Ash v Australian Retirement Homes Ltd [2013] QCATA 89

CITATION: Ash v Australian Retirement Homes Ltd [2013] QCATA 89 PARTIES: Eric John Ash (Applicant/Appellant) V Australian Retirement Homes Ltd (Respondent) APPLICATION NUMBER: APL087-12 MATTER TYPE: Appeals HEARING DATE: On the papers HEARD AT: Brisbane DECISION OF: Hon James Thomas AM QC, Judicial Member DELIVERED ON: 25 March 2013 DELIVERED AT: Brisbane ORDERS MADE: 1. Appeal allowed. 2. The order of the member in OCL040- 11 delivered on 24 January 2012, dismissing the application, is set aside. 3. The matter is returned to the Registrar to proceed according to law. CATCHWORDS: APPEAL – RETIREMENT VILLAGES – GENERAL SERVICES CHARGES – ANNUAL BUDGETS – where increases in charges beyond CPI margin – whether such charges limited to charges against residents – whether operator‘s contributions to be taken into account – whether special resolution necessary to increase individual items by more than CPI margin – whether operator infringed s 106 of the Retirement Villages Act 1999 Queensland Civil and Administrative Tribunal Act 2009, s 146 Retirement Villages Act 1999, ss 102A, 103, -- 1 of 12 -- 2 106, 107,191, 209, 219 APPEARANCES and REPRESENTATION (if any): This matter was heard and determined on the papers pursuant to s 32 of Queensland Civil and Administrative Tribunal Act 2009 (‗QCAT Act‘). REASONS FOR DECISION [1] The main issue raised in this litigation involves the interpretation of the phrase ‗total of general services charges‘ as defined in s 106 of the Retirement Villages Act 1999 (‗RV Act‘). [2] I have been appointed to determine this appeal on the papers. Background [3] The relevant dispute is between Mr Ash who was formerly a resident of a retirement village (the Aveo Peregian Springs Country Club) and the respondent scheme operator. He alleges that the charges for general services for each of the financial years 2006/2007 to 2010/2011 were increased by more than the CPI percentage increase for each of those financial years, contrary to s 106 of the RV Act. He seeks a recalculation of the general services charges and a refund. [4] The parties in the original proceeding, and on this appeal, were represented by persons familiar with practice and procedure in the retirement village industry. Mr Ash‘s application was framed, as it seems, to obtain a test case ruling on the true meaning of relevant words and phrases in ss 102A and 106 of the RV Act, so that industry practice, if necessary, may be adjusted. [5] Some assumptions seem to have been made in this litigation which are not necessarily correct. It is necessary at the outset to identify the true nature of what was in issue, and what jurisdiction existed to determine it. What issues were litigated? [6] For convenience I will refer to Mr Ash as ‗the resident‘ and to the respondent as ‗the operator‘. [7] The issues raised by the resident included whether the operator calculated its charges to residents for general services contrary to the requirements of s 106 of the RV Act; whether it overcharged Mr Ash; and, whether Mr Ash was entitled to a refund. These constitute a ‗retirement village dispute‘ as defined in s 21 of the RV Act. QCAT is the body to which such disputes are to be referred (section 167), and a QCAT Tribunal is the designated body to hear and resolve ‗retirement village issues‘ that are not successfully mediated (section 191). -- 2 of 12 -- 3 [8] On the facts as presented, if the resident‘s interpretation of the Act is correct the increases exceeded the prescribed limits for those years; and if the operator‘s interpretation of the Act is correct all the increases were at or below the CPI level of increase for those years. Accounting procedures are in question, and it is necessary to determine the basis upon which the RV Act requires the total of general service charges to be calculated in each year. [9] The remedies sought by the resident amounted to a series of injunctions or ‗enforcement orders‘ under s 191 of the RV Act requiring the operator to make acknowledgments in writing of its error, to reopen each ‗line item‘ and allow residents to vote on them in all the budgets, to recalculate the general services charges of all residents (including former residents) to allow various offsets, and to send a letter to all residents acknowledging the operator‘s failure to comply with s 106 of the RV Act. [10] No doubt the resident had the right to seek a determination of the legality of the operator‘s action under s 106, and to seek a re-accounting with respect to any charges made against him for the specified years. But an assumption seems to have been made that the resident was a representative plaintiff for the whole village and that the establishment of a right on his part to a reassessment would oblige the operator to undertake a re-accounting in respect of all residents. So far as I am aware this was not an application by a group of residents under s 173 of the RV Act, Mr Ash was not a representative plaintiff for the whole village, and the proceeding was not and could not be a class action. The resolution of a dispute is not a royal commission, and the question of what defences the