Armstrong v Kawana Island Retirement Village [2011] QCAT 613

CITATION: Armstrong v Kawana Island Retirement Village [2011] QCAT 613 PARTIES: Mr Les Armstrong v Kawana Island Retirement Village APPLICATION NUMBER: VH010-09 MATTER TYPE: Other civil dispute matters HEARING DATE: On the papers HEARD AT: Brisbane DECISION OF: Ms Louise McDonald, Member DELIVERED ON: 18 April 2011 DELIVERED AT: Brisbane ORDERS MADE: 1. That leave is not granted for legal representation. 2. That the Respondent refund the invalid levy paid by the Residents for the 2009/1010 budget subject to the offset amount in the sum of $810. The refund for each villa is determined using the same formula applied in determining each villa’s annual levy for the 2009/2010 financial year. 3. That the application for costs be dismissed. CATCHWORDS: General Services Charges Retirement Villages Act 1999, s 106 APPEARANCES and REPRESENTATION (if any): Decision was made on the papers without the parties being present. REASONS FOR DECISION Background 1 This matter was initially heard the Tribunal on 26 July 2010. As a result of the hearing of that dates the following orders were made, and handed down on 25 August 2010: -- 1 of 8 -- 2 1. That the General Services Charge increase in line items pertaining to Administration; Audit fees; Cleaning; Salaries and Wages; Office Expenses; Miscellaneous Expenses in the Scheme Operator’s 2009/10 budget is invalid. 2. That the Respondent allow residents to vote separately on each s 106 item that has increased more than the CPI percentage increase for the purposes of determining the “total general services charges’’ in accordance with s 106(2). 3. That in the event that the budget is not passed, the Operator recalculate the general services charge subject to an offset amount (that being contributions the Operator has paid on behalf of residents by way of the funded deficit). 4. The parties have liberty to apply to the Tribunal for further orders in the event that they cannot agree on the offset amount under Order 3. 2 Pursuant to Order 2, a special meeting of 29 September 2010 was conducted and residents passed the following budget items by way of special resolution for each individual line item: Administration; Audit Fees; Cleaning. 3 The following Budget items were not approved by the special resolution put to the residents on 29 September 2010: Employment Expenses: Salaries and Wages s 106, Office Expenses, Miscellaneous Expenses. 4 The parties undertook negotiations in relation to the general services charge payable as a result of the re-vote but were unable to agree upon the offset amount. The parties approached the Tribunal in accordance with Order 4. 5 At a directions hearing on 7 December 2010, the Tribunal ordered written submissions from the parties in order that this final matter in the dispute be determined. 6 Submissions were received as follows: - Submissions of the Respondent Hearing 7 December 2010 filed 3 December 2010; - Applicant’s reply to Respondent’s Submissions dated 6 December 2010, filed 7 December 2010; - Applicant’s submission regarding the Offset amount dated 13 December, filed 15 December 2010; - Submissions in reply to the Applicant’s Submissions dated 13 December 2010, filed 29 December 2010; - Applicant’s submission in reply to Respondent’s Submission dated 29 December, filed 1 January 2011; -- 2 of 8 -- 3 - The Tribunal was in possession of the Applicant’s Statement filed 14 December 2009. Respondent’s Submissions filed 27 January 2010. 7 The matter was determined on the papers. FACTS 8 The Tribunal considers that the following facts are relevant in determining this dispute. 9 On 15 June 2009 the Chairman’s report from the Residents Committee about the special resolution to approve the budget 7 July 2009 recorded that the Special Resolution be put: “That the increase in excess of CPI following Operator Costs be approved for the financial year 2009/10 subject to the Scheme Operator making a contribution to cover the full amount of the deficit so that we can achieve a balanced budget.” 10 This special resolution was put to the residents with budget items which were in excess of CPI posed as an aggregate, rather than a special resolution for each individual item, and the budget was invalidly passed on 7 July 2009. 11 General Services charges for 2009/2010 were charged to residents in accordance with this budget which was later determined invalid by the Tribunal. 12 The special resolution referred to at paragraph 9 was not in the format approved by the Respondent Operator. The Operator had scheduled a Special Meeting for 17 July 2009 which intended to pose each item as a separate special resolution.1 13 The Residents Committee, aware of the Operator planned Special Meeting continued with its Special Meeting of 7 July 2009 to pose despite awareness of the Operator scheduled meeting.2 The meeting of 17 July 2009 was subsequently cancelled upon advice that the special resolution of 7 July 2009 was not invalid. 14 The Chairman’s Report of 15 June 2009 states the Operator agreed to fund the deficit on the basis that there was no Tribunal application on the issue of the invalidity of the vote. 15 At the time of vote it was communicated by the Chairperson to the residents that the estimated deficit would be $155,000. In the Chairman’s report of 1 June 2009 the Chairman stated “if the Operator does not cover 1 Notice of Residents’ Meeting dated 25 June 2009. 2 Chairman’s notice to residents at item 7 of the Applicant’s Statement dated 14 December 2009. -- 3 of 8 -- 4 the deficit we will have to accept a vastly diminished service or pay an additional $100 minimum a month extra in monthly levies.” 