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- Unreported Judgment
GM QCAT 292
QUEENSLAND CIVIL AND ADMINISTRATIVE TRIBUNAL
GM  QCAT 292
In an application about a matter concerning GM
Guardianship and administration matters for adults
2 October 2019
20 November 2018
Brisbane and Townsville
IT IS THE DECISION OF THE TRIBUNAL THAT:
HEALTH LAW – GUARDIANSHIP, MANAGEMENT AND ADMINISTRATION OF PROPERTY OF PERSONS WITH IMPAIRED CAPACITY – OTHER MATTERS – where attorney made application for authorisation of conflict transactions – where adult owned cane farm with son which operated by trustee of family trust – where wanted transfer by way of gift of the cane farm, shares and transactions involving a the trust and a partnership
Powers of Attorney Act 1998 (Qld), s 73, s 118,
APPEARANCES & REPRESENTATION:
R Bennett, partner of Wilson Ryan Grose
D Honchin, of Counsel
REASONS FOR DECISION
- GM is a 79-year-old retired sugarcane farmer and GMM is her attorney under an enduring power of attorney. GM is now resident in an aged care facility and has a diagnosis of dementia.
- GMM has made application to the Tribunal to authorise him to enter certain transactions where he would be taking a direct personal benefit while entering them as attorney for GM. The proposed transactions were as follows:
- (a)Transfer of GM’s interest in the cane farm, being lot x on RP Y (‘the Farm’) to GMM for nil consideration;
- (b)Transfer of GM’s interest in the water allocation, having titles reference XXX to GMM for nil consideration;
- (c)Transfer of GM’s interest in X Pty Ltd ACN XXX XXX XXX to GMM for nil consideration;
- (d)Resignation of GM as director of X Pty Ltd;
- (e)Approval of Deed of Variation to the GB Family Trust to appoint GMM as appointor of the trust and upon his death and/or incapacity, GMM’s wife as the replacement appointor;
- (f)Transfer of GM’s shares in X Limited to GMM for nil consideration; and
- (g)Any other ancillary administrative orders as may be necessary to vary out the above transactions.
- The terms of the enduring power of attorney appointing GMM which was made on 16 October 1998 do not make provisions for him to enter conflict transactions. Section 73(1) of the Powers of Attorney Act 1998 (‘POA Act’) states that an attorney for a financial matter may enter into a conflict transaction only if the principal authorises the transaction, conflict transactions of that type or conflict transactions generally. A conflict transaction is, in accordance with s 73(2) of the POA Act, a transaction in which there may be conflict, or which results in conflict, between (a) the duty of an attorney towards the principal; and either (1) the interests of the attorney, or a relation or business associate or close friend of the attorney; or another duty of the attorney. There are exceptions set out in s 73(3) a transaction is not a conflict transaction merely because by the transaction the attorney in the attorneys own right and on behalf of the principal – deals with an interest property jointly held; or acquires a joint interest in property; or obtains a loan or gives a guarantee or indemnity in relation to a transaction mentioned in paragraph (a) or (b).
- When speaking of the duty that an attorney has towards the principal this beings into focus the provisions of the Act which set out the duties that attorneys have towards their principles:-
- (a)Section 66 of the POA Act – An attorney must exercise power honestly and with reasonable diligence to protect the principal’s interests;
- (b)Section 67 of the POA Act – An attorney who may exercise a power under a document must, when exercising power, exercise it subject to the terms of the document;
- (c)Section 76 of the POA Act – an attorney must exercise power in accordance with the General Principles, discussed below;
- (d)Section 84 of the POA Act – an attorney may invest only in authorised investments as defined in the Trusts Act 1973;
- (e)Section 86 of the POA Act – an attorney for a financial matter must keep the attorneys property separate from the principal’s property but this does not apply to property owned jointly by the attorney and principal;
- (f)Section 87 of the POA Act - there is a presumption of undue influence where a transaction is between a principal and an attorney or an associate of an attorney;
- (g)Section 88 of the POA Act – unless there is a contrary intention expressed in the enduring power of attorney, an attorney for financial matters for an individual may give away the principal’s property only if the gift is to a relation or close friend of the principal and of a seasonal nature or because of a special event (including for example a birth or marriage); or the gift is a donation of the nature the principal made when the principal had capacity or that the principal might reasonably be expected to make and the gift’s value is not more than what is reasonable having regard to all of the circumstances and, in particular, the principal’s financial circumstances.
- In the case where the principal does not have the capacity to authorise a transaction it is then for the Tribunal to determine whether the transaction or series of transactions should be approved. The Tribunal has power if it considers it in the best interests of the principal to authorise an attorney, either generally or in a specific case, to undertake a transaction that the attorney is not otherwise authorised to undertake or may not otherwise be authorised to undertake in accordance with s 118(2) of the POA Act. When the Tribunal is exercising power under s 118 of the POA Act it must comply with the General Principles set out in Schedule 1 of the POA Act in accordance with s 76 of the POA Act. In particular General Principle 7 – Maximum participation, minimal limitations and substituted judgment. The principle of Substituted Judgment must be used General Principle 7(4) so that if, from the adult’s previous actions, it is reasonably practicable to work out what the adult’s views and wishes would be, a person or other entity in performing a function or exercising a power under this Act, or an enduring document, must take into account what the person or other entity considers would be the adult’s views and wishes. There is an exception to this in General principle 7(5) However, a person or other entity in performing a function or exercising a power under this Act, or an enduring document must do so in a way consistent with the adult’s proper care and protection.
