Supreme Court New South Wales

• Medium Neutral Citation: W v H [2014] NSWSC 1696
• Hearing dates: 16 November 2014
• Decision date: 28 November 2014
• Jurisdiction: Equity Division - Protective List
• Before: Lindsay J (in chambers)

Decision

Orders made approving a family settlement relating to management and disposition of property of a protected person

• Catchwords: SUCCESSION - Wills, Probate and Administration - Protective jurisdiction - Allowance of provision for family out of protected estate - Statutory will - Approval of family settlement - Principles applicable; MENTAL HEALTH - Guardians, committees, administrators, managers and receivers - Management and administration of property - Allowance of provision for family out of protected estate - Approval of family settlement - Principles applicable; PRACTICE - NSW Trustee and Guardian Act - Management and administration of property - Allowance of provision for family out of protected estate - Approval of family settlement - Material considerations
• Legislation Cited: NSW Trustee and Guardian Act 2009 NSW Guardianship Act 1987 NSW; Succession Act 2006 NSW
• Cases Cited: Ability One Financial Management Pty Limited and Anor v JB by his tutor AB [2014] NSWSC 245 at [143]-[149] and [151]-[154]); Andrew v Andrew (2012) 81 NSWLR 656; E (Mrs) v Eve (aka Re Eve) [1986] 2 SCR 388 at 407 and 410; 31 DLR (4th) 1 at 14 and 16; Estate Kouvakas; Lucas v Konakas [2014] NSWSC 786 at [134]-[144] and [258; Estate of Scott; Re Application for Probate [2014] NSWSC 465 at [104]-[108]; Ex parte Whitbread (1816) 2 Mer 99; 35 ER 878; Ex parte Whitbread in the Matter of Hinde, a Lunatic (1816) 2 Mer 99; 35 ER 878; Griffin v Union Trustee Co of Australia Limited (1947) 48 SR (NSW) 360 at 363; 65 WN (NSW) 5 at 7; Griffin v Union Trustee Company of Australia Limited (1947) 48 SR (NSW) 360 at 363 and 365; 65 WN (NSW) 5 at 7 and 8 Holt v Protective Commissioner (1993) 31 NSWLR 227 at 238D and 241G-242A; In re Darling (a person of unsound mind) (1888) 39 ChD 208; In re Evans (a person of unsound mind) (1882) 21 ChD 297; In the Matter of Blair, a Lunatic (1836) 1 My&Cr 300 at 302-303; 40 ER 390 at 391; In the Matter of Thomas, a Lunatic (1846) 2 Ph 169; 41 ER 906; M v M [2013] NSWSC 1495 at [50](a) - (d; Osborne v Smith (1960) 105 CLR 153 at 158-159; PB v BB [2013] NSWSC 1223 at [27]-[30], [34], [38] and [56]; Pontifical Society for the Propagation of the Faith v Scales (1962) 107 CLR 9 at 19-20; Protective Commissioner v D (2004) 60 NSWLR 513 at 540 [149]-542(156), 543 [165] -[166] and 544 [171]-545 [173]; Re DJR and the Mental Health Act 1958 [1983] 1 NSWLR 557 at 564E-G; Re ES and the Mental Health Act 1958 [1984] 3 NSWLR 341 at 343B-344D; Re Eve [1986] 2 SCR 388 at 409-411 and 425-427; 31 DLR (4th) 1 at 16-17 and 28-29; Re Fenwick (2009) 76 NSWLR 22 at [170]-[176]; Scott v Scott [2012] NSWSC 1541; 7 ASTLR 299 at [287]; Secretary, Department of Family and Community Services v K [2014] NSWSC 1065; Secretary, Department of Health and Community Services v JWB and SWB (Marion's Case) (1992) 175 CLR 218 at 258; Szozda v Szozda [2010] NSWSC 804
• Texts Cited: Oxford Dictionary of National Biography (Oxford University Press, 2004), pp 220-221; HS Theobold, The Law Relating to Lunacy (Stevens & Sons, London, 1924)
• Category: Principal judgment
• Parties: Plaintiff: Locally-based son/manager of protected person; First Defendant: Partner of protected person; Second Defendant: Family company of plaintiff/lender to protected person; Third Defendant: NSW Trustee and Guardian; Fourth Defendant: Step-daughter of protected person; Fifth Defendant: Queensland-based son of protected person; Sixth Defendant: UK-based son of protected person
• Representation: Counsel: Plaintiff: TD Castle; First Defendant: G Sirtes SC and NCT Bilinsky; Second Defendant: mentioned by plaintiff; Third Defendant : -; Fourth Defendant: C Birtles, solicitor; Fifth Defendant : mentioned by plaintiff; Sixth Defendant : mentioned by plaintiff; Solicitors: Plaintiff: Elliot Tuthill; First Defendant: Broun Abrahams Burreket; Second Defendant: Pikes & Verekers Lawyers; Third Defendant: NSW Trustee & Guardian (Attention Catherine Phang); Fourth Defendant: Teece Hodgson & Ward; Fifth Defendant: Atwood Marshall; Sixth Defendant: Hayden Fowler Corbett Jessop
• File Number(s): 2014/00148579

Judgment

INTRODUCTION

1 These reasons for judgment provide a formal explanation of my approval (on Sunday 16 November 2014) of a family settlement relating to the management and disposition of the property of a 94 year old man - the patriarch of the family - whose estate was under management (with one of his three sons as manager) under the NSW Trustee and Guardian Act 2009 NSW.

