFC (the person) TAC (applicant) EZC (attorney) RBC (attorney) Representation: Counsel: D Reid for QFC Solicitors: S Robinson for QFC File Number(s): 2017/00330439 Publication restriction: Decisions of the Guardianship Division of the Civil and Administrative Tribunal have been anonymised to remove any information that may identify any person involved in the Tribunal's proceedings: Civil and Administrative Tribunal Act 2013 (NSW), s 65. REASONS FOR DECISION FINANCIAL MANAGEMENT APPLICATION AND REVIEW OF ENDURING POWER OF ATTORNEY Background 1. QFC is a 78-year-old woman who lives alone in her own home in regional NSW. She has five children TAC, EZC, RBC, BYC, and LXD. Meaning no disrespect, for the remainder of these reasons for decision QFC's children will be referred to by their first names only. 2. On 19 February 2010, QFC appointed EZC and RBC to be her attorneys, under an enduring power of attorney instrument. On the same day QFC appointed EZC and RBC to be her enduring guardians. 3. On 1 November 2017, the Tribunal received an application from TAC for the appointment of a financial manager for her mother. 4. On 20 December 2017 the Tribunal, conducted an interlocutory hearing and made orders regarding the date of the substantive hearing, and directed the parties to produce information and documents. 5. On 18 January 2018, the Tribunal received an application from TAC for review of the operation and effect of the enduring power of attorney instrument. 6. At a further interlocutory hearing on 23 January 2018, the Tribunal made further orders on QFC's request, adjourning the hearing that had been set down and extending the date for compliance with the directions. 7. A further interlocutory hearing was held on 21 February 2018 to consider an application for leave for legal representation for QFC from Mr Simon Robinson, solicitor at DeGroot's lawyers, as well as an application that the Tribunal order under s 64(1)(d) of the Civil and Administrative Tribunal Act 2013 (NSW) ("the CAT Act") that evidence relating to QFC's financial affairs not be disclosed to parties other than QFC and her attorneys. On 21 February 2018, the Tribunal granted leave for QFC to be legally represented by barrister, Ms Margaret Pringle. The decision regarding the application under s 64(1)(d) of the CAT Act was reserved, pending receipt of all the material that the parties had been directed to provide. 8. On 28 March 2018 the Tribunal decided not to make an order under s 64(1)(d) of the CAT Act as requested. However, the Tribunal did order that parties, other than QFC herself, were not to disclose this evidence to anyone who was not a party to the applications. The Tribunal provided written reasons for the decision. 9. QFC lodged an application for judicial review of this decision in the Supreme Court, which was heard on 9 April 2018. The Court declined to make the orders sought and dismissed the application. 10. The substantive applications were listed to be heard by the Tribunal on 10 April 2018, however, on application by TAC, the proceedings were again adjourned, to allow her time to read and consider the material which was the subject of the non-disclosure application. Given the timing of the Supreme Court proceedings, she had only been given this material on the morning of 10 April 2018. 11. The applications were relisted for hearing on 28 May 2018. At a further interlocutory hearing on 9 May 2018 the Tribunal refused an application for a further adjournment from Mr Robinson, who advised that Ms Pringle was no longer available on the 28 May 2018, although she had indicated at the hearing on 10 April 2018 that she was available on that date. 12. These reasons for decision arise from the substantive hearing of the applications on 28 May 2018. The hearing 1. The hearing was held in Sydney and QFC attended with Ms Deneice Reid, Barrister, and Mr Robinson. EZC, RBC and TAC also attended in person. 2. The Tribunal granted leave for QFC to be legally represented by Ms Reid, given Ms Pringle's inability to attend and represent her any longer. TAC objected on the basis that she believed that her mother's legal representatives were in fact taking instructions from EZC, however, Ms Reid (and Mr Robinson) advised that this was not the case and that they acted only for QFC and were taking instructions only from QFC. On the basis of this reassurance, the Tribunal was satisfied that it was in QFC's interests to have legal representation at the hearing. 3. The Tribunal confirmed with each of the parties that all of the written material that had been submitted to the Tribunal had been cross served between the parties, and that they had all had the opportunity to read and consider all of the evidence. 4. Early in the hearing, with the parties consent, the Tribunal spoke with QFC and Ms Reid alone and the other parties were asked to sit outside. The Tribunal then summarised the evidence QFC had given during the private session, so all of the parties were aware of the substance of the evidence that she had given. What did the Tribunal have to consider in relation to the application to review the enduring power of attorney? 1. The Tribunal may, on the application of an interested person, decide to review the making or the operation and effect of a reviewable power of attorney, or not to carry out such a review: Powers of Attorney Act 2003 (NSW) ("POA Act"), s 36(1). As a consequence of reviewing the making or operation and effect of a reviewable power of attorney, the Tribunal may decide whether or not to make an order under s 36 of the POA Act: s 36(2). 