operator may have to multiple money claims simply has not been litigated. I do not know whether limitation defences might arise in respect of some of the backdating that is sought for the reopening of past accounts, and note that potential defences such as settled account, waiver and estoppel might conceivably exist, and that they have simply not been explored, at least in respect of the residents of the village. [11] It was necessary and appropriate however that the Member should provide a ruling as to the proper effect of ss 102A and 106 of the RV Act in relation to the facts of the case. In turn, it is necessary that I examine the correctness of the Member‘s determination to that effect. [12] The determination of the Member was in effect an incidental ruling along the path to final relief in this particular claim by the resident. From an industry viewpoint, the Member‘s ruling (or a subsequent ruling on appeal) may have some value as a precedent, although it is hardly likely to settle the question. Such a decision however has the potential to disturb what, according to the operator‘s representative, has been common industry budgeting and charging practice in the development of retirement villages, and to give rise to multiple claims for reopening of accounts. I am prepared to say that it is highly desirable that there should be a legislative solution provided for this problem, which arises because of uncertainty in the existing legislation. -- 3 of 12 -- 4 [13] In summary, although multiple enforcement orders were sought, the claimant‘s essential cause of action in the proceedings before the learned Member was an individual money claim. Although findings were sought that the operator had committed offences (the penalty for each being up to 200 penalty units)1 the present proceedings are the resolution of a civil dispute which requires an incidental finding as to whether or not such offences were committed. [14] If I determine that the Member‘s interpretation was incorrect, it will be necessary to refer the matter back to the Member for further determination of assessment of any refund to which the resident may be entitled. [15] The present appeal is brought under s 146 of the QCAT Act. No questions of fact are in issue. [16] The central question was concisely stated in oral argument as ‗whether the CPI cap should be on the total budget for general services or on what people are charged.‘2 The essential question is whether the term ‗total of general services charges‘ in s 106 of the RV Act refers to all general services charges for the village or only to the general service charges required to be paid by the residents. The legislation [17] The relevant part of the RV Act is Division 7 of Part 5 consisting of ss 102A to 108. [18] Section 102A provides: 102A General services charges budget (1) The scheme operator must adopt a budget (the general services charges budget) for each financial year for charges for general services. (2) For subsection (1), the general services charges budget must— (a) allow for raising a reasonable amount to provide the general services for the financial year; and (b) fix the amount to be raised by way of contribution to cover the amount. (3) The residents committee may, by written notice given to the scheme operator, ask the scheme operator to give the residents committee a copy of the draft general services charges budget for the financial year at least 14 days before the beginning of the financial year. (4) The notice must be given at least 28 days before the beginning of the financial year. (5) The scheme operator must comply with the notice. 1 RV Act s 106(1); Offence proceedings are prosecuted in a Court, and are barred if not commenced within 12 months of commission, or 6 months of knowledge of it: RV Act s 219. 2 Transcript of Proceedings, page 16. -- 4 of 12 -- 5 (6) If, at the end of a financial year for which a general services charges budget is adopted, there is a surplus or deficit for the charges, the surplus or deficit must be carried forward and taken into account in adopting the general services charges budget for the next financial year. (7) Subsection (6) applies despite section 106(1). [19] Section 106 provides: 106 Increasing charges for general services (1) 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. Maximum penalty—200 penalty units. (2) In this section— CPI means the all groups consumer price index for Brisbane published by the Australian statistician. CPI percentage increase, for a financial year, means the percentage increase between— (a) the CPI published for the quarter ending immediately before the start of the financial year; and (b) the CPI published for the quarter ending immediately before the end of the financial year. total of general services charges, for a financial year, means the sum of all charges for general services for the financial year, other than the following charges— (a) a charge for a general service that has been increased by more than the CPI percentage increase for the financial year and that the retirement village residents, by special resolution at a residents meeting, have approved; (b) a charge for a general service that has