A recent decision of the Queensland Civil and Administrative Tribunal (QCAT) concerning the conduct of the Public Trustee of Queensland (PTQ) provides two very valuable and costly lessons for anyone acting as an Administrator or Enduring Attorney for someone.
In short, QCAT ordered the PTQ to pay compensation of $37,404.00 to a person for failing to diligently manage the financial affairs of that person, let’s call him ‘Wayne’ (not his real name).
Why was the claim against the PTQ?
Wayne was a young man who had received $500,000.00 in compensation as a result of an accident. The PTQ had been appointed as his Administrator, i.e., to manage Wayne’s financial affairs as he was unable to do it himself.
The PTQ was asked to lend $20,000.00 to Wayne’s father to enable the father and his partner to get rid of debts and to help them buy a home. At the time Wayne was living with the father and his partner which appeared to be the best arrangement for Wayne. PTQ duly agreed and lent the money to the father.
Years later, when it was clear that the loan was never going to be repaid, an application was made on behalf of Wayne to QCAT asking for an Order that the PTQ compensate Wayne for the loss.
PTQ argued that Wayne had wanted it to make the loan and, because Wayne was living with his father, that appeared to be in his best interests. Wayne’s argument was that the PTQ shouldn’t have loaned the money because it wasn’t a good investment. He also had a second argument, namely, that the PTQ should have been more diligent in securing and setting the terms of the loan.
Was the Loan Prudent and “Principled”
When making financial decisions for people, Administrators and Enduring Attorneys have to apply what is referred to as the ‘prudent person rules’. Under these rules, the Enduring Attorney or Administrator is required to invest funds wisely, avoid risky investments and preserve the adult’s funds as much as possible.
But, as well, Administrators and Enduring Attorneys are also obliged to make their decisions having regard to the General Principles contained in the legislation. These principles include that:
“power for matters should be exercised … for an adult in a way that is appropriate to the adult’s characteristics and needs”.
The question was whether the PTQ failed in its obligations in making the loan given that it wasn’t a good investment and given the risk that it wouldn’t be re-paid.
There were 2 questions for QCAT to answer:
- Should they have made the loan to the father? and
- Did they do it very well?
Question 1 – In answer to the first question, QCAT said that PTQ had, in making the loan, properly balanced the apparent tension between its obligations to invest money prudently while at the same time taking into account Wayne’s needs and circumstances. In other words, being prudent is not just assessed against financial benefits or getting the best return it is also about less tangible benefits in ensuring it is for the real benefit of Wayne.
Question 2 – So, the PTQ was successful in defending its decision but then it ran into trouble on the second question. Effectively, QCAT found that PTQ was not, as it was required to be, diligent in implementing the decision and documenting the loan. It failed to have the father as a party to a loan agreement and the agreement did not provide for the payment of interest. As a result it was ordered to pay Wayne $37,404.00.
Two Lessons for Administrators and Attorneys
The case holds two lessons for Administrators and Enduring Attorneys:
- When making financial decisions, the decision shouldn’t be approached purely from the financial perspective and the adult’s characteristics and needs must also be considered;
- In implementing the decision, they must always act diligently in ensuring that they have done everything necessary to protect the adult’s interests.
If you’re an Enduring Attorney, Administrator and have a conundrum about ‘prudent but principled’ decisions, please contact us to see how we may be able to assist.