16 The actual deficit funded by the operator was $234,308. This has not been passed on to the residents in the following financial year. 17 The communications from the chairperson to the residents through the Residents Committee were likely to have been a factor in initially invalid budget approval. The initially approved expenses were subsequently incurred by the Operator in accordance with the invalidly approved budget. 18 The three unapproved items, Employment Expenses, Salary and Wages, (s 106), Office Expenses and Miscellaneous Expenses, were levied and paid by residents under the obligations to pay in the general service charge in advance of the 2009/2010 financial year. They were levied at that rate on the basis of the aforementioned commitment by the Operator to fund the deficit. Residents received services in accordance with the invalidly approved budget. 19 As a consequence of the Special Meeting of 29 July 2010 the unapproved expenditure amounted to $71, 009. Preliminary Issues Leave for Representation: 20 The Respondent sought leave for legal representation under s 43 of the Queensland Civil and Administrative Tribunal Act 2009, on the basis that complex issues of law were to be decided given that the interpretation of s 106 of the Retirement Villages Act 1999 was of great significance to the industry. 21 The Applicant is quite correct that interpretation of s 106 was determined in the decision handed down on 26 July 2010. The remaining issue in this dispute is restricted to the dispute between the parties as to the refund due to residents from based on unapproved budget items, and in particular to the offset amount. This matter is neither legally nor factually complex. 22 Leave for legal representation was not granted to the Respondent. Substantive Issues 23 The Respondent’s primary submission claims that no refund is payable because the total general services charges have not increased for the financial year within the meaning of s 106(1). The Respondent submits that following the fresh special resolution which passed three of the initially invalid budget items, the total general services charge increased by 2.95% which is less than the CPI and consequently s 106(1) has been complied with, and therefore there is no need to recalculate the general services charge. -- 4 of 8 -- 5 24 The Applicant in reply submits that, firstly this is beyond the scope of Order 4, and even if the Respondent could retrospectively calculate the total general services charge, and it accordingly complied with s 106(1), the refund would still be payable as funds were improperly levied. The Tribunal accepts the Applicant’s submissions that Order 2 simply requires a fresh special resolution for each budget line item in excess of CPI increase, and does not contemplate the consequence of non compliance to be avoided. The Tribunal rejects the Respondent’s primary submission. Budget item for Employment expenses s 106, Office Expenses and Miscellaneous were invalidly levied from residents and require refund subject to an offset. 25 The Respondent, in the alternative submits that a recalculated alternative expenses budget 2010, referred to as the “Alternative 2010 Budget” takes into account the failure to approve increases, and merely increase unapproved items by CPI only, deriving a decreased expenditure of $14,497. The Respondent explains: “By way of summary, the total expenditure for general services in the Alternative 2010 Budget is $14,497 less than the expenditure set out in the initial 2010 budget that was not invalidly approved by Residents on 7 July 2009.” 26 The Applicant appropriately identifies that s 102A levies are based on the budget presented for adoption. The Tribunal rejects the Respondent’s submission, noting it appears to be in contradiction to the intention of the legislature in regulating the process of levying general services charges. 27 Fundamentally, parliamentary intent for the legislative scheme for levying general services charges is transparency, consistency and accountability. 28 The Tribunal refers again to its comments made at paragraph 4.27 of its decision of 25 August 2010, and notes the legislative intent found in the Second Reading Speech for the Retirement Villages Amendment Act 2006 which introduced the amendments to s 106 makes clear that transparency of this process was a primary objective in the legislative scheme: “… the Bill provides certainty for Residents in terms of their financial obligations, and brings greater transparency, consistency and accountability to Operators budgeting decisions.” 29 The Respondent’s submission based on an alternative budget which has not been put to the Residents for approval is inconsistent with the intended process, and underlying objectives embodied in the legislation. 30 The Respondent denies a need to calculate the offset amount, but submits in the alternative that the actual budget deficit $234,308 (which was significantly larger than the estimated budget deficit of $155,978) is the relevant figure to base any offset. In their submissions, the funded deficit was far greater than the decreased expenditure of $14,497, and -- 5 of 8 -- 6 accordingly outweighs any decreased budgeted expenditure by reason of the alternative budget. 31 The Applicant submits that the actual deficit is irrelevant, as it is the estimated budget which is approved by the Residents before the actual deficit is known. He argues that levies are calculated prepared from the budget prepared in advance of the financial year under s 102A, and therefore the budgeted figure rather than actual figures must be the basis for the calculation of any refund. The Tribunal accepts this submission, and relies on the budgeted deficit of $155,978 as a basis for determining the offset amount. 