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The public trustee companies in each state are best known for their services to the general public, such as will preparation and administration of deceased estates. But a lesser known function is financial management, known in some states as financial administration, on behalf of clients such as Colley and other people deemed to lack capacity.

This includes people with mental illness, intellectual disability, brain injury and, increasingly, age-related dementia.

Every state and territory has the equivalent of a public trustee and guardian, though the bureaucratic structures and underlying legislation varies. For example, in NSW and a number of other states the public trustee and public guardian are part of the same organisation, while in Victoria the functions are separate. (See breakout, below).

The appointment of a financial manager or guardian is usually made by a tribunal, such as the NSW Civil and Administrative Tribunal (NCAT) or the Victorian Civil and Administrative Tribunal (VCAT).

Family members can be appointed as financial managers or guardians but when there is no one who is both available and suitable - or there is conflict with relatives or service providers - the tribunals will often appoint the state’s public trustee and/or guardian. Even when someone has given powers of attorney to their family members, this can be overturned by the tribunals.

Flaws in the system

There was a time when people who were deemed to “lack capacity” were locked up in institutions. The financial management and guardianship system largely replaced that.

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But Alastair McEwin, the Disability Discrimination Commissioner at the Australian Human Rights Commission, says the system is “still very much entrenched in long-held assumptions about the capacity of people with disabilities to make decisions about their own lives”.

These preconceived notions means that tribunal members or judges might be more inclined to believe one side of the story to another, or to make assumptions based on one-off behaviour while ignoring the bigger picture. 

McEwin says both financial management and guardianship - which are systems of substitute decision making - need to be replaced with a system of assisted or supported decision making that empowers the person to make their own choices. This would bring Australia in line with the rights-based approach to disability issues in the United Nations Convention on the Rights of Persons with Disabilities.

Across Australia, the Herald and The Age have heard from many individuals and families dissatisfied with the system as it currently stands.

Of course, not every allegation of wrongdoing is true. Guardianship and financial management are inherently contentious, especially since public trustees and guardians are often appointed when there is family conflict, such as disagreement among adult siblings about how to help their elderly parent.

But speaking to those affected reveals many common themes across different states of Australia, despite differences in legislation. A common complaint is that guardianship is too controlling about the minutiae of people's lives and marginalises family members often for no reason. A 2015 Senate inquiry, which McEwin called a "seminal piece of work", heard guardians sometimes block the individual from accessing lawyers or advocates.

Another common refrain is that the trustees are penny-pinching, keeping a tight lid on expenditure even when managing recurring income rather than a lump sum, while simultaneously raking in huge fees.

Many critics argue the public trustees and public guardians work too closely together - particularly in those states where they are part of the same organisation - and this creates an inherent conflict of interest.

In a case of an elderly person for example, the state’s public guardian might be given guardianship and decide to move the person into aged care. The public trustee, who works for the same umbrella organisation, will then sell the person’s home - with the state collecting stamp duty along the way - and invest the proceeds into managed funds. There is usually an establishment fee when the money enters the public trustee system and then ongoing management and investment fees.

Complaints are rarely reported in the media because people under guardianship or financial administration cannot be publicly identified and in some states that even applies after they’re dead. In South Australia, it’s illegal to discuss guardianship proceedings even when the story has been anonymised.

The 2015 Senate inquiry found the fact that guardianship might gag a vulnerable person or prevent them from lodging a complaint a “form of abuse”.

“In many cases, the prevention of reporting violence, abuse and neglect leads to the indefinite perpetuation of inappropriate actions,” the Senate report said.

There is a real question of accountability and this is particularly obvious in financial management. Public trustee companies are owned by the states and are also overseen by the states. While private trustee companies come under the Australian Securities and Investments Commission, public trustee companies do not. The financial services royal commission didn’t look at public trustee companies, and the aged care royal commission is not expected to examine either guardianship or financial management.

In Victoria, Ombudsman Deborah Glass is investigating State Trustees, the state-owned company that is equivalent to the public trustee in other states, to see whether the corporation is acting in the best interests of clients.

The investigation, which is understood to be extensive and is still ongoing, is focusing on State Trustees’ role as an administrator for people who are unable to manage their financial and legal affairs because of disability, illness or injury.

A State Trustees spokeswoman said the organisation was co-operating with the Ombudsman but did not answer why there had been a spike in complaints.

Last July State Trustees terminated its chief executive, Craig Dent, for “serious misconduct” involving the alleged misuse of taxpayers’ funds and referred the matter to Victoria's Independent Broad-based Anti-corruption Commission. Dent denies the allegations and IBAC's review is still ongoing. 

State Trustees has stated no private money being managed on behalf of clients was affected by Dent’s alleged misconduct.

High fees

The fees charged by financial administrators can be eye-watering. The $25,000 that NSWTG wants to charge Colley’s estate is a case in point.