2. The Tribunal may make a number of orders relating to the operation and effect of a power of attorney if it is satisfied: * that it would be in the best interests of QFC to make the order * that it would better reflect the wishes of QFC to make the order 1. These orders relevantly include: * An order varying a term of, or a power conferred by, the power of attorney * An order removing a person from office as attorney * An order appointing a substitute attorney to replace an attorney who has been removed from office or who otherwise vacates the office * An order directing the attorney to: 1. Furnish accounts to the Tribunal or someone nominated by the Tribunal 2. Lodge a copy of all records and accounts of dealings and transactions made under the power 3. Requiring that the records and accounts be audited and that a copy of the report of the auditor be furnished to the Tribunal 4. Submit a plan of financial management for approval * An order revoking all or part of the power of attorney * Such other orders as the Tribunal thinks fit 1. If on a review of the enduring power of attorney, the Tribunal decides not to make an order under s 36 of the POA Act, it may, if it considers it appropriate in all of the circumstances to do so, decide to treat the application for review as an application for a financial management order under Pt 3A of the Guardianship Act 1987 (NSW) ("the Act"). As an application for financial management order has already been lodged, the Tribunal did not need to consider this provision. What did the Tribunal have to consider in relation to the financial management application? 1. The questions to be considered by the Tribunal are: * Is QFC incapable of managing her affairs? * Is there a need for another person to manage QFC's affairs and is it in her best interests for a financial management order to be made? * If so, who should be appointed financial manager? Overview of the evidence and submissions 1. The Tribunal had the benefit of a number of written submissions from TAC as well as her evidence and oral submissions at the hearing. In summary she submitted that QFC is being financially taken advantage of by EZC, in his role as her attorney. She provided details of a conversation she said that she had with EZC in 2017 which gave rise to her concerns (which EZC denies). TAC submitted that although her mother is quite able to manage all of her own day-to-day affairs, her attorneys, and in particular EZC, have made investment decisions on her behalf. TAC does not believe that her mother understands or would have agreed to the nature of the investments that EZC has made on her behalf had she understood them. TAC submitted that RBC does not understand the investments that EZC has made, and has simply signed paperwork as attorney on EZC's instruction. 2. TAC submitted that under EZC's control most of QFC's liquid assets, of around $1 million, have been invested in class B shares and convertible notes in a private company, called Company XYZ. In addition to this concentration of assets in a private company being a very risky investment strategy, arguably not appropriate for a person at QFC's stage in her life, the investment does not bring the return that QFC has understood or had been told it would and QFC is living less comfortably than she needs to, given her financial means. 3. In addition to this, TAC submitted that there are significant conflicts of interest in EZC arranging for his mother to have this investment, noting that EZC is the General Manager of Company XYZ, his wife and he are both shareholders, and one of his stepsons is a Director of the company. EZC is close friends with the Managing Director of the company, Mr X. On this basis TAC submitted that EZC's decision to invest almost all of QFC's money in Company XYZ has benefited him by bringing capital in to the private company, thus securing his employment and his investments and benefitting other people he is close to. She submitted that these decisions were not made because they were in QFC's best interests. She also made submissions which went beyond this, in relation to whether EZC had used QFC's money to purchase shares in his and his family's names and not just in her name. 4. QFC denied that any decisions have been made regarding her finances by anyone other than herself. She submitted that although EZC and RBC have signed documents on her behalf in relation to her investments, they have always acted in accordance with her instructions. She therefore denied that they have taken any actions as attorneys independently of her express wishes. QFC submitted that she has a clear understanding of the investments in Company XYZ, and that these provide her with both a sufficient income, as well as the anticipation of a significant capital gain in the short to medium future. She confirmed that whilst she understands that the investments come with a degree of risk, she is comfortable, knowing her son and Mr X, that the risk is minimal. 