Carson v Illawarra Retirement Trust t/as IRT Group [2024] QCAT 323

QUEENSLAND CIVIL AND ADMINISTRATIVE TRIBUNAL CITATION: Carson v Illawarra Retirement Trust t/as IRT Group [2024] QCAT 323 PARTIES: GEOFFREY RAYMOND CARSON (applicant) v ILLAWARRA RETIREMENT TRUST T/AS IRT GROUP (Respondent) APPLICATION NO/S: OCL015-22 MATTER TYPE: Other civil dispute matters DELIVERED ON: 8 August 2024 HEARING DATE: 25 January 2024 HEARD AT: Brisbane DECISION OF: Member Paratz AM ORDERS: The Tribunal Directs that: Illawarra Retirement Trust t/as IRT Group (‘the Trust’) is to file one (1) copy in the Tribunal, and give one (1) copy to Geoffrey Raymond Carson, of its Submissions as to the Final Orders to be made, and providing Draft Orders, which are consistent with the findings of the Tribunal made in these Reasons, that: (a) the Trust is in compliance with the Retirement Villages Act 1999 (Qld) in purchasing bulk insurance cover which encompasses insurance in relation to the Retirement Village known as Parklands at Currimundi in Queensland; (b) the Trust must identify and separate any insurance costs which are directly related to the Corporate costs of the Trust, which form part of the bulk insurance cover, in formulating the insurance component of the General Services Charge for the Parklands Village; (c) the Trust is to implement a logical process that fairly apportions the insurance costs directly related to the Parklands Village for the purposes of establishing the General Services -- 1 of 31 -- 2 Charge payable by the residents of that Village; (d) the Trust is to establish a means of disclosing to the residents the basis of the insurance costs that are being attributed to the Parklands Village in its General Services Charge, whilst still maintaining the commercial confidence of the Trust as to its overall activities; and (e) the dates from when such Orders should take effect, by: 4:00pm on the date two (2) months after the date of these Reasons. Geoffrey Raymond Carson is to file one (1) copy in the Tribunal, and give one (1) copy to Illawarra Retirement Trust t/as IRT Group, of his Submissions in Response to the submissions of the Trust as to the Final Orders to be made, and providing alternate Draft Orders (if any), by: 4.00pm on the date three (3) months after the date of these Reasons. Illawarra Retirement Trust t/as IRT Group is to file one (1) copy in the Tribunal, and give one (1) copy to Geoffrey Raymond Carson, of its Submissions in Reply to the submissions of Mr Carson as to the Final Orders to be made, and providing Draft Orders (if any), by: 4.00pm on the date four (4) months after the date of these Reasons. Unless either party requests an Oral Hearing, the Final Orders to be made will be determined by the Tribunal On the Papers, having regard to the submissions made, after: four (4) months after the date of these Reasons. The Tribunal Orders: Until further or other Order, publication is prohibited of: (a) The materials contained in pages 157-733 attached to the affidavit of Louise Lever dated 29 August 2022; and (b) The materials referred to in Order 2 given on 13 May 2022, being publication of an Excel spreadsheet attached to the statement of -- 2 of 31 -- 3 evidence of Jason Gaudiosi in hardcopy or in any electronic form or held on a USB. CATCHWORDS: RETIREMENT VILLAGES – GENERAL SERVICES CHARGE – where the operator purchased insurance in bulk – whether the operator is authorised under the Retirement Villages Act 1999 (Qld) to purchase insurance in bulk – whether the correct cost of insurance was included in the General Services Charge for the Village Retirement Villages Act 1999 (QLD), s 45, s 102AA, s 103, s 107A, s 108, s 110 Cotterell v Redcliffe Assembly [2014] QCAT 357 Queens Lake Village Pty Ltd v Queens Lake Village Residents Association [2011] NSWDC 21 Tew & Kelly v Masonic Care Queensland [2008] CCT VH005-08 APPEARANCES & REPRESENTATION: Applicant: Mr Wise (Solicitor) Respondent: Ms Walkom (Thomson Geer, Solicitors) REASONS FOR DECISION [1] Mr Carson (‘the Resident’) and his wife are residents of a Retirement Village known as ‘Parklands’ at Currimundi in Queensland (‘the Village’). The Resident is Treasurer of the Village’s Residents Committee. [2] The Village is owned and run by the Illawarra Retirement Trust (‘the Trust’). It is for independent living only, and is not an aged care facility. [3] The Trust described itself in its Response as follows:1 (1) The Respondent, the Illawarra Retirement Trust (IRT) was founded in 1969. It is a large, not-for-profit, community-based organisation. In accordance with those objectives, it attracts and trains a significant volunteer workforce. IRT is large and sophisticated enough to have internal divisions and subsidiary companies. (2) IRT at the time of the preparation of the budget for the financial year ended 30 June 2020 operated: a) 8 home care services; and b) 21 aged care centres; and c) 34 retirement Villages 1 Response of the Respondent filed 12 May 2022, [1]-[3] -- 3 of 31 -- 4 as well as a Corporate Services Unit (Admin), the IRT Academy and IRT Catering. (3) IRT operates 4 Retirement Villages in Queensland, including IRT Parklands Village situated at 242 Parkland Boulevard, Currimundi (the Village). [4] The Resident filed an Application in the Tribunal on 8 March 2022 for a hearing of matters under the Retirement Villages Act 1999 (the Act). The Resident sought the following orders: (a) That the General Services Charge (‘GSC’) budget adopted by the Respondent under s 102A for the financial year ending 30 June 2022 be amended so that the insurance line item does not include: (i) insurance costs attributable to the aged care and home care operations of the Respondent or its related entities (‘the External Insurance Costs’); or (ii) the costs of insurance cover beyond that to independently verify under s 110 of the RV Act (‘the Optional Insurance Costs’). (b) That the general services charge payable by the residents for FY22 be reduced in accordance with Order (1), and that any overpayment by residents for the period prior to the reduction be refunded to them before 31 December 2022. (c) That the general services charge budget adopted by the Respondent for the previous five financial years be reviewed to assess whether the insurance line items included any of the External Insurance Costs or the Optional Insurance Costs and, to the extent that they did, the amount paid by residents towards those costs be refunded to the residents before 31 December 2022. (d) That the Respondent ensure all future general services charge budgets do not include any of the External Insurance Costs, and only include the Optional Insurance Costs if they have been approved by residents in accordance with s 108(1). (e) That the Respondent provide the residents committee with sufficient information as required to independently verify the Respondent’s compliance with orders (1) – (4). (f) Further or other orders that the Tribunal considers appropriate to resolve the dispute. [5] It was Directed by Consent on 30 August 2022 that the relief sought at (c) above (as to the previous five financial years) be deleted. [6] The matter was heard at a hearing on 25 January 2024. Oral evidence was given by one witness for the Resident - Mr Carson; and by 4 witnesses for the Village – Mr Gorgiosi, Mr Gentili, Mr Jones, and Mr Donahoe. Statements from these and other witnesses were filed prior to the hearing. [7] Oral closing submissions were made at the conclusion of the hearing. I reserved my decision, and made non-publication orders in relation to certain materials until further or other order. -- 4 of 31 -- 5 Evidence relied on by the Resident Mr Carson [8] Mr Carson, the applicant, said in his first affidavit that he graduated BCom (Accounting) from Otago University in 1971 and over the following 40 years held a range of Accounting and Information Systems positions; and the final decade of his professional career was as a computer systems consultant, accompanied by roles as company Director and Company Secretary.2 [9] Mr Carson expressed the view that the concerns of the residents in this matter are not complicated and involve ‘two simple questions’ as follows:3 19. Our concerns about the External Insurance Costs and the Optional Insurance Costs are not complicated. That involved two simple questions: 1) to what extent are the residents of this village (and the respondent’s other villages) subsidising the insurance costs for the respondent’s aged care and other non-village operations?; and 2) to what extent are residents of this village funding insurance that is not required under s110 of the RV Act? [10] Mr Carson suggested how the cost of insurance, if bought in bulk across its properties, should most logically be apportioned as follows:4 33. In my view, the most logical approach to apportioning is as follows: a) for public liability cover (required under s110(2)(a)(iii) of the RV Act) the costs should be apportioned between the respondents village and non-village operations by reference to the relative liability risk that they pose and, for the Reasons stated above, the aged care businesses would carry a higher liability risk than the village businesses; and b) for building cover (required under s110(2)(a)(i) & (ii) of the RV Act) the costs should be apportioned by reference to the replacement cost of the respective buildings, not by reference to the ‘value of the fixed assets’; and c) for any other forms of cover, they are not required under s110, so the cost should not be passed on to village residents at all (for the Reasons stated in my Form 31 Application and below). Mr Evans [11] The resident relied on an affidavit of Mr Bruce Evans dated 24 November 2022. Mr Evans stated that he was a retired insurance professional, having worked in the insurance industry for 40 years in New Zealand and Australia.5 [12] Mr Evans said that he had been provided with a copy of the expert report of Mr Gareth Jones, an insurance broker, dated 28 October 2022. He was critical of the report of Mr Jones as follows:6 2 Affidavit of Geoffrey Raymond Carson dated 2 June 2022 [33]. 