Armstrong v Kawana Island Retirement Village [2011] QCATA 324

CITATION: Armstrong v Kawana Island Retirement Village [2011] QCATA 324 PARTIES: Mr Leslie Armstrong (Applicant/Appellant) v Kawana Island Retirement Village (Respondent/Cross-Applicant) APPLICATION NUMBER: APL176-11 MATTER TYPE: Appeals HEARING DATE: On the papers HEARD AT: Brisbane DECISION OF: Justice Alan Wilson, President Peta Stilgoe, Member DELIVERED ON: 28 November 20111 DELIVERED AT: Brisbane ORDERS MADE: 1. Leave to appeal is granted to both parties. 2. The appeal by Kawana Island Retirement Village is dismissed. 3. The appeal by Mr Leslie Armstrong is allowed; and, paragraph 2 of the decision dated 18 April 2011 is set aside and the following decision is substituted: “That the respondent Kawana Island Retirement Village refund the invalid levy paid by the residents for the 2009/10 budget, in the sum of $56,612.00. The refund for each villa is to be determined using the same formula that applied in determining each villa’s annual levy for the 2009/10 financial year.” 1 This decision was corrected on 11 April 2012, to correct an error arising from an accidental slip: Queensland Civil and Administrative Tribunal Act 2009, s 135. The citation for the decision that corrects these reasons is: Armstrong v Kawana Island Retirement Village [2012] QCATA 53. -- 1 of 7 -- 2 CATCHWORDS: APPEAL – LEAVE TO APPEAL – RETIREMENT VILLAGES – where invalid items in budget – where tribunal ordered refund of invalid levies subject to offset for contributions paid by way of funded deficit – where dispute about calculation of offset – where tribunal determined offset PROCEDURE – whether reasons for determination of offset adequate Queensland Civil and Administrative Tribunal Act 2009, s 121 QUYD Pty Ltd v Marvass Pty Ltd [2009] 1 Qd R 41 Armstrong v Kawana Island Retirement Village (No 2) unreported, cited Beale v Government Insurance Office of NSW (1997) 48 NSWLR 430, cited Cachia v Grech [2009] NSWCA 232, followed Camden v McKenzie [2007] QCA 136, followed Glenwood Properties Pty Ltd v Delmoss Pty Ltd [1986] 2 Qd R 388, followed Hopper v Mt Isa Mines Ltd [1999] 2 Qd R 496, followed McIver Bulk Liquid Haulage Pty Ltd v Fruehauf Australia Pty Ltd [1989] 2 Qd R 577, followed Phu v NSW Department of Education and Training [2010] NSWADTAP 76, followed APPEARANCES and REPRESENTATION (if any): This matter was heard on the papers in accordance with section 32 of the Queensland Civil and Administrative Tribunal Act 2009. REASONS FOR DECISION [1] Mr Armstrong is a resident in the Kawana Island Retirement Village. At a residents’ committee meeting on 15 June 2009, the operator proposed a special resolution: “That the increase in excess of the following operating 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 achieve a balanced budget.” [2] The special resolution was passed. By a decision of 25 August 2010, a QCAT tribunal found that the special resolution was invalid because -- 2 of 7 -- 3 s 106(2) of the Retirement Villages Act 1999 required a special resolution for each of the items that were to be increased by more than CPI. [3] The tribunal allowed the operator to put these items back to a vote on separate special resolutions. The tribunal further determined: In the event that items are not passed, the Operator should recalculate the levy and refund the difference to the residents subject to allowance for the deficit funded by the operator in the 2009/10 financial year. The parties have liberty to apply where this offset amount cannot be agreed between the parties. [4] Regrettably, this was the only guidance the tribunal provided as to the way in which the “allowance” or offset would be calculated. [5] At a subsequent special general meeting, the residents did not approve an increase above CPI for the following items: Item Unapproved Salaries and wages (s 106) $67,980.00 Office expenses 1,620.00 Miscellaneous 1,400.00 $71,000.00 [6] The parties agreed that the amount to be refunded, before considering the offset, was $71,000. They could not agree on the method of calculation of the offset. In a second decision of 18 April 2011, the tribunal determined that the offset should be calculated at 45% of the budgeted deficit – an amount of $70,190 – so that the operator had to refund only $819 to the residents. [7] Mr Armstrong has appealed that decision. He submits that the tribunal erred in its second decision because: a) The tribunal’s method of determining the offset was “irrational and unsafe”; b) The tribunal erred in finding that the process for determining the offset arises only from the facts and events that transpired; c) The tribunal failed to consider ss 102A and 107 of the Act; d) The tribunal failed to consider the intention of the legislative scheme for levying general service charges; e) The tribunal erred in finding that the operator was prevented from complying with s 106 and erred in treating that as a relevant consideration; and f) The tribunal