Cotterell v Redcliffe Assembly [2014] QCAT 357

CITATION: Cotterell v Redcliffe Assembly [2014] QCAT 357 PARTIES: June Cotterell (Applicant) v Redcliffe Assembly (Respondent) APPLICATION NUMBER: OCL053-13 MATTER TYPE: Other civil dispute matters HEARING DATE: On the papers HEARD AT: Brisbane DECISION OF: Member Hughes DELIVERED ON: 25 July 2014 DELIVERED AT: Brisbane ORDERS MADE: 1. Redcliffe Assembly is to ensure that its budget for the year ending 30 June 2015 and each subsequent year are prepared for the relevant financial year; 2. Redcliffe Assembly is to remove from the budget for the year ending 30 June 2014 and the budget for each subsequent year ‘Advertising and Promotions’ and ‘Subscriptions and Professional Fees’ as general services charges; 3. Redcliffe Assembly is to provide in the budget for the year ending 30 June 2014 and the budget for each subsequent year, information demonstrating that any anticipated costs associated with non- village facilities are excluded; and 4. Redcliffe Assembly is to provide in the budget for the year ending 30 June 2014 and the budget for each subsequent year, information about whether there is a more cost-effective alternative to any general services charge increase for that year. CATCHWORDS: RETIREMENT VILLAGES – GENERAL SERVICES CHARGES – ANNUAL BUDGET – where budget for calendar year instead of -- 1 of 10 -- 2 financial year – where budget discloses individual or line item charges and increases – whether Act prevents or restricts operator from increasing line item general services charges – whether general services charges include staff sickness and accident insurance, advertising and promotions and subscriptions and professional fees – whether budget excludes costs of non- village facilities – whether budget is to include information about cost-effective alternatives to general service charge increase Acts Interpretation Act 1954 (Qld) ss 14B, 36 and Schedule 1 Retirement Villages Act 1999 (Qld) ss 3, 21, 22, 102A, 106, 107, 107A, 167, 191 and Schedule Ash v Australian Retirement Homes Ltd [2012] QCAT 25 Ash v Australian Retirement Homes Ltd [2013] QCATA 89 Mayer v Queensland Villages (Samford Grove) Pty Ltd [2009] QCCTRV 4 Tew & Kelly v Masonic Care Queensland [2008] QCCTRV 6 APPEARANCES and REPRESENTATION (if any): This matter was heard and determined on the papers pursuant to s 32 of the Queensland Civil and Administrative Tribunal Act 2009 (Qld) (QCAT Act). REASONS FOR DECISION What is this Application about? [1] June Cotterell resides at Peninsula Palms Retirement Village. Miss Cotterell is concerned about how the operator of the village, Redcliffe Assembly prepares its annual budget for charges for general services. What is the Tribunal’s jurisdiction? [2] The Tribunal may make the orders the Tribunal considers just to resolve a retirement village issue.1 A ‘retirement village issue’ is a retirement village dispute.2 [3] A ‘retirement village dispute’ is a dispute about the parties’ rights and obligations under the residence contract or the Act.3 Miss Cotterell and 1 Retirement Villages Act 1999 (Qld) s 191(1). 2 Ibid s 22(a). 3 Ibid s 21(1). -- 2 of 10 -- 3 Redcliffe Assembly are disputing their rights and obligations relating to the budget for general services charges under the Act.4 This is therefore a ‘retirement village dispute’. [4] A party to a retirement village dispute may apply to the Tribunal if the parties cannot reach a mediation agreement.5 Miss Cotterell and Redcliffe Assembly have attempted mediation without reaching agreement. [5] The Tribunal may therefore make orders including: (a) an order for a party to do, or not to do, anything;6 (b) an order requiring a party to pay an amount;7 (c) an order that a party is not required to pay an amount.8 What are the issues? [6] Miss Cotterell has applied to the Tribunal for orders, some overlapping. In essence, she seeks Orders that: A. Redcliffe Assembly prepares a budget for the financial year ending 30 June 2014 and each subsequent year in accordance with section 102A of the Retirement Villages Act 1999; B. Redcliffe Assembly ensures the budgets separately identify the line items that have increased in accordance with section 107 as opposed to section 106 of the Act; C. Redcliffe Assembly ensures the budgets only include the anticipated costs of providing the village’s ‘general services’ as defined in the Act; D. Redcliffe Assembly ensures the budgets exclude or provide sufficient information to demonstrate that the budgets exclude any anticipated costs of Redcliffe Assembly’s non-village facilities and keep the financial accounts for the village separate from its non-village facility accounts; and E. Redcliffe Assembly ensures the budgets include sufficient information for residents to assess whether section 107A of the Act has been complied with. Whether Redcliffe Assembly is to prepare a budget for the financial year ending 30 June 2014 and each subsequent year in accordance with section 102A of the Retirement Villages Act 1999 [7] Miss Cotterell claims that Redcliffe Assembly’s proposed annual budget for the calendar year from 1 January 2013 to 31 December 2013 does not 4 Ibid s 102A to 108. 5 Ibid s 167(a). 6 Ibid s 191(2)(a) - ‘enforcement order’. 