3 Ibid [19]. 4 Ibid [33]. 5 Affidavit of Bruce Emery Evans dated 24 November 2022 [1]. 6 Ibid [5]. -- 5 of 31 -- 6 5. The expert report of Gareth Jones addresses the question only from the direction of IRT and the broker. He has failed to analyse the individual Village of IRT Parklands and not taken any consideration to the resident, and I submit has refrained from any comment to do with the risk profile of IRT Parklands, the insurance cover such as flood, the corporate costs of business interruption and the myriad of contents written within the ISR policy. [13] Mr Evans expressed the view that it ‘would seem obvious’ that the Trust was recovering corporate costs, as follows:7 13. I submit it would seem obvious there is a considerable portion of the premium the respondent Illawarra Retirement Trust ACN 000 726 536 are recovering from the Village GSF that relates and is a corporate cost and thus not recoverable. The RV Act section 109 gives a direction and definition of the term ‘damage’, and I would therefore submit the only premium recoverable from the GSF is that relating to this definition of damage, and therefore other insurance cover such as Business Interruption (and the premium relating thereto) is for the comfort and convenience of the scheme operator. [14] Mr Evans compared the insurance situation of the village and another property called the Plantation Retirement Resort Petrie Creek, and expressed the view that the similarities in construction, and facilities, have such similarity from a basic insurance underwriting basis that he would be of the view to treat the basis for insurance on equal terms, pro rata on the respective number of units.8 Evidence relied on by the Trust Mr Jones [15] An expert report was provided by Gareth Jones, who noted that he was an insurance broker with 40 years experience in both the International and Australasian sectors, and had been requested by the lawyers for the Trust to provide his opinion on a number of questions with regard to their insurance program.9 [16] Mr Jones concluded that he was unable to determine the specific premium allocation to the village, but believed that it was lower than a stand-alone cost would have been, as follows:10 1.5 What I cannot ascertain is the basis of the premium allocation to IRT/IRT Parklands but given the asset declaration and turnover, I believe that the most recent allocation of $80,569 is a lower cost than if IRT Parklands had to source the same suite of insurances, as a stand-alone retirement village. 1.6 In my opinion there would not be any cost or coverage benefit for IRT Parklands to have a stand-alone insurance program, as I consider the cost would be between $95,000 and $120,000 for the 2021 policy year for IRT Parkland. Additionally, it is my opinion that if IRT insured their retirement villages, separately from their aged care facilities, there would be no premium saving or coverage benefit for IRT parklands. 7 Ibid [13]. 8 Ibid [28]. 9 Report of Gareth Jones dated 28 October 2022. 10 Ibid [1.5]-[1.6]. -- 6 of 31 -- 7 [17] Mr Jones commented that the Trust appeared to have diligently managed the insurance program costs, as they have regularly attended the services of their insurance broker, who in turn have undertaken substantial insurance marketing programs in order to source the best possible options.11 [18] He said that on balance he believed that the Trust’s insurance program is in line with market rates, takes into consideration the cover obtained, past claims experience and insurance market conditions.12 and that upon reviewing the renewal report dated 15 May 2022 he considered that the premiums and cover obtained are reasonable and in accordance with market rates.13 [19] He expressed views as to the insurance cover that would be required by the Trust were as follows:14 7.82 The policies that would directly be required by IRT Parklands are: ISR, Equipment Breakdown, General Product, Public Liability and Professional Indemnity, Umbrella Liability, Management Liability, Cyber, Corporate Practice and Journey Injury. 7. 83 Policies such as the Motor Vehicle, Involuntary Workers and Corporate Travel could have relevance to IRT Parklands, but I have no knowledge of whether vehicles are owned/leased by IRT Parklands, and I also have no knowledge of whether IRT Parklands have any volunteer workers (at any time) or have employees who undertake travel on behalf of IRT (other than commuting between their residence and IRT Parklands). 7.84 The Group Personal Accident and Sickness policies appears to only insure the Directors and Executives of IRT. I am not sure if IRT intend this policy to cover the management of IRT Parklands (e.g. General Manager) in line with their executive criteria? [20] Mr Jones was asked to provide his opinion as to whether a separation between the insurance cost attributable to the Trust’s retirement villages and its aged care and other non-village operations could be achieved by a separate policy for the retirement village operations, and whether that would be a cost-effective alternative, and responded as follows:15 7.90 With reference to Annexure A, I do not believe that the insurance marketplace would take the delineation between Retirement Villages and Aged Care facilities into consideration (as the activities risk profile would not make a material impact to premium cost or coverage offered), on the following policies: a) Business Travel; b) Group Personal Accident and Sickness c) Journey Injury; d) Cyber Enterprise Risk Management; e) Management liability; 11 Ibid [7.20]. 12 Ibid [7.81]. 13 Ibid [7.80]. 14 Ibid [7.82]-[7.84]. 15 Ibid [7.90]-[7.92]. -- 7 of 31 -- 8 f) Corporate Practices; and g) Motor Vehicle Fleet. 7.91 With regard to the Industrial Special Risks policy, there could be an argument mounted that if the Aged Care properties were insured separately, then they could receive a better premium rate than Retirement Villages. The reason for this comment is that: a) Aged Care facilities usually have 24/7 employees supervision, so if there is an incident on site, it is addressed immediately (and any damage is minimised); and b) There is usually no resident cooking on site. 7.92 Having said that, if IRT did separate their Retirement Villages from their aged care (and other) facilities for insurance purposes, both sides of the business would lose the leverage of the bargaining power of a much larger group program. [21] Mr Jones considered that it could be argued that the aged care sector has a slightly higher risk profile than the retirement villages,16 but concluded that a combined policy was still preferable: 7.98 However, on balance, I still believe that it would be more cost-effective for IRT to buy a single, combined (retirement village and aged care) policy and allocate premiums to each facility, based on the insurers perception of risk for each. To buy two policies, IRT would be buying two policies of $20m each, which insurers will charge a cost for reserving their capital, reinsurance, policy administration costs and profit; plus a provision for anticipated claims (Actuarially based, as well as taking into consideration IRT’s own claims experience). 7.99 Therefore, I conclude that there would not be any material financial, or coverage benefit for IRT or IRT Parklands in having separate Retirement Village and Aged Care insurance programs. [22] Mr Jones was asked about allocating premiums and costs as between different units and the business of an insured, and commented that premium allocation is not a core service that brokers provide. He said that he had assisted some clients with premium allocations between different business sectors and locations in the past, and had often done this by trying to source the respective policy insurers premium calculation spreadsheet, and that some insurers assist with this process, but most will not provide their calculation sheets.17 Mr Gentili [23] Mr Gentili is the head of General Insurance and Claims at GSA Insurance Brokers Pty Ltd. He stated that GSA had been the insurance broker of the Trust since 2016.18 [24] He described the process of renewal of insurance for the Trust, which involved the preparation of an Insurance Renewal Report summarising the current policies held by the Trust, the changes to those policies, and GSA’s recommendations.19 16 Ibid [7.97]. 17 Ibid [7.101]. 18 Statement of Carlo Gentili dated 16 September 2022. 19 Ibid [2.9]. -- 8 of 31 -- 9 [25] He expressed the view that obtaining stand-alone insurance coverage for Parklands would be more expensive than being part of a bulk purchase, and recommended that IRT not be removed from the main insurance program as follows:20 6.1 IRT subscribes to insurance which covers all aspects of its operations rather than individual policies for each of the businesses it owns and operates. The ability to benefit from a stronger buying power gives IRT the ability to leverage its business size in exchange for discounts. In my experience, obtaining stand-alone coverages is more expensive. 