erred in concluding that the services attributable to the invalid levies were actually supplied, and expense incurred, and erred in treating that as a relevant consideration. -- 3 of 7 -- 4 [8] In its submissions in response to Mr Armstrong’s application for leave to appeal, the operator also sought leave to appeal the learned Member’s decision on the following bases: a) The unapproved expenditure should have been $14,927, not $71,000; and b) The tribunal should have considered the actual deficit, not the budgeted deficit. [9] Mr Armstrong submits: a) Section 107 of the Act prevents residents from being required to pay the increases because they had not been approved under s 106. Therefore, the appropriate offset is nil; b) If, as seems apparent from the tribunal’s first decision, the tribunal and the parties had always contemplated a reduction in the refund in recognition of the operator’s contribution to the budget, the offset must be calculated using the same logic that originally determined the contributions: i) The operator was always going to contribute the “operator funded deficit” which was $155,978. Therefore, a proportion of each invalid increase was always going to be paid by the operator; and, ii) If the operator’s budgeted contribution was 20.3%, the operator should bear 20.3% of the unapproved amount. This reduces the refundable amount to $56,587, but all of that amount should be refunded to the residents. [10] The operator submitted that there should be no refund to the residents: a) The total general service charges have not increased by more than CPI within the meaning of s 106(1) of the Act; b) In the alternative, the actual deficit of $234,308 (as opposed to a projected deficit of $156,726), fully funded by the operator, offsets any general decrease in the budget due to the failure of the special resolutions; c) The initial budget which was approved, albeit invalidly, proposed a staff restructure so that the s 106 staff salaries were reduced by $46,490 and the s 107 staff salaries were increased by $67,980. Therefore, there was a net increase of only $21,490. The operator acted on the approved changes, upgrading an apprentice gardener to a senior qualified gardener and adding cleaning hours. Had the budget not been approved, the operator would not have restructured its staff; and -- 4 of 7 -- 5 d) Mr Armstrong’s analysis does not take account of the CPI increase to which the operator would have been entitled, without a special resolution. [11] The question whether or not leave to appeal should be granted is usually addressed according to established principles: Is there a reasonably arguable case of error in the primary decision?2 Is there a reasonable prospect that the applicant will obtain substantive relief?3 Is leave necessary to correct a substantial injustice to the applicant caused by some error?4 Is there a question of general importance upon which further argument, and a decision of the appellate court or tribunal, would be to the public advantage?5 [12] The tribunal’s decision to offset the refundable amount by 45% is said to be based upon the fact that these items were approved, albeit invalidly, and that the operator did take steps to collaborate with the residents to have the budget approved in accordance with the Act but those steps were frustrated by the residents’ group’s opposition to that process. [13] The QCAT Act requires the Tribunal to give reasons for its final decision.6 Those reasons need not be lengthy or elaborate, but they must contain three essential elements: appropriate and sufficient reference to the relevant evidence; the material findings of fact that were made (and the reasons for making those findings); and, the applicable law and the reasons for applying it in the way expressed in the decision.7 It has also been said, in Queensland, that the crucial requirement is for the Tribunal to give reasons which disclose what has been taken into account in a way that means that any error is revealed.8 [14] With respect, the learned Member here has not identified the logical connection between the factors enumerated at paragraph [42] of her reasons9, and the decision to offset the refundable amount by 45%. The learned Member’s failure to explain her reasoning in applying the facts to reach the conclusion that an offset of 45% was reasonable is a failure to give adequate reasons, which amounts to an error of law10 and leave to appeal should for that reason be granted, to both parties. [15] The difficulty for the appeal tribunal is in exercising its discretion to ascertain precisely what the learned Member intended by the words we have quoted at paragraph [3], above. Because the first decision has not 2 QUYD Pty Ltd v Marvass Pty Ltd [2009] 1 Qd R 41. 3 Cachia v Grech [2009] NSWCA 232 at 2. 4 QUYD Pty Ltd v Marvass Pty Ltd [2009] 1 Qd R 41. 5 Glenwood Properties Pty Ltd v Delmoss Pty Ltd [1986] 2 Qd R 388 at 389; McIver Bulk Liquid Haulage Pty Ltd v Fruehauf Australia Pty Ltd [1989] 2 Qd R 577 at 578, 580. 