- GMM filed an affidavit with his application which set out details of GM current living circumstances, the history of his parent’s marriage and he and his sisters, JMT and GMF, the history of his parents cane farm and his involvement with it, the proposed transactions, and details of GM’s assets and liabilities with a report from BRI Ferrier. I note that GMM currently resides with his family in a hose built on the cane farm at PM and he has been living there since 1993 when his late father semi-retired. GMM owned a cane farm next door to his parents cane farm, of 70 acres, and he had been working away from home until 1987 when he returned and commenced working full time on the family farm in joint partnership with his farm next door. He worked full time with his father until he semi-retired in 1993 and them continued running the farm full time up until his father’s death in 1999. I note from the instructions to BRI Ferrier that the he currently owns the farm equally with GM. He stated he had continued to run the farm full time on GM’s behalf since then. He says that from 1987 until 1996, several months after the birth of his first child, he received drawings of $500 per month and his parents took drawings of $1,000 per month. From 1996, his drawings were increased by his father to be the same as their drawings in the sum of $1,000 per month. He states that these drawings have not increased since that time. The farming operations are carried out through a family trust with a corporate trustee.
- GMM states in the affidavit says that his sisters grew up on the farm with him, however since adulthood and moving out of home, they have not participated in the running and management of the farm. He stated that his sister JMT lives with her partner in a town close by and GMF lives rent free in a property owned by GM, in another city. GMF pays the Rates and insurances on the property. GMM confirmed that arrangement had been in place before GM lost capacity. GMM states that GM, shortly prior to her losing capacity, had discussed transferring the farm to him during her lifetime and that her long time solicitor had spoken to her about this. He states that his mother had raised this issue with him on several occasions, and that he had told her it wasn’t the right time to do it. He states that he is finding it increasingly difficult to operate the farming business in the manner in which it operated prior to his mother’s diagnosis. He stated that it was difficult to see a future forward for himself, his wife and family. He was diagnosed in 2016 with a disease and almost lost his life and that it was after this event that he realised he had no security or succession planning for his family. While his mother was of sound mind, he was always able to make decisions with her approval in relation to the farming business. Since her diagnosis of dementia, he cannot legally make decisions to borrow money against our joint assets for future improvements and/or expansion of the farming business.
- GMM stated that if he predeceased his mother he did not want his wife and children to have to commence litigation in order to provide for themselves. This would be a terrible outcome for all involved, particularly after the years of hard work we have all, as a family, put into the property, further, he wants to ensure that his mother’s needs and her wishes are carried out. He does not believe that anyone including his mother, will be unduly prejudiced by the proposed transactions taking place now. That the transactions will not have any impact on the outcome of his mother’s testamentary intentions, a copy of her will dated 19 July 2006 was exhibited to the affidavit. He states that the proposed transactions will have an impact on the assets that he is to receive form his mother’s estate. The intended gifts to his sisters under his mother’s will remain unaffected by the proposed transactions. He also exhibited a copy of a binding death benefit nomination for the G Family Super Fund.
- GMM states that the report from BRI Ferrier outlines his mother’s future expenses post the proposed transactions will be met from financial resources that would form part of the benefit he is to receive from her estate and/ or superannuation death benefit. As such the proposed transactions are said not to have any negative impact on the intended gifts for his sisters under his mother’s will.
- A report form and Occupational Therapist was exhibited to GMM’s affidavit and was said to outline a number of matters including:
- (a)GM no longer has capacity to make decisions of a financial nature;
- (b)GM will need to remain in care for the duration of her life;
- (c)GM has a life expectancy of between three and five years; and
- (d)GM’s ongoing costs of care for the duration of her life and her reasonable needs including provision of contingencies.
- The report of BRI Ferrier is said to outline a number of matters including:
- (a)GM’s assets and liabilities income and expenditure prior to the proposed transactions;
- (b)GM’s assets and liabilities income and expenditure prior to the proposed transactions;
- (c)GM’s assets and liabilities income and expenditure post the proposed transactions;
- (d)Confirmation that having regard to the material contained in the medical report which is exhibited to the affidavit of GMM, GM has, post the proposed transactions, more than sufficient income to meet her reasonable living expenses and allows for significant contingencies; and
- (e)GM’s will dated 19 July 2006 which was confirmed by the family solicitor as being her last will showed that GN was appointed as her executor. That her houses at 88 X Street, Town; 87 X Street, Town and 12 Y Lane, City were, along with all furniture etc. and the proceeds of any bank accounts, gifted to her daughters JMT and GMF. The residue of her estate was gifted to GMM.
- The report of BRI Ferrier discloses the following current assets and liabilities, with supporting documentation for values, for GM:-
House 87 X Street, Town
$160,000 to $180,000
$160,000 to $180,000
House 88 X Street, Town
$200,000 to $220,000
$200,000 to $220,000
House 12 Y Street, City
$230,000 to $250,000
$230,000 to $250,000
Farm and water allocation
$740,000 to $770,000
50% interest in equity of M and MM G Partnership
50% interest in equity in GB Family Trust
$2,369,020 to $2,459,020
$1,537,953 to $1,597,953
Further care fees before Lifetime limit (14/9/17)
Personal room furnishings
Amount payable to:-
GB Family Trust
$2,211,801 to $2,301,801
$1,515,067 to $1,575,067
- GM’s income and expenditure was as follows:-
87 X Street, Town
88 X Street, Town
12 Y Street, City
(nil occupied by daughter)
G Family Super Fund
G Family Trust
Private Health Insurance
Uninsured medical costs
Main carer unable to provide support
Rates and Insurance
87 XC Street, Town
88 X Street, Town
112 Y Lane, City
paid by daughter
- BRI Ferrier considered the net asset positon after the proposed transactions and in their opinion. They remained an appropriate mix, in terms of “realisability”, providing options for access to funds in the event of unforeseen circumstances and significant net assets remained after the proposed conflict transactions. Their opinion in regards to income was that a significant issue was the longevity of the pension currently drawn down from the G Family Superannuation Fund. The report notes the Occupational Therapists report indicates that GM’s life expectancy is between 3 and 5 year. It is noted that there is a report on the G Family Super Fund which is annexed to the BRI Ferrier report which has useful information in regard to the longevity of the fund which should be considered having regard to the inherent uncertainties in projections of future financial performance and the disclaimers in the Superannuation Fund Report. The Superannuation Fund Report is said to show a projection of superannuation earnings and administration costs and a forecast that GM’s superannuation fund is likely to allow her current pension to be able to be paid for approximately 28 years. It is also noted that the superannuation pension will be able to be adjusted to be increased, should circumstances require, without foreshortening the pension longevity within GM’s life expectancy.