6.2 On July 2021, I was asked by Louise Lever, Executive General Manager- Quality and Governance of IRT to provide advice as to whether it would be more cost efficient for GSA to insure IRT parklands on a stand-alone basis. It is GSA’s recommendation to IRT to not remove parklands from the main IRT property insurance program for the following Reasons: a) The increased cost of insurance due to a smaller portfolio being available to insurers; b) The higher administrative fees from GSA to set up a new insurance program for IRT Parklands, rather than be part of the group arrangement. c) Additional claims from IRT Parklands (including residents) will lead to further increases in costs with a smaller premium pool available to insurers; d) Level of coverage that is provided by the current IRT insurance program may not be achieved by a small, stand-alone policy; e) GSA would face difficulty securing insurers as IRT currently have 4 insurers on their program. These insurers will not participate in an alternate program; and f) Lack of capacity in the market due to several insurers withdrawing from the Independent Living sectors. Ms Duncan [26] Ms Duncan is the Manager-Risk of the Trust and had held that role since September 2018. She holds a Bachelor of Commerce, majoring in Accounting, and is also a Chartered Accountant. She has acted as the Internal Auditor and in her current position with the Trust.21 [27] She noted that the Trust was required by the residence contract to purchase such insurance as necessary, as follows:22 2.11 Clauses 5.1, 5.3 (a) and 11.6 of the residence contract authorise and require the scheme operator to purchase both mandatory insurance cover under s 110(2) of the Act and policies covering other risks as may be deemed by IRT as a scheme operator to be necessary. [28] Ms Duncan described the way in which the Trust obtained information from its broker, and the internal meetings that were held in relation to the placing of insurance. 20 Ibid [6.1]-[6.2]. 21 Statement of Michelle Duncan dated 20 December 2023. 22 Ibid 2.11. -- 9 of 31 -- 10 [29] She described how an insurance budget allocation spreadsheet is prepared each year, and allocated as follows: 7.2 With respect to the ISR policy, the proportion of the cost of this policy is divided between units by calculating the percentage of the reinstatement value of fixed assets and equipment being insured held by that business unit. 7.3 The proportion ascribed to each of IRT’s business units was as follows: a) Retirement Villages – 69.5% b) Aged Care – 29.6% c) Catering – 0.8%; and d) Administration – 0.1% 7.4 As the above figures show, the greatest proportion of fixed assets insured by IRT are held within the retirement villages business unit. This is because retirement villages are comprised of separate lots and units, as opposed to aged care which is composed of only a few buildings. 7.5 For the remaining types of insurance held by IRT, except for motor vehicle insurance, the division between different business units is determined by the employment costs for each business unit as a proportion of IRT’s overall employment costs. The rationale for using this methodology is that the risks insured by the other types of policies are person driven, and so the costs are allocated in accordance with the staffing costs. If, for example, the allocation was done per resident numbers as opposed to employee costs, the allocation to the retirement villages business would increase significantly. This is because the employee costs of IRT’s aged care business is much higher. 7.6 The proportion of the value of the employment costs ascribed to each of IRT’s business units was as follows: a) Aged Care – 65.2% b) Home Care – 14.1% c) Administration – 11.9% d) Retirement Villages – 6.4% e) Catering – 2.0%; and f) Academy – 0.4% 7.7 The proportion of the total cost of the insurance premiums allocated to each of IRT’s business units was as follows: a) Aged Care – 60.11% b) Retirement Villages – 15.41% c) Home Care – 12.09% d) Admin – 10.21% e) Catering – 1.83%; and f) Academy – 0.34% -- 10 of 31 -- 11 7.8 The costs of the insurances are then further broken down and assigned to each Retirement Village, Aged Care Centre, Home Care Centre, Admin, Catering and Academy. For retirement villages, this is done on a per accommodation unit basis. Each retirement village’s individual budget is then provided to the retirement village manager who provides a copy to the resident’s committee. Mr Gaudiosi [30] Mr Gaudiosi is a management accountant employed by the Trust, and in that role assists in the preparation of the annual budget that will be presented to residents of retirement villages. He described the manner of allocating insurance costs across the business of the Trust as follows:23 2.3 In allocating insurance premiums across its business, IRT relies on the information entered into a centralised Excel spreadsheet prepared by me. I refer to this Excel spreadsheet as the ‘Budget Allocation Spreadsheet’. A copy of the Budget Allocation Spreadsheet as at 30 June 2022 is annexed hereto in soft copy and in hard copy at pages 2 to 12. I am the author of the spreadsheet. 2.4 Most of the calculations made in the Budget Allocation Spreadsheet are automated, meaning that I use formulas embedded in the Budget Allocation Spreadsheet which automatically produce certain totals through particular cells once the data is inputted into those cells. 2.5 The Budget Allocation Spreadsheet in its electronic form has a number of ‘tabs’ at the bottom of the document, which represent different worksheets of the Budget Allocation Spreadsheet. I describe each relevant tab below, including information contained in each different worksheet. 2.6 In around March each year, I attend a meeting with Louise Lever (Executive Gen Manager – Quality and Governance) and Michelle Duncan (Manager – Risk) to consider the insurance premium estimates for the upcoming financial year and how those costs will be allocated to IRT’s different business units. 2.7 During the meeting, the following elements are discussed are: a) the estimated premiums provided by GSA Insurance Brokers Pty Ltd (GSA) b) whether the allocations of the insurance premium remain appropriate; and c) any operational changes, such as a sale or purchase of new assets. 2.8 I then enter the estimated premiums in the Budget Allocation Spreadsheet, which is used to prepare the General Service Charge (GSC) budgets for residents. I explain this process further below. 23 Statement of Jason Gaudiosi dated 26 August 2022[2.3]-[2.8]. -- 11 of 31 -- 12 Mr Donahoe [31] Mr Donahoe is the General Manager Queensland for the Trust. He stated that he is not involved in the process as to allocation of insurance costs to each individual retirement village, but described the process of consultation with residents as follows:24 2.5 IRT’s finance team then use information provided regarding the estimated insurance costs to prepare a draft village budget. I then meet with various IRT employees, including village managers to go through the draft budgets. 2.6 In Queensland, towards the end of each financial year, residents can request a draft budget for the upcoming year. 2.7 The residents, usually by a representative of the Resident’s Committee, provide feedback. This feedback is then considered and any necessary amendments are made. [32] He described the process of preparation of the IRT Parklands for the financial year commencing 1 July 2021, noting that the final budgets were amended to allow for ‘clawbacks’ that were required, as follows:25 3.5 When I received the budgets, I picked up there was an issue regarding the ‘clawbacks’. Because of the delay in finalising the budget, the amount of the General Service Charge for financial year 2020 continued to be charged to the residents. As the General Service Charge was increased for financial year 2021, the difference in the amount of these charges needed to be recovered from the residents. I responded by email dated 18 August 2021, raising this issue. After the issue of the clawbacks was rectified, I approved the final budgets for distribution to residents. Mr McCann [33] Mr McCann is the Village Manager of IRT Parklands. He stated that part of his role is to liaise with residents in relation to the yearly budget process in respect of the General Service Charge to residents.26 [34] He said that in relation to the financial year commencing on 1 July 2021, that he provided Mr Carson with a draft budget dated 2 June 2021, and engaged in correspondence with him, and that the final budget was circulated to residents on 19 August 2021 as follows:27 5.7 The final budget for IRT parklands was circulated to the residents on 19 August 2021. I prepared a memorandum to the residents to explain what the new budget would mean for the monthly contribution paid by all residents. The memorandum also explained that there would be an amount that would be charged over the following three months to account for the increase that had not been included in the monthly contributions charged on July and August 2021. 24 Statement of Kevin Donahoe dated 29 August 2022, [2.5]–[2.7]. 25 Ibid 3.5. 26 Statement of Terry McCann dated 26 August 2022. 