5. QFC agreed that she became aware of the option of investing in Company XYZ because EZC and Mr X told her about it. She trusts her son implicitly, and has no concerns that he is in any way conflicted raising this investment option with her, even though he is employed by Company XYZ. She said that if the business got into financial difficulty, "[EZC] would treat me the same as all other shareholders, he's too honest not to... he'd work it out the best he could for the company." Her response was therefore based solely on the premise that she retained decision making capacity and did not contemplate EZC's position should she lose that capacity. 6. QFC submitted that whilst RBC signs documents on her behalf with EZC, she is not really involved in the decisions, and that QFC makes the decisions herself after discussion with EZC. She said that EZC will make a proposal to her about an investment and she will ask questions about it and will then decide. She confirmed to her recollection she has agreed with all of his proposals. 7. EZC submitted that as attorney he has assisted his mother to make investments in Company XYZ. His said that his role is simply to give effect to decisions that she has made, but agreed that he has also provided her with recommendations and options. He sees no conflict of interests in the investment with Company XYZ because the investments are not his decision, but in any event, he felt that his role within Company XYZ was an advantage to QFC, as he has a close understanding of how the business is operating. 8. EZC submitted that in 2014 his mother asked him and RBC to assist her with her investments and they sought assistance from a financial advisor. They followed this advice for a period but as these investments were not performing sufficiently, and the fees for the financial advisor were high, based on information he gave her, QFC decided instead to invest in Company XYZ where she was guaranteed a rate of return of 8% per annum on convertible notes, which she continues to receive. Although there is no return to date on the class B shares, it is anticipated that these will show a significant capital gain in the relatively near future. EZC also submitted that the money invested in Company XYZ comprises only about one quarter of QFC's overall estate, bearing in mind the value of her home, and contents and items described as "collectables". EZC submitted that QFC is entirely able to make her own financial decisions, and has made decisions which he and RBC have helped her to enact, which are in her financial best interests. 9. RBC did not make separate submissions, and found it difficult to articulate to the Tribunal whether she was making decisions for her mother as her attorney, or as, QFC and EZC suggested, was simply assisting QFC to give effect to decisions that she had made about her own investments. Generally however her views mirrored those of EZC and QFC regarding QFC's capability and role in managing her own financial affairs. 10. At the first directions hearing, the Tribunal directed QFC (with her consent) to obtain a report from a suitably qualified health professional such as a geriatrician or neuropsychologist, specifically addressing her current capability to manage her own financial affairs, and to provide this to the Tribunal and the other parties. In response to this she provided letters from her general practitioner, Dr Z (12 January 2018), and Dr Y, a Geriatrician, (dated 7 February 2018). She had already provided a brief letter dated 8 December 2017 from Dr Z. It appears that Dr Y is the father of Dr Z, which was a matter of concern for TAC, however, the Tribunal drew no particular conclusion from this. Both doctors are under a professional obligation to make their assessments based on their own observation of the patient, and there is no evidence which suggests that anything other than this occurred in relation to QFC. TAC also expressed dissatisfaction with the nature of Dr Y's assessment, and had asked the Tribunal to direct QFC to undergo neuropsychological testing on the basis that this would provide a more accurate picture of her executive level functioning. QFC did not wish to undergo further assessment of this kind, and in the circumstances the Tribunal decided not to direct her to do so. 11. In his letter of 12 January 2018 (the more detailed letter), Dr Z answers questions addressing the relevant legal "test" which were put to him in a letter from Mr Robinson's firm. In summary, he states that he had been QFC's treating doctor for three years, and also had the records from her GP and specialists for the past 10 years. He states that he generally sees her every six months and occasionally more often. He saw her in November 2017 for a full health assessment and again in January 2018. He states that there is no indication from her presentations at his practice or in her previous medical notes that QFC suffers from any disability. He states that "She is punctual to appointments, well presented, coherent, understands medical conditions, manages her medications, blood tests and appointments, has insight into her treatment and can coherently discuss results and medical information." On a Mini-Mental State Examination in November 2017 she scored 28/30 "which is normal and indicates no evidence of dementia". He notes that in 2012, she had a meningioma surgically removed, and that a CT scan from 2015 indicates some scarring from that operation as well as "age-related changes". Nonetheless he states "on the information that I have access to, both clinically and in her medical records, there is nothing to indicate that [QFC] is unable to determine what is in her best interests or to protect her own welfare and interests or needs a financial manager". 