ACT CIVIL & ADMINISTRATIVE TRIBUNAL PINES MANAGEMENT (ACT) PTY LTD v EASTICK AND ORS (Retirement Villages) [2017] ACAT 109 RV 1/2017 Catchwords: RETIREMENT VILLAGES – meaning of ‘operator’ for the purposes of the Retirement Villages Act 2012 – application for approval of amendments to the recurrent charges payable under a village contract – matters to be considered when determining whether to approve, with or without modification, a proposed amendment of recurrent charges – Tribunal approval of proposed annual budget – no orders as to costs Legislation cited: Retirement Villages Act 2012 ss 7, 116, 135, 137, 141, 143, 145, 150, 154, 159, 162, 163, 164, 166, 167, 168, 169,181, 260 Retirement Villages Act 1999 (NSW) ss 116 Subordinate Legislation cited: Retirement Villages Regulation 2013 ss 24, 38, 32 Cases cited: AB Hunt v Kurrajong Village Pty Ltd [2006] NSWCTTT 125 Alloura Waters Retirement Village Residents Committee v Living Choice Australia Pty Ltd [2014] NSWCATCD 68 Beattie v Wesley Mission [2017] NSWCATAP 12 Carey Bay Retirement Village Residents Committee v Anglican Care (Retirement Villages) [2011] NSWCTTT 497 Deahm v The Fairways Partnership (Retirement Villages) [2011] NSWCTTT 232 Queens Lake Village Pty Ltd v Queens Lake Village Residents Association [2011] NSWDC 21
Transcript
ACT CIVIL & ADMINISTRATIVE TRIBUNAL
PINES MANAGEMENT (ACT) PTY LTD v EASTICK AND ORS (Retirement Villages) [2017] ACAT 109
RV 1/2017
Catchwords: RETIREMENT VILLAGES – meaning of ‘operator’ for the purposes of the Retirement Villages Act 2012 – application for approval of amendments to the recurrent charges payable under a village contract – matters to be considered when determining whether to approve, with or without modification, a proposed amendment of recurrent charges – Tribunal approval of proposed annual budget – no orders as to costs
SubordinateLegislation cited: Retirement Villages Regulation 2013 ss 24, 38, 32
Cases cited: AB Hunt v Kurrajong Village Pty Ltd [2006] NSWCTTT 125Alloura Waters Retirement Village Residents Committee v Living Choice Australia Pty Ltd [2014] NSWCATCD 68Beattie v Wesley Mission [2017] NSWCATAP 12 Carey Bay Retirement Village Residents Committee v Anglican Care (Retirement Villages) [2011] NSWCTTT 497Deahm v The Fairways Partnership (Retirement Villages) [2011] NSWCTTT 232Queens Lake Village Pty Ltd v Queens Lake Village Residents Association [2011] NSWDC 21Sakkara Investment Holdings Pty Ltd atf Sakkara Landings Trust v Residents Committee of the Landings Retirement Village [2016] NSWCATAP 52Sakkara Investment Holdings Pty Ltd atf Sakkara Landings Trust v Residents Committee of the Landings [2017] NSWCATCD 29The Residents Committee of the Landings v Sakkara Investment Holdings Pty Ltd atf Sakkara Landings Trust [2015] NSWCATCD 113
Tribunal: Presidential Member G McCarthy
Date of Orders: 18 December 2017Date of Reasons for Decision: 18 December 2017
AUSTRALIAN CAPITAL TERRITORY )CIVIL & ADMINISTRATIVE TRIBUNAL ) RV 1/2017
BETWEEN: PINES MANAGEMENT (ACT) PTY LTDApplicant
AND: EASTICK and those parties listed in schedule 11
Respondents
TRIBUNAL: Presidential Member G McCarthy
DATE: 18 December 2017
ORDERThe Tribunal orders that:
1. The approved spending of Pines Management (ACT) Pty Ltd for the financial
year ending 30 June 2018 be in accordance with the annual budget at annexure
A to this order.
2. The matter will be listed for further hearing in mid-January 2018 on the
following questions
(a) amendment to the recurrent charges payable by the residents; and
(b) any order as to costs or the payment of money.
………………………………..Presidential Member G McCarthy
1 There were 26 respondents to the application, each of whom is a resident in the subject retirement village. The names of the respondents are at Schedule 1 to these reasons for decision
1. Pines Living Pty Ltd is the Crown lessee of Block 2 Section 9 Farrer, ACT (the
land). Pines Living has constructed a nursing home and a retirement village on
the land. Approximately one third of the land remains vacant.
2. The retirement village is comprised of 24 residential accommodation units, six
of which remain vacant.
3. For each unit that is now occupied, Pines Living, as licensor, has entered into an
agreement described as a Deed of Loan and Licence (the Deed) with a licensee
who, under clause 5.1.1 of the Deed, has obtained a licence to occupy the unit.
4. Under clause 5.3, the Deed does not give the licensee “any right of exclusive
possession to any part of the unit.”
5. Each licensee has also entered into an agreement with Pines Management Pty
Ltd described as a Service Agreement (the Service Agreement). Under the
Service Agreement, Pines Management as ‘Manager’ (being the entity
appointed by Pines Living to manage and operate the retirement village) is
required under clause 3.1 to provide services to the resident (being the
applicable licensee under the applicable Deed) “in accordance with the
Management Terms” set out in Annexure 2 to the Service Agreement.
6. Clause 4.3 of the Service Agreement provides for preparation of a proposed
“Annual Recurrent Charges Budget”. Clause 5.1 provides for an “Annual
Expenditure Budget”. The difference between the two budgets is unclear. They
seem to blend the statutory requirements for preparation of an annual budget
under Division 7.4 of the Retirement Villages Act 2012 (the RV Act) and the
statutory requirements under Division 7.3 of the RV Act for setting the level of
recurrent charges payable to fund (wholly or in part) the cost of services to be
provided under the annual budget.
7. Clause 5.11 provides for Pines Management’s right to refer a proposed annual
budget to the Tribunal “if the residents do not consent to it within 30 days of
being given the proposed Annual Expenditure Budget.” This right reflects Pines
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Management’s right under section 163(1) of the RV Act to apply to the
Tribunal “for an order in relation to the spending proposed for the financial
year”, and the Tribunal's power, on receipt of such an application, to make
orders, directions recommendations and determinations of liability regarding
the proposed budget of the kinds described in section 163(2) of the RV Act.
8. Whilst not mentioned in clause 5.11 of the Service Agreement, if a resident
refuses to consent to the spending in the proposed budget (as occurred in this
case) the resident also has the right under section 163(1) of the RV Act to apply
to the Tribunal “for an order in relation to the spending proposed for the
financial year.”
9. By application dated 27 June 2017, Pines Management seeks the following
orders:
(a) A declaration (or order) under section 154 of the RV Act approving the
increase in recurrent charges to $585 per month as set out in the notice to
residents dated 12 January 2017.
(b) A declaration (or order) under section 163 of the RV Act approving the
annual budget as set out in the notice to residents dated 12 January 2017.
(c) Such further or other orders as the Tribunal thinks fit.
10. The application is consequent upon 22 of the 23 residents of the retirement
village not consenting to the increase in recurrent charges or the proposed
annual budget.
11. The exception was Mr Niranjan Krishan Aggarwal, who is a director and
majority shareholder of Pines Living. The other directors of Pines Living are
Arun Aggarwal and Ghauri Aggarwal. The other shareholder is Arun Aggarwal.
12. Mr N K Aggarwal is also a shareholder of Pines Management. The directors are
Arun and Mahesh Aggarwal, who also own the balance of the shares in Pines
Management.
