SC v Ability One Financial Management Pty Ltd

These proceedings concern management of the protected estate of an elderly man (JC, the second defendant) in respect of whom Slattery J, in proceedings numbered 2021/00047726 in the Protective List of the Equity Division of the Court:

The present proceedings (in which the plaintiff, SC, seeks a change in manager of JC’s estate) have been conducted by all parties without detailed reference to Slattery J’s reasons for judgment or a detailed chronology of the proceedings before his Honour.

It is sufficient to note the barebones of a chronology of those proceedings, which were between FC (as plaintiff), SC (as first defendant), JC (as second defendant) and the NSW Trustee (as the third defendant). The principal contest was between FC and SC.

The subject matter of the contest was the capacity of JC for self management, both management of his estate (“financial management”) and management of his person (“guardianship”). As Protective List Judge, on 12 April 2021 I made an interlocutory order for the appointment of NSW Trustee as receiver and manager of the estate of JC. After a final hearing of the proceedings, Slattery J on 15 or 16 December 2022 made, and temporarily stayed the operation of, a declaration pursuant to section 41(1)(a) of the NSW Trustee and Guardian Act 2009 NSW that JC is incapable of managing his affairs; an order, pursuant to section 41(1)(a) of the Act, that the estate of JC be subject to management under the Act; and an order, pursuant to section 41(1)(b) of the Act, that Ability One Financial Management Pty Ltd (the first defendant in the current proceedings) be appointed manager of JC’s protected estate subject to the orders and direction of the NSW Trustee.

Those protective orders were stayed until 15 February 2023 to allow administrative steps to be taken. On that date, orders were made formalising the appointment of Ability One Financial Management Pty Ltd and providing for management of the protected estate to be transferred from the NSW Trustee to Ability One Financial Management Pty Ltd.

Having thus made orders providing for management of JC’s estate, on 14 April 2023 Slattery J made orders for management of JC’s person in the appointment of SR as a committee of the person.

In making his orders, his Honour took note that at that time, although JC’s principal assets were located in NSW, he had (albeit in controversial circumstances) moved to Queensland to live with SC and his family. His Honour reinforced this Court’s jurisdiction by calling in aid the 1987 Jurisdiction of Courts (Cross Vesting) Acts of NSW and Queensland.

The orders made for the appointment of Ability One Financial Management Pty Ltd as manager of JC’s protected estate included two orders relating to remuneration of the company as manager. Those orders reflect the fact that the company operates a business as a “private manager for reward” otherwise than as a licensed trustee company.

As the office of a protected estate manager (commonly described as a “financial manager”) is a gratuitous one, a manager without statutory authority authorising remuneration requires an order of the Court granting authority to charge, receive and retain remuneration for performance of the obligations of a manager: Ability One Financial Management Pty Ltd and Anor v JB by his Tutor AB [2014] NSWSC 245; Re Managed Estates Remuneration Orders [2014] NSWSC 383.

The orders made by Slattery J on 15 February 2023 included orders to the following effect:

The latter of these orders is, in terms, a standard order for a private manager for reward (other than a licensed trustee company) who is deemed to be suitable for appointment as a manager for the purposes of section 41 of the NSW Trustee and Guardian Act 2009 NSW.

The current proceedings were commenced by a summons filed on 13 November 2023 in which SC, as plaintiff, sought against Ability One Financial Management Pty Ltd (as the first defendant) and JC (as the second defendant) orders to the following effect:

On 11 December 2023, at a directions hearing, I ordered that FC (the surviving son of JC’s two sons) be joined in the proceedings as the third defendant.

On 11 March 2024 I made a formal notation that Ability One Financial Management Pty Ltd, in effect, submitted to the orders of the Court but remained prepared to assist the Court by the provision of a report or reports, reserving any right it may have in respect of criticism going to its reputation.

JC, as the second defendant, and as a person admittedly incapable of managing his affairs, has played no active role in these proceedings. At no time has he appeared before the Court during the currency of these proceedings. Nobody has filed an affidavit purporting to have been sworn by him. He has not been called by any party to give evidence of any kind he might have given directly and personally about management of his affairs.

FC has opposed SC’s summons and is his natural contradictor. They have fundamentally different views about JC’s best interests.

JC’s wife and one of their two children (a son) have died. FC is a son of JC and his only surviving child. SC is a nephew of JC with whom JC lives in Queensland.