been increased by more than the CPI percentage increase for the financial year and that is allowed under section 107. [20] Section 107 provides: 107 Resident’s responsibility for paying increased general services charge A resident is not required to pay a charge for a general service under a residence contract to the extent that the charge is more than that payable under the contract and increased under section 106, unless the excess is attributable to an increase in— (a) rates, taxes or charges levied under an Act in relation to the retirement village land or its use; or (b) the salary or wages of a person engaged in the retirement village‘s operation and payable under an award, certified agreement, enterprise flexibility agreement, industrial agreement, Queensland -- 5 of 12 -- 6 workplace agreement or other industrial agreement made, approved, certified, or continued in force under— (i) the Industrial Relations Act 1999; or (ii) a Commonwealth Act; or (c) insurance premiums, or insurance excesses paid, in relation to the retirement village or its use; or (d) maintenance reserve fund contributions. [21] The dictionary (the schedule to the Act) includes the following definitions: general services are services supplied, or made available, to all residents of a retirement village. Examples of general services –  management and administration  gardening and general maintenance  a shop or other facility for supplying goods to residents  a service or facility for the recreation or entertainment of residents … personal services are optional services supplied or made available for the benefit, care or enjoyment of a resident of a retirement village. Examples of personal services—  laundry  meals  cleaning the resident‘s accommodation unit … services charge means a charge payable by a resident for a general or personal service under a residence contract. [22] The ‗budgets‘ for the relevant years were supplied in evidence. The Parties’ Contentions [23] The operator‘s representative explained that as a village grows in size (in both units and residents), the total of general services expenditure increases, obviously because there are more residents, more facilities, more staff and more expenses generally. But the number of residents who are able to contribute to the general services increases as well, so it is possible for the average cost per resident to either increase or decrease as the village grows. [24] The operator says that during the development phase of a retirement village it is ‗impractical‘ (which it may be inferred means commercially unattractive) to recover from residents by way of general services charges an amount sufficient to cover the total expenditure required to provide the general services required in each year. To keep the general services -- 6 of 12 -- 7 charges to a ‗practical‘ level during the expansion period, the operators of such villages make their own contributions to the budget for general services, and to some extent subsidise it. It seems obvious that modest service charges would be a strong inducement in the selling of units. [25] According to the operator, and this was not contested, as the number of residents increases and the project nears completion the deficit in the amount able to be recovered from residents for such services declines progressively. When the village becomes fully completed and occupied, it is ―practical‖ for the costs of the provision of general services at the village to become fully resident funded. It may be more accurate to say ‗substantially resident funded‘ as there may still be some minor contributions that the operator may need to make. In most cases, by the time of completion, a village is virtually resident-funded. Both parties also agreed with the following statement – In many completed villages… scheme operators make additional voluntary contributions over and above the amounts required by the Act. They wish to ensure that the levies in the village remain attractively low to prospective residents (who are often pensioners) but do not want to compromise the quality of the services offered.3 [26] Some of the amounts which scheme operators contribute to the general services charges (for example payments made pursuant to ss 104 and 105) are mandated by the Act, and others, as indicated by the operator, are voluntary. Different types of village may result in different levels of operator‘s contribution, but that does not affect the nature of the practice. Whether these are acts to be seen as acts of generosity or acts of commercial enticement does not in the end matter. They are lawful and likely to continue. [27] The operator‘s representative explained that it is ‗accepted industry practice‘ in a developing village that a scheme operator: (a) Prepares a forecast of the cost of providing the general services for that financial year (being the amount estimated under s 102A (2)(a); (b) Sets the ‗total of the general services charges‘ at an amount that results in the previous financial year‘s general services charges being increased by no more than the CPI or otherwise in accordance with s 106; and (c) Contributes the shortfall from the forecast cost of providing