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Who is the operator?
13. By interim application dated 26 July 2017, the residents sought a determination
as to who is ‘the operator’ of the retirement village. The residents submitted that
it is Pines Living. Mr Christensen, solicitor for Pines Management, submitted
that it is Pines Management.
14. ‘Operator’ is defined in section 7 of the RV Act as follows:
7 Meaning of operator
(1) In this Act:
operator, of a retirement village-
(a) means the person who, alone or with someone else, manages or controls the retirement village; and
(b) includes-
(i) a person for the time being managing or controlling the retirement village; and
(ii) a person (other than a resident or other person mentioned in section 8 (Meaning of residence right) who owns land in the village; and
(iii) a person mentioned in section 15A (1) (d) (Application to residents and operators of former retirement villages); and
(iv) any other person prescribed by regulation; but
Note: Power to make a regulation in relation to a matter includes power to make provision in relation to a class of matter (see Legislation Act, s 48 (2)).
(c) does not include-
(i) the body corporate of a community title scheme or the owners corporation for a units plan; or
(ii) the managing agent of a community title scheme or units plan; or
(iii) any person excluded from this definition by regulation.
(2) If there is more than 1 operator for a retirement village, it is sufficient compliance with a requirement of this Act if-
(a) any of the operators exercises the functions of an operator under this Act; and
(b) any notice or other document required to be given to the operator under this Act is given to any of the operators.
Note 1 A reference to an Act includes a reference to the statutory instruments made or in force under the Act, including any regulation (see Legislation Act, s 104).
Note 2 For how documents may be given, see the Legislation Act, pt 19.5.
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(3) In this section:body corporate, of a community title scheme-see the Community Title Act 2001, dictionary. (emphasis added)
15. As a matter of statutory interpretation, section 7(1)(a) states the meaning of
‘operator’. Section 7(1)(b) describes different kinds of persons who are within
the definition of ‘operator’, although the word ‘includes’ contemplates that
there may be other kinds of persons who are ‘operators’.
16. Section 7 must be read as a whole. By doing so, it becomes clear that there can
be more than one operator. Section 7(1)(a) - (d) describes different kinds of
persons, each of which (or whom) is an operator. Section 7(2) sets out what
constitutes sufficient compliance with a requirement of an operator under the
RV Act “if there is more than 1 operator”.
17. In this case, I am satisfied that, for different purposes, Pines Living and Pines
Management are operators of the retirement village. They can, and do, perform
different statutory functions required of an operator. For example, Pines Living
fulfilled (so far as I can ascertain) the obligations of ‘the operator’ under
sections 23, 24 and 25 of the RV Act.
18. Meanwhile, relevant for the purposes of the interim and substantive applications
to the Tribunal, I accept Mr Christensen’s submission (by reference to the
Service Agreement) that Pines Management is ‘the operator’ for the purposes of
the rights and obligations of the operator under Divisions 7.3 and 7.4 (sections
147-167) of the RV Act.
19. The parties referred me to the Disclosure Statement at Annexure 4 to the Deed
and the reference in the third line of the document to Pines Living as the
“Operator's Name”.
20. Mr Christensen, referring to a letter dated 23 May 2017 from Mr NK Aggarwal
for and behalf of Pines Living, submitted that the statement in the Disclosure
Statement was an obvious error. He said that the operator “is, and always has
been, Pines Management” and that “a retirement village cannot have two
operators.” He supported Mr Aggarwal's position that each resident should
“check contract document, and amend the above error” (sic).
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21. Ms Carscadden on behalf of the residents disputed that it was an ‘error’. She
submitted that the document clearly names Pines Living as the operator, that the
Disclosure Statement at Annexure 4 to the Deed should be given effect and that
it is quite wrong for anyone including the residents to change a contract by
ruling out one name and inserting another.
22. I am not persuaded that the naming of Pines Living as the operator for the
purposes of the Disclosure Statement is incorrect. The only services to be
provided by “the operator” under the Disclosure Statement are the personal
services listed in paragraph (l) of the Statement. Whilst that appears unlikely, it
does not affect the independent obligation of Pines Management to manage the
retirement village under paragraph (d) of the Disclosure Statement, and the
independent obligation on residents to enter into a Service Agreement with
Pines Management prior to taking up residence.
23. Pines Management's obligations under the Service Agreement cause it to be an
operator for certain purposes of the RV Act irrespective of the fact that it is not
named as such in the Disclosure Statement or whether Pines Living is also an
operator for other purposes including for the purpose of providing the services
described in paragraph (l).
24. For these reasons, in my view Mr NK Aggarwal's statement that “a retirement
village cannot have two operators” is incorrect.
Approval of the proposed annual budget
25. I turn to Pines Management’s substantive application for approval of the
proposed annual budget. The document put forward as the proposed annual
budget stated:
2017-2018
Budget
Audited Income & Expenses 1 July 2016 to 30 June 2017
IncomeRecurrent Charges for 24 Units 168,480 149,944
Pest Spray 1,200 984Office Supplies 500 0Village Manager 64,000 61,547Rates 14,0003 13,772Telephone & Internet 2,400 1,731Electricity 7,500 8,530Water 4,200 2,899Contingencies 2,500 0Capital Works Fund 4,000 0
Total Expenses 188,742.43 155,673
Net Profit/(Loss) )4 (5,728)
26. The parties agreed that I consider each proposed expense item in turn, save for
bank fees, petty cash, window cleaning, pest spray and office supplies which
the residents accepted as appropriate sums to be included in the budget.
2 By letter dated 3 October 2017, Mr Christensen, solicitor for Pines Management sought an increase in the budgeted amount from $12,425 to $13,492.43 for reasons explained in my consideration of the claim for insurance
3 At hearing, Mr Christensen explained that the proposed figure of $6,500 was an error as explained in my consideration of the claim for rates
4 The proposed net loss increases to $20,262.43 once the proposed increases to the budgeted amounts for insurance and rates are included
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Auditing fees
27. The claim for auditing fees ($3,500) typified the residents’ primary complaint
about so many of the items in the budget: Pines Management has not disclosed
to them any information or at least sufficient information to enable the residents
to understand the basis for the proposed expenditure and/or why that
expenditure is necessary and/or reasonable.
28. In my view, the residents’ entitlement to such information is apparent. It is, with
respect, the most basic proposition that if a person or persons (and in this case
the residents of the retirement village) are being asked to pay for an item of
proposed expenditure, there should be full disclosure, on request, of any details
regarding that proposal to enable the residents to form a considered view about
it, whether it is reasonable and whether alternatives should be explored.
29. Such disclosure is also a statutory obligation. Section 162(4) of the RV Act
states:
(4) The operator must give any information in relation to the proposed spending that the residents committee for the retirement village (or, if there is no residents committee, a resident) reasonably asks for, for deciding whether to consent to the budget.
30. The RV Act is modelled on, and in substance repeats, the Retirement Villages
Act 1999 (NSW) (the NSW Act). The Retirement Villages Regulation 2013
(the RV Regulation) is likewise modelled on the Retirement Villages
Regulation 2009 (NSW) (the NSW Regulation) although the NSW Regulation
has since been overtaken by the Retirement Villages Regulation 2017 (NSW).
31. Case law commenting upon the operations of the NSW Act and NSW
Regulation is therefore relevant for present purposes.
