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  • Unreported Judgment

WCV

 

[2016] QCAT 114

CITATION:

WCV [2016] QCAT 114

PARTIES:

WCV

APPLICATION NUMBER:

GAA1908-16

GAA1911-16

GAA

MATTER TYPE:

Guardianship and administration matters for adults

HEARING DATE:

15 April 2016

HEARD AT:

Southport

DECISION OF:

Member Mc Donald

DELIVERED ON:

10 May 2016

DELIVERED AT:

Southport

ORDERS MADE:

  1. RW as the appointed Administrator is authorised to enter the conflict transaction being:

that the Administrator may continue to reside in WCV property in exchange for market rent, presently being $400 per week.

  1. The appointment of RW as Administrator for WCV for all financial matters is continued.
  2. This appointment remains current until further order of the Tribunal. It is reviewable and will be reviewed in one (1) year.
  3. The Administrator shall file an updated management plan by 11 August 2016.

CATCHWORDS:

Approval of financial management plan, review of appointment of Administrator, conflict transaction; Trusts Acts 1973, section 22(4) prudent persons rule, power to invest, Guardianship and Administration Act 2000, Sections 50, 51, 39, 35, Schedule 4.

APPEARANCES:

RW , SW, AW.

REASONS FOR DECISION

Conflict Transaction

  1. [1]
    WCV, now aged 93 years, suffered a major stroke in September 2014. He has been living in a nursing home since that time. The stroke affected most areas of his function, and significantly affected his language centre. As a result, WCV has minimal communication and is unable to communicate his needs and wants.  WCV executed an enduring power of attorney on 27 August 2012 appointing his two sons RW and SW as attorneys for all personal health and financial matters. His son RW was appointed Administrator for all financial matters for his father WCV on 16 January 2015 when SW, the co-attorney sought to resign from his joint appointment with RW under an Enduring Power of Attorney. The Tribunal made an administration appointment at the time because there had been some transactions relating to the adult’s property that the Tribunal sought to monitor. At this hearing it was identified that RW was living in WCV’s home. RW was asked to make an application for the approval of a conflict transaction.
  2. [2]
    The conflict transaction hearing was set down on 28 January 2016. During this hearing RW informed the Tribunal that he had paid a sum of rental each week to his brother to live in the house as well as an advance payment on his father’s behalf by way of an investment. The rent in advance to WCV was in the form of a purchase of a managed investment in WCV’s sole name. This investment was a solicitor’s first mortgage. He had also invested the adult’s funds in another solicitor’s first mortgage. He indicated that he was receiving the income from one of these two investments into his own account. RW presented some illegible material about his contributions for which he claimed he was not seeking compensation. Immediately prior to this hearing RW advised that the Accounts provided to the Tribunal on 6 January 2016 were based on a system where he outlaid all costs for the adult and sought compensation after his death from his father estate. The accounts were not available to the Member during the hearing. RW had indicated that he was in receipt of the income from the investment into his bank account and was paying all of his father’s expenses. It was apparent that the Administrator was mixing his funds and those of the adult’s and the Tribunal was concerned about the transparency of these transactions. The Tribunal raised concerns about rental payments being made to SW rather than applied to the adult’s benefit.  The Tribunal warned RW strongly about the obligations upon an Administrator to act prudently, and to not mix funds under section 50 of the Guardianship and Administration Act 2000, (the Act), and thereby initiated a review into his administration and sought an updated financial management plan, and adjourned the conflict transaction application pending receipt of clearer information from RW.   The review of his appointment was listed before the Tribunal on 15 April 2016 together with the adjourned conflict transaction hearing.

Conflict Transaction

  1. [3]
    RW is living in the home owned by WCV, while WCV pays for his placement in a nursing home. On the face of it this creates a conflict transaction where there is a conflict in the Administrator’s duty toward the adult and his personal interests.
  2. [4]
    Pursuant to section 37 of the Guardianship and Administration Act 2000, Administrators have an obligation to avoid conflicts of duty and interest. The Tribunal may authorise a conflict transaction having regard to the  General Principles of the Act where it shown to be a prudent financial decision and  appropriate to the adult’s circumstances.
  3. [5]
    At the hearing of 15 April 2016, RW indicated that the Tribunal’s expressed concerns about the rental payments had been rectified. He no longer made payment to his brother, and instead paid $400 per week to WCV’s pensioner security account. He identified a payment he made to his father’s account on 8 April 2016 of  $1,733.33 as rental. RW explained that the figure was representative of rent paid since the previous hearing. He indicated that this was now a monthly arrangement. The Tribunal notes that this figure is strangely uneven, and does not equate to 9 weeks rent at $400 week, but has RW’s undertaking that this payment will be made regularly and that this is the first of them. RW indicated in relation to rent prior to the hearing of 28 January 2016 was identified by the payment of $16,385 which included advance rental payment up to June 2016. There remain some obscurities in these dealings which will need to be rectified and the Administrator will be required to account for rental payments he has undertaken to make.
  4. [6]
    WCV resides in a nursing home and is maintaining the costs of the outgoings and maintenance on the premises where the Administrator is residing. RW stated to the Tribunal that there was no additional charges for non payment of a refundable administration deposit for the nursing home. It is usual practice that where no RAD is paid, a higher rate of daily fee will be paid or a combination thereof. RW gave evidence  that WCV was in a low care facility prior to his admission to the  high care ward of the nursing home prior to the fee changes which would see WCV charged a higher daily fee, and therefore is not being charged at a higher daily rate.  The Tribunal has accepted his evidence that the new charges do not affect the adult. He is paying approximately $741 for  nursing home fees.
  5. [7]
    WCV maintains the cost of outgoings on the real property in return for rental of $400 per week. RW’s evidence is that this rental was previously paid in advance in the purchase of an investment in the adult’s name in a solicitors first mortgage investment. His evidence is that he paid $16,385 as a lump sum. His evidence is that this was rental payment until June 2016. He has also stated that since the previous hearing he is paying $400 each week for rent to WCV pensioner security account, the first payment of $741 per fortnight and receiving $800 per fortnight in rental. WCV outlays $115 per fortnight for outgoings on the house in return for rent. Prior to the hearing of 28 January 2016 the Administrator had sought that WCV paid for house and contents insurance, but has rectified this limiting the insurance payable by the adult to house insurance.
  6. [8]
    WCV’s income sources include a British Pension as well as private pension entitlements from British pensions and a local pension. On average his fortnightly income from these sources is $1513.45. The mortgage investment returns he identifies as returning $146 per fortnight. (He orally corrected the error in the financial management plan which he declared only $75 per fortnight income from this source.)
  7. [9]
    With the mortgage investment now income received into the adult’s account, and rental income being paid, the adult’s fortnightly budget leaves a regular credit of approximately $569 per fortnight. WCV’s future needs are likely to relate to his medical needs and there appears to be funds available for meeting these. The Tribunal considers that it is reasonable for the Administrator to live in the property owned by the adult in these circumstances on the grounds that he continues to contribute rental costs at market value. The Tribunal accepts that RW is paying market rent and authorises the conflict transaction in terms of the present rental arrangement to pay $400 per week.