FC believes that SC was the effective cause of JC moving to Queensland away from his family home in Greystanes, Sydney, near FC; that, suffering from dementia, JC lives not only in the care of SC but under his controlling influence; that SC has obstructed his access to JC; and that SC is motivated by a desire to secure JC’s wealth for himself, if not during JC’s lifetime then, upon JC’s death, under a will ostensibly made in favour of SC at the time JC moved to Queensland.

SC, for his part, denies any wrongful conduct vis-à-vis JC and maintains that he and his family care for JC without charge and without any motivation to benefit from JC’s estate.

The NSW Trustee appeared throughout the proceedings to assist the Court.

With the benefit of reports prepared by Ability One Financial Management Pty Ltd in its capacity as manager of JC’s estate and by the NSW Trustee, as well as affidavits and documentary evidence, the summons was heard on an expedited basis on 2-3 May 2024. With the acquiescence of all parties, the evidence before the Court was adduced without objection save as to relevance. Counsel for SC was anxious that any reference to the judgments of Slattery J be limited by reference to section 91 of the Evidence Act 1995 NSW.

Upon an assumption that section 91 applies without qualification upon an exercise of protective jurisdiction, I have endeavoured not to contravene the strict letter, or spirit, of the section. No party has made submissions to the effect that a fact that was in issue in the Slattery J proceedings can be taken as having been proved for the purpose of these proceedings by a finding of fact made by his Honour.

Section 91 of the Evidence Act 1995 is in the following terms:

It is not necessary to notice in this judgment the “exceptions” specified in section 92 and the “savings” noted in section 93 of the Evidence Act.

It is common ground for the purpose of these proceedings that JC is and at all material times has been a person incapable of managing his own affairs at least from the time he was declared by Slattery J to be incapable of self management. His Honour’s determination of incapacity is not challenged in these proceedings. The central focus of the proceedings is upon the identification of a manager of his protected estate, predicated upon an acceptance that he lacks capacity.

A number of affidavits were read in support of SC’s summons. Of them, only two deponents have had substantial personal contact with JC. One is SC himself. The other is SR, JC’s committee of the person. Other affidavits relied upon by SC are those relating to his proposed new “financial manager”. They are, in a sense, formal at least in circumstances in which I have formed the view that, for the time being, it is not in the best interests of JC for there to be any change in the identity of the manager of his protected estate.

SC was cross examined by counsel for FC. There was no cross examination of SR or any of SC’s other deponents.

Ability One Financial Management Pty Ltd prepared for the Court a report dated 31 January 2024 which was admitted into evidence, and an affidavit of the principal of the company and its related company (Ability One Pty Ltd), Mr Grant White. Mr White was cross examined by counsel for SC.

FC swore an affidavit in opposition to SC’s summons but it was not read on the hearing of the summons, counsel announcing that he did not regard it as relevant to the issues ultimately to be determined in the current proceedings. No party challenged that announcement or sought to read, or tender, any part of FC’s affidavit.

The NSW Trustee provided a report to court dated 1 March 2024 which was admitted into evidence.

There is no dispute about the principles to be applied on an application for a change in the identity of the manager of a protected estate.

Informed by the judgment of the Court of Appeal in Holt v Protective Commissioner (1993) 31 NSWLR 227, guideline principles were summarised in M v M [2013] NSWSC 1495 at [49]-[50] in the following terms:

These guideline principles were confirmed in Ability One Financial Management Pty Limited and Anor v JB by his Tutor AB [2014] NSWSC 245 at [34]-[35] and supplemented by the following observation in [36]:

A determination of these proceedings can be accommodated (without recourse to the Court’s inherent jurisdiction) within the statutory framework focused upon the NSW Trustee and Guardian Act 2009 NSW, sections 39-41 and the Interpretation Act 1987 NSW, section 47.

Sections 39-41 of the NSW Trustee and Guardian Act 2009 NSW are in the following terms:

Section 47 of the Interpretation Act 1987 NSW is in the following terms:

Standard orders made on a change of manager follow the template set out in M v M [2013] NSWSC 1495 at [55]:

Additional orders are routinely made in the appointment of an institutional, private manager for reward which is not a licensed trustee company but obtains the Court’s approval for remuneration.

Where a “private manager for reward” (other than a licensed trustee company) is appointed to manage a protected estate then (in conformity with Ability One Financial Management Pty Limited and Anor v JB by his Tutor AB [2014] NSWSC 245 and Re Managed Estates Remuneration Orders [2014] NSWSC 383) orders and a notation to the following effect are generally included in the Court’s orders:

SC’s application for removal of Ability One Financial Management Pty Ltd as JC’s financial manager is closely connected with his application that Northern Plateau Wealth Management Pty Ltd be appointed as manager in substitution for Ability One Financial Management Pty Limited.