32. In Queen’s Lake Village Pty Ltd v Queens Lake Village Residents Association,5
Levy SC DCJ of the District Court of NSW said:
61. In a case where the residents have refused to consent to proposed items of budgetary expenditure, on the application of an operator or a resident, the CTTT is invested with wide powers: s 115(2)(a)-(i) of the RV
5 Queen’s Lake Village Pty Ltd v Queens Lake Village Residents Association [2011] NSWDC 21 at [61] – [62] and [72]
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Act. Again, those powers are discretionary in their application, and not mandatory. In particular, in the determination of a relevant dispute, the CTTT is given a discretion to make an order that the operator should remain liable for so much of the proposed expenditure as was considered by the CTTT as being not reasonable or not necessary to pass on to the residents: s 115(4) of the RV Act . In making any determination under this section, the CTTT was given a wide discretion to have regard to " any other relevant matter ": s 115(6) of the RV Act .
62. I construe the references to " any other relevant matter " in ss 115 and 108 of the RV Act , to be read subject to the rules of procedural fairness, which, in this context, requires that appropriate notice be given to the affected party, and for that process to be applied, transparent evidence should be available in respect of any such matters to be considered in that regard. These conferred discretions are wide in their nature and effect. Accordingly, the exercise of such discretions must proceed according to recognised principles of fairness to the persons affected: House v The King [1936] HCA 40; (1936) 55 CLR 499.
..
72. In the context of this case, a purposive and business efficacy approach requires a balanced approach where acknowledgment must be given to the predominant features that contain compliance codes and limiting circumstances for the financial exposure of residents, purposively aimed at consumer protection. In my view, the fairest manner in which these objectives are met is for determinations and interpretations to proceed transparently on identified facts in evidence.
33. In Carey Bay Retirement Village Residents Committee v Anglican Care
(Retirement Villages) the tribunal likewise noted the importance of transparency
and objective evidence in support of an amount in a proposed budget.6
34. Pines Management’s claim for auditing fees is a good example of poor
transparency. The residents’ primary complaint was that they had not received
copies of any tax invoices or other evidence for audit fees. It was not until the
hearing of Pines Management’s application to the Tribunal that they received a
tax invoice from Mr John Beard, registered company auditor, for his fees of
$3,500 for auditing the accounts and financial statements for Pines Management
for the year ended 30 June 2017.
35. Mr Beard gave evidence at the hearing by telephone. He explained that in order
to do the audit he drew up an audit plan, interviewed Pines Management’s
6 Carey Bay Retirement Village Residents Committee v Anglican Care (Retirement Villages) [2011] NSWCTTT 497 at [36] – [38]
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employee manager of the retirement village (Mr Binto Valiakalayi) who
performs the role of bookkeeper in relation to the retirement village, examined
the records that Mr Valiakalayi kept on the MYOB files and corrected his
mistakes. Mr Beard explained that he was now semi-retired, working from
home, and that his fee was approximately 50% of the market rate for doing an
audit of this kind.
36. I have concluded that the budget expense of $3,500 for auditing fees is
reasonable. At the hearing, the residents agreed – having received a copy of
Mr Beard’s invoice.
37. For this item in the budget, I allow $3,500.
Accounting fees
38. By email sent on 11 August 2017, two months after Pines Management applied
to the Tribunal for approval of its budget, Mr Valiakalayi informed the residents
that Pines Management’s accountant is Manv Accountants Pty Ltd.
39. Mr NK Aggarwal is a director and a majority (at least) shareholder of Manv
Accountants Pty Ltd. Pines Living, Pines Management and Manv Accountants
Pty Ltd have the same business address.
40. The residents submitted that Manv Accountants has a conflict of interest in
charging Pines Management for accounting services where Mr NK Aggarwal is
a director and shareholder of Manv Accountants, a director and shareholder of
Pines Management and is also a resident at the retirement village.
41. I accept that Manv Accountants has a conflict of interest, but in my view it does
not preclude Manv Accountants from providing accounting services to Pines
Management. The conflict can be managed by Manv Accountants providing full
disclosure of the work done (or proposed to be done) and the fees charged (or
proposed to be charged) in order to evidence that the work has been (or will be)
done at market rate, or better, and at arm’s length.
42. However, despite my invitation to do so, Mr Christensen did not produce any
evidence of any accounting services provided by Manv Accountants to Pines
Management or that Pines Management had incurred any accounting fees
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payable to Manv Accountants in relation to the operation of the retirement
village.
43. Mr NK Aggarwal was obviously the person best placed to give evidence about
the accounting fees proposed in the budget. Mr Aggarwal attended the Tribunal
hearing, but Mr Christensen explained he had made a “forensic choice” not to
call Mr Aggarwal to give evidence.
44. As noted in Queen’s Lake Village, determinations need to proceed
“transparently on identified facts in evidence”. There being no evidence to
support the proposed expenditure on accounting fees, I disallow the claim.
Legal fees
45. Mr Christensen submitted that an allowance for legal fees should be made as a
contingency against the possibility of such fees. Despite my invitation to do so,
he did not point to any likelihood of such fees being incurred, or the kind of
legal services that might be required or why $9,000 was an appropriate sum to
include in the budget.
46. An allowance for “contingencies” is already made in the proposed budget, to
which I later refer. If the need for legal services arises, the budget can be
amended (with the consent of the residents) according to that need and the
likely cost of those services. Section 167 of the RV Act provides for
amendment of an approved budget, and permits the Tribunal to make an order
for further spending if that further spending is appropriate, needed urgently and
was not reasonably foreseeable when the budget was approved.
47. The residents expressed concern that the budgeted legal fees would be spent by
Pines Management on the engagement of a solicitor to assist with its application
to the Tribunal for approval of the proposed budget. The residents described it
as “unconscionable” that they should be required to fund Pines Management’s
claim against them.
48. The residents’ concerns were justified. By email sent on 1 December 2016,
Mr Valiakalayi wrote to the residents as follows:
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After discussions with the management, I have been instructed to engage a solicitor and lodge an application with the Tribunal, possibly for increasing the recurrent charges $229 per week, for all the residents, effective from 01 December 2016. Legal costs for the above are estimated at about $8000. These will have to be paid by the levies as management expenses.
49. Section 260(1) of the RV Act states:
(1) The residents of a retirement village are not liable to pay any costs the operator of the village incurs or expects to incur in obtaining legal advice, or undertaking a legal proceeding, in relation to the village unless—
(a) the costs appear in the approved annual budget for the village; or(b) section 52 (Costs of preparation of village contracts) applies.
50. It seems tolerably clear that Pines Management sought to include $9,000 in the
annual budget, in accordance with section 260(1)(a) of the RV Act, in order to
require the residents to fund Pines Management’s action in the Tribunal against
them. Mr Valiakalayi confirmed that to be so in his witness statement at
paragraph 9.
51. Where the residents have refused to consent to the inclusion of legal fees in the
proposed annual budget, the Tribunal may order those costs to be included in
the budget under section 260(2) of the Act which states:
(2) If the residents refuse to consent to the inclusion of the costs as an item in a proposed annual budget, the ACAT may, on application by the operator under section 163 (ACAT orders—decisions about spending), order spending on those costs if the ACAT decides that—(a) the legal advice or proceeding is wholly in the interest of the
residents; and(b) the costs are reasonable in the circumstances.
52. I am not persuaded that it is “wholly in the interest of the residents” that Pines
Management obtain funding for legal fees from the residents via the annual
budget to fund its action against them, especially where (in my view)
approximately half of the proposed expenditure in the proposed annual budget
should not be allowed.
53. I disallow the claim for legal fees.
Fire appliance servicing & monitoring
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54. The proposed annual budget proposes an increased in the costs for fire
appliances servicing and monitoring from $3,436 to $6,300.