- In the opinion of BRI Ferrier, in the absence of unforeseen circumstances, GM will still have significant net assets after the proposed transactions to meet her expected expenditure for her life expectancy and sufficient flexibility in her financial arrangements to meet expenditure, if required, from net assets, without depleting net assets in an unsustainable manner. BRI Ferrier provided calculations to show GM’s net assets would deplete in an orderly way after five years she would have net assets of $1,187,631 and even after 25 years she would have net assets of $932,724.
- The BG Family Trust Financial statements for the 1 July 2016 to 30 June 2017 financial year were annexed to the BRI Ferrier report. I noted that the profit and loss account showed an amount available for distribution of $55,694 in the 2016 income year which was distributed to GMM and an amount of $173,625 in the 2017 income year which was distributed to GMM. The Balance sheet in Assets showed loans of $111,899 in the 2016 year and $135,558 in the 2017 year with the debtor being GM. And beneficiary accounts of $69,910 in 2016 and $134,378 in 2017 as liabilities which included an amount of $18,957 owed to GM.
- The partnership of GM and GMM showed income of $3,000 in each of 2017 and 2016 with distributions of $1,447 to GM and $1,448 to GMM in 2016 and 1,456 to GM and $1,457 to GMM in 2017. The net assets of the partnership were $114,635 in 2016 and $117,548 in 2017 with GM having a net deficit of in excess of 22,000 in each year of partner’s funds.
- There were valuations from Landmark Harcourts for each of the properties confirming the amounts set out in BRI Ferriers’ report.
- I note that the investment of $113,160 is in the Commonwealth Investments Funds with the income reinvested.
- The report in regard to G Family Super Fund shows that GM and GMM and his wife are members of the fund. With total fund assets of $625,154 and GM’s account having a balance of $365,208 in pension phase. The projections for GMs pension show that it will begin to decline when GM reaches the age of 85 years. There was also a copy of a binding death benefit nomination executed by GM in favour of GMM.
- I noted that the valuation for the cane farm provided was only a single page summary.
- The Occupational Therapist report notes that GM has a diagnosis of dementia with comorbidities, including heart conditions and hypertension, and that based on the report of Dr Oats GM’s life expectancy is estimated at between 3 and 5 years. The report confirms the estimate of aged care fees and incidentals set out in the BRI Ferrier report. It states In regard to her cognitions, in accordance with a letter from the Department of Social Services dated 18 November 2014 that she has:-
- (a)Regular short term memory problems;
- (b)Occasional risk behaviour;
- (c)Regular confusion; and
- (d)Occasional disorientation.
- The aged care facility reported that since 2014 GM’s cognition has declined further and her care needs have increased. The report notes that in conversation with the Occupational Therapist GM had reported that she had been living in the aged care facility for approximately one month, though it was later confirmed that she had been residing there since 2015. She later admitted that her memory was deteriorating. She reported that she cannot remember the names of her grandchildren. She was confident and accurate in reporting the names and ages of her children. She could recall her date of birth but she could not recall basic information provided by the author earlier in the assessment, for example the name of the assessor.
- The Tribunal directed that further material be field by GMM and that all material be given to GM, GMF, TJM and the Public Trustee of Queensland for submissions.
- GMT filed an affidavit setting out the health issues that had arisen for GM since 2014 and advised that:
- (a)GM had been residing with her prior to transfer to the aged care facility as a result of her decline both cognitively and physically;
- (b)GM had a shunt inserted to drain fluid on GM’s brain which had resulted gait disturbance and incontinence which were more significant at the time than her memory and cognitive impairment; and
- (c)GMT and GMF had provided personal support for GM.
- GMF also filed an affidavit setting the history of GM’s health issues the support that she gave her and her concerns in regard to financial matters.
- Copies of the certificates of titles for GM’s properties and the water allocation were filed. The farm and water allocation were owned as tenants in common between GM and GMM.
- The trust deed for the BG Family Trust was filed it showed G Farming Pty Ltd as the trustee with primary beneficiaries being GB (deceased) GM and GMM and the spouses. Secondary beneficiaries included the children and spouses of the primary beneficiaries. The principal of the trust was BG (deceased). The principal has the power to direct the trustee to distribute income or capital of the trust in accordance with clause 6 of the Trust Deed; the power to appoint a new trustee in accordance with clause 13 of the trust deed. If the principal dies then the power under clause 13 vests in his legal personal representative.
- Taylor Byrne provided an updated valuation of the farm and water allocation at $1,500,000.
- The general ledger for the GB Family Trust showed GMs loan account had drawings each year of $12,000 from 2014 and that in 2016 her beneficiary loan had been used to partially set off her loan account liability.
- GM’s tax returns for the income years 2012 to 2017 show that in 2012 she had a taxable income of $114,762 including a trust distribution of $79,443. With 2013 total income of $50,984 including a $21,231 trust distribution. Her income in 2014 was $59,136 with a trust distribution of $16,575. GM’s taxable income in 2015 was $20,067 with a trust distribution of $250. Her taxable income in 2016 was $18,208 with a $1,133 trust distribution. Her 2017 taxable income was $15,207 with a $978 trust distribution. I note that her taxable income does not include her superannuation pension as it is non-taxable.
- GM’s daughters JMT and GMF, filed submissions. They opposed the application for the approval of the conflict transactions on the basis that estimated income excess for needs is estimated at about $1,995 per year (about $38.36 per week) of which 45% is made up from ‘rental income’ and return on investments – an equivalent of 5 – 6 weeks rent – the source of the income was said to be too volatile for such a small ‘excess in needs’.