27 Ibid [5.7]. -- 12 of 31 -- 13 The Lease and the Act [35] I have set out relevant provisions of the Lease and the Act, and have put particular words of significance in italics, below. The Lease [36] The Resident signed a Lease dated 29 October 2010 with the former owner of the Village, Ridge Haven Retirement Village Pty Ltd. That lease was taken on by the Trust, and its provisions apply. The Lease refers to matters relevant to Insurance and the General Services Charge (‘GSC’) in several sections. [37] Section 5.1 is as follows: 5.1 Outgoings Contribution The Scheme Operator shall notify the Resident prior to the execution of this lease and thereafter on or before the date of giving notice of each annual meeting of the resident’s proportion of the ‘operating expenses’ of the scheme operator or a related entity in respect of the running, maintenance and management of the village (‘operating expenses’) for the financial year in which the annual meeting occurs. The Resident’s proportion of operating expenses is called the Outgoings Contribution (also known as the ‘General Services Charge’). An expense incurred by a related entity is only an operating expense if it is a necessary and reasonable expense incurred for the sole benefit and operation of the village. The Scheme Operator may take into account costs and expenses which are attributable directly or indirectly to the unit and expenses which are levied on a per unit basis and on the village as a whole and such matters as the Scheme Operator considers relevant having regard to standard business and accounting practices. The scheme operator will make available to the Resident, upon request a copy of the final budget showing how the Outgoings Contribution was calculated. [38] Section 5.3(d) is as follows: 5.3 Definition of Operating Expenses For the purposes of this clause 5, and without limiting the generality of Clause 5.1, the term ‘operating expense’ includes: … (d) all insurance premiums payable by the Scheme Operator in respect of the Village and the buildings and other improvements together with the plant and equipment at the Village and of such of the contents in the buildings and other improvements as are the property of the Scheme Operator against loss or damage generally and all premiums for insurance against public liability, workers compensation and such other insurable risks as the Scheme Operator may from time to time determine. [39] Section 11.6 is as follows: 11.6 Scheme Operator to Insure The Scheme Operator shall during the currency of this lease procure that the unit and all other significant property of an insurable nature located on or used in relation to the Village and belonging to the Scheme Operator is insured for its full insurable value on -- 13 of 31 -- 14 a replacement basis against loss or damage by fire, earthquake, storm or tempest, and shall take out insurance policies covering public liability, workers compensation and any other risks as may be deemed by the Scheme Operator to be necessary with a reputable insurer. The Scheme Operator shall be entitled to recover these costs from the Resident in accordance with clause 5. The Resident shall pay any excess payable on any policy of insurance in respect of loss or damage to the unit. The Act [40] Section 45 provides as follows: 45 Form and content of residence contract (1) A scheme operator must ensure each residence contract for the retirement village includes details, including the details prescribed by regulation, about the following— (a) the right to rescind the contract under section 48 before the cooling-off period ends; (b) if the cooling-off period starts on the day the residence contract is signed—the date the cooling-off period ends; (c) if the cooling-off period starts on the day a later event happens or another contract is entered into—the later event or other contract; (d) the ingoing contribution payable under the contract; (e) the exit fee payable under the contract; (f) the resident’s exit entitlement; (g) the services charges; (h) the amounts payable, and when the amounts are payable, by the resident for the maintenance reserve fund for the retirement village; (i) the insurance for the retirement village, and insurance for which the resident is responsible; (j) all conditions precedent to the resident’s right to reside in the retirement village; (k) the resident’s right to resell the right to reside in the accommodation unit; (l) the resident’s entitlement to audited and unaudited financial statements for the village; (m) the dispute resolution process established under this Act; (n) the statutory charge, if relevant to the resident’s title to, or interest in, the accommodation unit; (o) the resident’s and scheme operator’s rights to terminate the contract; (p) the funds the scheme operator is required to keep; (q) the retirement village facilities; -- 14 of 31 -- 15 (r) the retirement village land; (s) whether the resident and the scheme operator are to share any capital gain or capital loss after the resident’s right to reside in the unit is terminated and, if so, how it is to be shared; (t) another matter prescribed by regulation. (2) A regulation may prescribe a term that must be included in a residence contract (a required term) or that must not be included in a residence contract (a prohibited term). (3) A scheme operator must not enter into a residence contract that— (a) is not in the approved form; or Note— See section 227AA(2). (b) does not include details required under subsection (1); or (c) does not include a required term; or (d) includes a prohibited term. Maximum penalty—100 penalty units. (4) A provision of a residence contract is of no effect to the extent it— (a) includes a prohibited term; or (b) purports to restrict or exclude the operation of a provision of this Act; or (c) is otherwise inconsistent with this Act. [41] Section 102AA provides as follows: 102AA General services charges fund (1) A scheme operator must establish and keep a fund for general services. (2) The scheme operator must not use an amount standing to the credit of the fund for a purpose other than providing general services. Maximum penalty – 540 penalty units. [42] Section 102A provides as follows: 102A General services charge budget (1) The scheme operator must, for each financial year, adopt a budget (the general services charge budget), that complies with subsection (2) and section 113AA, for the general services charges fund. Maximum penalty—200 penalty units. (2) The general services charge budget must— (a) allow for raising a reasonable amount to provide the general services for the financial year; and -- 15 of 31 -- 16 (b) fix the amount to be raised by way of contribution to cover the amount. (3) At the end of a financial year for which a general services charge budget is adopted, any surplus or deficit in the fund must be carried forward and taken into account in adopting the general services charge budget for the next financial year. (4) The scheme operator must fix the total general services charge mentioned in section 106(1) after the scheme operator complies with subsection (3). [43] Section 103 provides as follows: 103 Working out and paying general services charges for residents (1) The amount a resident of a retirement village may be charged for general services under a residence contract must be worked out in the way stated in the contract. (2) A scheme operator must not charge a resident of a retirement village for general services an amount more than the amount worked out under subsection (1). Maximum penalty—200 penalty units. (3) The scheme operator must not include, or provide for, in a residence contract in a general services charge an amount or component, however described, that is payable for or towards replacing the retirement village’s capital items. Maximum penalty—200 penalty units. (4) However, subsection (3) does not apply to an existing residence contract. (5) Subject to section 104, a resident of a retirement village is responsible for only the resident’s proportion of the general services charges for the period the resident resides in the resident’s accommodation unit. (6) Subsection (1) or (2) does not prevent the resident from being required to pay, as part of a general services charge under a residence contract, an amount directly or indirectly attributable to GST payable for the supply by, or to, the scheme operator for general services. (7) The scheme operator must not include, or provide for, in a general services charge an amount or component, however described, that is payable for or towards— (a) costs awarded by the tribunal against the scheme operator; or (b) legal costs incurred by the scheme operator in relation to a retirement village issue. Maximum penalty—200 penalty units. -- 16 of 31 -- 17 (8) In this section— GST has the meaning given by A New Tax System (Goods and Services Tax) Act 1999 (Cwlth). supply has the meaning given by A New Tax System (Goods and Services Tax) Act 1999 (Cwlth). [44] Section 107A provides as follows: 107A Considering more cost-effective alternative services Before increasing the amount included in a general services charge that relates to the provision of a particular general service, the scheme operator must consider whether there is a more cost-effective alternative to the general service. [45] Section 108 provides as follows: 108 New services to be approved by majority of residents (1) A scheme operator may offer residents a service not already supplied under the scheme, for which a services charge is to be, or may be, made, only if the residents agree to it being supplied by special resolution at a residents meeting. (2) Subsection (1) does not apply to— (a) a personal service; or (b) a service that is the same as a service already supplied under the scheme and introduced as a cost-effective alternative after consideration under section 107A; or (c) another service, if the residence contract of each of the residents states that the service was proposed to be supplied. (3) The scheme operator must get at least 2 quotes for supplying the service from qualified tradespersons appropriate for the service. (4) However, the requirement to get at least 2 quotes does not apply if, for exceptional reasons, it is not practicable to get more than 1 quote. (5) The scheme operator must give copies of the quotes or, if the quotes are voluminous, summaries of the quotes and advice about where the complete quotes may be inspected, promptly to the residents. (6) Any cost associated with getting a quote must be paid by the scheme operator. (7) If any capital improvements