7 Ibid s 191(2)(b) - ‘payment order’. 8 Ibid s 191(2)(c). -- 3 of 10 -- 4 comply with the Act because the budget is prepared for the calendar year ending 31 December 2013 instead of the financial year ending 30 June 2014. [8] A scheme operator must adopt a budget for each financial year for charges for general services.9 ‘Financial year’ means a period of 1 year beginning on 1 July.10 The proposed budget was initially for the calendar year ended 2013 and therefore is not for the financial year beginning on 1 July 2012 or 1 July 2013. [9] Redcliffe Assembly accepts that the budget now be based on a financial year.11 Redcliffe Assembly has therefore filed a revised budget for the year ended 30 June 2014. This is effectively for the financial year beginning on 1 July 2013. There is no therefore no need to order Redcliffe Assembly to prepare a budget for the financial year ending 30 June 2014. [10] To facilitate on-going compliance, Redcliffe Assembly is to ensure that its budget for the year ending 30 June 2015 and each subsequent year are prepared for the relevant financial year. Whether Redcliffe Assembly is to ensure the budgets separately identify the line items that have increased in accordance with section 107 as opposed to section 106 of the Act [11] A scheme operator must not increase the total of general services charges for a retirement village for a financial year by more than the CPI percentage increase for the financial year.12’ Total of general services charges’ means the sum of all charges for general services other than: (a) a general service increase greater than CPI approved by special resolution of the residents;13 or (b) a general service increase greater than CPI allowed under section 107 of the Act.14 [12] A resident is not required to pay a general service charge increased under section 106 unless attributable to an increase in: (a) rates, taxes or charges levied under an Act in relation to the retirement village or its use;15 (b) the salary or wages of a person engaged in the retirement village’s operation;16 (c) insurance premiums or excesses paid for the retirement village or its use;17 or 9 Ibid s 102A(1). 10 Acts Interpretation Act 1954 (Qld) s 36 and Schedule 1 definition of ‘financial year’. 11 Statement of Arthur Sweeney dated 4 November 2013 at paragraph 15. 12 Retirement Villages Act 1999 (Qld) s 106(1). 13 Ibid s 106(2)(a). 14 Ibid s 106(2)(b). 15 Ibid s 107(a). 16 Ibid s 107(b). -- 4 of 10 -- 5 (d) maintenance reserve fund contributions.18 [13] ‘General services’ are services supplied, or made available, to all residents of a retirement village and include management and administration, gardening and general maintenance, a shop or other facility for supplying goods to residents and a service or facility for the recreation or entertainment of residents.19 [14] Miss Cotterell claims that the Tribunal has previously ruled20 that it is an essential requirement for budgets to be presented in a way that allows residents to determine line items that have been increased under section 107 of the Act as opposed to section 106 of the Act. [15] This reasoning is predicated on interpreting section 106 as requiring a separate special resolution of residents to approve any increase greater than CPI on an item by item or line by line basis. [16] However, section 106 of the Act does not prevent or restrict an operator from increasing individual line items: The resident originally contended that the operator was in any event obliged to obtain a special resolution approving any line items that increased beyond the applicable CPI percentage. However by the time of hearing the submission was that s 106 required a line by line approval by special resolution only if the ‘total of general services charges’ exceeded the relevant limit for that year. … s 106 does not impose any such requirement, even when the total of general services charges exceeds the CPI limit. Section 106 is primarily concerned with the total costs and charges for general services, not individual or ‘line’ items. Approval of individual items by special resolution is necessary if someone (presumably the operator) wishes a particular item to be excluded from the reckoning of ‘total of general services charges’. That is the effect of the definition of that term in s 106. But it is only a definition, that is to say, a general definition that allows two exceptions. It is true that it provides a means for operators to validly increase the overall total by lawful increase of individual items. But it is not a requirement that increased charges (either individually or cumulatively) need to be approved by special resolution. It is simply a basis of reduction in the calculation of the ‘total of general services charges’.21 [17] The confusion in interpreting section 106 appears to arise from linking the reference to CPI in section 106(1) with the reference to CPI in the definition of ‘total general services charges’ in section 106(2)(a). However, each CPI reference is within a separate and distinct context. 17 Ibid s 107(c). 18 Ibid s 107(d). 19 Ibid, Schedule definition. 20 Tew & Kelly v. Masonic Care Queensland [2008] QCCTRV 6 at [31], [32]; and Mayer v Queensland Villages (Samford Grove) Pty Ltd [2009] QCCTRV 4 at [19], [21]. 