12. In his letter, Dr Y stated that he saw QFC on one occasion for over an hour. He notes that he is writing the report (which is addressed to Mr Robinson) because he has been asked to provide an assessment regarding QFC's current ability to manage her own financial affairs and her current capacity to provide instructions in the proceedings before NCAT. 13. He stated that QFC presented as a well-groomed, cheerful and articulate woman, who gave a clear account of her history. He states that she reported that she has had reasonable health during her life, but has mild controlled hypertension and diabetes for which she takes oral medication. He states that she had two craniotomies for meningioma, (a benign tumour) in 2012 and a CT scan shows no acute findings or evidence of recurrence. He states there is some radiographic change suggestive of white matter change/small vessel disease associated with ageing. Given the way the letter is written it is unclear whether Dr Y is reporting what QFC told him in relation to these results, or whether he has seen them for himself. 14. Dr Y states that QFC appeared to have insight into the reason for the assessment and described the dispute within the family "in a sensible fashion". He states that she admits to occasional memory difficulties specifically for names but that her long-term memory appeared good, her use of words and expressions of complex thought appeared intact and she talked "without rancour or undue emotion". 15. He conducted the Addenbrooke's ACE–III cognitive examination (Australian version A) on which she scored 87/100. He states that she lost six points on memory and seven points on fluency, and scored full points on each of the other domains of attention, language and visuospatial. He concludes "I believe [QFC] is cognitively intact, with perhaps early short-term memory difficulties associated with ageing. She does not have dementia and is not depressed. She appeared sensible. I believe she has capacity to determine what is in her best interests and protect her own welfare and interests. I believe she can manage her own financial affairs and provide instructions in legal proceedings at the Tribunal." Unfortunately Dr Y was not available to speak with the Tribunal during the hearing. 16. The Tribunal was provided with some material from EZC, RBC and QFC setting out the details of QFC's financial situation and the details of the involvement of her attorneys. On discussion it was apparent that EZC had prepared this. In a letter dated 18 February 2018, he provided a chronology which indicated that on 19 May 2014 he met with his mother to "discuss her wishes", and he provided a file note of that meeting headed "Mums Wishes-19 May 2014". Amongst other things, this file note states that QFC has $1 million to invest, and that she is "very worried about losing its capital value. She wants it to earn enough money for her to live on, which is $50,000 per year". The note states "as a risk strategy she is thinking of something like 4x $500,000 investments" (although this of course would amount to an investment of $2 million). 17. The chronology state that a further meeting occurred between EZC and RBC and QFC on 12 September 2014, and the details of this were reflected in a file note headed "Mums Wishes-12 September 2014", which, in part states that QFC has about $1 million in an investment account, and that she "wants [ABC] and [DZ] to decide on her future investments and then manage them for her, on her behalf. She wants to be involved in all steps in the process and to be kept informed." The file note reports that QFC had organised an appointment that day with her bank to discuss investments and arrange online bank access for ABC and DZ to "manage all of Mum's bank accounts and financial dealings." The Tribunal understands "ABC" to be EZC and "DZ" to be RBC. Later in the chronology, it states that QFC did not give them authority to access her bank accounts until April 2015, at which point they opened an account on her behalf. 18. The chronology continues that in April 2015 EZC and RBC sourced a financial advisor and in May 2015 they invested $650,000 for QFC in wealth management firm to be invested in a public unit trust. A copy of a schedule from the wealth management firm shows the investment proposal. There were handwritten annotations on this document, changing the proposal, but it was unclear whose notes these were. 19. The chronology states that in addition to the $650,000 invested in the wealth management firm, on 13 July 2015, EZC and RBC invested $250,020 in convertible notes with Company XYZ, at a rate of return of 8% pa. 20. The chronology continues: "From April 2015 onwards. [RBC] and [EZC] continued to monitor, manage, support and make recommendations to [QFC], with regard to her investments in [a commercial bank], [the wealth management firm] and [Company XYZ], resulting in [QFC]: 1. Not having to do it herself; 2. Not having to worry about the detail herself; 3. Achieving her investment goals of not reducing the capital value of her investment; and 4. Achieving her income goals of at least $50,000 per year from her investments. As part of the ongoing management of [QFC]s investment goals, RBC, EZC and [QFC] have made changes along the way to delete non performing investments and replace them with performing investments. These have been enacted for QFC by RBC and EZC using the Power of Attorney given from [QFC].".... All of [QFC]'s investment decisions have been made by [QFC]. The investment balance [QFC] has is now performing to her expectations in terms of both capital security and income producing. There is no current reason to make changes. RBC and EZC have not used their Power of Attorney for anything other than what has been set out above." 