- GM is asset rich but cash poor, and unexpected events, such as the loss of a tenant or a major financial expense related to the properties, will result in an immediate need to call upon limited cash reserves or the sale of a house – each of which impacts negatively on the interested persons (her daughters) as such calls will deplete or reduce the assets under the adult’s will to the interested persons. The transactions provide no benefit to the adult, but rather provide only benefit to the applicant, increasing the risk that the adult’s assets will be depleted if the rental properties are not 100% occupied during her lifetime. They also dealt with the appropriateness of the applicant to manage the financial affairs of the adult.
- The submissions of the daughters note the contents of the will and say that the basis of the claim that the proposed conflict transactions will not impact upon the testamentary intentions of the adult appears to be the BRI Ferrier report. However, while the report outlines the assets and liabilities it does not deal with the risks associated with the income stream. It is noted that the BRI Ferrier identifies that there will be a reduction of about $700,000 in the adult’s net assets and that the asset base is not either before or after the conflict transaction an insignificant amount for a woman of 78 years of age. The income stream is said to be more significant given that daily living expenses will come from the income stream initially, unless it is insufficient to meet the daily needs and then after that is exhausted it would be reasonable to expect that the assets would be liquidated to cover expenses. The submission notes the superannuation will likely continue to cover about 55% of the adult’s annual needs. According to the Occupational Therapist’s report those care needs will amount to $29,499 per year with additional matter totalling $41,895. It is submitted that figures are quite conservative in terms of estimate for such things as physiotherapy and that an amount of $8,780 could be allocated for this having regard to the adult’s fall risk.
- There is a discussion of the income and expenses and the proportion of those that will be made up of volatile sources such as rental increasing from 31% to 42% as a result of the loss of the trust distribution and the dividend income. It is also noted that one tenant will likely leave as he is a spouse of one of the sisters and they are separating. It is noted that following the proposed transactions the amount available for excess needs will be approximately 5.6 weeks of combined rent. It is submitted that if the adult’s income stream from rentals were interrupted, even for a short period, the adult would have to call upon her cash reserves or sell a house. Either would have a direct impact upon the assets available for distribution to the daughter’s. The applicant, GMM, would have no obligation to call upon the trust or other assets which are subject of the conflict transaction, thus shielding himself from the costs of care for the adult, the obligation falling upon the adult and ultimately the daughters.
- It was accepted by the daughters that there is evinced an intention on behalf of the adult and her husband BG to leave the farm and all its attendant arrangements including the trust and company to the son, the applicant. Of that there can be no real doubt. Those assets will fall to the applicant in the ordinary course of events. The application brought now is said to accelerate that process, in addition to the farm, trust and company and any remaining superannuation (through the binding nomination), the applicant is also seeking the shares. There was also discussion about whether the refundable accommodation deposit would form part of the estate. It was noted that there was an unsecured loan to the adult form the Family Trust as at 30 June 2017 valued at $135,557.6 and, according to the BRI Ferrier Report, that unsecured loan disappears form the list of assets and liabilities following the conflict transaction. However, it is not clear why that is so, unless it is intended that the liability be forgiven in the transfer however that would mean that the transfer of interest and shares has not occurred for nil consideration. The BRI Ferrier Report reports the conflict transaction as ‘transfer of interest in the BG Family Trust and G farming partnership, net of financial liabilities associates with the trust and partnership.’ The orders sought provided to the Tribunal do not deal with any such extinguishment of liability. If the liability is not extinguished then presumably upon her passing and in accordance with clause 5 of the will, the unsecured loan will constitute a ‘just debt’ to be paid by the executor. Payment will of course have to be made out of the assets of the estate, which at that point will consist only of the assets intended to devolve to the interested persons.
- It is submitted that it is equally clear that the adult intended to leave the residential properties and cash to the interested persons. The only protection the interested persons have with respect to the devises in the adult’s will is the maintenance of those assets at their current rate – they are susceptible to erosion by the needs of the adult to fund her future care and needs. The most significant aspect of that relates to the two properties 87 and 88 X Street. As deposed to by the applicant, GMF lives rent-free at the 12 Y Street property by prior arrangement with the adult. A deficiency in income will put that property in peril of sale by the attorney. Whether it would be sold would be entirely a matter for the applicant who is the attorney. In such circumstances the protection of the adult and the beneficiaries can only be ensured where there is adequate financial capacity by way of income sufficiently in excess of the needs of the adult so as to preserve the bequests to the interested persons under the adult’s will. It is submitted that the conflict transactions proposed by the applicant do not provide for such protection. Alternatively, the interested persons should be given notice if the properties are to be sold or encumbered and given the opportunity to intervene in the transaction if they are able or minded to.
- It is submitted that the applicant’s positions as attorney, executor of the adult’s will and beneficiary for the residual places, the applicant is in a conflict position. One in which it is submitted that his duties to the principal, estate and the other beneficiaries (daughters) may bring him into conflict with his own interests (see MAD  QGAAT 26 (10 April 2008)). In addition, the daughters have concerns about the spending of monies by the applicant in circumstance where the applicant deposes (5.14) that he is unable to operate the farming business without the authorisation of the conflict transactions, in particular the purchase of vehicles, renovations to the farmhouse, purchases of homes and monies spent on legal attempts to take over the adult’s assets. The daughters consider that the applicant is far more focussed on his on his own wellbeing and future prosperity than the care, protection and comfort of the adult over the short time she has remaining. The daughters consider that an administrator should be appointed to protect the adult’s interests. If the Tribunal is against the appointment of an administrator then it is submitted that the Attorney be required to account annually to the interested persons in respect of the financial affairs of the adult. The daughters seek to ensure the adult has adequate and proper care during her remaining life. Financial security is essential to that. They accept that their interests in the bequests arising under the adult’s will makes them inappropriate to be administrators. And that such appointment would merely bring the siblings into significant dispute. They suggested in the circumstances the Public Trustee would be suitable for appointment.