His primary case for removal of Ability One Financial Management Pty Ltd is that there is a breakdown in the relationship between the company and (he submits) JC such that the welfare and interests of JC, as the paramount consideration, require the company’s removal.

That there has been a “relationship breakdown” of sorts is common ground between Ability One Financial Management Pty Ltd and SC; but, in my assessment, the material breakdown in relationships is that between Ability One Financial Management Pty Ltd and SC, not the company and JC.

In my assessment, SC has not accepted that he is not in complete and effective control of JC’s affairs. I have formed that view despite the fact that SC has adduced evidence of a letter (ostensibly written by JC in his own hand) complaining about Ability One Financial Management Pty Ltd’s alleged mismanagement of his affairs. On the whole of the evidence I am satisfied that JC (a person deficient in mental capacity) lives under the close, day-to-day influence of SC, whose disparagement of Ability One Financial Management Pty Ltd and identification of JC’s interests with his own, I infer, undermines the objectivity, and reliability, of views ostensibly expressed by JC as his own.

SC’s primary case for removal of Ability One Financial Management Pty Ltd is supported by allegations to the effect that the company has mismanaged JC’s estate (particularly in pursuing arrangements for sale of JC’s principal assets, two contiguous blocks of land at Greystanes in outer Sydney); declined to meet with JC personally; and charged excessive fees.

I reject these allegations. In my assessment, Ability One Financial Management Pty Ltd (under the management of Mr Grant White) has, on the whole, acted diligently and reasonably in management of JC’s affairs. It has taken responsible, legal, valuation and real estate advice about steps to be taken towards a sale of JC’s land and, in doing so, it has been responsive to suggestions made by SC without surrendering the independent judgement required of it as manager. As Mr White conceded in cross examination some mistakes had been made along the way but none of those is of a nature or order to warrant the pejorative label of “mismanagement”.

In my assessment, Mr White has not declined to meet personally with JC, but he has met resistance from SC and he has been concerned to allow management steps to be taken in an orderly way before meeting personally with JC. He has approached this part of the duties of Ability One Financial Management Pty Ltd with mature thought and discretion. It must, of course, be remembered that Ability One Financial Management Pty Ltd is a manager of JC’s estate, not his person.

Mr White has recognised an obligation, as manager of JC’s financial manager, to consult with JC and (significantly, bearing in mind JC’s mental incapacity) JC’s “significant others”. As a “significant other” who presents himself as a gateway to contact between JC and his financial manager, SC has contributed to a lack of personal contact between JC and Ability One Financial Management Pty Ltd. Notably, when he brought JC to Sydney (ostensibly to view his old home at Greystanes) SC failed to take an opportunity for him to meet with Mr White. His explanation for this (that JC was unwilling to meet with Mr White and just wanted to get back to Queensland) was disingenuous.

In my assessment, SC’s allegations of overcharging against Ability One Financial Management Pty Ltd are without foundation. The company has complied with the regulatory regime (contemplated by Slattery J’s orders) supervised in the ordinary course by the NSW Trustee. It is not to the point that SC contends that his nominee for JC’s replacement financial manager, may have supplied a quotation for a “cheaper” fee regime. The NSW Trustee, with institutional oversight of remuneration charged by managers of protected estates of all descriptions, has determined that Ability One Financial Management Pty Ltd’s fees are just and reasonable. The NSW Trustee’s oversight of those fees is ongoing.

Ability One Financial Management Pty Ltd’s preparedness, voluntarily, to moderate its fees in response to SC’s persistent complaints, upon an assumption that the company would wind down its management of JC’s affairs in an orderly transition to a replacement manager, to my mind illustrates the measured, professionalism of the company’s approach to management of JC’s affairs whilst under provocation of a stream of complaints by SC.

In my opinion, Ability One Financial Management Pty Ltd is entitled to adhere to rulings made by the NSW Trustee about its remuneration and is free to do so. The integrity and practical operation of the NSW Trustee’s administrative system for reviewing remuneration procedures is not under challenge in these proceedings. In my opinion, the maintenance of a regular administrative system for orderly supervision of the remuneration of financial managers is in the interests of all protected persons, including JC. I am not satisfied that Ability One Financial Management Pty Ltd has charged, or will in the future charge, remuneration which (under the supervision of the NSW Trustee) is otherwise than just and reasonable.