FACTUAL CONTEXT

2 Until January 2014 the 94 year old, AVW ("the protected person") lived in his own home, at Vaucluse, with his domestic (de facto) partner of over 30 years, CH. In mid-January 2014 his health turned for the worse. He was admitted to St Vincent's Hospital for about two weeks. For the following two months or so, throughout February and most of March 2014, he stayed at an aged care facility, in Rose Bay, for respite care. In late March 2014 he was granted residency at an aged care home at Vaucluse. At that point if not earlier, any prospect of him returning home was negligible.

3 Materially, the protected person's family comprised: his partner; her adult daughter, his step-daughter, who lived with them; and his three adult sons by an earlier relationship. At all material times, one of the sons lived in Sydney. Another in Queensland. The third in the United Kingdom.

4 Between 1990 and September 2013 or thereabouts the protected person's locally resident son assisted him with his investments and, for some years, held an appointment as his attorney under enduring powers of attorney.

5 By September 2013 or thereabouts the funds in the protected person's investment portfolio had been exhausted. He became dependent upon funding provided by family.

6 He was asset rich, income poor. His principal assets comprised his Vaucluse home (with an estimated value of $16 million) and an investment property in Surry Hills (with an estimated value of $1.2 million). Allowing for liabilities, at the time the Court was called upon to approve a family settlement his net estate was comfortably above $15 million.

7 Because of the structure of his estate, the protected person's move to full time residential care in an aged care home was unable to be financed (pending a sale of one or the other or both of his principal assets) without borrowing from his locally resident son's family company.

8 Tensions within the family were bound to rise with the protected person's descent, thus, from independent living at home to full time, and ostensibly permanent, residence in an aged care home.

9 In retrospect, those tensions can be traced back, at least, to October 2012. At that time the protected person purportedly made a new Will (favouring his partner over his sons), revoked powers of attorney earlier granted to his locally resident son and granted his son, subject to a limitation, a fresh power of attorney which (because of a technical deficiency) was not effective as an enduring power of attorney.

10 Shortly thereafter he appointed his partner as his enduring guardian, with the functions of making decisions on his behalf about his accommodation, health care, medical and dental concerns and personal services, with no express limitations placed on her authority.

11 In late 2013, early 2014 the family found itself confronted with competing applications in the Guardianship Division of the Civil and Administrative Tribunal of NSW ("NCAT"). In October 2013 the protected person's partner applied for the appointment of a financial manager. Subsequently, the locally resident son applied for a review of the appointment of the partner as enduring guardian, and for a review of the revocation of his appointment as the protected person's attorney.

12 NCAT grappled with these competing applications at a hearing conducted on 17 March 2014, resulting in orders made on 20 March 2014.

13 In the event, it was not necessary for a determination to be made on the application for review of the appointment of the protected person's partner as enduring guardian. With the acquiescence of his son, that application was adjourned.

14 The Tribunal found that the protected person did revoke powers of attorney earlier granted to his son but that, in making a fresh limited appointment of his son as an attorney, he failed to make an appointment that endured beyond the onset of mental incapacity, with the result that no power of attorney subsisted.

15 Critically, it decided to make a financial management order (under ss 25E, 25G and 25M of the Guardianship Act 1987 NSW) appointing the son as manager of the protected person's estate. At that point the older man became a "protected person" within the meaning of the Guardianship Act 1987 NSW (s25D) and the NSW Trustee and Guardian Act 2009 NSW (s 38).

16 The Tribunal's appointment of the son as financial manager led, indirectly, to the son's commencement of these proceedings in the Supreme Court by a summons filed on 16 May 2014. Acknowledging the fiduciary character of the office of a protected estate manager, he sought directions from the Court (specifically by reference to ss 64-65 of the NSW Trustee and Guardian Act 2009 NSW) authorising transactions whereby, through his family company, he could provide loan funds for the benefit of the protected person and his partner, subject to a grant of security for repayment of loans.

17 The proceedings were conducted in an orderly way so as to engage each interested member of the family, as well as the NSW Trustee and Guardian. The principal appearances were those of the Sydney based son and the protected person's partner, but everybody was kept informed of developments as they occurred.

18 Central to a resolution of tensions within the family were issues about: (a) whether one or both of the protected person's Vaucluse and Surry Hills properties should be sold; (b) the nature and extent of provision to be made, for the protected person's partner and her daughter, out of his protected estate; (c) whether the Court could, and should, authorise the making of a statutory will for the protected person; and (d) if so, the terms of any such will.

19 It is not necessary, here, to recite each step along the family's road to consensus. It is sufficient to record that, subject to the Court's approval, the family ultimately agreed upon arrangements for the sale of property, a grant of provision for the protected person's partner and her daughter, and the terms of a statutory will.