- The submissions note the tribunal’s power to authorise a conflict transaction is found in s 118(2) of the POA Act, and that the transaction may be authorised if it is in the ‘best interests of the principal’. In Aintree University NHS Hospitals Trust v James  UKSC 67 the UK Supreme Court (in a medical treatment case) took the view that the ‘purpose of the best interests testis to consider the matters from the patients point of view’. It is submitted that the focus of the test under the POA Act is also upon the principal, not the attorney or the daughters. In this case the best interests of the adult include not only her financial interests but her ongoing care and welfare. While it is true that aside from the specified bequests, the other assets of the adult (such as the farm) would normally be left to the applicant, the ongoing cate and welfare of the adult rely upon there being sufficient funds available to meet the ongoing financial costs of meeting those car needs. It is also in the best interests of the adult that her testamentary intentions be given effect to. In this mix then, a decision which protects the testamentary intentions and which secures her ability to meet her financial care needs would be a decision in the best interests of the adult.
- It is submitted that the proposed conflict transaction approval is not in the best interests of the adult because:
- (a)It puts the achievement of her testamentary wishes in competition with her future care needs;
- (b)A large portion of her financial needs can normally be met by the pre-conflict transaction income even with rental incomes that might not be secure (for example the income excess to needs can meet a loss of income for 48.5 weeks, cf. with post conflict transaction positon of 5-6 weeks of loss of rental income);
- (c)The small income excess post conflict transaction produces less capacity to withstand large expenditure needs that are unexpected without resort to capital or savings (damage to houses from natural disasters, loss of tenants, medical needs); and
- (d)The applicant has failed to demonstrate how the decision is in the best interests of the adult.
- It was submitted that:
- (a)the application for conflict transactions be dismissed and the Public Trustee be appointed as administrator;
- (b)alternatively, the applicant be ordered to account annually to the daughters regarding the adult’s financial affairs and the applicant will not sell or otherwise encumber any of the premises referred to in paragraph 3 of the will of the adult dated 19 July 2006 without first giving the daughters 28 days’ notice.
- GMT in her affidavit states that GMM had not allowed her to rent one of the houses when she had offered to pay rent and that he had instead rented it to her ex-husband and there may have been a period when rent was not being paid. While it was clear from her parent’s will that GMM was to receive the farm, if GM had passed first then all of the remainder of GB’s estate was to come to the daughters.
- GMF in her affidavit sets out the support she gives GM in regard to meeting her clothing and footwear needs, and concerns she has in regard to GMM using assets which comprise the daughters’ share of GM’s estate. She provided details of the work she has performed on the property she resides in which is owned by GM and the effect of GM losing the payments she receives from the family Trust in particular if there was significant maintenance or repairs needed to the properties. She acknowledged that GM intended for GMM to receive the Farm upon her death, she did not agree that GM intended for her shares or any other assets in her name to be transferred to GMM prior to her passing, She objects to GMM managing the Super Fund as he could reduce payments to her at any time and suggests that GM’s superannuation could be transferred to a new fund with the daughters in control of it. She states that GMM has never provided them, GMF and GMT with an explanation of how GM’s funds are expended.
- GMM filed a further affidavit sworn on 18 July 2018. He stated that he believed that the proposed transactions were in the best interests of GM for the following reasons:-
- (a)During his father’s lifetime and prior to GM’s loss of capacity, it was always understood they would upon their retirement transfer the farm to him;
- (b)He describes his father transferring a half share of the farm to him in 1998 at a time when he was suffering terminal cancer. And notes that at the time his mother was relatively young and in good health and his father wished to ensure that the remaining 50% of the farm remained in his mother’s name so that she had sufficient income and assets and ensure her quality of life;
- (c)He states that his mother and he discussed on more than one occasion her plans to transfer the remaining portion of the property she held to him prior to her death;
- (d)He exhibits a copy of a letter from his lawyers to the family solicitor for GB and GM and his reply; and
- (e)He believes that if his mother had capacity, she would proceed with the proposed transactions on her own volition. He is aware it is common practice within the rural industry, particularly cane farming families such as his own, for elderly parents as part of their succession planning strategies, to transfer their farming interests during their lifetime to their children who have remained on the farm. It is common practice and allows them to take advantage of stamp duty exemptions as a result of family farming arrangements. GM’s dementia has robbed us of the opportunity to complete the succession plan she and his father had.
- The letter mentioned in GMM affidavit states that the author was the family solicitor for BG and GM it noted that prior to his death GB had gifted a one half interest in the cane farm to GMM in October 1998. Following the transaction BG and GMM each had a one half interest in the farm. The solicitor believed that this was to ensure that GMM had a one-half interest in the farm before BG’s death. He noted that he had attended to the preparation of GM’s will in 2006. He noted that following the making of the will GM had made an appointment to check her will to ensure that the water allocation would pass to GMM as part of the farm. He believes this would have been after 2009 when separate titles for water allocations came into existence. At that time the possibility of transferring the farm to GMM had been raised but GM indicated that GMM was not in any hurry for her to do that. He did not open a file or make a diary note of the meeting. As far as he was aware it was always the intention of GM that her son, GMM would inherit the cane farming enterprise.
- Final submissions were also filed on behalf of GMM. They note that GM has been residing in an aged care facility since 15 July 2015 and that she has been diagnosed with dementia and requires 24-hour care and that she is expected to remain at the current facility until she passes away, with her current life expectancy being three to five years. The Occupational Therapist’s report in regards to cognition was also cited.
- The reports of BRI Ferrier and the Occupational Therapist are noted and confirm that her expenditure needs including her accommodation will be $29,499 per annum. The BRI Ferrier Report provided a comparative analysis of GM’s net assets and income both before and after the proposed transactions. It is anticipated, in the absence of unforeseen circumstances, after the proposed transactions, GM will have sufficient income to meet her expected expenditure for her life expectancy and sufficient flexibility for her financial arrangements to meet expenditure, from net assets without depleting nett assets in an unsuitable manner.