21 Ash v Australian Retirement Homes Ltd [2013] QCATA 89 at [49] – [51]. -- 5 of 10 -- 6 [18] The first context is that residents pay for total general services charges increased up to CPI. Residents do not pay for total general services charges increased by more than CPI. [19] The second context is that in calculating the increase in total general services charges, an increase for an individual line item more than CPI will not be included if:  approved by special resolution of the residents22; or  comprised of rates, taxes or other statutory charges23, salary or wages of a person engaged in the retirement village’s operation24, insurance premiums or excesses25 or maintenance fund contributions26. [20] The budget does not need to identify “line items that have been increased under section 107 of the Act as opposed to section 106 of the Act”. This is because section 106 does not prevent or restrict increases to line items.27 Section 106 simply defines items (including those in section 107) that are to be excluded when calculating an increase in total services charges: It is… tolerably clear from the specific definition of ‘total of general services charges’ in s 106(2) that all charges for general services are included, other than the 2 specific exceptions that are enumerated. Similarly it is difficult to think that s 106(1) is concerned with anything other than the total of general services charges for the whole village for a particular year.28 [21] The budget therefore needs only to identify each line item and its corresponding increase for the purpose of determining whether the line item has been properly included in calculating the increase in total services charges: Normal and proper accounting procedures will require an operator’s budget to disclose individual items and the respective levels of increase. But there is nothing in s 106 that requires submission of items for approval by resolution. Such a process only becomes necessary if a particular party wants the benefit of deleting a particular item from reckoning in the ‘total of general services charges’.29 [22] Redcliffe Assembly’s budget identifies individual line items and their respective levels of increase. This accords with normal and proper accounting procedures sufficient to allow residents to determine whether each item has been properly included in calculating the increase in total services charges. 22 Retirement Villages Act 1999 (Qld) s 106(2)(a). 23 Ibid s 107(a). 24 Ibid s 107(b). 25 Ibid s 107(c). 26 Ibid s 107(d). 27 Ash v Australian Retirement Homes Ltd [2012] QCAT 25 at [29] – [30], [32]. 28 Ash v Australian Retirement Homes Ltd [2013] QCATA 89 at [32], [33]. 29 Ash v Australian Retirement Homes Ltd [2013] QCATA 89 at [52]. -- 6 of 10 -- 7 Whether Redcliffe Assembly is to ensure the budgets only include the anticipated costs of providing the village’s ‘general services’ as defined in the Act [23] Miss Cotterell claims that ‘Staff Sickness and Accident Insurance’, ‘Advertising and Promotions’ and ‘Subscriptions and Professional Fees’ are not ‘general services’30 and therefore should not be included as cost items to be met by residents. [24] ‘General services’ are services supplied, or made available, to all residents of a retirement village and include management and administration, gardening and general maintenance, a shop or other facility for supplying goods to residents and a service or facility for the recreation or entertainment of residents.31 [25] ‘Staff Sickness and Accident Insurance’ is an insurance premium related to the use of the retirement village32 - 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. [28] Redcliffe Assembly is therefore to remove from the budget for the year ending 30 June 2014 and the budget for each subsequent year ‘Advertising and Promotions’ and ‘Subscriptions and Professional Fees’ as general service charges. Whether Redcliffe Assembly is to provide sufficient information to demonstrate that the budgets exclude any anticipated costs associated with non-village facilities and keep village accounts separate from non- village accounts [29] Miss Cotterell claims that ‘Management’, ‘Administration’, ‘Finance/Payroll’, ‘Gardens and Grounds – Salaries and Wages’, ‘Maintenance’, ‘Workers Compensation Insurance’, ‘Staff Sickness and Accident Insurance’, ‘Accounting Fees’, ‘Security Costs’, ‘Professional 30 Retirement Villages Act 1999 (Qld), Schedule definition. 31 Ibid, Schedule definition. 