55. The residents accept, in principle, that the costs of servicing and monitoring the
retirement village’s protection systems is an appropriate expense to include in
the budget. Their objection arises from a lack of transparency regarding the
services provided and the costs.
56. The objection is properly made.
57. If Pines Management wishes to set a figure in a proposed budget for an item of
expenditure it needs to be based on evidence, whether that be tax invoices from
previous years, quotations for proposed expenditure and the like. It is the
residents’ money, not the operator’s, that is to be spent. It is implicit from that
proposition that the residents have a right to such details as they request
regarding proposed expenditure, to object to expenditure and to suggest
alternative expenditure.
58. Mr Valiakalayi, in his witness statement, provided tax invoices from Form1
Fire Protection - Canberra Pty Ltd for its monthly fire equipment testing service
and from Romteck Grid Pty Ltd, which provides a notification service to the
fire services (presumably the ACT Fire Brigade) in the case of a fire. Form1
charge a monthly fee of $185. Romteck Grid charge a quarterly fee of $397.73.
Together, the evidence suggests annual costs for fire equipment and monitoring
of $3,811.
59. At the hearing, Mr Christensen provided a quote dated 29 August 2017 from
Form 1 for $2,108.70 for rectification of defects concerning doors in the
retirement village.
60. I am not persuaded that an allowance for that amount should be made in the
budget for fire appliance servicing and monitoring. The quote is not concerned
with fire appliance servicing and monitoring. It is for the supply and installation
of a plastic sign that was damaged or missing ($192) and for the supply and
installation of new door seals “due to excessive door clearances”. The latter
issue is not a cost that should be included an annual operating budget. It is a
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capital cost to fix a defect in the construction of the doorways in the retirement
village.
61. Where the retirement village is owned by Pines Living, the cost of correcting
defects in the construction of the building should be paid by that company, even
if it seeks reimbursement from the contractor who installed the doors in the
course of construction.
62. For this item in the budget, I allow $3,811.
Lift maintenance
63. In support of the claim for lift maintenance, Mr Valiakalayi provided a tax
invoice from Kone Elevators Pty Ltd for $1,046.46, being a quarterly invoice
for, I was told, its fixed-price service fee for maintaining the lift. This equates to
$4,186 per annum.
64. Mr Valiakalayi did not provide any basis for why the proposed budget should
allow instead $4,700, particularly where Kone Elevators (I was told) charge a
fixed price for maintaining the lift regardless of the work involved in doing so.
65. For this item in the budget, I allow $4,186.
Insurance
66. The claim for insurance ($12,425) was another claim where the residents
objected primarily because Pines Management would not give them a copy of
the insurance policy or policies or explain the coverage or how the premiums
were calculated despite their requests.
67. The respondents accepted that premiums and charges associated with insurance
for the retirement village should be included in the budget, but could not
comment on the amount in the proposed budget because they did not have
sufficient information.
68. Under section 162(4) of the RV Act, the policies and details about the
premiums should have been provided to the residents long ago, yet at hearing
on 27 September 2017, Mr Christensen could not provide relevant details
regarding the policies or their coverage in order to substantiate the allowance in
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the proposed annual budget. I gave him leave to obtain and provide the
necessary documents after the hearing.
69. In their correspondence after the hearing, after considering the policies provided
by Mr Christensen, the residents expressed their concern about what “exactly”
is covered under the policy, and in particular whether they are covered for
alternative temporary accommodation should the retirement village become
uninhabitable. Ausure would not provide details to the residents because they
are not the owner of the policy. I can understand Ausure’s position, but Pines
Management should have provided these details to the residents.
70. I understand the residents’ frustration, but have concluded that the
appropriateness or sufficiency of an insurance policy or policies beyond that
required under the RV Act is not a matter that I can appropriately consider. I
have no evidence about the cost or appropriateness of such extended coverage.
The Tribunal’s function is to review the proposed amount for insurance by
reference to the evidence before me.
71. Under section 145(3) of the RV Act, Pines Management must have insurance to
cover damage, costs incidental to the reinstatement or replacement of the
insured buildings and public liability insurance. As best I can ascertain, policies
to provide that insurance have been obtained. Under section 145(3), premiums
to obtain that insurance can be funded from recurrent charges if included in the
approved annual budget.
72. Regarding building and contents insurance, Ausure Pty Ltd provided a tax
invoice dated 24 August 2017 for renewal of Pines Living’s policy for an
amount of $32,654.78.
73. By letter dated 27 September 2017 (the day of the Tribunal hearing), Ausure
wrote to Mr NK Aggarwal giving details about the components giving rise to
the total premium amount. It noted the total insured asset value of the nursing
home at $24,525,000, and the total insured asset value of the retirement village
at $8,325,000.
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74. Ausure noted its renewal premium at .085%, being $20,846.25 for the nursing
home and $7,076.25 for the retirement village. To that was added a terrorism
levy of $1,563.66 applicable to both properties, GST of $2,948.62 and a broker
fee of $200 plus GST ($20) to a total of $32,654.78.
75. Regarding the public liability policy, in its letter dated 27 September 2017
Ausure noted the total premium was $11,000 plus GST plus a broker fee of
$200 plus GST ($20) to a total of $12,320. Ausure did not provide any
apportionment of the policy between the nursing home and the retirement
village.
76. The total of the premiums for both policies is $44,974.78.
77. Mr Christensen submitted that 30% of the total premium, that is $13,492.43,
should be approved in the annual budget for insurance. This appears to be based
on the fact that the total insured asset value of the retirement village is
approximately 30% of the total insured value of both assets.
78. I reject the submission.
79. 30% of the total premium skews the apportionment in favour of Pines
Management because 30% of the premium attributable to the asset value of the
nursing home - ($6,254) - is more than 70% of the premium attributable to the
asset value of the retirement village - ($4,953).
80. In my view, the amount to include in the budget should be the amount
attributable to insuring the retirement village as best as it can be calculated.
81. The amounts therefore payable for building and contents insurance are
$7,076.25 plus GST ($707.62), 30% of the terrorism levy ($469.10) plus GST
($46.91), 30% of the broker’s fee ($60) plus GST ($6) to a total of $8,365.88.
82. For public liability insurance, a breakdown has not been provided and perhaps
cannot be provided given the nature of the policy. I therefore allow 30% of the
premium ($3,300) plus GST ($330) 30% of the broker’s fee ($60) plus GST
($6) to a total of $3,696.
18
83. For this item in the budget, after adding the two total amounts, I allow $12,062.
Cleaning
84. Mr Valiakalayi provided evidence that Pines Management:
(a) employs a cleaner who charges $25 per week;
(b) engages Cut Price Trash Paks who provide a monthly Trash Pak Pick Up
Service at $6.23 per week; and
(c) engages Suez Recycling and Recovery who collect dry general waste and
comingle containers at a cost of $19.80 and $18.80, respectively, per
week.
85. At hearing, Mr Christensen provided tax invoices from the cleaner which, he
submitted, evidence that the cleaner spends between four and six hours per
week providing cleaning services, primarily vacuuming and mopping the
common areas. I am satisfied that Mr Valiakalayi intended to say in his
statement that the cleaner charges $25 per hour, not per week, but the invoices
provided in evidence were rendered fortnightly, not weekly, for between four
and six hours of cleaning.
86. The residents submitted that the trash pack service is not required, and so
should be deleted from the proposed budget.