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NSWTG says it cannot comment on Colley’s case because of confidentiality and privacy but it's understood the fee includes back fees for administration of the trust as well as the transfer of the title from NSWTG to Beehag's name.

Were it a simple matter of settling an estate, a private solicitor could legally charge a maximum of $3905 in probate fees, based on the estimated $650,000 value of the Kingscliff property.

Karen*, an accountant from Melbourne, says Colley’s story echoes her own experience trying to get care for her father, and speaking to other families under financial management and guardianship orders. Karen’s name has been changed because her father, who is 79 and has frontal lobe dementia, can’t be identified for legal reasons.

“The first thing that echoed to me is that how they’re doing this is through fees,” she says. “We look at elder abuse as stealing money, but the legal way of liquidating estates is through fees, legal fees and accounting fees.

“Once the family is isolated from decision making there is nothing they can do other than watch while trustees and administrators charge excessive fees for work that is not of the same value.”

Karen adds that private companies can also charge excessive fees to vulnerable people - she is currently fighting a $71,000 legal bill sent to her father by a private law firm that had unsuccessfully applied to be her father’s financial manager. She submitted evidence to the VCAT that the law firm took the work despite knowing her father legally lacked the capacity to make financial and legal decisions, but the bill was only knocked down to $50,000.

The state-owned public trustees are the main providers of professional financial management for people deemed to lack capacity, and therefore the main beneficiary of fees.

Colley was one of 11,661 people across NSW under the financial management of NSWTG, according to the state government entity’s 2018 annual report. Another 4500 people have private financial managers, and NSWTG provides oversight.

NSWTG manages $5.9 billion in client assets, with $1.7 billion in the financial management common fund, which is mainly for people under a financial management order.

In Victoria, State Trustees administers the financial and legal affairs of 11,459 people, managing assets worth a total of more than $1 billion.

As businesses, this makes each trustee company about the size of a small public superannuation fund.

A list of fees on its website states that State Trustees charges VCAT-appointed clients a 3.3 per cent capital commission when money is withdrawn from a bank account or shares or other assets sold. It also takes a cut of any income - 3.3 per cent of any pension and allowances received from Centrelink or Department of Veterans Affairs and 6.6 per cent of any other gross income. Despite State Trustees lowering its fees last July, the fees are still high compared with a private trustee company.

NSWTG generally has lower fees and does not take a cut of income. A NSWTG spokeswoman said its fees were set by government in the NSW Trustee and Guardian Regulation 2017 and a review was completed by the Independent Pricing and Regulatory Tribunal NSW in 2016.

McEwin says a rights-based approach would give the person with disabilities information and the right to seek another service provider with lower fees, similar to the model used in the National Insurance Disability Scheme.

NSWTG rejects the notion there is a conflict of interest, with a spokeswoman saying that NSWTG is compelled to follow the principles set out in legislation when deciding whether to sell a client’s assets.

Meanwhile, in Victoria the Office of the Public Advocate has more powers than the public guardian in most states and is legally independent of government as it reports to parliament.

Victorian Public Advocate Colleen Pearce says it is common practice for financial administrators to seek the advice of VCAT before selling property against the wishes of the represented person.

“An administrator (private or professional) must avoid a conflict of interest,” Pearce says. “If my office is concerned that an administrator is not meeting their statutory obligations then we will give consideration to making an application for reassessment of the administration order to VCAT.”

A State Trustees spokeswoman says the organisation often needs to deal with "circumstances where there is a high degree of conflict, such as complex family matters".

"Our role is to act in the client’s best interests and this may involve selling property to facilitate entry to a nursing home so the client can have the best possible care," she says.

The Herald and Age investigation has found a number of cases of people around Australia under financial management orders whose money has been mismanaged by the relevant public trustee companies. The following two case studies are typical of the many stories unearthed. In both these individual cases, The Herald and The Age has verified the broad outline of events. The individuals and even their state of residence can not be identified for legal reasons, so names have been changed.

Taking advantage of the elderly

Barbara* was in her 80s and living in an aged care home in an Australian capital city close to her adult children. She still owned her former home, which was let to tenants. Barbara’s living expenses were low and she could fund the cost of aged care from the rental income and the age pension, while maintaining a buffer of about $19,000 in her bank account.

But as Barbara lost capacity to manage her affairs, her adult children were finding it hard to agree on how to proceed. Her state’s public trustee and guardian was put in charge.

The public trustee started investing her money on her behalf. The estate officer took nearly $12,000 of her savings – more than half – and invested it in her name across six managed funds run by the public trustee. The managed funds had high fees and the underlying investments were long term with a fair degree of risk – arguably unsuitable for a pensioner who had no experience with the sharemarket.

Then the estate officer said Barbara’s funds were running low and they needed to sell her home – even though they had $12,000 in managed funds in her name.

Barbara’s daughter Sue* says the public trustee’s policy was that any time there was more than $10,000 in funds, they would transfer the “surplus” to managed funds. Meanwhile, they also used this as evidence that the funds were depleting.