1. Neither QFC nor RBC recalled "meetings" occurring in the way the file notes implied. QFC said she would have talked with EZC and RBC when they came to her place to help with the garden. She was adamant that she would not have ever told EZC and RBC that she wanted them to "decide" on her future investments and just keep her informed. She has always been the person making decisions. 2. QFC confirmed that EZC and RBC have online access to her investment account and will transfer money online on her request to the cheque account she accesses for her day to day spending. She does not do internet banking herself and it suits her to have EZC and RBC do this for her. TAC expressed concern that her mother is in a position where she must ask EZC or RBC to make her money available to her, but QFC expressed no concern about this arrangement to the Tribunal. The incomplete and somewhat illegible copies of bank statements which were provide to the Tribunal showed regular deposits of money from Company XYZ to QFC's account and transfers from that account to her cheque account, consistent with the evidence. 3. The Tribunal noted that all financial documentation from the wealth management firm and Company XYZ has been signed by EZC and RBC as attorneys and not by QFC personally. The Tribunal was told that this was a matter of convenience and was not an indication that the attorneys were making decisions on QFC's behalf. 4. The Tribunal noted that only two file notes were provided purporting to reflect discussions between QFC and her attorneys about her situation. These both predate any action being taken in relation to her finances. Based on these QFC wanted to invest her money with low risk ("is very worried about losing its capital value") and a reliable return on her investment ($50,000 a year). In fact the way in which her funds have been invested is not consistent with either of these priorities, with a relatively high risk (shares and convertible notes in a private company) and taxable income well below the income she had wished, (even though money invested in shares earns no income). 5. In response to a question from the Tribunal, EZC confirmed that no other records had been kept of discussions between QFC and her attorneys during the process of actually making decisions about her investments, despite the apparent significant change in QFC's priorities and investment goals. This was despite the fact that EZC claimed that, as a certified practicing accountant, he always keeps written records of actions. 6. In response to questions from the Tribunal, EZC denied that he had any conflict of interest as attorney for his mother, despite his managerial role within Company XYZ, and his own substantial investments. In his view, this was, if anything, an advantage for his mother because of his close association with the business. The Tribunal asked whether there would be a conflict of the business did not go well, putting him in a position of choosing whether the interests of the business to retain capital or the interests of his mother not to lose capital would be in conflict. He similarly denied there would be any conflict in those circumstances, stating "My POA does not determine my fiduciary duty", which did not assist the Tribunal to understand how he would manage such a conflict. 7. Based on the written material submitted to the Tribunal, including the financial statement prepared by EZC and the documentation from Company XYZ, a breakdown of QFC's current financial affairs is as follows: * Unencumbered home in regional NSW, with an estimated value of $1,200,000; * Stamps, coins, paintings and other collectables, with an estimated value of $1,500,000. The hearing participants confirmed that there has been no valuation of these items in recent times, and they are not insured separately from the general house contents. Given the very significant estimated value, and the lack of evidence supporting how this estimate was arrived at, the Tribunal did not accept that this is a reliable estimate; * Cash at bank of $90,000; * Personal effects valued at $200,000; * Shares in public companies of $5,000; * the investments in Company XYZ, the details of which are set down below, based on the investment documents, (rather than on the material provided by EZC): Date purchased Investment details Comments 13 July 2015 Convertible note A: 5556 notes @ $45 per note ($250,020) 8% interest, paid quarterly ($20,002 pa) The Financial statement prepared by [EZC] values these at $75 a note ($416,700), however the relevant convertible note agreement refers to them being purchased for $45 a note. No evidence was submitted confirming they are worth $75 a note. The convertible note agreement provides that after 2 years (13 July 2017) the note is either converted to class B shares or redeemed. This date has past but [EZC] advised that there is an agreement to roll over this convertible note in the same terms as the original note. However there is no documentation to confirm this, and this is not indicated as an option in the convertible note agreement documentation. 