87. For budget purposes, by reference to the cleaner’s tax invoices, I allow 2.5
hours per week for cleaning ($62.50), together with the Trash Pak and Suez
weekly costs. I can see no reasonable basis to delete the trash pack service. I
calculated total weekly cleaning costs of $112, meaning an annual amount of
$5,824. Although the respondents agreed to the proposed budget sum of $4,800,
that amount seems insufficient.
88. I see no reason not to increase the approved amount for cleaning to $5,824,
particularly where, under section 166(1) of the RV Act, it would be a strict
liability offence for Pines Management to spend money allocated to cleaning
otherwise than on cleaning costs as approved in the annual budget, unless Pines
Management can establish that the expenditure was in accordance with the
exception under section 166(3).
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89. Section 166 of the RV Act provides:
166 Spending otherwise than in accordance with approved annual budget(1) The operator of a retirement village commits an offence if—
(a) the operator spends money received for recurrent charges for a financial year for the village; and
(b) the spending is not in accordance with—(i) the approved annual budget; or
(ii) the approved annual budget as amended under section 167 (Amendment of approved annual budget).
Maximum penalty: 50 penalty units.(2) An offence against this section is a strict liability offence.(3) Subsection (1) does not apply if the spending—
(a) was a change in spending between items in the approved annual budget; and
(b) does not reduce the level of services the retirement village provides; and
(c) does not cause the total spending provided for by the approved annual budget to be exceeded.
Note The defendant has an evidential burden in relation to the matters mentioned in s (3) (see Criminal Code, s 58).
(4) Subsection (5) applies if the operator of a retirement village—(a) commits an offence under subsection (1); or(b) does not comply with an order under section 161 (ACAT order—
proposed annual budget)) to give the residents of the village a proposed annual budget in relation to a current financial year for the village.(5) A resident of the retirement village may apply to the ACAT for (and the ACAT may make) an order directing the operator to refund the recurrent charges paid by the resident during the financial year until the day when the order is made.
90. In The Residents Committee of the Landings v Sakkara Investment Holdings Pty
Ltd T/As Sakkara Landings Trust7 the New South Wales Civil and
Administrative Tribunal (the NCAT) commented on section 116 in the NSW
Act, which is the statutory equivalent of section 166:
74 In my opinion, having regard to the requirement under section 114 for the operator of a retirement village to seek consent of the residents of
7 The Residents Committee of the Landings v Sakkara Investment Holdings Pty Ltd T/As Sakkara Landings Trust [2015] NSWCATCD 113 at [74]
20
the village to the expenditure itemised in the proposed annual budget, coupled with the provisions of section 116(3) which provide that the operator must not expend money received by way of recurrent charges otherwise than in accordance with the approved annual budget or any amendment thereof, prima facie if an amount itemised in a proposed annual budget to which the residents have consented is not spent in accordance with that budget, and the provisions of s 116 (3A) do not apply, then the residents are entitled to have that amount refunded to them.
91. In the case of cleaning, it is difficult to envisage that the exception under
section 166(3) could apply because expenditure of money allocated for cleaning
on a different item in the approved annual budget would invariably reduce the
level of cleaning, and thus the level of services provided by the retirement
village to the residents.
92. Also, if Pines Management sought to spend money allocated to cleaning on any
other item (in the same way that if it sought to spend money allocated to an item
otherwise than in relation to that item), the onus would be on it to prove on the
balance of probabilities that the exception under section 166(3) was satisfied.8
93. For this item in the budget, I allow $5,824.
Gardening
94. Pines Management seek approval for $7,500 for gardening, and rely upon
invoices from Jakes Complete Garden Care (Jakes) for expenditure on
gardening, waste removal, pruning, lawn mowing, planting and hedging from
2 January 2016 to 5 May 2017. For the calendar year 2016, these invoices
totalled $5,825.
95. The respondents object to the proposed budget sum on the grounds that the only
gardening done on the land occupied by the retirement village is trimming of
hedges and blowing leaves from the main open areas. They said that the
mowing (and apparently other garden maintenance) is done on the large area of
vacant land, approximately 6,072m², adjoining the retirement village.
8 Sakkara Investment Holdings Pty Ltd as trustee for Sakkara Landings Trust v The Residents Committee of the Landings Retirement Village [2016] NSWCATAP 52 at [104] – [107]
21
96. I had very little information about the work done. Mr Valiakalayi attached the
invoices to his witness statement but did not comment about them. No one from
Jakes gave evidence about where the work was done or what was done, and the
residents stated that when they telephoned Jakes on 18 September 2017 to
obtain information about the invoices they were told that Jakes was under
instruction “not to give any information whatsoever”.
97. In my view, Jakes’ work to maintain the vacant land has no connection with
maintaining the grounds at the retirement village. The retirement village has no
more connection with the vacant land than it does with the nursing home. To
maintain the vacant land is an entirely independent cost incurred by Pines
Living in its capacity as the Crown lessee.
98. Mr Christensen submitted that maintaining the vacant land should be included
in the annual budget because the residents could walk upon the vacant land and
enjoy it as part of their leisure activities. I reject the submission. A photograph
produced in evidence of the vacant land shows it to be an entirely uninviting
bare area devoid of any aesthetic appeal.
99. The question arises as to what portion of Jakes’ gardening invoices should be
allocated to gardening work conducted on the grounds of the retirement village.
The residents submit that there is no garden, save for the hedges and some trees.
The photograph of the hedges shows them to be individual bushes, still in a
very immature state, yet to develop into a hedge at all. Mr Valiakalayi said that
maintenance of the retirement village garden was largely the effort of the
residents.
100. I have concluded on the evidence that Jakes is primarily engaged to maintain
the vacant land, and does a small amount of additional gardening work in the
retirement village when required and when already on site. The invoices show
an hourly rate of $130 per hour, which I presume to include overhead costs of
equipment and fuel, particularly for a large open ground tractor style mower.
None of that equipment, would be required to trim plants in the retirement
village.
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101. For the modest (and remaining) gardening needs of the retirement village, a
gardener would need to attend at most once a fortnight. Doing the best I can, I
allow $50 per fortnight. For this item in the budget, I allow $1300.
Repairs & maintenance
102. Pines Management seeks approval of $20,500 in the budget for “repairs and
maintenance”. The notes to the amended budget, at note 5b, state that this claim
for “other maintenance” (meaning other than capital maintenance) is comprised
of $9,000 for a “maintenance contractor”, $4,000 for “materials”, $2,500 for a
“painter”, $2,500 for “rubbish management” and $2,500 for “others, including
possible tree lopping”.
103. Despite this breakdown, the Tribunal received very little (if any) evidence to
support the claim.
104. Mr Valiakalayi stated that “there is no pattern to the need for maintenance”.
That may be so, but I expected at least some evidence of past maintenance costs
(separate from evidence for separate claims for lift maintenance and capital
maintenance) to provide some basis for a proposed budget for future “other
maintenance” costs. As mentioned, Pines Management must proceed
transparently on identified facts in evidence.
105. Mr Valiakalayi provided tax invoices with his statement concerning repairs and
replacements carried out during the financial year ended 30 June 2017.
However, in my view, all those invoices relate to replacement or repair of
capital items, save for a callout fee of $115 for a resident who was locked out of
their residence which is not repair or maintenance at all. I therefore deal with
these items under the separate claim for capital maintenance.
106. Referring to the items in note 5b, I had no evidence regarding a “maintenance
contractor”. I had no evidence as to whether this related to a particular
contractor who has provided general services over a 12 month period, or a
proposed contractor for the budget period or a global amount for contracted
maintenance services provided or to be provided by different maintenance
contractors from time to time. I had no evidence as to whether these costs have
previously been incurred or why they are (or would be) separate from capital
23
maintenance. I had no evidence as to how the proposed sum of $9,000 was
calculated.