- It was submitted on behalf of GMM in regard to best interests that in considering best interests a number of factors need to be considered by the Tribunal including:
- (a)GM’s wishes;
- (b)Any potential adverse consequences; and
- (c)The impact of the proposed transactions on GM and/or other children.
- GM’s wishes have always been to provide for her family. GM, and prior to his death her husband, had always intended to benefit GMM with their farming assets and to recognise his significant contribution to them in having worked on the farm since he was a young man. They always intended to benefit their daughters from other assets held by them separate to the farm. These wishes are clearly reflected in GM’s will. Further evidence of this intention is shown by the initial transfer of 50% of the farm to GMM by his father in 1998. The farm was transferred by way of gift from GB to GMM at that time with the balance being in GM’s name to ensure that she had sufficient funds and income to support her fort eh rest of her life as she was still reasonably young and in good health at the time. Further conversations over the years were had between GM and her lawyer in relation to transferring the balance of the farm to GMM, however, however these plans were not pursued to any finality prior to GM’s loss of capacity.
- The BRI Ferrier Report and the Occupational Therapist’s Report illustrate that, although there will be a change in the assets and income of GM post the proposed transaction, she will not, having regard to her current and future needs, suffer any adverse consequences as a result of the proposed transactions and will still be able to continue to enjoy the same quality of life she presently enjoys and have financial protection for any unforeseen contingencies.
- Further, it was submitted that, having regard to her daughters, her testamentary wishes will not be affected or impeded in any way as a result of the proposed transactions.
- Further submissions were made on behalf of GMM in response to the material from his sisters. It was clarified that:
- (a)as the lifetime cap for the daily means tested fee had been reached, the only ongoing accommodation cost of GM was the basic daily living fee, which is $18,039 per annum;
- (b)the allowance of $4,000 per annum is sufficient to cover the costs of repairs and maintenance to the properties owned by GM; and
- (c)while the daughters raise concerns about the GM’s income after the proposed transactions the expert evidence is that GM will have excess income of $1,955 per annum and that the Tribunal should rely on the expert report from BRI Ferrier.
- What is more significant is whether there are sufficient assets to meet GM’s expenditure over the rest of her life, from net assets without depleting those assets in an unsuitable manner and the BRI Ferrier report shows that having regard to GM’s expected life of 3 to 5 years there are with net assets after five years only decreasing by $7,436 and she has cash reserves of $150,000 excluding the CBA investment of $17,000. If even if the rental properties were not rented for 3 of the years this would be a deficit of $54,600 and this deficit could be funded from cash reserves and still leave over $90,000 in cash reserves (excluding the CBA investment Fund, so over $200,000 including that fund) after that period. Even if GM were to live another 10 years it was submitted her net assets would $1,155,405 a decrease in net assets position of $32,227. The other option it is submitted which is available to GM to fund any deficit ion income or unforeseen expenses (before having to sell a property) would be to access her pension entitlement (which is an asset devised to GMM and would only detriment him in that respect) or access the cash investment held with the CBA. It is submitted that the tribunal should be satisfied that after the proposed transactions, for the rest of her lifetime (whether that be 3 – 5 years as opined or her life expectancy of a healthy 78 year old), GM would have sufficient income and capital to fund any deficit in rental income and/or any unforeseen expenses.
- It is submitted that the daughters seem primarily concerned with the depletion of assets which are to be devised to them under GM’s will. They are expecting to receive GM’s three real properties and funds in bank accounts. They raise concerns around GMM selling those properties, out of necessity or otherwise. They suggest GMM may sell a property even where there may be other funds available to support expenses. They go as far as to suggest there are risks that the care expenses of the adult fall upon them and, that having regard to the reserves, there are sufficient funds to cover any one-off or unforeseen expenses. The refundable accommodation deposit of $320,000 will also form part of the bank accounts to be released to the daughters on GM’s death.
- Based on the concerns and evidence of the daughters, the Tribunal would not be persuaded or concerned that there was any real risk of GMM causing any unnecessary sale of the properties, the properties being sold out of necessity to fund any unforeseen expenses or a deficit in income, the testamentary intentions of GM being defeated, in terms of the daughters’ interests. These concerns would exist irrespective of whether or not the proposed transactions were allowed.
- In regards to the allegations of misconduct and mishandled funds by GMM it is submitted that these allegations are not supported by evidence and the Tribunal should give them little, if any, weight and there are various reasons why this is so set out in the submissions. GMM also objected to the daughters’ proposals to alter the management of the financial affairs in particular rolling GM’s superannuation entitlement out of the current fund could have significant impacts on the longevity of the fund, the X Limited shares can only be owned by a cane grower and the refundable accommodation deposit cannot be accessed until GM’s death. GM chose to appoint GMM over the daughters knowing their position, level of understanding of her finances and their relationships. The daughters present no evidence as to the estimated cost of any proposed administrator, these would not be insignificant. The proposal only increases GM’s expenses which is in complete contradiction to the daughters’ position in terms of their concerns about GM’s expenses and possible depletion of assets. In all of these circumstances it would not be appropriate to alter the arrangements for the financial matters for the applicant to manage her financial matters, it was submitted that GM had chosen GMM to manage her affairs because he had worked on his parents farm, full time, since 1987; he has run the farm since his father’s death in 1999, while the daughters were not involved; and he has intimate knowledge of GM’s financial affairs. The submissions in regard to testamentary wishes are clear that it was intended that GMM was to take the farm and the daughters were to benefit from the properties and the residuary. It is submitted that GM had intended to transfer her share of the farm to GMM prior to her death. It was GMM himself who prevented the transactions taking place at that time. This is not disputed by the daughters save that GMF denies that GM intended that her shares and other assets to be transferred to GMM prior to her passing. GMM”s position is supported by the transfer of a one-half share of the farming interest to GMM by GB during his life, and the letter from the family solicitor sating that the possibility of transferring the property to GMM had been discussed with GM. That, in saying that the assets will fall to GMM in the ordinary course of events, the daughters fail to appreciate the evidence that the ongoing success of the farming business is at risk and if the proposed transactions do not occur, it will place the business in jeopardy. That it is difficult to continue to operate the business in the manner it was operated previously, he cannot legally make any decisions to borrow money against their joint assets for future improvements and or expansion of the farming business and the existence of the business may be placed in jeopardy.