20 On Sunday, 16 November 2014 (after the family had been engaged in months of negotiations), the Court was invited to make orders designed to give effect to a settlement. Apprehensive (on reasonable grounds) that the protected person was about to die, all members of the family joined in that invitation so that they could give their undivided attention to him in his final hours, each confident that legal disputes had been resolved.

21 In acceding to the family's request, it was necessary for me to consider the proposed orders specifically from the perspective of the protected person, consulting his interests and what courses of action were likely to be beneficial to him. A primary consideration was that, in circumstances in which his personal welfare had been made as secure as it could be, importance attached to ensuring that, with the consent of all interested members of the family, adequate provision had been made for all branches of the family.

22 In approving the family's settlement, as I did, it was necessary for me to consider, more particularly, a range of topics, including whether the criteria for authorisation of a statutory will had been made out and, upon an assumption that the protected person might live indefinitely, whether arrangements should be made for provision of a capital sum to the protected person's partner, out of his estate, to enable her to buy a new residence (and to live comfortably) following sale of the Vaucluse property.

23 Although the family had initially anticipated that their settlement would be embodied in a deed, circumstances precluded them from giving effect to that design. In the event, the family's agreement was embodied in orders and notations made by the Court.

24 Those orders and notations included an order formally joining each interested member of family as a party in the proceedings and a notation to the following effect:

"NOTE that, subject to any orders that may be made by the Court or any orders or directions that may be made by the NSW Trustee and Guardian in the interests of [the Protected Person], it is agreed, between all parties to the proceedings (other than the NSW Trustee and Guardian), that the estate of the Protected Person is to be administered, before his death (and, mutatis mutandis, after his death) in accordance with the orders and notations, today, here, recorded by the Court."

25 There followed, inter alia, an order making provision for capital sums to be paid to the protected person's partner and her daughter out of proceeds of a sale of the Vaucluse property; an order authorising the making of a statutory will on behalf of the protected person, making provision for his sons and sundry other people; an order, under s 95 of the Succession Act 2006 NSW, approving releases by all interested parties of their rights to apply for family provision relief in respect of the estate of the protected person; an order, subject to further order, confirming the Sydney son's appointment as financial manager for the protected person; an order, subject to further order, that the protected person's Queensland-based son and the protected person's partner be appointed his joint guardians with plenary powers; orders making provision for the costs of the proceedings; and ancillary orders. The order that provision be made for the partner and her daughter out of the protected estate was matched, in the statutory will, by equivalent provision to be paid out of the deceased estate so that, whether the protected person lived a long time or not, the substantive outcome was the same.

26 In approving the family's settlement I was satisfied both as to the existence of the Court's jurisdiction and as to the propriety of the particular orders sought being made.

27 The Court's order authorising the making of a statutory will was made on the afternoon of Sunday, 16 November 2014, enlivening the jurisdiction discussed in Estate of Scott; Re Application for Probate [2014] NSWSC 465 at [104]-[108]. The Will was signed and sealed by a Registrar on the morning of Monday, 17 November 2014, at which time the protected person remained living, although evidently in extremis.

PROTECTIVE JURISDICTION : PRINCIPLES AND PRACTICE

A General Statement

28 Where: (a) a person of advanced age has irretrievably lost all mental capacity to transact business; (b) he or she is secure in a quality care facility, with more than adequate provision for present and future care; (c) his or her estate is under management pursuant to orders made under the NSW Trustee and Guardian Act 2009 NSW or the Guardianship Act 1987 NSW; (d) the estate is more ample than any present or prospective need of the protected person; and (e) it is in his or her interests, and for his or her benefit, to do so the Court may, on terms, approve a family settlement designed (with the fully informed consent of all persons interested in the estate) to make reasonable provision out of the estate under management for the protected person's family.

Theobold : A Guide to Protective Jurisdiction Law and Practice

29 The correctness of this proposition can be tested against references to the seminal text of HS Theobold, The Law Relating to Lunacy (Stevens & Sons, London, 1924).

30 That Theobold has long been regarded as an authoritative text can be seen in references to it in material cases as diverse as Griffin v Union Trustee Company of Australia Limited (1947) 48 SR (NSW) 360 at 363 and 365; 65 WN (NSW) 5 at 7 and 8; Protective Commissioner v D (2004) 60 NSWLR 513 at 522 [53]-[54] and 540-541 [150]-[151]; and E (Mrs) v Eve (aka Re Eve) [1986] 2 SCR 388 at 407 and 410; 31 DLR (4th) 1 at 14 and 16 (approved in Secretary, Department of Health and Community Services v JWB and SWB (Marion's Case) (1992) 175 CLR 218 at 258).

31 Its analysis can often be found underlying authoritative judgments of Powell J as the Protective List Judge of this Court. His Honour also relied on it in his Forbes Lecture: The Origins and Development of the Protective Jurisdiction of the Supreme Court of NSW (Forbes Society, Sydney, 2003).

32 Sir Henry Studdy Theobold KC (1947-1934) served as Master in Lunacy in England between 1907-1922: 54 Oxford Dictionary of National Biography (Oxford University Press, 2004), pp 220-221.