107. I make the same observations regarding the claims for “materials”, save for
evidence that Mr Valiakalayi periodically replaces light bulbs.
108. It is difficult to envisage maintenance services provided by a painter that are not
painting (i.e. maintenance) of a capital item, and so to be dealt with under the
separate item for capital maintenance.
109. The claim for “rubbish management” appears to duplicate the rubbish
management services provided by Cut Price Trash Paks and Suez, especially
where there is no suggestion of any other costs incurred for rubbish
management.
110. I considered the possibility that Pines Management holds invoices for repairs
and maintenance separate from invoices for capital maintenance but has not
produced them to the Tribunal, especially where – according to the budget –
$18,061 was spent on this line item per Pines Management’s audited income
and expenses for the previous financial year.
111. Several difficulties arose with that possibility.
112. First, Pines Management was on notice from the residents’ documents filed in
the Tribunal that they objected to this line item because of “insufficient details
and invoices”. It would seem that if Pines Management had invoices to
substantiate expenditure on items of this kind in the previous year, separate
from capital maintenance, to provide a basis for this challenged line item in the
proposed budget, they would have produced them. It did not do so. I drew the
inference that they do not exist.
113. Second, Pines Management’s financial report for the year ended 30 June 2017
gives no indication as to how the “audited” expense of $18,061 was derived.
The financial report simply provides a global sum of $32,159 for “maintenance,
gardening and repairs”, which appears to be comprised of gardening expenses
($7,202), repairs and maintenance ($18,061) and capital maintenance ($6,896).
24
However, the basis for those three sums is unknown, save for the gardening
expenses which appear predominantly to relate to maintenance of the vacant
land.
114. If Pines Management wants the residents to contribute funds for “repairs and
maintenance” separate from garden and capital maintenance, it is incumbent on
Pines Management to produce evidence to them to substantiate this past
expenditure as a platform or basis from which to contend that the expenditure is
likely to be ongoing and needs to be allowed for in the proposed budget. Pines
Management has not produced any evidence either to the residents before this
proceeding began, or to the Tribunal in this proceeding, to prove this past
expenditure of $18,061 or any of it.
115. Pines Management still has that opportunity. If that evidence is produced,
distinguishable from garden maintenance or capital maintenance and
attributable to repairs and maintenance of the retirement village, Pines
Management can amend the approved annual budget under section 167(1) of
the RV Act if the residents approve the amendment.
116. However, on the evidence presently before me, I can surmise only minor items
such as replacement lightbulbs for repairs and maintenance that would not
constitute capital maintenance. For this item I allow $300.
Capital maintenance
117. ‘Capital maintenance’ is defined in section 135(1) of the RV Act as follows:
capital maintenance—
(a) means works carried out for repairing or maintaining a capital item; and
(b) includes works prescribed by regulation as being capital maintenance; but (c) does not include works prescribed by regulation as not being capital maintenance.
118. ‘Capital replacement’ is defined in section 135(1) of the Act as follows:
capital replacement—
(a) means works carried out for replacing a capital item; but
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(b) does not include capital maintenance.
119. Regarding funding for capital maintenance and capital replacement, section 141
of the RV Act states:
141 Funding of certain capital maintenance and capital replacement(1) The operator of a retirement village may fund the cost of capital maintenance for which the operator is responsible from the following sources:
(a) the capital works fund for the village (if any);(b) recurrent charges.
(2) The operator must bear the cost of capital replacement of a capital item for which the operator is responsible.(3) This section does not authorise the funding of any of the following from the capital works fund or recurrent charges for the retirement village:
(a) the construction of a new building or a new stage of the village;(b) any work arising from the breach of a statutory warranty under the
Building Act 2004, section 88 (Statutory warranties), in relation to which a proceeding may be started under that Act;
(c) the depreciation of capital items;(d) the refurbishment of vacant residential premises in the village;(e) anything else prescribed by regulation.
120. ‘Capital item’ is defined in section 135(1) of the RV Act as follows:
capital item, for which the operator of a retirement village is responsible—
(a) means—
(i) a building or structure in the village; and
(ii) plant, machinery or equipment used in the village’s operation; and
(iii) any part of the village’s infrastructure; and
(iv) any other item prescribed by regulation; but
(b) does not include a capital item that is—
(i) owned by a resident of the village; or
(ii)common property under a community title scheme or units plan; or
(iii) prescribed by regulation.
121. For the purposes of the definition of capital item in section 135(1)(a)(iv), items
prescribed as capital items are stated in section 24 of the RV Regulation as
follows:
26
24 Capital item—Act, s 135 (1), def capital item, par (a) (iv)
The following capital items in a retirement village, including those in residential premises in the village, are prescribed:
Examples—par (d)whitegoods, portable air conditioner, fan, tables, chairs
122. In Alloura Waters Retirement Village Residents Committee v Living Choice
Australia Pty Ltd,9 the NCAT commented on capital maintenance as follows:
21. It is the responsibility of an operator to allocate a sufficient amount for "capital maintenance" as defined (RVA s 4) when preparing a proposed annual budget for the village. This includes maintenance and repairs to capital items in the village and for those items inside a resident's unit for which an operator is responsible. Examples of maintenance include: carpet cleaning, air conditioner servicing, painting the village, repairing footpath cracks, replacing tap washers and replacing faulty stove elements.
22. The RVA (s 4) defines capital maintenance as: "works carried out for the purpose of repairing or maintaining an item of capital and includes works prescribed by the regulations as being capital maintenance, but does not include works that are prescribed by the regulations as not being capital maintenance". In this regard, the relevant regulation is RVR reg 5 which prescribes, as not being capital maintenance, work done to substantially improve a capital item beyond its original condition or work done to maintain or repair an item of capital that it would be more cost effective to replace. Furthermore, "capital replacement" as defined (RVA s 4), being works carried out for the purpose of replacing an item of capital, expressly excludes capital maintenance.
123. Pines Management provided invoices for replacing an alarm number pad and
door station ($1,717.57), repairing the main hot water boiler ($872) servicing
9 Alloura Waters Retirement Village Residents Committee v Living Choice Australia Pty Ltd [2014] NSWCATCD 68 at [21] – [22]
27
the sumps and water tanks ($1,182.50), servicing the garage doors ($750),
repairing a damaged safety door ($400), replacing perspex on a gate and
installing a cover over heating vent in unit 3 ($465), replacing toughened glass
($590), attending to the lockout of a resident ($115), annual service and
maintenance of air-conditioning units in apartments within the retirement
village ($900) and periodic repairs to individual air-conditioning units within
particular apartments (totalling $609).
124. Pines Management did not put forward these invoices for the purpose of
obtaining a finding that they should be paid from recurrent charges. They are
put forward, for present purposes, only as evidence to derive an appropriate
amount to include in the budget for capital maintenance. In my view, they
provide a useful guide as to an appropriate amount.
125. Regarding the cost of replacing the alarm pad and doors station, the residents
submitted that the cost should not be included as part of capital maintenance
because it is a capital replacement cost. In reviewing a budget for future costs, I
did not need to decide the point but without further details, the cost appears to
be replacement of a faulty part in the course of the maintenance of an overall
capital item, meaning the alarm system, and so could properly be characterised
as capital maintenance.
126. Without further detail, and without making a finding, all of the other items, in
my view, can also be broadly characterised as involving capital maintenance
and assist for the purpose of setting an appropriate amount for capital
maintenance in the budget.