6 Queensland Civil and Administrative Tribunal Act 2009, s 121. 7 Phu v NSW Department of Education and Training [2010] NSWADTAP 76 at [13]; and, see Beale v Government Insurance Office of NSW (1997) 48 NSWLR 430. 8 Hopper v Mt Isa Mines Ltd [1999] 2 Qd R 496 per Moynihan J at 512. 9 Armstrong v Kawana Island Retirement Village (No 2) unreported. 10 Camden v McKenzie [2007] QCA 136 at [29]. -- 5 of 7 -- 6 been appealed, the uncontested findings which appear to be relevant to the learned Member’s decision are: a) That the operator acted reasonably to collaborate with the residents; b) The operator has funded the deficit in the general services charges budget; c) The operator attempted to comply with the requirements of the Act but was “undermined” by the residents’ group; and, d) The aggregate special resolution was carried with a large vote in its favour. [16] The operator’s arguments that: the total general services charges had not increased by more than CPI; that it had altered its staffing arrangements in light of the approved budget; and, the fact that the actual deficit was much higher than the budgeted deficit were all put to the learned Member before she made her first decision. She did not adopt those submissions. The learned Member did not offer the operator the opportunity to recast its budget, increasing the rejected line items by CPI rather than the proposed amount. The only lifeline offered to the operator was that, in light of the factors she identified, the learned Member would not order that the monies be repaid without the opportunity for compliance (our emphasis). [17] Because neither party appealed the learned Member’s first decision, the operator cannot now argue that the learned Member erred in her second decision by: a) Specifically rejecting the operator’s argument that, because the total budget increase was within CPI there should be no refund to the residents; b) Rejecting the operator’s argument that the refund should take into account an alternative budget that increased the rejected line items by CPI and “readjusted” the employment expenses back to the pre- budget levels; c) Acknowledging that the primary intention of the legislative regime was transparency of the budget process; or, d) Determining that the exercise was to be undertaken with reference to the budgeted deficit not the actual deficit and that the offset will be a proportion of the budgeted deficit. [18] The only logical interpretation of the learned Member’s requirement that the refund be subject to an allowance for the deficit funded by the operator is that the operator should be entitled to keep some of the refund back, to acknowledge its contribution to the operating expenses. -- 6 of 7 -- 7 [19] The operator-funded deficit of $155,978 from a total invalidly approved budget of $768,490 represents 20.3%. Because of the unapproved items, the approved budget must be reduced to $697,490 ($768,490 - $155,978). If the operator is expected to bear 20.3% of the revised budget, its contribution should be reduced to $141,590 (20.3% x $697,490). The difference between the operator-funded deficit of the invalid budget and the operator-funded deficit of the revised budget is $14,387.53. It is this amount that the operator should be entitled to retain. It follows, therefore, that it should refund $56,612.00 ($71,000 - $14,387.53) to the residents. [20] The tribunal has determined, and the parties accept, that the operator is obliged to refund any unapproved items from the 2009/10 budget. The tribunal has also determined, and the parties accept, that the operator should be given some relief from that obligation, having regard to the operator-funded deficit. The learned Member’s reasons for decision did not, with respect, adequately explain the basis for allowing an offset of 45%. Leave to appeal should be allowed on the grounds that the learned Member’s reasons are inadequate. [21] Having considered the material carefully, we are unable to find a logical basis for allowing an offset of 45%. The only available guidance for any such calculation must be the proportion that the operator-funded deficit bears to the budget, as a whole. Using that calculation, we find that that the refund to the residents should be reduced by 20.3%, giving a refund of $56,612.00. [22] In the result, the appeal by the operator has failed, and it should be dismissed. Mr Armstrong’s appeal has succeeded, and should be allowed. The proper relief consequent upon that successful appeal may be achieved if paragraph 2 of the decision dated 18 April 2011 is set aside, and the following decision is substituted: That the respondent Kawana Island Retirement Village refund the invalid levy paid by the residents for the 2009/10 budget, in the sum of $56,612.00. The refund for each villa is to be determined using the same formula that applied in determining each villa’s annual levy for the 2009/10 financial year. -- 7 of 7 --