SC’s case for removal of Ability One Financial Management Pty Ltd as JC’s financial manager is supported by his application for the appointment of Northern Plateau Wealth Management Pty Ltd as its replacement. An attraction of that company, in the eyes of SC, is that it is comparatively local to his residence, where JC currently lives, and is therefore thought to be more accessible than Ability One Financial Management Pty Ltd.

I leave to one side that the NSW Trustee (as expressed in its formal “report to Court”) has no experience of Northern Plateau Wealth Management Pty Ltd as a financial manager.

Whatever (if any) benefit might accrue from a “local” Queensland-based corporate financial manager, a practical consideration is that, apart from management of a Cairns home unit ostensibly bought by JC as an investment when he moved to Queensland to live with SC’s family, the major management tasks required to be undertaken in the foreseeable future (resolving costs assessments arising from the litigation that culminated in Slattery J’s orders and arranging a sale of JC’s Greystanes properties) focus substantially on work to be undertaken in New South Wales. SC’s proposed Queensland-based corporate financial manager has no presence in NSW.

By comparison, Ability One Financial Management Pty Ltd has a presence in both Queensland and New South Wales and, in an earlier professional life, Mr White was a Queensland solicitor. FC, JC’s closest living relative, lives in Sydney, although, under the influence of SC, JC now lives in Queensland and, to his deep concern, has no contact with FC.

Despite conflict between SC and Ability One Financial Management Pty Ltd, I am satisfied that, under the stewardship of Mr White, Ability One Financial Management Pty Ltd can be relied upon to perform the functions of JC’s financial manager in a professional and independent way.

In my assessment, SC has no real insight into his lack of independence in dealing with questions relating to management of JC’s affairs. Nor can the Court readily rely upon him not to interfere with the proper management of the affairs of JC in the absence of an independent, professional, financial manager prepared to endure his displeasure and to resist his apparent determination to insist that JC’s affairs be managed in a manner congenial to him personally.

Some of the resistance of SC to Ability One Financial Management Pty Ltd’s management of the affairs of JC appears to be a function of his desire for financial advantage. In the early days of Ability One Financial Management Pty Ltd’s management regime, he did not disclose to the company that his son and the daughter of SR (JC’s “guardian”) were living in JC’s home unit in Cairns at a lower than market rent. He has resisted the company’s proposal that JC’s car be sold even though JC is no longer able personally to drive it and it is routinely driven by him. On the evidence presented to me, an available inference is that, until the company intervened, SC was appropriating to himself funds transferred by the company to an account in JC’s name on account of living expenses.

Lurking behind these illustrations of SC’s self-interested involvement in JC’s affairs is a barely hidden expectation on his part that he will benefit from JC’s deceased estate in the fullness of time. He was less than frank in acknowledging that (immediately prior to his taking JC to live with him in Queensland and away from his son FC) JC ostensibly made a will naming him as sole beneficiary. In cross examination he did not readily concede the existence of the will or his part in its execution. It was left to his counsel, in final submissions, to confirm the existence of the will.

One cannot exclude the possibility that SC’s intervention in arrangements made by Ability One Financial Management Pty Ltd for the sale of JC’s Greystanes properties, and his frustration of the company’s attempts to obtain vacant possession of the properties (because of non co-operation in removal from the properties of unidentified “personal possessions” of JC located on the properties) have been motivated by a desire to impede an orderly sale of the properties. This, despite the fact that, before Slattery J, SC supported a sale of the Greystanes properties and the costs presently being assessed for payment out of JC’s estate cannot be paid without the benefit of proceeds of sale of the Greystanes’ properties.

All things considered, I am affirmatively satisfied that it is in the best interests of JC for Ability One Financial Management Pty Ltd to remain in office as manager of his protected estate, at least until JC’s Greystanes properties are sold and current costs assessment procedures have been completed. I do not, however, intend to suggest that the company should retire or be removed from office or to place a time limit on the company’s service as financial manager. It is sufficient for the day that SC’s summons be dismissed and that, by that dismissal, the company’s occupation of the office of manager be confirmed.

Given SC’s obstruction of management of JC’s protected estate some concluding observations about ongoing management of JC’s affairs are necessary.

If SC continues to obstruct financial management of JC’s protected estate (and to object to contact between JC and FC and between Ability One Financial Management Pty Ltd and FC) his conduct might invite reconsideration of JC’s residential and guardianship arrangements. I do not intend to suggest, by this observation, that JC’s current living arrangements with SC’s family should be disturbed in the foreseeable future, only that a lack of co-operation on the part of SC with JC’s financial manager and FC serves nobody’s best interests.