- GMM submits that his parents would have wanted to make sure that the ongoing operation of the business was not placed at risk, and that the business continued. It is submitted that if the proposed transactions don’t go ahead the daughters will receive what they were intended to receive but there may no longer be a farming business for GMM to receive from which he could support himself and his family. So the testamentary intentions of GM and GB could be defeated. If the proposed transactions are allowed, the daughters will receive what they were intended to receive, being at least the properties, the refund of the accommodation deposit ($320,000). GMM would already have received the farming business. Ultimately, the testamentary intentions of GM in terms of their specific bequests would be upheld.
- Submissions were made on behalf of GMM as to what is in the best interests of GAA. The Tribunal should have regard to the principles set out in the decision of C v W (No 2)  NSW SC 945; the protective jurisdiction exists for the benefit of the person in need of protection but it takes a large and liberal view of that that benefit is, and will do on behalf do a protected person not only what may directly benefit him or her, but what, if he or she were able to manage his or her own affairs, he or she would, as a right and honourable person, desire to do. Consideration should be given to what the particular person incapable of self-management would be likely to do (acting with wisdom and prudence) if he or she possessed the capacity to act. Whatever is to be done, or not done, must be measured against what is in the interests and for the benefit of the person in need of protection. Consideration should be given to whether any loss, cost or other detriment, to the estate of the incapable person suffered, or likely to be suffered, as a consequence of conduct ought to be excused is of an order that falls within, or goes beyond, a dimension that can reasonably be accounted for on the grounds of friendship, relationship, charity or other motives on which ordinary people act.
- It is noted that the daughters submit that the proposed transactions provide no benefit to GM. This fails to take into account not only what may directly benefit GM, but also what he or she, if capable would have done or desired to be done. They also submit that the proposed transactions places achievement of testamentary wishes in competition with GM’s future care needs. This is said not to be supported by the BRI Ferrier Report and the Occupational Therapist’s Report. It is submitted that the proposed transaction would benefit GM because they:-
- (a)Ensure continuity in estate planning, not only of GM but also GM’s husband, GB;
- (b)In terms of GM’s inter vivos wishes, they ensure that they are upheld – namely the wish to transfer the farming interests prior to her death;
- (c)In terms of GM’s testamentary wishes, they ensure they are upheld and also reduce the risk to the business, by transferring those interests now;
- (d)Measured against the interests of GM, there is no detriment that would be suffered by GM. In terms of her financial security for the remainder of her life;
- (e)Ensure the continuing authority of GM, through the enduring appointment of GMM.
- It is conceded that the proposed transaction also benefits GMM, however, it is submitted that, notwithstanding the benefit being conferred, it is not a transaction in which there is, or may be a conflict between the duties of GMM towards GM because in this instance the interests of GMM and GM coincide. The proposed transaction is not one which is borne of GMM, but is representative of GMM taking steps to give effect to his parent’s wishes on a grander scheme.
- It is noted that the daughters refer to an unsecured loan to GM from the Family Trust valued at $135,557.61. It is said to be intended that this liability be forgiven in the event the proposed transactions take place and GMM is willing to comply with any direction the Tribunal may require, that provides for the extinguishment of that liability.
- GMM filed a further affidavit sworn on 24 September 2018. He agrees that his relationship with his sisters is trained but says they have all worked together to manage GM’s care. GMM also deals with the allegations made by the daughters about caring for GM, renting of the properties and the decision to pay the refundable accommodation deposit and the ongoing care of GM.
- GMM submits in regard to the daughters’ plan for management of the assets that the X Limited shares can only be owned by a cane grower and the RAD can only be accessed following GM’s death. That the daughters seem to be concerned with the protection of capital to ensure they can receive the properties and the maximum residual amount from GM’s estate. Both accept that their parents intended for all of us to be cared for from the remaining assets and that GM was to receive the farm and business as his share. If this proposed transaction is allowed, it is expected that GMT and GMM will receive what their parents intended them to receive being the properties and the residual of the estate. However if this transaction is not allowed it is possible the existence of the farming business and its income stream will be placed in jeopardy. GMM is finding it increasingly difficult to continue to operate the farming business in the manner in which it is operated prior to GM’s diagnosis and he is unable to legally make any decisions to borrow money against their joint assets for future improvements and/or expansion of the farming business. He believes that if GM had capacity she would want to proceed with the proposed transactions of her own volition. And that both his parents would have wanted to make sure the ongoing operation of the farming business was not placed at risk, and that the business continued intact, so that it could be received by him to support him and his family.
- The Tribunal may authorise the proposed transactions where it considers they are in the best interests of GM having regard to the matters set out in the POA Act where it has jurisdiction to so determine. Jurisdiction is enlivened where the tribunal is satisfied that GM has impaired capacity and I am satisfied that based on the diagnosis of dementia that GM currently has impaired capacity to make complex financial decisions.
- The conflict transactions contemplated here include the transfer of assets owned by GM to the value of $841,067 which represents approximately 35% of her total assets to her son, GMM, who is her attorney. These comprise her share in the family cane farm which she owns as tenants in common with her son GMM, shares in X Limited which is a company connected to the sugar cane industry and interest in the Family Trust and partnership which provides equipment to the cane farm. There were other transactions such resignation of GM as a director of the family company and transfer of her shares in the family company to GMM. I note that the family company acts as trustee of the GB Family Trust and it is that trust which operates the cane farm. There was also a request to approve a deed of variation of the Family Trust which would change the appointor to GMM. As a result of the transactions, GM was no longer to receive any distributions of income from the Family Trust which had been in previous years in the order of $12,000 per annum.