127. The respondents’ queries about these items go more to the question of why they
needed to be paid from recurrent charges. Many cases have dealt with disputes
as to whether expenditure is capital maintenance (which an operator can recoup
from recurrent charges) or a capital expense (which an operator must meet from
28
its own money).10 The potential for later disputes about expenditure is no reason
not to allocate an appropriate amount in a budget for capital maintenance.
128. As noted in Alloura Waters quoted above, Pines Management has a
responsibility to allocate a sufficient amount for capital maintenance. That
allocation, however, does not preclude the residents from later challenging the
characterisation of an expenditure, even where the accounts have been audited.
In The Residents Committee of the Landings v Sakkara Investment Holdings Pty
Ltd T/As Sakkara Landings Trust11 the NCAT rejected the proposition that the
audited accounts of the operator are conclusive as to whether monies have been
properly expended against an item in the proposed budget.
129. That is so, notwithstanding Pines Management’s obligation to ensure that the
accounts “correspond as closely as possible with the layout of the proposed
Trust v Residents Committee of the Landings Retirement Village [2016]
NSWCATAP 52, the NCAT Appeal Panel commented on that obligation as
follows:
Given the statutory requirement for itemisation that governs the proposed annual budget and its layout, the RV Act envisages that the audited annual accounts will have, to the maximum extent possible, the same layout, and thus the same line items, as the proposed budget. In this way, residents will be able meaningfully to compare the annual budget that they (or the Tribunal) approved with the audited annual accounts in order to determine whether the operator has in fact expended the money received by way of recurrent charges in accordance with the approved annual budget, as required by section 116(3) and whether any variations are “minor”.
130. In this case, of concern is that all the items, including attending to the resident’s
lockout, total only $6,091, yet Pines Management seeks approval of $12,000 for
10 AB Hunt v Kurrajong Village Pty Ltd [2006] NSWCTTT 125; Sakkara Investment Holdings Pty Ltd atf Sakkara Landings Trust v Residents Committee of the Landings [2017] NSWCATCD 29
11 The Residents Committee of the Landings v Sakkara Investment Holdings Pty Ltd T/As Sakkara Landings Trust [2015] NSWCATCD 113 at [74]
12 Retirement Villages Act 2012, section 169(6)
29
capital maintenance. This is approximately double the amount ($6,896) said to
have been expended on capital maintenance in the previous year.
131. There is no explanation for why a budgeted allocation twice that of the previous
year should be approved.
132. In my view, as noted in Queens Lake Village and in Carey Bay Retirement
Village, an operator (and in this case Pines Management) that seeks significant
financial contributions from residents of a retirement village in order to fund
anticipated capital maintenance of the village must demonstrate what those
estimated costs will be in a transparent manner by reference to evidence so that
the residents know, and can challenge if they so choose, the proposed
expenditure of their money.
133. On the evidence before me, for this item I allow $6,100.
Window cleaning
134. Pines Management seeks approval for $2,000 to clean the windows, contending
it has insufficient funds to pay more. It relies on an email that Mr Valiakalayi
sent to all residents on 12 May 2017 that stated:
As you may (sic) aware from our quarterly accounts, the current financial year is already running at a loss with expenses incurring (sic) is is more than our income from recurrent charges” and “there is no (sic) sufficient amount to pay for window cleaning contractors.”
135. There are several difficulties with Mr Valiakalayi’s position.
136. First, I am not satisfied that the retirement village is running at a loss. The only
evidence in support of that proposition is Pines Management’s statement of
profit or loss for the year ended 30 June 2017 that records a net loss of $5,728.
However many of the claimed expenses, for example the rates payable for the
adjoining vacant land, are not attributable to the retirement village.
137. I also have real doubts about the expenditure of $32,159 at the retirement
village for the year ended 30 June 2017 for “maintenance, gardening and
repairs”. The residents challenged a proposal for amounts totalling $46,800 for
the five items under the heading “maintenance, gardening and repairs” in the
30
proposed budget on the basis (among others) that Pines Management had not
produced sufficient invoices or detail about this proposed expenditure. In
answer, Pines Management has produced invoices which, in total, evidence
expenditure of approximately $12,200, much of which of which in my view
does not relate to the retirement village.
138. Second, the central purpose of setting an annual budget is to ensure, as best as
possible, that the operator can cover the costs of operating the retirement village
during the applicable financial year and into the future. If costs are to be
trimmed in order to operate the village within the means of the residents,
discussion needs to occur with the residents as to where costs can be trimmed.
139. In the case of window cleaning, it is clear from the evidence that the residents
place a high priority on having clean windows and are willing to pay for it.
They tendered in evidence a quote from Stuart’s Window Cleaning dated
18 September 2017 for window cleaning for the apartment building (outside
only) on all three levels and the outside windows of all the villas for a total
price of $3,600. The residents asked for that quote be used for the purpose of
approving proposed expenditure on window cleaning of $3,600.
140. Third, the proposition that Pines Management cannot afford window cleaning
because of other costs is disingenuous. As mentioned in relation to cleaning,
and as later mention in relation to other costs, section 116 of the RV Act
provides (subject to a small exception) that money allocated to an item in the
budget cannot be spent on another item. If the residents wish to spend $3,600 on
window cleaning, so be it. Expenditure on that item cannot have any bearing on
expenditure on any other items.
141. For this item, I allow $3,600.
Village manager
142. By letter dated 1 February 2016, Pines Management employed Mr Valiakalayi
as the manager of the retirement village with an annual salary package of
$60,000 comprised of an annual salary ($50,400), motor vehicle and mobile
phone allowance ($4,800) and a superannuation guarantee charge ($4,800).
Under his employment agreement, Mr Valiakalayi is required to work Monday
31
to Friday, 9.00am to 3.00pm, and be available to the residents 24 hours a day
7 days a week (except when on leave) on his mobile phone and in person to
attend to any emergencies or residents’ other requirements.
143. Pines Management propose that Mr Valiakalayi’s salary be increased for the
year ended 30 June 2018 to $61,000 per annum, comprised of an annual salary
($51,000), motor vehicle and mobile phone allowance ($4,800) and a
superannuation guarantee charge ($5,200). It also proposes a further $3,000 to
cover the cost of a replacement manager when Mr Valiakalayi is on leave.
144. The residents object for several reasons.
145. First, Mr Valiakalayi is not fully occupied and they never agreed that the
employment of a full-time manager is warranted. They are not willing to pay
recurrent fees to pay Mr Valiakalayi’s salary, rather than to pay for other
services and facilities which they believe have greater priority. They also
contend that Mr Valiakalayi does not work his full hours, and does a lot of work
for the exclusive benefit of Mr NK Aggarwal. In particular, they contended that
Mr Valiakalayi spends time showing vacant units to prospective residents.
Under section 159 of the RV Act, his salary payable for his time in doing so
“must not be financed by way of recurrent charges”.
146. The residents contend that for their small retirement village, necessary duties of
a manager could be properly done in no more than four hours per day, Monday
to Friday. They submit that the position should be a part-time position.
147. The residents said that they did not approve the expenditure of $60,000 in the
budget for FY17 to employ Mr Valiakalayi. Assuming this is right, I presume
that Pines Management have not been paying Mr Valiakalayi’s salary from
money received from the residents by way of recurrent charges. To have done
so would seem to be an offence under section 166 of the RV Act.
148. In issue is the proposal for Mr Valiakalayi’s salary, increased to $64,000
(including the cost of replacement manager when Mr Valiakalayi is on leave),
to be approved in the annual budget for FY 18 so that it can be paid from
money received from the residents by way of recurrent charges.