33 Theobold introduced his chapter entitled "Gifts and Allowances" (Theobold, pp 462-467) with the following paragraphs, drawing upon the depth of his judicial and administrative experience:

"It is the business of [a judge exercising the protective jurisdiction of the Court] to administer the lunatic's estate [that is, in modern parlance, the estate of a protected person] and not to give it away, but that is not to say that it may not be proper in a due course of administration to make donations and voluntary allowances out of the lunatic's estate.

Some of the propositions which will be laid down here [in chapter 65] are not covered by authority; so far as they are not, they are submitted as convenient guides in performing the difficult duty of dealing with the numerous claimants upon the superfluity of lunatics."

34 Given the respect that has been accorded to Theobold by NSW courts, and its author's long experience as Master in Lunacy in England, the fact that particular propositions in the text may be unsupported by judicial authority is not a substantial impediment to my acceptance of its authority.

35 Nevertheless, in reading Theobold, allowance has to be made for differences between England and New South Wales, old times and new.

36 A ready illustration of the need for this is found in modern legislation (the history of which is canvassed in Re Fenwick (2009) 76 NSWLR 22) enabling the Court to authorise the making of a will for a person lacking testamentary capacity.

37 All things considered, Theobold remains an insightful treatment of enduring problems that arise in administration of the Court's protective jurisdiction. It is particularly helpful in its exposition of principles that inform an exercise of the Court's inherent jurisdiction; and in its provision of historical examples dating back, particularly, to the formative times of Lord Eldon (1751-1838) as Lord Chancellor of England (1801-1806 and 1807-1827).

38 A seminal judgment of Lord Eldon is reported as Ex parte Whitbread in the Matter of Hinde, a Lunatic (1816) 2 Mer 99; 35 ER 878.

39 With emphasis added, the headnote reads as follows:

"Practice of making an allowance to the immediate relations of a Lunatic, other than those whom the Lunatic would be bound to provide for by law, extended to the case of brothers and sisters and their children, and founded not on any supposed interest in the property, which cannot exist during the Lunatic's life-time, but upon the principle that the Court will act with reference to the Lunatic and for his benefit, as it is probable the Lunatic himself would have acted if of sound mind. The amount and proportions of such an allowance are, therefore, entirely in the discretion of the Court."

40 Lord Eldon's judgment (at 2 Mer 101-103; 35 ER 879) elaborates the specified principle, encased in a precautionary tale about the intersection between human frailty and what is necessary for the due administration of a protected estate (with emphasis here added):

"The Lord Chancellor [Eldon]. For a long series of years the Court has been in the habit, in questions relating to the property of a Lunatic, to call in the assistance of those who are nearest in blood, not on account of any actual interest, but because they are most likely to be able to give information to the Court respecting the situation of the property, and are concerned in its good administration. It has, however, become too much the practice that, instead of such persons confining themselves to the duty of assisting the Court with their advice and management, there is a constant struggle among them to reduce the amount of the allowance made for the Lunatic, and thereby enlarge the fund [102] which, it is probable, may one day devolve upon themselves. Nevertheless, the Court, in making the allowance, has nothing to consider but the situation of the Lunatic himself, always looking to the probability of his recovery, and never regarding the interest of the next of kin. With this view only, in cases where the estate is considerable, and the persons who will probably be entitled to it hereafter are otherwise unprovided for, the Court, looking at what is likely the Lunatic himself would do, if he were in a capacity to act, will make some provision out of the estate for those persons. So, where a large property devolves upon an elder son, who is a Lunatic, as heir at law, and his brothers and sisters are slenderly or not at all provided for, the Court will make an allowance to the latter for the sake of the former; upon the principle that it would naturally be more agreeable to the lunatic, and more for his advantage, that they should receive an education and maintenance suitable to his condition, than that they should be sent into the world to disgrace him as beggars. So also, where the father of a family becomes a lunatic, the Court does not look at the mere legal demands which his wife and children may have upon him, and which amount, perhaps, to no more than may keep them from being a burthen on the parish, - but, considering what the Lunatic would probably do, and what it would be beneficial to him should be done, makes an allowance for them proportioned to his circumstances. But the Court does not do this because, if the Lunatic were to die to-morrow, they would be entitled to the entire distribution of his estate, nor necessarily to the extent of giving them the whole surplus beyond the allowance made for the personal use of the Lunatic.

The Court does nothing wantonly or unnecessarily to alter the Lunatic's property, but on the contrary takes [103] care, for his sake, that, if he recovers, he shall find his estate as nearly as possible in the same condition as he left it, applying the property in the mean time in such manner as the Court thinks it would have been wise and prudent in the Lunatic himself to apply it, in case he had been capable.

The difficulty I have had was as to the extent of relationship to which an allowance ought to be granted. I have found instances in which the Court has, in its allowances to the relations of the Lunatic, gone to a further distance than grand-children - to brothers and other collateral kindred; and if we get to the principle, we find that it is not because the parties are next of kin to the Lunatic, or, as such, have any right to an allowance, but because the Court will not refuse to do, for the benefit of the Lunatic, that which it is probable the Lunatic himself would have done.

[No Order was made upon the Petition.]"