are required for the scheme operator to supply the service, the scheme operator may supply the service only if the capital improvements are requested by the retirement village residents under section 90B. (8) The operator may not charge the residents for the new service before the service is supplied to the residents. -- 17 of 31 -- 18 [46] Section 110 provides as follows: 110 Scheme operator must insure village (1) A scheme operator must insure and keep insured, to full replacement value, the retirement village, including the accommodation units, other than accommodation units owned by residents, and the communal facilities. Maximum penalty—540 penalty units. (2) The scheme operator must ensure that insurance taken out under this section— (a) covers, to the greatest practicable extent— (i) damage; and (ii) costs incidental to the reinstatement or replacement of insured buildings, including the cost of taking away debris and the fees of architects and other professional advisers; and (iii) public liability; and (b) provides for the reinstatement of property to its condition when new. Maximum penalty—540 penalty units. (3) The insurance may be taken out subject to an excess. (4) However, for insurance other than public liability insurance, the excess must not be more than the maximum excess prescribed under a regulation, unless the residents, by special resolution at a residents meeting, agree otherwise. (5) For subsection (4), the residents may not agree to the excess being more than 1% of the insured value of the retirement village. Submissions of the Resident [47] The Resident submitted that when he and his wife first moved into the Village in 2010, the monthly levy payable to the (then) Village operator was $287.00, and that since then it has increased by 49.5% to $429.04, and that this was causing him and his wife and other pensioner residents financial distress, which could lead to eviction if not paid, and a significant loss of capital due to exit fees and terms.28 [48] The Resident submitted that he and the residents committee are concerned that the insurance costs being passed on to residents via the monthly levy (GSC) are higher than they should be because they include: (a) insurance costs attributable to the aged care and other non-Village operations of IRT (the External Insurance Costs); and (b) the costs of insurance beyond that required under s 110 of the RV Act (the Optional Insurance Costs). 28 Applicant's submissions filed 25 November 2022, [3]. -- 18 of 31 -- 19 [49] The Resident expressed his Reasons as to why the External Insurance Costs and the Optional Insurance Costs should not be charged to residents, and the orders that were being sought as follows:29 6. The External Insurance Costs should not be charged to residents because: a) it is well established that costs attributable to any aged care operations owned by a Village scheme operator cannot be passed on to the residents of the Village (see Tew & Kelly v Masonic Care Queensland [2008] CCT VH 005-08; and Queens Lake Village Pty Ltd v Queens Lake Village Residents Association [2011] NSWDC 21); b) it is a breach of clause 5 of the lease; c) it is a breach of ss 102AA(2), 102A(3), 103(1) and 103(2) of the RV Act. 7. The Optional Insurance Costs should not be charged to residents of the Village because: a) there is a more cost-effective alternative for the purposes of s107A of the RV Act, ie not doing so; b) it is inconsistent with the PID provided to the Applicant on entry to the Village and is therefore a breach of ss103(1) & (2); and c) it represents a new service that requires the approval of residents by special resolution under s 108(1). 8. The applicant seeks orders that effectively exclude the External Insurance Costs and the Optional Insurance Costs from the budget used by the respondent to calculate the GSC for FY22, and the budgets for future years. [50] In the initial Application, the Resident attached detailed reasons as to why the orders should be made, and noted that it had queried the insurance costs with the Trust who had replied as follows:30 IRT’s insurance policies apply to the entire IRT business which includes retirement villages, aged care centres and home care operations. IRT does not take out separate policies for each village as this would dramatically increase the cost of insurance to residents. Our brokers have canvassed the Australian insurance market and has managed to secure a renewal terms in these difficult market conditions. The insurers continued to continue (sic) to work through these significant losses and also involved in many other claims that have heavily effected (sic) insurance pricing and coverage for the Aged Care sector. [51] The Resident submitted that the Trust’s aged care and home care operations would naturally have higher insurance costs than the Village, given the impact on aged care and home care of the Aged Care Royal commission, the Covid-19 pandemic, and the usual frailty of people requiring aged care or home care, whereas in comparison the 29 Ibid [6-9]. 30 Application for a tribunal hearing – Retirement Villages Act 1999 [13]. -- 19 of 31 -- 20 Village has a younger population and only allows residents capable of independent living.31 [52] The Resident submitted that ‘in these circumstances’ he and the residents committee had ‘good reason to be concerned that residents of the Village are effectively subsidising the higher insurance costs attributable to IRT’s aged care and home care operations’.32 [53] As to the Optional Insurance Costs, the resident submitted that the policies provided by the Village show a significant amount of additional insurance cover beyond that required by s 110, and that ‘much of which will have minimal benefit for the residents as follows:33 Including cover for ‘products liability’, ‘personal property of employees’, ‘accompanied baggage in Australia’, ‘unpacking expenses’, ‘liability for duty’, ‘loss of land value’, ‘securities’, ‘decorative livestock’, ‘inland transit’ and ‘rewriting of records’. The policies also include cover for ‘consequential loss of profits’ with the amount insured being more than 20% of the total policy. Submissions of the Trust [54] The Trust submitted that the Village was acquired in or about 2012, and that the original scheme operator of the Village was a much smaller operator, who had purchased its mandatory insurance cover pursuant to s110(2) of the Act.34 [55] The Trust submits that the prior scheme operator purchased types of insurance to which the residents are obliged to make a contribution over and above the types of insurance cover mandated to be purchased under s 110(2) of the Act.35 [56] It submitted that the Resident’s contract authorised and required the Trust to purchase both mandatory insurance cover under all s 110(2) and policies covering other risks, as may be deemed necessary by it as a scheme operator; and permitted the premiums for such insurance to be brought to account as an operator expense provided such insurance was either directly or indirectly attributable to the Village as a whole.36 [57] It explained that following its acquisition of the Village, it was faced, along with all other operators of Retirement Villages, home care services and aged care facilities, with a significant and exponentially increasing trend in the cost of insurance premiums, and considered whether there was a more cost-effective alternative to the provision of the general service of providing insurance by way of a single Village- specific policy or policies, leading it to decide to purchase insurance in a different way as follows:37 11. This caused IRT to decide to purchase insurance cover for the Village by using policies that apply to all of its assets and operations so as to achieve improved buying power in the insurance market. That power came particularly from the size and value of IRT’s total assets and, to a much lesser extent, the size of its overall operations, including the overall number and cost of all of its employees. This approach enables the 31 Ibid [15]. 32 Ibid [16]. 33 Ibid [32]. 34 Response, n1, [4], [6]. 35 Ibid [7]. 36 Ibid [8]. 37 Ibid [9]-[11]. -- 20 of 31 -- 21 purchase of insurance cover at considerably discounted rates than would otherwise apply to the purchase of a single Village-specific policy or policies. It also serves to create a significant saving in the cost of administering the acquisition of, and recourse to, such insurance cover. [58] It explained that for the purpose of preparing the budget for the financial year ending 30 June 2022, it estimated the cost of each of the 12 different types of policies it was purchasing for the entirety of its operations, and each cost was then allocated amongst its 6 relevant internal divisions, being Admin, Academy, Homecare, Catering, Retirement Villages and Aged Care, for:38 (a) industrial special risk; (b) equipment breakdown; (c) public liability; (d) umbrella liability; (e) corporate travel; (f) personal accident and illness; (g) involuntary workers; (h) journey insurance; (i) cyber crime; (j) directors and officers; and (k) statutory liability. [59] It described the apportionment of the insurance costs as being fair as follows:39 31. For the Reasons set out above, aged care and homecare insurance costs are, on a fair, sensible and reasonable basis, separated from the insurance costs which IRT’s retirement Villages division and ultimately the Village have to pay. No passing on of insurance costs from the aged care or home care divisions has occurred. [60] The Trust submitted that if the allocation of the insurance costs is performed properly, as set out in its submissions, it was not inconsistent with the Act as follows:40 36. If allocation is performed properly, as above:- a) no amount standing to the credit of the Village’s general services fund is, in fact, used for a purpose other than providing general services and it therefore follows there is no inconsistency with s102AA(2) of the RVA in IRT’s approach to insurance; and b) the general services budget allows the raising of a reasonable amount to provide for the general services of the Village in the financial year ending 30 June 2021 and therefore no inconsistency exists between IRT’s approach to insurance and s102A(3) of the RVA, and 38 Ibid 20. 