8 April 2016 1333 class B shares purchased. ASIC documents states these were purchased for $1 a share, consistent with other shares issued that day. No income from these shares anticipated until 2019. The financial statement states these were purchased for $75 per share, but there is no confirmation of this. If $75 is correct, the value is $99,975, if it is $1, then the value is $1,333. Value of investment at purchase and at present is unclear. 2 Sept 2016 2667 convertible notes purchased for $75 each ($200,025). 8% interest. paid quarterly, ($16,002 pa) Term expires 2 September 2018 at which point [QFC] can get capital back with any outstanding interest or convert to class B shares. 13 October 2016 3600 ordinary shares purchased. ASIC documents say purchased for $180,000 which is $50 a share, consistent with the other shares issued that day, No income from these shares anticipated until 2019. Financial statement reports that these are worth $75 each ($270,000) but no other confirmation of this. 31 August 2017 2133 convertible notes @$75 each ($159,975) at 8% ($12,798 pa) Expiry 2 years (3 August 2019) at which point can get capital back with any outstanding interest or convert to class B shares 1. Based on the above, a conservative assessment indicates that QFC invested $791,353 in Company XYZ, which is less than the amount that EZC has indicated. If it is accepted that the shares are each worth $75 a share (noting there is no documentation to support this), the current value of the investments in Company XYZ is $890,015 or $1,056,695 (based on a value of $75 for all shares and convertible notes, which again is not supported by the documentation.) 2. Based on QFC's tax returns her income from dividends in the 2015/16 financial year was $28,284 of which $20,000 was from Company XYZ, and in the 2016/17 financial year her income from dividends was $39,592 of which $34,323 were from Company XYZ. These reflect income in financial years, and as the table above shows, investments in Company XYZ have been made over a period between July 2015 and August 2017, so the tax returns above do not reflect the income that QFC will earn from the Company XYZ investments she currently holds. Nonetheless this income is well below the income she had apparently said that she wanted to earn and significantly none of the money invested in shares earns any income. 3. TAC submitted that her mother earns well below the income she could be earning from a lower risk investment elsewhere, if all of her money was generating income. 4. As set out above, the Tribunal noted significant irregularities in the evidence regarding QFC's investments. Review enduring power of attorney Should the Tribunal conduct the review? 1. The Tribunal decided to conduct a review of the enduring power of attorney because significant allegations had been made in relation to the conduct of EZC and RBC as attorneys, which warranted further consideration by the Tribunal. Should the Tribunal make any orders under section 36? 1. As noted above, the Tribunal can only make orders in relation to the enduring power of attorney if the orders "better reflect [QFC]'s wishes" or if the Tribunal is satisfied that the orders are in her "best interests". QFC was adamant that she did not want any changes to her existing arrangements, which means that there were no orders which the Tribunal could make which would "better reflect her wishes". The Tribunal was therefore left with the option of making orders if satisfied they were in QFC's "best interests". 2. Although it is not stated in the legislation, a person's capacity to make their own changes to their enduring power of attorney is clearly a relevant consideration for the Tribunal when deciding whether or not to make orders under s 36 of the POA Act. Although the Guardianship Division of the Tribunal's ("the GD") authority to review enduring powers of attorney derives from the POA Act, and not the Act or the CAT Act, broadly the jurisdiction's focus is protection of the rights of people with a disability. The GD is generally obliged to observe the s 4 principles of the Act, which are focussed on the rights and interests of people with a disability. In this context, it is relevant to note that the POA Act does not give the Tribunal the authority to review general powers of attorney – only enduring powers of attorney. This supports the conclusion that the Tribunal's interest is primarily in the rights of those whose affairs can be managed on their behalf under the instrument once they have lost the ability to do so for themselves. In this sense, the Tribunal's jurisdiction is "protective". However, the Tribunal's jurisdiction is not "paternalistic" – it is not the Tribunal's role to decide what is in a person's best interests if the person is in a position to do that for themselves. 