41 Although the report of this judgment in Ex parte Whitbread does not record an appearance before Lord Eldon of Charles Christopher Pepys (later Lord Cottenham), when Cottenham (1781-1851) himself served as Lord Chancellor (1836-1841 and 1846-1850) he is reported to have provided, in In the Matter of Blair, a Lunatic (1836) 1 My&Cr 300 at 302-303; 40 ER 390 at 391, the following commentary on Whitbread:

"THE LORD CHANCELLOR [Cottenham] said that he entertained great doubts with respect to the power of the Great Seal [303] to grant, and with respect to the propriety of granting, allowances to relations of lunatics, for whom the lunatic was not legally bound to provide; but his Lordship expressed an opinion that the Master had improved upon his former report by recommending a smaller allowance. In Ex parte Whitbread in re Hinde (see 2 Mer. 99), in which his Lordship was counsel, he recollected that Lord Eldon felt very great difficulty in acceding to an application similar to the present; the matter was several times mentioned to Lord Eldon, and he repeatedly answered, by asking what power he had to give away the property of a lunatic. Lord Eldon did, at last, accede to the prayer of the petition in that case, and the precedent which he had so made had been followed in several subsequent instances. The practice, however, was one which could not be regarded with too much caution, and the principle involved in it ought to be narrowed, rather than extended in its operation; and his Lordship desired that it might be understood that he would never exercise such a jurisdiction without the greatest possible jealousy and caution. As, however, the principle had been so far followed, and as there seemed no probability that the lunatic would recover, or would be capable of greater enjoyments than those which were now afforded to her, his Lordship would, in the present instance, make the order."

42 True to his word, Lord Cottonham approached this branch of the protective jurisdiction with caution. In In the Matter of Thomas, a Lunatic (1846) 2 Ph 169; 41 ER 906 he is reported to have rejected a petition by the wife of a lunatic (the committee of the lunatic's estate) for a capital allowance of £2,000 to enable one of several children of the lunatic to purchase a property in Barbados (in circumstances in which the income of the lunatic's property was about £1,600 a year), with the following comments directed at counsel for the petitioner:

"THE LORD CHANCELLOR [Cottenham]. The Court will advance small sums to put relations of a lunatic out as apprentices : but as to advancing large sums of £2000 to enable one of his family to buy an estate, I never heard of such a thing. In that way you might dispose of the whole of the lunatic's property, and leave him, if he recovers, to find all his property gone. If you can find any precedent for such an application, you may mention it again : but if there is none I shall certainly not make one."

43 Ex parte Whitbread and Blair were followed by the English Court of Appeal (constituted by Jessel MR and Lindley LJ) in In re Evans (a person of unsound mind) (1882) 21 ChD 297. There "the guiding principle" was said (at 21 ChD 300) to be "the benefit of the lunatic, and [an] allowance [may be made out of a lunatic's estate] because it would be a disgrace to him that certain near relatives should not be maintained and educated". It was also said (at 21 ChD 301) that "[a] similar principle would apply if [a] lunatic had been in the habit of making an allowance while sane, in which case a moral obligation would arise, for the recipient no doubt would regulate his mode of life on the faith of its being continued".

44 Observations to a similar effect were made by the Court of Appeal (constituted by Cotton, Bowen and Fry LJJ) in In re Darling (a person of unsound mind) (1888) 39 ChD 208. The Court recognised that: (a) "considerable allowances" were sometimes made for persons who had legal claims upon a lunatic, such as a son or daughter, and also for persons who had moral claims upon the lunatic (39 ChD 211); (b) allowances for a person who was the next successor to the lunatic's estate stood in a special category because it was considered to be in the interest of every possessor of an estate to ensure that his or her successor was educated and brought up in such a manner as to enable the successor to fulfil duties attaching to ownership of the estate (39 ChD 211 and 212); and (c) the Court was required, in each case, to consider what the lunatic would have done in the particular circumstances if sane (39 ChD 211, 212-213 and 213).

45 Historically, although the perspective of a protected person has been central since (at least) Lord Eldon's days, the size and nature of a protected estate and the presumptive interest in the estate (if any) of a petitioner for an allowance out of the estate have assumed substantial importance in particular cases.

46 Taken together, illustrations from (19th century cases point to principled pragmatism in the operation of the law. They provide the foundations on which Theobold (to which attention now turns) was built.

47 Theobold instructs us that the protective jurisdiction of the Court is parental and protective. It exists for the benefit of the person in need of protection. It also takes a large and liberal view of what "benefit" is, and it will do on behalf of a protected person not only what may directly benefit him or her, but what, if he or she were capable of managing their own affairs, he or she would as a right-minded and honourable person desire to do: Theobold, pp 362-363, 380 and 462.

48 It is necessary for the Court to take up conduct of a protected person's affairs cut short by incapacity for self-management: Theobold, p 59.

49 The limits of the Court's inherent, protective jurisdiction have never been, and cannot, from the nature of the case be defined. The jurisdiction is not restricted by specific powers which have been conferred by statute: Theobold, p 362. It is commonly called in aid of orders addressing questions not contemplated, or adequately addressed, by legislation: Re Eve [1986] 2 SCR 388 at 409-411 and 425-427; 31 DLR (4th) 1 at 16-17 and 28-29.