Eventually the aged care facility returned $21,000 in overpayments – but the public trustee immediately sent it back.

Family members are now managing guardianship and financial administration for Barbara.

Indigenous over-representation

In another part of Australia, the state’s public trustee lost most of the money they were managing for Bob*, an Indigenous man now in his 30s.

Bob was in a car accident as a young child and when he turned 18, he was awarded a $450,000 payout from an insurance company for injuries to his arm and leg. Bob had developed mental illness as a teenager and is not very communicative with strangers, though his stepfather Jack* says he is much more expressive with family and other Indigenous people.

Bob spoke to The Herald and The Age briefly to confirm that he was happy for his stepfather to tell the story on his behalf.

At 18, Bob was assessed as having average intellectual capacity but prone to lapses in concentration. He was deemed to be legally capable of making his own decisions except for financial administration of his payout. His mother and aunt were appointed to help him with his financial affairs and they helped him buy a flat to live in and a 12-hectare block of bushland on the coast as an investment.

But there was conflict in the extended family and relatives made allegations that his mother and aunt were misappropriating money. As a result the public trustee and guardian was appointed to his case, then his mother and aunt were reappointed, then the public trustee and guardian was appointed again. The allegations were not properly investigated until a decade later, when they were determined to be unfounded.

Meanwhile, Bob, a troubled young man, was living in the city, sleeping rough and spending time in jail. The public trustee installed tenants in his flat and sold his land. Then they sold the flat, invested it in managed funds – and lost most of it in the global financial crisis.

Bob was mostly homeless for a period of nine years and the public guardian prevented him from seeing his mother and effectively from maintaining connections with his Indigenous community.

Bob’s mother and stepfather kept fighting on his behalf. The public guardian fought to keep control of Bob’s affairs; documents reveal the public guardian claimed at one point that Bob had a brain injury from his childhood car accident, when it was just an arm and leg.

Since 2009 Bob has been living with his mother and stepfather again and, according to his family, life has improved. “He’s doing well,” Jack says. “He hasn’t been arrested once. He was being arrested and jailed regularly for the period of time he was with the adult guardian, for street offences, for being homeless on the street.”

The family had to fight for Bob to have full access to his disability pension - the public trustee only wanted to give him $150 a week from his pension.

In 2016 the tribunal granted Jack responsibility as both Bob’s guardian and financial administrator. “Any day it could change if the empire strikes back but that’s the way it is now,” Jack says.

But there’s only about $60,000 of the original money left – and less if the family decides to use some of it to pay legal fees to sue the public trustee. Jack estimates the flat would be worth about $1 million today, while the block would be worth $850,000, more if sub-divided.

Jack believes part of the problem for Bob was a bureaucratic disregard for his Indigenous heritage and culture, and paternalistic attitudes.

At the 2015 Senate Inquiry, the North Australian Aboriginal Justice Agency (NAAJA) presented evidence that Aboriginal and Torres Strait Islander peoples are over-represented in the adult guardianship system. It told the inquiry there was nearly eight times as many people under guardianship in the Northern Territory as in NSW, the next highest Australian jurisdiction, and 81 per cent of the adults under guardianship in the NT were Indigenous, despite Indigenous people being only 30 per cent of the population.

*Names have been changed

STATE BY STATE

Victoria
Under the Guardianship and Administration Act 1986, where a person is found to lack capacity to manage their own affairs, the Victorian Civil and Administrative Tribunal (VCAT) may appoint an administrator to administer their financial affairs and/or a guardian to make lifestyle decisions such as health care and accommodation. Administrators and guardians can be private individuals, such as family members. When there is no suitable private guardian, VCAT can appoint the Office of the Public Advocate (OPA) as a guardian. OPA answers to the Victorian parliament.

When there is no suitable private administrator, VCAT can appoint a professional administrator entitled to remuneration. The most common provider of financial administration in Victoria is State Trustees, a state-owned company. State Trustees also provides a range of other services to the general public, including will preparation, administration of deceased estates, and acting as attorney under an enduring power of attorney.

NSW
Under NSW law, where a person is found to lack capacity to manage their own affairs, the NSW Supreme Court, NSW Civil & Administrative Tribunal (NCAT) Guardianship Division and the Mental Health Tribunal can appoint a financial manager to manage a person’s financial affairs and/or a guardian to make lifestyle decisions such as health care and accommodation. Financial managers and guardians can be private individuals, such as family members.

The NSW Public Trustee and Guardian (NSWTG) acts as a financial manager when appointed by a court or tribunal. NSWTG also provides a range of other services to the general public, including will preparation, administration of deceased estates, and acting as attorney under an enduring power of attorney. The Public Guardian, which is part of NSWTG, can be appointed as a guardian when there is no suitable private guardian. NSWTG answers to the Supreme Court.

Source : https://www.smh.com.au/business/consumer-affairs/penny-pinching-raking-in-huge-fees-public-trustees-under-scrutiny-20190131-p50uwc.html