the general services for the financial year (after the resident payments of general services charges are worked out in the way set out in the preceding paragraph), by way of an operator ‗contribution‘. [28] In short it is common practice for a scheme operator, in adopting a budget under s 102A, to elect to fix the amounts that will be raised by 3 Submissions of the Appellant, dated 12 September 2012; Submissions of the Respondent on this Appeal, at [30]. -- 7 of 12 -- 8 contributions from residents at a lower level than the total of the forecast costs of providing the general services, on the basis that the scheme operator will make contributions that will not form part of the general services charge that will be made against the residents. [29] It is true, as the operator submits, that s 102A does not prohibit or prevent the operator from doing this, and that there is nothing wrong with the operator running the scheme in this way. But such a feature has nothing to do with the requirements of s 102A. That section says nothing about differentiating between amounts to be raised by contribution from residents and amounts to be raised by contribution from other sources. Section 102A(2) is concerned with the preparation of a budget for the total amount to provide the general services for the year, and the amounts to be raised by way of contribution to cover that amount. It seems implicit that the two items in ss 102A(2)(a)-(b) will balance (i.e. be the same amount). [30] It follows that the operator is free to make a differentiation between amounts to be contributed by residents and amounts that it will contribute itself if it chooses, but if it does so it is not pursuant to any requirement of s 102A. It is a voluntary additional or step not specifically contemplated by the Act. [31] Clearly s 102A(2)(b) refers to the total amount to be raised by way of contribution, whether from residents, scheme operator or anyone else. Discussion [32] Many submissions were advanced concerning combination of words and terms such as ‗general services charges‘ in ss 102A and 106. I agree with the learned Member‘s observations concerning the imprecise drafting that recurs throughout the Act, and note that it is difficult to think that the drafters at all times intended the same word to have the same meaning wherever it appeared in the Act. It is however 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. [33] 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. The operator‘s submission would require ‗the total of general services charges for a retirement village‘ to be read down to ‗the charges that the operator has chosen to levy against the residents‘. [34] Clearly in a developing village the residents are a growing, shifting, incomplete group. The ‗total of general services charges for a retirement village‘ must also include any expenses in respect of former residents and the operator. Certain obligations on the part of such persons are recognised by the RV Act, including the operator‘s obligation to pay for unlicensed units. -- 8 of 12 -- 9 [35] It is a fundamental submission of the resident that the phrase ‗charges for general services‘ must be given the same meaning where it appears in ss 102A and 106 of the RV Act, regardless of whether they are funded by residents or by other contributors. [36] It is necessary to consider how the RV Act might operate, and in particular the process that might lead to an infringement of s 106. [37] When, and how, does an operator ‗increase‘ the charges, and thereby become liable for a breach of s 106 if the increase is too great? [38] The adoption of the s 102A budget is not in itself the imposition of a charge or levy. A further specific step is contemplated by s 103 of ‗working out and paying charges for general services for residents‘. Section 103 contemplates the working out of the residents‘ individual charges, and is concerned with matters such as maintaining the proportions payable by the individual residents consistently with the ―public information document‖4 that each resident receives. It does not impact on the total charges to be levied, which have already been determined by the budget. [39] It is the adoption of the section 102A budget that fixes the total of the charges for the year. Consistently with the requirements of the Act, this seemingly should be adopted early in the financial year to which it relates. The obligation to advise residents of the operator‘s intentions before the end of the preceding financial year, imposed by s 102A(3), is only for the provision of a draft budget. Accordingly, submissions that the Act requires the budget to be prepared before the final CPI figures for the year can be known are incorrect and unhelpful. It would seem that only one budget is contemplated for each financial year. The prospect of an amended or supplementary budget would seem to be ruled out by the requirement that a draft of the budget be supplied to residents at least 14 days before the commencement of the financial year. [40] The act of ―increase‖ by the operator would therefore seem to be the passing of the s 102A budget. [41] Against that background it seems obvious that both ss 102A and 106 are concerned with the total of general services charges for the village for the financial year, and are not concerned with subdivisions of those charges or subdivisions of the amount that will be raised by way of contribution. Those are additional steps, voluntarily decided upon by the operator. [42] The central question was concisely stated in oral argument as ‗whether the CPI cap should be on the total budget for general services or on what people are charged.