50 The jurisdiction, generally, does not bear the character of adversarial litigation between parties who claim an interest in the estate of a protected person. It is directed, principally, to administration of the estate without strife in the simplest and least expensive way. Towards that end, the Court's methodology may be inquisitorial in character: Theobold, pp 59-60 and 362.

NSW Case Law and Legislation

51 Guided by Theobold, this Court has held that the jurisdiction extends, independently of statute, to authorisation by the Court of voluntary allowances out of an estate (including, if thought fit, allowances out of capital) for the maintenance or benefit of a protected person's family: Theobold, pp 462-467; Protective Commissioner v D (2004) 60 NSWLR 513 at 540 [149]-542(156), 543 [165] -[166] and 544 [171]-545 [173]; Griffin v Union Trustee Co of Australia Limited (1947) 48 SR (NSW) 360 at 363; 65 WN (NSW) 5 at 7; Re DJR and the Mental Health Act 1958 [1983] 1 NSWLR 557 at 564E-G; Re ES and the Mental Health Act 1958 [1984] 3 NSWLR 341 at 343B-344D; Scott v Scott [2012] NSWSC 1541; 7 ASTLR 299 at [287]; Secretary, Department of Family and Community Services v K [2014] NSWSC 1065 at [67].

52 Where (as in these proceedings) the estate of a protected person is managed by a private manager (ie, a manager other than the NSW Trustee), the Court's inherent powers are supplemented by the NSW Trustee and Guardian Act 2009 NSW, ss 65(1)(b) and 65(2)(e).

53 Section 65 (which is in chapter 4 of the Act) is in the following terms, with emphasis added:

"65 Orders by Supreme Court and NSW Trustee as to property

(1) General power. The Supreme Court or the NSW Trustee may make such orders as appear to it necessary for rendering the property and income of a managed person available for the following purposes:

(a) the payment of the debts and engagements of, and otherwise for the benefit of, the person,

(b) the maintenance and benefit of the family of the person,

(c) otherwise as it thinks necessary or desirable for the care and management of the estate of the person.

(2) Orders as to disposal of estate Without limiting the generality of subsection (1), the Supreme Court or the NSW Trustee may order that any property of the person be sold, mortgaged, dealt with or disposed of as the Court or the NSW Trustee thinks most expedient for the purpose of raising or securing or repaying with or without interest money which is to be or which has been applied to any one or more of the following purposes:

(a) payment of the person's debts or engagements,

(b) discharge of any encumbrance on property of the person,

(c) payment of any debt or expenditure incurred for the maintenance (including future maintenance), or otherwise for the benefit, of the person,

(d) payment of the costs of any proceeding under this Act or of any sale or other disposition made under this Act,

(e) payment of such other sum or sums to such person or persons as the Court or the NSW Trustee thinks fit.

(3) Orders as to application of money. Without limiting subsection (1), the Supreme Court or the NSW Trustee may authorise and direct the application of money comprising the whole or any part of the estate of the person to any one or more of the following purposes:

(a) the preservation and improvement of the estate of the person,

(b) the taking up of rights to issues of new shares, or options for new shares, to which the person may become entitled by virtue of any shareholdings,

(c) the investment of money, being money not required for the time being for any of the other purposes specified in this subsection, in such manner as the Court or the NSW Trustee thinks fit.

(4) An order by the NSW Trustee is subject to the regulations or to any order of the Supreme Court or to any order of the Civil and Administrative Tribunal (in the case of a person under guardianship)."

54 Parliament has endeavoured to accommodate social change, by adapting the machinery of government to service an aging population and a growing number of people unable to manage their own affairs (M v M (2013) NSWSC 1495), and by enhancing the Court's powers to facilitate administration of estates, before and after death. The law as it has developed in New South Wales (in common with other Common Law jurisdictions) seeks to accommodate death as a process culminating in physical death, rather than simply as the event of physical death.

55 It seeks both to protect those in need of protection and to allow them, and their families, a normal life in their respective communities.

56 An illustration of this appears in s 39 of the NSW Trustee & Guardian Act 2009 NSW, in chapter 4 of the Act (entitled "Management functions relating to persons incapable of managing their affairs"):

"39 General principles applicable to Chapter

It is the duty of everyone exercising functions under this Chapter with respect to protected persons or patients to observe the following principles:

(a) the welfare and interests of such persons should be given paramount consideration,

(b) the freedom of decision and freedom of action of such persons should be restricted as little as possible,

(c) such persons should be encouraged, as far as possible, to live a normal life in the community,

(d) the views of such persons in relation to the exercise of those functions should be taken into consideration,

(e) the importance of preserving the family relationships and the cultural and linguistic environments of such persons should be recognised,

(f) such persons should be encouraged, as far as possible, to be self-reliant in matters relating to their personal, domestic and financial affairs,

(g) such persons should be protected from neglect, abuse and exploitation."

57 Section 39 adapts a template found in s 4 of the Guardianship Act 1987 NSW. That Act governs the work of the Guardianship Division of the Civil and Administrative Tribunal of NSW ("NCAT") as the successor of the Guardianship Tribunal.

58 Much of the heavy workload of dealing with people in need of protection through an inability to manage their own affairs is borne by NCAT.