39 Ibid [31]. 40 Ibid [36]. -- 21 of 31 -- 22 c) the amount a resident of the Village may be charged for general services has been worked out in a way stated in the resident’s contract and therefore no inconsistency exists between IRT’s approach to insurance and s103(1) of the RVA. [61] In its final submissions the Trust noted that in 2012, the Village (including the residential dwelling and shared spaces) was insured for a total sum of $14,685,000; and that in 2019 the Village was valued for insurance purposes at $47,140,000.41 Cases referred to by the parties [62] The Resident referred to the cases of Tew & Kelly v Masonic Care Queensland;42 and Queens Lake Village Pty Ltd v Queens Lake Village Residents Association.43 [63] The Trust referred to Queens Lake Village also, as well as Cotterell v Redcliffe Assembly.44 [64] Tew & Kelly was heard in 2008 and considered sections of the Retirement Villages Act 1999 (Qld) which related to the keeping of accounts for a maintenance reserve fund and capital replacement fund. [65] In that matter, an operator was using the same bank account for funds of a retirement village and for a nursing home and hostel. The residents submitted that the operator should operate a separate bank account for the operating costs and income of the village to ensure transparency in the income and expenditure attributable to the village as distinct from the nursing home and hostel.45 The operator submitted that it acted as it did because it wished to avoid the costs of keeping multiple bank accounts.46 [66] The Tribunal found that the intent of the legislation was that the separate accounts were required, and should be able to be accessed with transparency: 17. The RVA imposes detailed accounting procedures on scheme operators, and it does so because Parliament considered that because retirement villages are funded by residents, the residents are entitled to receive detailed information as to how their contributions are spent. Retirement villages are unlike aged care facilities which receive government subsidies and have no similar requirements about accounting procedures. It is clear that there is a requirement under the RVA for transparency in financial accounting, and after examining the financial records of the village, we have reached the conclusion that the necessary transparency is lacking because of the commingling of the funds of the village with those of the nursing home and hostel. We interpret the RVA contrary to the interpretation urged upon us by the respondent, as requiring the MRF and CRF to be kept in separate accounting systems. 18. We find that the Care Systems software in use in the village is inappropriate for use in a retirement village. The accounts and evidence before us do not allow simply queries to be answered regarding charges attributed to the village, and we are not able to ascertain whether inappropriate charges may have been made to residents as a result of this 41 Respondents Final Submissions filed on 24 January 2024, [1.23]-[1.24]. 42 [2008] CCT VH005-08 (‘Tew & Kelly’). 43 [2011] NSWDC 21 (‘Queens Lake Village’). 44 [2014] QCAT 357 (‘Cotterell v Redcliffe Assembly’). 45 Tew & Kelly (n 42), [6]. 46 Ibid [16]. -- 22 of 31 -- 23 commingling of accounts. We will therefore order in terms of Order A sought by the applicants that the accounts of Corinthian Court be kept in a separate and distinct accounting system from the general accounts of Masonic Care Queensland. [67] Queens Lake Village is a 2011 decision of the District Court of New South Wales. It was an appeal from a decision of the NSW Consumer Trader and Tenancy Tribunal. The operator and the Residents Association of a retirement village were in dispute as to certain insurance expenses and business overhead costs. The issues were described as follows:47 8. The matter at issue in the CTTT was the permissibility of the operator including in its annual budget for payment by the residents, two items of likely expenditure for the Village in the forthcoming year. Those items comprise certain insurance costs, and some amounts for administrative and business overhead expenses, described as corporate recharge expenses, likely to be incurred by the operator in the forthcoming year. 9. The residents did not dispute the statutory entitlement of the operator to make levies of the kind sought. However, the resident disputed the proper identification of the amount sought to be paid and the transparency of the particular amounts as sought by the operator. The resident disputed the characterisation of those amounts as being legitimately and properly passed on to them as being amounts reasonably assessed or chargeable in respect of the Queens Lake Village. The basis of the dispute arose from the definition of outgoings in the contract between the parties, according to the elements of the definition to which I have added emphasis. The amounts in question were $23,100 in respect of insurance, and $28,954 in respect of a broad category of items described as corporate recharge expenses. [68] The court noted the operator’s submissions as to the basis of apportioning costs amongst separate retirement villages as follows:48 56. The operator argued that as a matter of recognised business efficacy and efficiency, the governing legislation contemplated that an operator may operate more than one retirement village. The operator also pointed to the mechanism within the legislative scheme for the preparation and approval of budgets for each retirement village separately. The operator submitted that regulation 17 (1) (g) of the RV Regulations contemplated the apportionment of expenditure to a particular village as a proportion of greater total and it was submitted that it had appropriately followed all proper steps contemplated by the legislation. [69] The court referred to the evidence as to the insurance issue, and concluded that the evidence did not support the apportionment that was made:49 87. My review of the evidence before the CTTT on the insurance issue compels me to the conclusion that the state of the evidence simply did not permit any rational analysis of the insurance costs so as to enable a justifiable or reasoned apportionment of the insurance costs, including to confine such cost to only those costs permitted by statute as being legitimately relevant to insurance of the retirement village in question. 47 Queens Lake Village (n 43) [8]-[9]. 48 Ibid [56]. 49 Ibid [87]. -- 23 of 31 -- 24 Only the insurance cost permitted by statute could be passed on to the residents: s 100 of the RV Act. That is not a provision which can be avoided by contract between the parties s 199 of the RV Act. [70] The court upheld the decision of the CTTT which was as follows: 2. Pursuant to the provisions of the Retirement Villages Act 1999, s 115(2){e}an order is made that the line item of “insurance” in the sum of $23,100 and the line item of “corporate recharge” in the sum of $28,594 are both excluded from the budget for Queens Lake Retirement Village for the financial year 2010 – 2011. [71] Cotterell v Redcliffe Assembly50 was a 2014 decision of this Tribunal. A resident of a retirement village sought orders as to what items should be included in the annual budget for charges for general services. [72] In that matter, the Tribunal considered five separate categories of treatment of matters in the budget, and made Orders as to items to be included in the budget for the year ending 30 June 2014 and subsequent years. [73] The Tribunal made findings that certain items were not properly chargeable to residents, and should not be included in the budget. Examples are the discussion of findings as to the following matters: [25] ‘Staff Sickness and Accident Insurance’ is an insurance premium related to the use of the retirement village – the village needs staff to operate. It is therefore a general service properly included in the budget. [26] ‘Advertising and Promotions’ is not a service supplied or made available to residents. Redcliffe Assembly claims it helps to sustain resale demand and maintain resale value. However, units are sold individually and therefore most sales interest is generated by individual promotion and marketing. Residents therefore should not be required to pay for advertising and promoting the village as a whole. [27] ‘Subscriptions and Professional Fees’ is not a service supplied or made available to residents. Although residents may indirectly benefit from staff attending seminars, the costs of education usually repose with the educated staff member or their employer. This is because they are the primary beneficiaries – the knowledge stays with the individual who may or may not stay with the village. Residents should therefore not pay for educating staff. Discussion [74] This matter concerns the interpretation of relevant legislation, and an examination as to whether it has been properly complied with. [75] It raises questions as to whether the existing Retirement Villages Act 1999 (the Act) sufficiently provides for the modern situation of large organisations operating a large number of properties, and the issue as to how to apportion costs fairly between individual properties. [76] The