32 The Applicant submits that the refund payable is calculated by determining the percentage OF the operator funded deficit represented in the total budget, and then applying that percentage to the pre-offset refund of $71,000. On this calculation, the operator deficit was $141,481 of a total budget of $753,999 which he claims is $18.76%. 33 He claims offset should be determined as 18.76% of the unapproved expenses (18.76% of $71,000 is $13,319). 34 Further, that this offset be deducted from the total unapproved expenses to leave a refund: $71,000 - $13,319.60, and submits the refund owing is $57,680. 35 The Applicant argues this provides consistency and fairness, producing a refund regardless of projected or actual deficit is applied. 36 The Respondent rejects this submission as having no logical basis. Although they deny any offset amount is due by virtue of the reduced expenditure in the alternative budget, it submits the Applicant. The Tribunal does not accept the Applicant’s submission that the calculation should be based the deficit’s proportion of the total budget. 37 There is however no prescribed formula. The process for determining the Order 3 offset amount, in default of agreement between the parties, arises from the facts and events that transpired. 38 The projected deficit was noted as $155,000 in the Chairman’s report of 15 June 2009, and this was the basis for the original invalid budget. The Special Resolution which invalidly passed the budget presented on that date included the following terms: “That the increase in excess of CPI following Operator Costs be approved for the financial year 2009/10 subject to the Scheme Operator making a contribution to cover the full amount of the deficit so that we can achieve a balanced budget.” 39 It was this amount communicated to the residents and was contemplated in the budget approval process, in the arrangement between the Resident Committee and Operator. The estimated deficit which based the budget approval is the basis from which the Tribunal makes the offset. -- 6 of 8 -- 7 40 The Tribunal refers to paragraph 5.2 of the decision of 25 August 2010. “The levy is to be calculated based on this vote, if any items are not passed, and (sic) excess repaid to the Residents, subject to an allowance for the deficit funded by the operator.” 41 Order 3 must be read in light of this conclusion. The offset amount was intended to be calculated a proportion of the budgeted deficit, a proportion which may be agreed between the parties. In the event the parties cannot agree on a figure the tribunal has been requested to resolve this dispute. 42 The Tribunal has considered the following factors in determining the allowance for the budget deficit to be offset from any refund payable: Residents have not approved items in the budget and anticipated the levy paid would be refunded to some extent. Residents initially invalidly approved the items and expenses were incurred and services received by the residents. The Operator did take steps to collaborate with residents to comply with the legislative process in a meeting planned for 17 July 2010 which was cancelled following advice the Special Resolution of 7 July 2009 was not invalid. The cancellation of this meeting appears to have been associated with the underlying opposition of the residents group to this meeting referred to at clause 3.16 of the Reasons for the Decision handed down on 25 August 2010. To some extent that the Operator was frustrated by the residents group in initially compliance, and this is a relevant factor in the determination of the offset amount. 43 It is the Tribunal’s view, having regard to the above factors that 45% of the deficit should be offset from the refund amount to determine the levy payable. $71,009 has been invalidly levied, less (45% of the budgeted deficit of $155,978 which is $70,190). An amount of $819 should be refunded to residents. COSTS 44 The Applicant seeks costs. He argues that in accordance with s 102(1) the interests of justice require that costs are awarded. He states that the Respondent was aware of the breach but failed to rectify it. Further, he refers to an offer to settle made on 15 July 2009. He notes he has incurred legal costs in pursuing this dispute. 45 The Respondent argues that it is not in the interests of justice to award costs. They refer to decisions of the Commercial and Consumer Tribunal, Residents of Wishart Christian Village v Wishart Christian Village Association3 and Sheppard and the Residents of Umibirra Retirement Village v Milstern Retirement Services Pty Ltd4 which awarded costs in 3 [2004] CCT V502-3. 4 [2009] CCT VH009-17. -- 7 of 8 -- 8 circumstances where “total disregard” was exhibited by the Operators. Further, they state that the offer to settle was not expressed as such and is irrelevant. 46 Section 100 of the Queensland Civil and Administrative Tribunal Act 2009 requires that each party bears their own costs. This is displaced only in circumstances that the interests of justice require under s 102(1) and within the scope of s 102(3). 47 The Tribunal has in its previous decision noted that the Operator made attempts to comply but was in part practically frustrated by the actions of the resident group in convening an alternative meeting and abandoned the meeting scheduled by the Operator which would have rectified the error. There are no factors in this case which suggest that it is in the interests of justice to award costs. 48 The application for costs is dismissed. -- 8 of 8 --