59 Central to the guardianship work of NCAT is the making, supervision and revocation of "guardianship orders" (governed by Part 3, ss 7-25C, of the Guardianship Act 1987 NSW) and "financial management orders" (governed by Part 3A, ss 25D-25U, of the Guardianship Act 1987, read with chapter 4 of the NSW Trustee and Guardian Act 2009 NSW).

60 As part of an administrative tribunal, the Guardianship Division of NCAT works within a legislative framework that preserves the jurisdiction of the Supreme Court of NSW (eg, Guardianship Act 1987 NSW, ss 8 and 31; In Re WN (a person alleged to be of unsound mind) (1903) 3 SR (NSW) 552 at 561, 567, 569 and 570) and allows for appeals (Civil and Administrative Tribunal Act 2013, Schedule 6, Part 6) and references (Guardianship Act 1987, s 25L) to the Court.

61 In the practice of law in New South Wales illustrations of the broader perspective now required to be taken of the law of succession, and the close connections that can now exist between the probate and protective jurisdictions of the Court, include the following:

(a) the concept of an "Enduring Power of Attorney" (presently governed by the Powers of Attorney Act 2003 NSW) has become familiar throughout the community, allowing individuals, with legal advice, to appoint an agent whose powers to act in the name of, and for, the principal can survive the principal's dissent into mental incapacity: Szozda v Szozda [2010] NSWSC 804; Scott v Scott [2012] NSWSC 1541; 7 ASTLR 299.

(b) the related concept of an "enduring guardian" appointment by private instrument (governed by Part 2, ss 5-6 O, of the Guardianship Act 1987 NSW) has become equally familiar.

(c) through the work of NCAT's Guardianship Division many people have become familiar with procedures governing the appointment by the Tribunal of an "enduring guardian" and a "financial manager", offices paralleled by the Court's historical jurisdiction to appoint a "committee of the person" or a "committee of the estate".

(d) over the past two decades or so, the law has moved (as it continues under imperatives of the times to move) towards greater deployment of private managers in the management of protected estates: M v M [2013] NSWSC 1495, recounting developments since Holt v Protective Commissioner (1993) 31 NSWLR 227 at 241-243.

(e) not only have formalities attending the making of wills been relaxed, with provisions now found in the Succession Act 2006 NSW, for the making of an "informal will" (s 8) or the rectification of a will (s 27), but a person lacking testamentary capacity can have a Court-approved "statutory will" made, on his or her behalf, by reference to a presumed intention (ss 18-26; Re Fenwick 2009 76 NSWLR 22; Secretary, Department of Family and Community Services v K [2014] NSWSC 1065).

(f) applications for family provision relief under chapter 3 of the Succession Act (ss 55-100) have become a commonplace method of "challenging a will" (to adopt a colloquial, but technically deficient expression) after death, and Court approved releases (under s 95) of prospective family provision entitlements are routinely sought in connection with settlement of litigation within a family, broadly defined.

62 A persistent problem that is, or may be, inherent in allowing increased access to the courts for the adjudication, or adjustment, of property rights, between family members or across generations, is the exposure to substantial legal costs to which disputation may condemn everybody.

63 The Court must be mindful of that problem.

ANALYSIS

64 Although experience counsels caution against premature, or absolute, pronouncements of universal harmony in any family, the current proceedings demonstrate what can be achieved, for the benefit of a whole family, where, in the administration of a large managed estate, care is taken to cultivate trust and to facilitate constructive conversations within the family. A prospect of substantial, acrimonious litigation (including a contested probate suit and family provision proceedings) after the death of a patriarch was averted by discussions within the family, assisted by the availability of the services of the NSW Trustee and Guardian in working out practical solutions to practical problems.

65 In dealing with problems of this character, the central point of reference must, at all times, be the welfare and interests of the protected person (NSW Trustee and Guardian Act 2009 NSW, s 39(a); Guardianship Act 1987 NSW, s 4(a); Holt v Protective Commissioner (1993) 31 NSWLR 227 at 238D and 241G-242A), recognising that a protected person lives in community, particularly, with family.

66 Theobold was correct to record that "[it] is the business of [a judge exercising the Court's protective jurisdiction] to administer [a protected person's] estate and not to give it away". It was equally correct to observe that it may be proper, in the due course of administration of a protected estate, to make donations and voluntary allowances out of the estate, particularly to make provision for members of a protected person's family, broadly defined.

67 Theobold was correct moreover (at pp 463-464), both in counselling caution against allowances being made for family (or, at least, children) of a protected person beyond the person's income, and in recording that "there is no reason to doubt that in a proper case an allowance may be made out of capital".

68 Each case must, ultimately, turn on its own facts.

69 Where (as in the current proceedings) a protected person is of an advanced age, physically beyond any practical possibility of a return to mental capacity, and secure in a quality care facility with an estate more ample than any present or prospective need he or she might have, the business of a protective judge (consulting the welfare and interests of the protected person) may, in fact, be to give away, at least, a substantial part of the estate to those who have a clear claim on his or her bounty and a reasonable expectation of testamentary benefit.