residents of ‘Parklands’ at Currimundi are focused on the costs that are apportioned to their village, and the charges that they are each asked to pay, and want 50 Cotterell v Redcliffe Assembly (n 44). -- 24 of 31 -- 25 to be satisfied of their appropriateness, and see clear and transparent evidence of those specific charges. [77] The operator contends that it is doing its best to act fairly, and to minimise costs to residents as much as possible, which involves taking advantage of economies of scale by purchasing insurance in bulk, and then apportioning the costs to individual properties. [78] The provisions of the Act do not provide clear direction as to how those several objectives of the residents and the operators are to be accommodated. As a result, the parties are in the dilemma of attempting to ‘unscramble the omelette’ which arises when a single cost is apportioned amongst multiple properties. [79] The residents specifically want to know whether the retirement villages operated by the Trust are subsidising the insurance costs for the Trust’s aged care and other non- village operations, and whether they are funding insurance costs that are not specifically required under s 110 of the Act, or are properly categorised as Corporate costs of the Trust. [80] The relationship between the residents and the operator is governed by the resident’s lease (residence contract) which they entered into for each residence in the retirement village, and by the provisions of the Act. [81] The Act provides guidelines for the operator as to how the general services charges fund is to be handled: (a) The Act recognises in s 103(1) that the amount a resident of a retirement village may be charged for general services under a residence contract is to be worked out ‘in the way stated in the contract’. (b) It imposes an obligation in s 107A on the operator to consider whether there is a ‘more cost-effective alternative’ before it increases the amount included in a general services charge. [82] The Act requires by s 110 that an operator must ‘insure and keep insured, to full replacement value, the retirement village, including the accommodation units, other than accommodation units owned by residents, and the communal facilities’. [83] The Trust has described how it purchases insurance for all its properties in bulk, and then through a series of internal meetings it decides, based upon professional advice received, how to apportion that insurance between its five operating groups of Aged Care, Retirement Villages, Home Care, Administration, Catering, and Academy. [84] The Trust submits that it’s process of apportioning insurance costs results in savings overall, and has a financial benefit to the residents. It submits that if it was required to obtain discrete insurance for each property, that the cost to the residents would be greater. [85] The resident does not agree that individual policies would result in greater cost to the residents. It would be a pyrrhic victory for the residents overall however, if it eventuated that the Trust was required to take out individual property insurance, and the result was that the residents were left in a worse position than if the process of apportionment used by the Trust had not been challenged. -- 25 of 31 -- 26 The purchase of insurance in bulk [86] Mr Jones, the expert relied upon by the Trust, was clear in his conclusion that there would not be any material, financial, or coverage benefit for the Trust and the Village in having separate Retirement Village and Aged Care insurance programs. [87] Mr Gentili, the insurance broker for the Trust expressed the view that the ability to benefit from a stronger buying power gives the Trust the ability to obtain discounts, and that in his experience, obtaining stand-alone coverages for each business would be more expensive. [88] The resident relied in large part upon comparison with another village, the Plantation Retirement Resort Petrie Creek, and forming a view that the residents in the village were paying more for insurance than they would as a stand-alone policy, by comparing their charges with those at the other village. [89] I give greater credence to the views of Mr Jones and Mr Gentili as to the benefit of purchasing insurance in bulk, rather than the residents simple comparison of current charges between two stand-alone villages, where there are differences between the properties as to their age and condition, and no evidence that the other village is in fact adequately and properly insured. [90] I am not satisfied that the residents have established that their General Services Charge is inflated by virtue of their insurance being incorporated in the group purchase. The apportionment of charges [91] Witnesses for the Trust have outlined the process used to apportion the insurance costs amongst its business units. It involves meetings between officers of the Trust, and the preparation of a spreadsheet. [92] The decisions made in determining the apportionment may be based upon sound procedures, but the difficulty is that it is not transparent for the residents to know that. The Trust does not make public its internal calculations, presumably for reasons of commercial confidence. The spreadsheet may be perfectly reasonable and appropriate, but the difficulty is that the residents cannot verify that, as they do not have access to the principles or process. [93] The Tribunal in Queens Lake Village identified that ‘It is clear that there is a requirement under the RVA for transparency in financial accounting’, as described earlier. The insurance items included in the General Services Charge [94] The resident contends that the General Services Charge includes insurance items that are not required under section 110 of the Act, which refers specifically to insurance for damage, reinstatement and replacement buildings, and public liability. [95] Section 110, by directing that specific insurance is mandatory, does not exclude other insurance being obtained if thought appropriate. I note that Clause 116 of the lease provides that the operator ‘shall take out insurance policies covering public liability, workers compensation and any other risks as may be deemed by the scheme operator to be necessary with a reputable insurer’. [96] It is notable that the Trust expert, Mr Jones, had doubt as to whether policies such as the motor vehicle, involuntary workers and corporate travel, would have relevance to -- 26 of 31 -- 27 the village, and commented that the group personal accident and sickness policies appear to only insure the directors and executives of the Trust. Conclusion Bulk Insurance [97] The Trust has an obligation under s 107A of the Act, as the operator, to consider a ‘more cost-effective alternative’ in dealing with the General Services Charge, and specifically in increasing it. [98] It flows from this that the Act anticipates an obligation on the Trust to have regard to cost-effective alternatives in setting the General Services Charge as one of its duties. [99] I am satisfied that the Trust is acting in pursuit of that obligation by buying insurance in bulk, across its various properties, as a general concept, if by doing so it achieves the most cost-effective alternative for the residents. [100] Difficulties arise however in the allocation process, in ensuring that each individual property is only allocated a cost that directly relates to its functioning, as opposed to the overall management and corporate costs of the Trust. [101] In order to determine what specific insurance categories are applicable to an individual property, I consider that the most obvious and appropriate comparable measure would be the insurance that would be taken out in relation to that property on an individual basis. [102] In that respect the insurance taken out in relation to a retirement village such as the Plantation Retirement Resort Petrie Creek (‘the Plantation Village’) which Mr Evans suggested as an appropriate comparison, may serve to help identify the specific insurance categories that should apply to the village, but are not determinative as I have noted. [103] Mr Evans attaches documents to his affidavit in relation to the Plantation Village as follows:51 (a) the budget for General Services Charges for 2022; (b) Income and Expenditure statements for the years ending 30 June 2020, 2021 and 2022; and (c) Certificates of Insurance for Industrial Special Risks and Public Liability Insurance. [104] Those attachments disclose a total amount for insurance in the budget, and an item for insurance in the income and expenditure statements. The certificates of insurance identify only the two broad headings of Industrial Special Risks and Legal Liability. [105] Mr Jones identified the following general insurance covers that he considered that retirement village operators should consider:52 (a) Industrial Special Risks, which (primarily) covers fixed assets and consequential loss (ie loss of income/profit); along with a number of optional 51 Statement of Bruce Emery Evans dated 24 November 2022, [22]. 