3. Having examined the available evidence regarding QFC's financial arrangements, as well as the actions of her attorneys, the Tribunal held a number of concerns. It is highly likely that EZC's interest as his mother's attorney is conflicted, given his close association with Company XYZ. Section 12(1) of the POA Act provides that an attorney is in a fiduciary relationship with the person whose affairs they manage and as such must act in that person's best interests and must not obtain a personal benefit other than specifically provided for in the executed enduring power of attorney (no such provision exists in QFC's EPOA). QFC invested in Company XYZ based on recommendations from EZC. These were not the recommendations of the financial advisor from the wealth management firm. EZC confirmed that because those investments were not returning sufficient income he proposed Company XYZ as an alternative to his mother. He confirmed at the hearing that he did not propose any options other than Company XYZ. 4. QFC's investments with Company XYZ have essentially provided capital to a private company which is still establishing itself, and, as General Manager, and co-investor since around the time QFC's first investment in Company XYZ was made, it is likely that EZC's interests were met by bringing his mother's money into the business. His interests are also met by her money remaining in the business. Given the lack of diversification of her investments, the risk profile of convertible notes and shares in a private company, the lack of income return on the shares (which form a substantial proportion of her investment) and the likely difficulty of QFC withdrawing from those investments, it is arguable that these investments are not consistent with QFC's interests. 5. However the evidence before the Tribunal is that the decisions to make these investments have been made by QFC and not by her attorneys. It is self-evident that a competent person can make whatever decisions they chose when investing their money, even if they seem unusual or unsound to others. 6. The Tribunal already noted the inconsistencies and gaps in the documentation regarding QFC's investments. If QFC is acting on her own behalf, then she can choose whether or not to keep records (though clearly it would be prudent to do so). However the evidence is that as attorney, EZC has been performing the "administrative" role, if not the decision making role in the management of QFC's financial affairs, and as such, with RBC, has entered into contracts and other commitments on her behalf. Although there is no statutory requirement that an attorney keep records and accounts there is a general law obligation to do so. [1] If the records EZC submitted to the Tribunal are a complete account of the records he has kept, (and this is what he was directed by the Tribunal to provide), then there are significant issues with their accuracy and reliability. The incomplete documentation is of concern because the purchase prices of convertible note A and the shares, as well as the current value of the investments, and status of convertible note A are all unclear. 7. The Tribunal accepts that TAC made her applications in good faith on the basis of genuine concerns regarding her mother's financial affairs. The Tribunal accepts that many of her concerns are legitimate; her mother's investments are not typical for a person in her circumstances, and expose her to considerably more risk than might usually be the case, and QFC is clearly very strongly influenced by EZC in the decisions that she has made regarding her investments. There are also legitimate concerns regarding EZC's role as attorney in particular the likelihood of conflict of interest given his position as general manager of Company XYZ, the absence of reliable records regarding the value of her investments, the discussions which led to changes in her investment strategy and goal, as well as decisions about individual investment purchases. 8. As noted in Re R [2000] NSWSC 886, to allow an attorney With conflicts of interest to continue is something that … has to be watched carefully. If it has to be watched carefully, then it seems to me that it is just a question of fact and degree as to whether in all the circumstances it is in the best interests of the incapable person that that situation continues. 1. Significantly this refers to the "best interests of the incapable person". The evidence before the Tribunal is that whilst EZC may be strongly influencing his mother in relation to her investment decisions, she is capable of making those decisions for herself and has been doing so. The evidence is that QFC understands and is happy with her current investments, and does not want any changes to the way in which she has arranged her affairs, including any changes to her attorneys. If she did want to obtain her own advice, or make changes, she is able to do so. QFC's lawyers have consistently confirmed that in their view she is quite capable of giving instructions and of understanding the nature and effect of the enduring power of attorney. Therefore there would be no impediment to QFC executing a new enduring power of attorney if she wished. In these circumstances, the Tribunal cannot be satisfied that it would be in QFC's best interests for the Tribunal to make any orders under s 36 of the POA Act. 2. Even if the Tribunal decided that it was appropriate to make an order under s 36 of the POA Act, and change the terms of the enduring power of attorney, the evidence is there would be no impediment to QFC executing a new enduring power of attorney in the same terms as the instrument which is currently under review. 3. On the basis of the findings above, the Tribunal decided not to make any orders under s 36 of the POA Act. Financial management Is QFC incapable of managing her affairs? 