- The material provided by GMM is at pains to show that following the transactions there would be sufficient income for GM to have a small surplus of $1,955 and it was said that this would mean that GM would not suffer any detriment from the transactions. GM’s daughters JMT and GMF were concerned that there was insufficient surplus income to take account such things as a loss of tenants in the rental properties or unforeseen expenses and that as a result GM’s assets such as her bank account and if necessary one of her houses may need to be sold. Those assets were specifically gifted to the daughters in GM’s will. GMM was the residuary beneficiary of the estate and he would have taken the farm and the shares and there had also been a binding death benefit nomination in his favour for GM’s superannuation pension.
- It is clear that some of the things proposed such as GM resigning as a director of the family company should occur as she does not have capacity and so she is unable to fulfil the duties and responsibilities of a director and should not be subject to the liability of a director. In the normal course the way to deal with that would be for the shareholders including and removing her as a director and replacing her. I do not consider that this is a transaction for the purpose of the POA Act and would not require any authorisation in particular where the shares held t\by GM in the company will be subject to authorisations to transfer them to GM and so at the time the meeting is called the shares will no longer be owned by GM.
- There was also a request to approve a deed of variation to the GB Family Trust. This deed would not be entered by GMM as an attorney for GM and again there would be no requirement to approve. Though of course the trustee who other person who has power to enter the deed must do so in accordance with trust law having proper to the duties of a trustee and act in accordance with those duties.
- One of the issues here is that GM has a will which makes specific gifts to her daughters and there are concerned to preserve their inheritance while also advocating to ensure that GM is not adversely affected by the proposed transactions.
- The test is that the Tribunal considers the transactions in the best interests of GM. I do not consider it enough that GM will have adequate income to ensure that her expenditure needs are met during her life. That is no material detriment. Best interests is a much higher test. There must be positive reason why the tribunal considers appropriate to authorise the transactions. As mentioned regard must be had to the general principles and in particular to ascertain what would be the wishes of GM. It is clear from her will that she wanted GMM to inherit the farm there is not though any sufficient evidence that she intended to gift it to him during her life. The farm was owned by GB, GM’s husband and before he died he gifted half of it to GMM as tenants in common so that GM would inherit a half share in his will and she then made a will leaving that share to him. She did not though make any real attempt to transfer the property to him during her life with there being one discussion documented with her lawyer. Though GMM deposes there were more discussions between him and GM.
- Currently GMM runs the farm through the Family Trust and despite assertions that he received limited income from it, it is clear he received large distributions in more recent years. Whereas it was sad that GM was receiving an annual distribution of $12,000 this in fact was by way of loan and her estate would have been required to pay back that loan to the trust. This $12,000 is counted in the report provided to the Tribunal as income to GM and it the loss of that income which means that GM’s financial position deteriorates from an annual surplus of $16,980 to $1,955.
- GM is therefore the owner of land on which a commercial enterprise occurs and is subject to any liability which attaches to that enterprise. GMM is concerned that he is unable currently to borrow money secured over the land because he is acting as attorney for GM. The borrowing of money would also put GM at financial risk. It is in GM’s interests that she not be exposed to this financial risk.
- GM has also made her testamentary intentions known so any decisions which are made must take account of those intentions and it is clear that GM was to inherit the farm and control of the family trust with the daughters to receive other named assets. It should be noted that if any asset which is specifically gifted is sold by the attorney in undertaking their duties and a beneficiary losses their benefit as a result then a claim can be made against the estate in accordance with s 107 of the POA Act. So the effect of some of the assets which are specifically gifted being sold can be ameliorated.
- I consider that GM would not have wanted to put GM’s ability to take over the farm at risk and if she had known that she may lose capacity and no longer be able to actively engage in the management of the farm then she would have wanted to ensure that GM had appropriate control of the farm.
- I consider it is in GM’s best interests that she not be exposed to the risk of running the farm and that she would want GMM to be able to take over the running of the farm. Therefore the transactions involved in the transfer of the farm and the water allocation and the shares in X Terminal are authorised. There is a condition on the holding of the X Terminal shares mentioned above so that an owner must be a cane grower and GM is no longer a cane grower. There is also a partnership between GM and GMM which owns some of the farming equipment as GM has lost capacity and will no longer be involved in the farm this partnership should be dissolved. It is necessary to ensure thought that GM not be subject to any unnecessary tax liability.
- At the hearing there was discussion about how to ensure that there was no financial detriment from an income perspective for GM in regard to the transactions which again will preserve her best interests and will put her testamentary wishes at risk by avoiding the need to sell assets which have been gifted to her daughters.
- I noted that GM received no direct income from the farm; she received payments from the Family Trust and the dividends from the shares. While the Tribunal has no power to make orders affecting the trustees of a trust, it can made an order obliging an attorney for a beneficiary to take particular action to ensure certain things are done by a trustee. In this case it was agreed that the loan account that GM has with the trust should be forgiven as a way of compensating her to a certain extent for the value of the farm and other assets. Further, that, in each year the trustee of the GB Family trust distributes an amount of $15,000 in income to GM payable in monthly instalments and this is to ensure that she continues to receive the same amount of income following the transactions including the amount from the trust and the dividends from X Limited.
- On that basis GM is no longer at risk financially in regard to the farm, her testamentary intentions in regard to the farm are protected and she does not suffer any detriment to her income overall as it will stay the same. I am therefore satisfied that the transactions in regard to the farm assets are in the best interests of GM and I authorise GMM to into enter them in accordance with the order.
- The daughters were concerned that they were not informed by GMM in regard to GM’s finances and the Tribunal wishes to ensure that the orders it makes in this matter are carried out. So, GMM must file accounts each year for GM in the Tribunal and give a copy to JMT and GMF.
- Published Case Name:
- Shortened Case Name:
 QCAT 292
02 Oct 2019