‘5 4 RV Act ss 13, 74. 5 Transcript of Proceedings, page 16 -- 9 of 12 -- 10 [43] In my view the best argument for the operator in support of such a construction is that ss 106 to 108 focus upon the protection of residents against undue increases in general services charges. Under s 106, residents are the only persons who may approve particular increases (by special resolution) with the consequence that those increases are exempted from reckoning whether the CPI increase has been exceeded, and ultimately whether the prohibition in s 106 has been infringed. Under s 107, residents are likewise the beneficiaries, and civil law consequences are provided in their favour. Similarly, ss 107A and 108 are resident– oriented. [44] These considerations however are insufficient to require the words ‗total of general services charges for a retirement village‘ and ―the sum of all charges for general services for the financial year‖ to be read as the sum of what the residents are charged for general services. The operator‘s argument requires insertion of words such as ‗payable by the residents‘ or ‗levied against the residents‘ after ‗charges‘ in s 106(1) and also in the definition of ‗total of general services charges‘ in s 106(2)(b). [45] A number of the operator‘s submissions are based on misapprehensions of the resident‘s contentions. It is unnecessary to list all of these, but in particular it should be noted that the resident did not contend that s 102A(2) limits the operator from injecting funds to defray expenses. Neither did his submission confuse expenditure with charges. [46] The operator seems to have assumed that because s 102A did not preclude it from making its own contributions, it could fix a reduced sum for residents‘ contributions (i.e. less than the total needed for raising a reasonable amount to provide the general services for the year), and carry that reduced sum forward into s 106. The problem is that s 102A is not concerned with residents‘ contributions, but rather the total amount to cover general services for the financial year. That is the figure that in my view, s 106 is also concerned with. [47] Further, in my view it was erroneous to hold, as the learned Member did, that ‗the amount raised under s 102A(2)(a) does not necessarily have to be the same as the amount to be raised by contribution under s 102A(2)(b)‘.6 [48] I have therefore concluded that the learned member erred in construing these sections in favour of the operator‘s contentions. Line Items Issue [49] 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 6 Ash v Australian Retirement Homes Ltd [2012] QCAT 25 at [25]. -- 10 of 12 -- 11 special resolution only if the ‗total of general services charges‘ exceeded the relevant limit for that year. [50] The appellant resident did not pursue this point on the present appeal, and it is unnecessary to express a concluded view on it. However in case it re-surfaces in the further proceedings I will indicate my provisional view that 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. [51] 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‘. [52] 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 special 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‘. Conclusions [53] The appeal should be allowed, and the order dismissing the application should be set aside. [54] I accept the appellant‘s overall submission that ‗the sum of all charges for general services for the financial year’ in the definition of ‗total of general services charges’ in s 106(2) of the RV Act is a reference to the total forecast expenditure on general services in the budget prepared under s 102A, regardless of whether the charges are paid by the residents or the operator, and that the only items that may properly be excluded from that sum are the items described in sub-paras (a) and (b) of that definition. [55] On the evidence the operator breached the requirements of s 106(1) in the budget years ending in 2007, 2008, 2009, 2010 and 2011. The breaches were a consequence of the operator‘s erroneous interpretation of s 106 by which it based its calculations on the total of general services charges that it budgeted to be raised from residents, and did not bring into account contributions from other sources. [56] Obviously issues such as the proper way to determine any refund that may be due to the appellant remain alive. -- 11 of 12 -- 12 [57] The matter should be returned preferably to the same Member to proceed according to law. Of course this will depend upon availability of the member and the convenience of the parties, so I shall simply return the matter to the registrar so that the parties may apply for further directions. -- 12 of 12 --