32 As contemplated by the Retirement Villages Act 1999 (Qld), s 107(c). -- 7 of 10 -- 8 Fees and IT Support’ are likely to include costs associated with co-located facilities. [30] Redcliffe Assembly denies this and states that it carefully considers, allocates and appropriates a reasonable apportionment of these expenses “and in doing so has erred on the side of understating the allocation of costs so as to benefit residents of the village”.33 [31] Redcliffe Assembly’s denial therefore concedes these items include both village and non-village facilities that are then apportioned. At the very least, this apportioning is not transparent in the budget. [32] An object of the Act is to facilitate the disclosure of information to prospective residents to ensure the rights and obligations of the residents and scheme operator may be easily understood34. This extends to ensuring residents understand that an item of expenditure is properly payable by residents. Residents cannot be satisfied that an item of apportioned expenditure is properly payable by them if they do not have information explaining the basis of apportionment: The accounts… do not allow simply (sic) 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 the commingling of accounts… … the annual accounts are meaningless to residents unless sufficient detail is provided to enable residents to satisfy themselves that each item of expenditure is properly payable by them. This is particularly important in a complex such as this where there is a sharing of staff and other costs between a village, a nursing home and a hostel.35 [33] Redcliffe Assembly is therefore to provide in its budget for the year ending 30 June 2014 and the budget for subsequent years information demonstrating that any anticipated costs associated with non-village facilities are excluded. Whether Redcliffe Assembly is to ensure the budgets include sufficient information for residents to assess whether section 107A of the Act has been complied with [34] Before considering the charge for a particular general service, the scheme operator must consider whether there is a more cost-effective alternative to the general service.36 [35] Redcliffe Assembly contends that this does not require a scheme operator to provide details of its consideration to residents. Redcliffe Assembly adds that it kept residents informed of village finances and actively encouraged questions on its budget presentation at a residents’ meeting. 33 Statement of Arthur Sweeney dated 4 November 2013 at paragraph 25. 34 Retirement Villages Act 1999 (Qld) s 3(1)(a)(ii). 35 Tew & Kelly v. Masonic Care Queensland [2008] QCCTRV 6 at [18], [28]. 36 Retirement Villages Act 1999 (Qld) s 107A. -- 8 of 10 -- 9 [36] The provision is unclear how a scheme operator evinces compliance with its obligation to consider more cost-effective alternatives. Extrinsic material may therefore be considered to aid interpretation of the provision.37 [37] Section 107A was part of a suite of amendments designed to:  Make operators’ budget decisions more transparent and accountable;38  Require operators to involve residents in the village budget-setting process, make greater disclosure of financial information and follow stricter guidelines for increasing fees and charges;39and  Provide certainty for residents about their financial and other obligations and bring greater transparency, consistency and accountability to operators’ budgeting decisions.40 [38] Interpreting section 107A to require operators to ensure budgets provide information about whether there is a more cost-effective alternative to a general service charge increase is entirely consistent with these aims: As the Act now stands, residents play no role in setting the budget for the village, and the only accounting information they are entitled to receive is bare financial statements. As a result, any tough budget decisions made by the operator can be both unexpected and alarming for residents. To address this, the Bill requires an operator to provide residents with draft yearly budgets, and to then meet with residents to discuss these budgets before they are finalised. The Bill also requires the operator to provide residents with quarterly financial information, explaining variations between the yearly budget and the actual expenditure incurred. That will provide residents with more information and some influence over the financial affairs of their village.41 [39] Redcliffe Assembly is therefore to provide in its budget for the year ending 30 June 2014 and the budget for each subsequent year, information about whether there is a more cost-effective alternative to any general service charge increase for that year. Orders [40] For these reasons, the Tribunal orders that: 1. Redcliffe Assembly is to ensure that its budget for the year ending 30 June 2015 and each subsequent year are prepared for the relevant financial year; 2. Redcliffe Assembly is to remove from the budget for the year ending 30 June 2014 and the budget for each subsequent year ‘Advertising 37 Acts Interpretation Act 1954 (Qld) s 14B. 38 Retirement Villages Amendment Bill 2006, Explanatory Notes under ‘Reasons for the Bill’ at page 1. 39 Retirement Villages Amendment Bill 2006, Explanatory Notes under ‘Policy Objectives of the Bill’ at page 2. 40 Retirement Villages Amendment Bill 2006, Second Reading Speech. 41 Retirement Village Amendment Bill 2006 Second Reading Speech. -- 9 of 10 -- 10 and Promotions’ and ‘Subscriptions and Professional Fees’ as general services charges; 3. Redcliffe Assembly is to provide in the budget for the year ending 30 June 2014 and the budget for each subsequent year, information demonstrating that any anticipated costs associated with non-village facilities are excluded; and 4. Redcliffe Assembly is to provide in the budget for the year ending 30 June 2014 and the budget for each subsequent year, information about whether there is a more cost-effective alternative to any general service charge increase for that year. -- 10 of 10 --