Updated Financial Management Plan and Review

  1. [10]
    RW submitted an updated financial management plan dated 18 February 2016. The plan includes rental income of $800 per fortnight in addition to the range of private and public income sources. The financial management plan indicates that WCV has accommodation expenses of $741 per fortnight.
  2. [11]
    At the point of submission of this document the adult had approximately $16,000 in savings in his bank account and $40,000 across two managed investments (solicitor’s first mortgage schemes) This plan proposed that there would be no sale of the current assets. 
  3. [12]
    At hearing, RW advised that this plan has changed since submitting the most recent financial management plan, with the Administrator investing $15,000 of the adult’s funds in another mortgage investment scheme. A total of $55,000 is now invested in this form of investment.
  4. [13]
    Pursuant to section 35 of the Guardianship and Administration Act 2000, the Administrator must exercise this power of investment with reasonable diligence to protect the adult’s interest. The prudent person rule applies to all investments made as Administrators.
  5. [14]
    Administrators have the power to invest on behalf of the adult in an authorised investment s 51(2) of the Act. An authorised investment is defined at schedule 4 of the Act to be an investment which if the investment were the funds of  a trustee, would be an investment by the trustee exercising the power of investment under the Trusts Act 1973 , or an investment approved by the Tribunal. Section 24 of the Trusts Act  the Administrator must have has a duty to consider matters prescribed under section 24(1) in exercising the power of investment. Among these considerations includes the needs of the beneficiaries, the desirability of diversifying trust instruments, the potential for capital appreciation, the risk of capital or income loss, likely income return and the timing of that return.
  6. [15]
    It is evident that there is a high rate of return on this investment, but this is not without risk. The nature of the risk associated with this investment concerns the Tribunal. RW acknowledged that solicitor first mortgage schemes as a means of investment is traditionally considered a high risk investment, and acknowledged that a return of the stated 9.5 per cent suggested this was the case. RW claimed that he considered the risk was low given that the risk was spread over three separate properties in “small” sums. He expressed his opinion that the property market that is boyant with solid construction occurring in the housing industry. He stated that he had inspected the site involved in the recent investment and had no concerns. RW said that he was a financial advisor and had been successful in the past with this form of investment.
  7. [16]
    RW provided an investment certificate noting $30,000 is invested on 16 January 2016 with one investment through Ingerwerson and Lansdown at 9.5 percent. This is not a small sum as suggested.
  8. [17]
    The Tribunal is concerned that a high proportion of WCV’s liquid funds are tied up in high risk investments. While the return is to date much greater than traditional forms of investment, the Tribunal is concerned about an absence of diversity to these funds. The Tribunal would like to see greater diversification of investment to ensure compliance with the prudent person rule. The current financial management plan is not approved and an updated plan which reflects this diversity is ordered.
  9. [18]
    The evidence before the Tribunal suggested that there has previously been mixing of funds in contravention of section 50, and a conflict transaction involving the Administrator’s occupation of the premises. The Tribunal has chosen to continue the appointment of the Administrator where theses issues have been rectified. The Tribunal is satisfied that WCV is now in receipt of rental income and the income from the managed investments. The mixing of funds has been rectified and the Administrator now has clear understanding of his obligations in this regard. The Administrator has improved the adult’s financial position overall based on decisions made since the appointment.
  10. [19]
    The Tribunal considers that the Administrator is now managing the adult’s affairs appropriately and now, with these changes, competently. Given the history of mixing of funds and diffiulties with transparency, the Tribunal will reconsider this administration appointment again in 12 months.
Close

Editorial Notes

  • Published Case Name:

    WCV

  • Shortened Case Name:

    WCV

  • MNC:

    [2016] QCAT 114

  • Court:

    QCAT

  • Judge(s):

    Member McDonald

  • Date:

    10 May 2016

Appeal Status

Please note, appeal data is presently unavailable for this judgment. This judgment may have been the subject of an appeal.
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