70 To adapt a passage found in Theobold (at p 464), the Court may find, in a particular case (as in this case), that it cannot be for the benefit of a protected person that his or her close family members "should be allowed to want or to be left uneducated, or be driven into the hands of money lenders, or put to other unsatisfactory devices, when they will one day come into the [protected person's fortune], which is, in the meantime, more than sufficient for his [or her] maintenance and may be uselessly accumulated." Putting aside the hyperbole of language from an earlier age, there remains here a point well made.

71 In the case at hand, the NSW Trustee's involvement in the proceedings provided an independent, objective safeguard, protective of the interests of the protected person. Additional comfort was taken from representation of interested parties by senior, experienced barristers and solicitors, and by personal attendance of family members at Court when problems, and prospective solutions, were identified and debated.

72 On the hearing of an application for approval of a family settlement, involving disposition as well as management of a protected estate, importance attaches to adjectival and substantive safeguards, including the following:

(a) first, an endeavour should be made to ensure that all persons with a present, or prospective, interest in the estate are joined as parties in the proceedings or at least (by analogy with the principle identified in Osborne v Smith (1960) 105 CLR 153 at 158-159, explained in Estate Kouvakas; Lucas v Konakas [2014] NSWSC 786 at [134]-[144] and [258]) that they have been given notice of the proceedings and allowed an opportunity to intervene.

(b) secondly, all participants in proceedings involving an exercise of protective jurisdiction must be reminded that the jurisdiction is not a "consent jurisdiction" in which orders of the Court can be procured by the consent of parties (PB v BB [2013] NSWSC 1223 at [27]-[30], [34], [38] and [56]; M v M [2013] NSWSC 1495 at [50](a) - (d); Ability One Financial Management Pty Limited and Anor v JB by his tutor AB [2014] NSWSC 245 at [143]-[149] and [151]-[154]). The Court is bound to exercise an independent judgement, informed by established principles, in making any decision affecting a protected person or his or her estate.

(c) thirdly, the focal point for all decisions to be made by the Court affecting the person or property of a person in need of protection (not merely a person formally declared to be incapable of self-management) must be defined by reference to criteria, however expressed, grounded in primacy being given to the welfare, interests and benefit of the person in need of protection.

(d) fourthly, in making decisions affecting the estate of a person who (by reason of incapacity or death) is not present and able to advance his or her own case, the Court must strive to make an objective judgment, taking into account all material circumstances (including those subjective to the absent person), which objectivity is variously described by reference to principles designed to give effect to a protected person's probable judgement (Ex parte Whitbread (1816) 2 Mer 99; 35 ER 878); considerations of wisdom and justice, informed by knowledge of all the circumstances of the case (Pontifical Society for the Propagation of the Faith v Scales (1962) 107 CLR 9 at 19-20); contemporary community standards (Andrew v Andrew (2012) 81 NSWLR 656); and the presumed intention of an incapacitated person (Re Fenwick (2009) 76 NSWLR 22 at [170]-[176]; Secretary, Department of Family and Community Services v K [2014] NSWSC 1065 at [75]-[81]).

(e) fifthly, taking notice of traditional concerns about the disposition of property of lunatics who might recover sanity, the Court should be slow to approve any "family settlement" involving a disposition of the property of a protected person able to express a personal view about disposition of his or her estate or possessed of a prospect of recovery of his or her capacity.

(f) sixthly, although the jurisdiction to be exercised by the Court is not a "consent jurisdiction", the Court should be slow to sanction a "family settlement" to the extent that there is, or may be, a person interested, or prospectively interested, in a protected estate who has not consensually bound himself or herself to the terms of the proposed settlement.

(g) seventhly, whether by deed or another formal record of their agreement, the parties to a family settlement should record the intended effect of the settlement, taking into account the contingency that death might intervene so as to terminate management of the protected estate, bringing into direct operation the law governing administration of a deceased estate.

(h) eighthly, although the Court may be willing to entertain a proposal for approval of a family settlement, it must be vigilant against the possibility that such a proposal may be an attempt to circumvent a judicial determination of questions which should, in the public interest, be determined in the course of ordinary litigation.

(i) ninthly, ordinarily, the Court's assessment of a claim on the estate of a protected person will be assisted by an independent report by the NSW Trustee or another professional.

(j) tenthly, in the event that provision is ordered to be made out of a protected person's estate for his or her family, consideration should be given to whether an order for provision can, and should, be subject to terms. An allowance out of an estate may be made, for example, on condition that it be brought into account against the respective shares to which recipients may become entitled out of the protected person's deceased estate: Theobold, p 466. Or, by way of another example, it may be appropriate that provision be made on terms securing its repayment to the protected person in particular circumstances: Theobold, p 464.

73 Whatever (if any) terms are imposed on approval of a family settlement affecting a protected estate, the Court should be cautious to ensure that all interested persons are consulted before any order for provision (especially by way of a capital sum) is made. Care should be taken to ensure that the protected person is beyond recovery of capacity for self-management, and not the subject of contrived or improper claims.

74 Care should also be taken against today's necessity for decisions to be made being overburdened by contentious evidence of interested parties advancing their own views of what is presently required by attributing to a protected person long-past statements of opinion or intention. Historical views of a protected person are entitled to respect, but they are not necessarily determinative of what must be done now in his or her best interests, and for his or her benefit.

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Decision last updated: 28 November 2014