1. The law presumes that a person is capable of managing their own financial affairs unless there is sufficient evidence to the contrary. The test for determining a person's capability to manage his or her affairs is subjective to the extent that the nature of the person's financial affairs is relevant to the consideration of their capability. The test has been described as follows (P v NSW Trustee and Guardian [2015] NSWSC 579, [307]-[308]): Is a person reasonably able to manage his or her own affairs in a reasonably competent fashion, without the intervention of a [financial manager] charged with a duty to protect his or her welfare and interests? … [A] focus for attention is whether the person is able to deal with (making and implementing decisions about) his or her own affairs (person and property, capital and income) in a reasonable, rational and orderly way, with due regard to his or her present and prospective wants and needs, and those of family and friends, without undue risk of neglect, abuse or exploitation. 1. In considering whether the person is "able" in this sense, consideration may be given to: * past and present experience as a predictor of the future course of events; * support systems available to the person; and * the extent to which the person, placed as he or she is, can be relied upon to make sound judgments about his or her welfare and interests. 1. No one asserts and there is no evidence that QFC is not entirely capable of managing her own day-to-day finances. Any assertion that there are limitations to QFC's capability to manage her own affairs relate to decisions regarding her investments, which provide her source of income. 2. The details of the reports from Dr Y and Dr Z have been set out above. These both acknowledge that QFC has some early cognitive changes, resulting in some memory loss but that this falls short of a diagnosis of dementia. They both express that they consider that QFC is capable of making all necessary decisions on her own behalf regarding her finances with regard to her own interests. The Tribunal does not need to find that a person has a disability in order to be satisfied that they are incapable of managing their own financial affairs, however, it is necessary for the Tribunal to have sufficient evidence of incapability before it can make this finding. 3. TAC has asserted that her mother has a degree of cognitive impairment which has not been identified in the limited testing and assessment conducted by Dr Y. Her evidence for this is primarily based on her own knowledge of her mother, the change she has noted in her mother's behaviour and decisions in the past few years, and her observation of her mother's lack of understanding of the nature of her current investments. Based on the available evidence, no one else who has given evidence to the Tribunal shares TAC's view. 4. QFC vehemently denies that she is not entirely capable of managing her own financial affairs. She presented to the Tribunal as a very independent minded and proud woman who took some offence at the suggestion that she is not capable of managing for herself. The Tribunal did observe her to have some memory loss consistent with the medical evidence, particularly regarding the circumstances under which EZC became more actively involved in her financial affairs, some years ago. However her evidence regarding her current financial situation remained consistent through the hearing: that she makes her own decisions based on recommendations from EZC whom she trusts, understands that not all of her investments currently generate income, (trading this off for a potential future capital gain), changed her mind (as is her right) about the degree of risk she is prepared to tolerate and understands and accepts the risks of her current investments. 5. The Tribunal also considered whether or not there was sufficient evidence that QFC was incapable of managing her own financial affairs because she is vulnerable to influence from others. Certainly she relies heavily on EZC's advice, and her high regard for him may cloud her judgement to some extent. However there is no persuasive evidence that she is not capable of rejecting EZC's proposals, if she considered that they were not in her best interests, even if her inclination is generally to accept his advice. 6. Based on the available evidence, the Tribunal was not satisfied that QFC is incapable of managing her own financial affairs. On this basis she is not someone for whom the Tribunal could make a financial management order, even if this were warranted. The application for a financial management order is dismissed. ********** Endnote 1. This was considered by Slattery J in Susan Elizabeth Parker v Margaret Catherine Higgins & Ors [2012] NSWSC 1516 as follows: "The attorney's obligation is really one to keep accurate primary accounting records, for which the principal can call, if necessary, for the principal's examination. If the principal then wishes to produce secondary accounts, or full financial accounts, that is a matter for the principal" [at 64]. I hereby certify that this is a true and accurate record of the reasons for decision of the Civil and Administrative Tribunal of New South Wales. Registrar 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. Decision last updated: 04 May 2020