52 Report of Gareth Jones dated 28 October 2022, [7.4]. -- 27 of 31 -- 28 extensions. This policy is considered to be standard, compulsory policy; in order to protect the business property and the revenue derived from these assets. It can cover all portfolio assets/locations, unregistered plant and equipment and the (overarching) consequential loss of income/revenue/profit, in the event of loss or damage to the business. (b) Public and Products Liability, including Excess and/or Umbrella Liability. This policy covers claims arising from the business’ legal liability to third parties, for bodily injury and property damage claims. Given the number of people in a facility at any one time, the business needs to ensure that they have enough coverage in place, should there be multiple injuries and/or fatalities; giving consideration to increase in class actions and court awards; (c) Professional Indemnity and/or Medical Malpractice Insurance for nursing staff employed by the retirement village; (d) Motor Vehicle Cover, if the business owns or leases registered motor vehicles; (e) Directors and Officers Liability or Management Liability (which includes Employment Practices Liability, Fraud, Tax Audit and Statutory Liability Cover). This policy addresses indemnities that the business provides to their executives and staff, as well as to protect the business from claims arising from allegations of breach of professional duty; as well as costs associated with legal expenses incurred from official investigations; (f) Cyber Cover, including privacy breach, cyber extortion and crime, telecommunications fraud, regulatory fines and penalties and data recovery costs (g) Corporate Travel, Personal Accident for Volunteers and Journey Injury policies; (h) Electrical and/or Mechanical Breakdown and Consequential Loss Cover (aka Equipment Breakdown) (i) Workers Compensation – compulsory cover; and (j) Construction Insurance, in the event of any major works and/or refurbishment of the fixed assets, as the Industrial Special Risks policy will exclude major works. [106] Whilst I generally accept the evidence of Mr Jones, I do not consider that his evidence goes as far as establishing that each of those 10 categories of insurance apply directly only to the Village, and are not directly related to the Corporate activities of the trust. Categories of insurance cover applicable to the Village [107] It is difficult to compare insurance cover by reference to the title of the cover alone. To properly compare, it is necessary to have reference to the wording of the actual policies. For present purposes however, I will have regard to the titles of the cover and the descriptions that have been provided. [108] There is clear common ground between Mr Evans and Mr Jones that two categories of cover would be obvious and necessary insurance categories directly related to the Village: -- 28 of 31 -- 29 (a) Industrial Special Risks; and (b) Public Liability. [109] It becomes more difficult to identify on the evidence available which of the other categories that Mr Jones identifies should properly be seen as categories directly related to the village, as opposed to the corporate coverage of the Trust. [110] It would appear that some of the other categories that Mr Jones identified are very likely to properly be directly related to the Village: (a) Electrical and Mechanical Breakdown and Consequential Loss Cover (aka Equipment Breakdown); (b) Workers Compensation; (c) Construction Insurance; and (d) Personal accident. [111] I consider it likely that the other categories which Mr Jones identified are more likely to not be directly related to the Village, and should be categorised as directly related to Corporate costs of the Trust: (a) Directors and Officers Liability or Management Liability; (b) Cyber Cover; (c) Corporate Travel; and (d) Journey Injury. Process of Apportioning Cost [112] Once the relevant categories have been determined, the next step is as to identifying and implementing a transparent process of apportioning the appropriate cost of those categories from the bulk charge to the Village. [113] Currently, the Trust employs a system of internal determination of percentages to apply to individual properties. Mr Gaudiosi described the current process of apportionment of the 13 categories of cover over the six operating areas (aged care, retirement villages, home care, admen, catering, academy)53 and set out a table showing the percentages of each category of cover which was applied to each operating area. [114] Mr Gaudiosi then described how those apportionments for the operating area of retirement villages were then attributed to each individual retirement village according to the number of units located at each retirement village. [115] The final result of that process in relation to the Village was that the estimated insurance costs for the Village for the draft budget 2021/2022 was 3.37% of the overall insurance cost of the Trust. [116] I am not satisfied that the current process used by the Trust does result in an appropriate allocation to the Village of costs of insurance that should be correctly applied to it, as I consider that some of the costs of insurance which are currently 53 Statement of Jason Gaudiosi, [3.12]. -- 29 of 31 -- 30 being applied to the Village should properly be treated as Corporate costs of the Trust and be borne by the Trust itself. Those costs should be excluded in calculation of the insurance costs to be attributed to the General Services Charge for the Village. [117] The process outlined by Mr Gaudiosi does generally appear to be based upon a logical apportionment, and it may be that a similar process could be utilised in relation to the specific village insurance attribution, if the correct cover and a greater degree of transparency was employed which would allow the residents to see and understand the basis of the amounts for insurance which are included in the General Services Charge for the Village. [118] I therefore consider that the Resident is correct in querying the appropriateness of the current costs of insurance which are being attributed to the Village. Appropriate orders [119] The Trust submitted that that it wished to be heard as to any Orders that were proposed to be made, as follows:54 7.2 If IRT’s primary submission that it has not contravened the RVA is not accepted, IRT asks to be heard on the width and type of the orders sought after the Reasons and findings are delivered about any contraventions are found. This is because those Reasons and findings may or may not justify the width of the orders sought. It is not every case where, notwithstanding a contravention of the RVA, a just resolution of the retirement villages dispute warrants orders of the type and width sought to justly resolve the dispute. For instance, sometimes an order in prospective terms only will be the just way to resolve a dispute. [120] I see merit in the proposal that before I make Final Orders, that the parties should be given an opportunity to make submissions upon the width and type of those Orders, having regard to my findings as to the objects that are to be achieved. [121] I therefore do not make Final Orders at this time, but give the following Directions as to submissions as to, and determination of, Final Orders: 1. Illawarra Retirement Trust t/as IRT Group (‘the Trust’) is to file one (1) copy in the Tribunal, and give one (1) copy to Geoffrey Raymond Carson of its Submissions as to the Final Orders to be made, and providing Draft Orders, which are consistent with the findings of the Tribunal made on the date of these Reasons, that: (a) the Trust is in compliance with the Retirement Villages Act 1999 (Qld) in purchasing bulk insurance cover which encompasses insurance in relation to the Retirement Village known as Parklands at Currimundi in Queensland; (b) the Trust must identify, separate and remove any insurance costs which are directly related to the Corporate costs of the Trust, which form part of the bulk insurance cover, in formulating the insurance component of the General Services Charge for the Parklands Village; 54 Final submissions of the Trust dated 24 January 2024, [7.2]. -- 30 of 31 -- 31 (c) the Trust is to implement a logical process that fairly apportions the insurance costs directly related to the Parklands Village for the purposes of establishing the General Services Charge payable by the residents of that village; (d) the Trust is to establish a means of disclosing to the residents the basis of the insurance costs that are being attributed to the Parklands Village in its General Services Charge, whilst still maintaining the commercial confidence of the Trust as to its overall activities; and (e) the dates from when such Orders should take effect, by: 4:00pm on the date two (2) months after the date of these Reasons. 2. Geoffrey Raymond Carson is to file one (1) copy in the Tribunal, and give one (1) copy to Illawarra Retirement Trust t/as IRT Group, of his Submissions in Response to the submissions of the Trust as to the Final Orders to be made, and providing alternate Draft Orders (if any), by: 4.00pm on the date three (3) months after the date of these Reasons. 3. Illawarra Retirement Trust t/as IRT Group is to file one (1) copy in the Tribunal, and give one (1) copy to Geoffrey Raymond Carson, of its Submissions in Reply to the submissions of Mr Carson as to the Final Orders to be made, and providing Draft Orders (if any), by: 4.00pm on the date four (4) months after the date of these Reasons. 4. Unless either party requests an Oral Hearing, the Final Orders to be made will be determined by the Tribunal On the Papers, having regard to the submissions made, after: four (4) months after the date of these Reasons. Non-publication order [122] I made Non-publication Orders on 25 January 2024 to preserve the commercial confidentiality of the Trust, and consequently also the interests of the Residents. I re- frame those orders for completeness as follows: 1. Until further or other order, publication is prohibited of: (a) The materials contained in pages 157-733 attached to the affidavit of Louise Lever dated 29 August 2022; and (b) The materials referred to in Order 2 given on 13 May 2022, being publication of an Excel spreadsheet attached to the statement of evidence of Jason Gaudioso in hardcopy or in any electronic form or held on a USB. -- 31 of 31 --