In proper discharge of its functions as JC’s financial manager, Ability One Financial Management Pty Ltd has an obligation, in the absence of exceptional circumstances, to endeavour to consult with all JC’s significant others from time to time. That includes FC as well as SC. However, if SC continues to engage in obstructive behaviour, he may, to that extent, relieve Ability One Financial Management Pty Ltd (or any other manager who might, at some future time, be appointed) of any obligation to engage with him in serving JC’s best interests.

In any event, it seems to me, JC’s best interests presently require that Ability One Financial Management Pty Ltd give ongoing consideration to consultation with SR (as JC’s “guardian”) and FC despite resistance or (in the case of FC) outright opposition on the part of SC.

In light of SC’s obstructive behaviour to date, it might be prudent for Ability One Financial Management Pty Ltd, in consultation with the NSW Trustee, to consider taking steps, from time to time, for the appointment of an independent Visitor to attend upon JC and to prepare for the Court a report on his personal circumstances and general welfare.

Although the welfare and interests of JC are likely to be better served by all interested persons resolving to work together harmoniously than by resort to further proceedings, the door of the Court remains open to an application for directions in management of the affairs of JC, if necessary, for service of JC’s welfare and interests as the paramount consideration.

For the present, I order that SC’s summons be dismissed.

As Ability One Financial Management Pty Ltd has foreshadowed an application for costs, and it is necessary that all interested parties reflect on whether any (and, if so, what) burden of costs of the summons can properly be imposed on JC’s estate, I will allow all parties an opportunity to make submissions about costs.

In an endeavour to crystallize any such submissions, I draw to attention Slattery J’s observations about orders for costs in protective proceedings in FC v SC (No 2) [2023] NSWSC 376 at [17]-[18]:

His Honour’s application of these principles in that judgment, the first round of litigation in this Court between FC and SC concerning the welfare of JC, should not necessarily be taken as a guide to what, “in all the circumstances, seem the proper orders for costs”, to paraphrase Powell J in CCR v PS (No 2) 6 NSWLR 622 at 640F-G.

The orders that I propose to make in relation to the costs of these proceedings must, of necessity, be informed by the reasons for judgment that I published on 28 May 2024. In those reasons I foreshadowed the view I take as to the costs jurisdiction in protective matters and I did so by reference to the orthodox statement of principles in the earlier judgment of Slattery J.

I am conscious that the approach taken to costs in protective proceedings is governed by the paramountcy principle which governs the exercise of the jurisdiction generally.

There is, I think, implicit in at least some of the submissions made by counsel for the plaintiff today that I should take note of the size of the second defendant’s protected estate. In my assessment the size of an estate, although possibly relevant to what costs orders should be made, is not of itself a reason for ordering that an estate bear costs.

On the findings I made in disposition of the proceedings, the plaintiff’s conduct has been essentially obstructive of the proper and due management of the second defendant’s protected estate. That in itself might be taken as the foundation for an order that the plaintiff pay the costs of other parties to the proceedings.

This is not a case in which the plaintiff could reasonably have proceeded on the basis that he has an entitlement to have his costs out of the estate or that he had a reasonable expectation that that would occur.

I am conscious of the problems with the relationship between the plaintiff and the third defendant and how a sound relationship between those parties could positively affect the welfare of the second defendant.

I am not sure that the plaintiff has great insight into the obstructive course that he has taken. If I were to make an order that he get his costs out of the estate of the second defendant, I doubt that that would bring home to him the need for him to cooperate with the manager of the estate and, indeed, to co-operate with the third defendant in allowing family relationships to thaw.

My attention has been drawn to an exchange of correspondence between the solicitors for the plaintiff and the third defendant proceeding, at least on the part of the plaintiff, upon an assumption that a Calderbank offer could be made as between those parties in terms determining the outcome of the substantive proceedings. The plaintiff says that that correspondence shows that he was flexible in his approach to the proceedings. In fact it was obvious, in my assessment, that he was not flexible. The primary objective of these proceedings from his perspective was to displace the existing manager. During the course of the hearing he did not abandon his application for a Queensland-based corporate manager to replace the first defendant. He maintained that position unfailingly.

In my opinion the proper order for costs in relation to the plaintiff is that he pay or bear his own costs without recourse to the estate. I propose to proceed on that basis and to proceed otherwise as foreshadowed at the time I delivered judgment. I decline the third defendant’s application that the plaintiff be ordered to pay his costs, but I will grant his application for a lump sum award of costs (out of the estate of the second defendant).

I make the following orders for costs,