32
149. The starting point is to consider Mr Valiakalayi’s duties. In his statement,
supplemented by his oral evidence during the hearing, Mr Valiakalayi stated
that he attends to issues as they arise including transporting residents to medical
appointments, arranging activities for the residents in the retirement village,
managing the day-to-day finances in terms of banking, paying invoices and
purchasing necessary items for the village, and liaising with tradesmen to attend
the village to carry out maintenance and repairs. He stated that when he
commenced as manager he worked three hours per day but this was found not to
be sufficient to fulfil his various duties and so his engagement was increased to
six hours per day plus on-call availability.
150. During the hearing, Mr Valiakalayi was more specific about his duties. He said:
(a) He has done a MYOB course, and spends 10 – 15 hours per week doing
office administration.
(b) He spends approximately three hours per week speaking with residents
and responding to their emails.
(c) He spends approximately two hours per week inspecting the village
grounds, particular looking out for safety issues and addressing them. He
said that he walks around the village every day.
(d) He drives 1-2 residents to see a doctor in Mawson, and has done that
approximately 15 times in the last six months. He said that the trip from
the retirement village to the doctor is less than 1 km each way.
(e) Every Monday he drives the resident of unit 19 to the shops, which I
understood to mean the Mawson shops.
(f) He does not show prospective residents around the village, saying “I’m
100% not doing it”.
(g) He meets with the auditor, Mr Beard, and gives him the accounts from the
MYOB system to enable Mr Beard to audit the financial reports.
33
(h) He maintains the retirement village clubhouse, which has a business
centre, a library and a large TV, and the exercise room which has a
treadmill and an exercise machine.
(i) He agrees that maintenance of the retirement village gardens is largely the
effort of the residents.
(j) He does not have any trade skills, and does only simple tasks such as
changing light bulbs. He engages tradespeople to do necessary repairs and
maintenance.
(k) He opens the gate once a month to technicians to enable them to take
meter readings, which I understood to mean readings of water, electricity
and gas consumption.
(l) He has tried to organise village activities such as outings, yoga, Tai Chi
and carpet bowls to make the retirement village more attractive to
potential residents, but most of the existing residents (for different
reasons) did not wish to be involved in the activities he organised.
151. In terms of training and experience, Mr Valiakalayi said that he worked in a
retirement home in New Zealand between 2010 and 2013, and has a bachelor’s
degree in commerce that he was awarded in India.
152. I have considered each proposed component of Mr Valiakalayi’s salary
package.
Annual Salary
153. Mr Valiakalayi’s employment contract proposes an annual salary of $51,000 for
which he will be required to work 30 hours per week plus be available to the
residents on a 24 hours a day seven days a week basis for emergencies. In
approximate terms, this equates to an hourly rate of $32.
154. I am satisfied on the evidence that Mr Valiakalayi does not have any skills
relevant to the position of manager of a retirement village, save (perhaps) for
administration skills necessary to carry out the necessary bookkeeping
regarding operations of the retirement village. It was difficult to ascertain
34
whether $32 was an appropriate (or lawful) hourly rate. The best guide would
be the Federal award that covers Mr Valiakalayi’s employment, but
Mr Valiakalayi gave evidence that he did not even know what a Federal award
is much less whether there is an award that covers his employment or (if so)
what it is.
155. At hearing, Mr Christensen also did not know whether there is an applicable
award. After the hearing, he stated in an email to the residents sent on 5 October
2017 “my research indicates that [a] retirement village manager should be
employed under the Aged Care Award”, which I take to mean the Aged Care
Award 2010 (Cth), but – assuming he is correct – Mr Christensen gave no
indication of Mr Valiakalayi’s entitlements under that award.
156. It is completely unsatisfactory that the Tribunal is left to obtain for itself a copy
of the Aged Care Award, then try to ascertain whether it applies and (if it does)
then determine Mr Valiakalayi’s award entitlements, devoid of any submission
from Pines Management on these issues. In my view, it is also not appropriate
for the Tribunal to undertake such a task in the absence of any position from
either party on the issue.
157. Mr Christensen’s response to my inquiry, Mr Valiakalayi’s evidence that he
was unaware of what a Federal award is and that his employment contract
makes no mention of an applicable award leads me to believe that his contract
was prepared without regard to the Aged Care Award 2010. It might not be
applicable. I have no evidence of comparable salaries paid to persons doing
similar work in other retirement villages, and am left with no point of reference
for determining the appropriateness of Mr Valiakalayi’s hourly rate.
158. The residents also submitted that Mr Valiakalayi does not make any significant
contribution to the clubhouse or leisure centre. They note that they were largely
responsible for fitting out these rooms. In any event, I cannot see how the
maintenance of these rooms is time consuming for Mr Valiakalayi.
159. On the evidence, Mr Valiakalayi’s primary responsibility seems to be office
administration, and that seems to occupy most of his time. However his skill at
performing that function seems to be doubtful. Mr Beard gave evidence that he
35
spent considerable time correcting mistakes in the MYOB files and that in his
view “the bookkeeper”, meaning Mr Valiakalayi, “doesn’t know what he’s
doing”.
160. Mr Beard gave evidence that this was not entirely Mr Valiakalayi’s fault
because he is using a MYOB software system that is out of date. Mr Beard
explained that the software system being used is a training package, and that he
has been unable to persuade Mr NK Aggarwal to spend $30 per month to obtain
up-to-date software that was fit for purpose. Mr Beard said that he had spoken
repeatedly to Mr Aggarwal about this need for up-to-date software, but Mr
Aggarwal is unwilling to spend the money.
161. Apart from office administration, Mr Valiakalayi properly admitted that he does
not have any skills relevant to the management of a retirement village. He does
not have any tools, save for a ladder to assist when changing light bulbs, and he
engages trades persons for repairs and maintenance.
162. A threshold question arose at hearing as to whether the budget should allow for
an annual salary appropriate for employing a person appropriately skilled to
manage a retirement village, which could easily exceed $64,000, or a salary
appropriate for the skills and services that the residents have been receiving
during the past financial year and which Pines Management propose they would
continue to receive in the form of Mr Valiakalayi’s ongoing employment.
163. Mr Christensen submitted that the budget should be set by reference to the facts
and circumstances as they are, not what they might be. I agree. There is no
suggestion that Pines Management are seeking to employ an appropriately
skilled retirement village manager, and the budget is proposed in prospect of
Mr Valiakalayi’s ongoing employment.
164. In my view, neither Mr Valiakalayi’s employment nor his salary is in
proportion to his duties. Regarding his primary responsibility of managing the
books, it is clear on the evidence that Pines Management would do better to
contract with a bookkeeper who has the relevant skills and equipment to
perform this role. Otherwise, Mr Valiakalayi provides only unskilled labour. I
accept the residents’ submission that his other duties can be comfortably done
36
in approximately 4 hours per day, given the comparatively small size of the
retirement village and that six of the units are vacant.
165. Mr Valiakalayi said that if his full-time employment salary and entitlements are
not increased or, or at least maintained, he would resign. So be it. His wishes
are no reason for the residents to fund a full-time position that is not necessary.
166. As mentioned, I have no evidence as to an appropriate hourly rate, but allowing
an hourly rate of $30, four hours per day, five days per week, I calculate a part-
time weekly salary of $600.
167. In relation to salary, and allowing 4 weeks paid annual leave, for this item I
allow $31,200.
Motor vehicle and mobile phone allowance
168. Mr Valiakalayi said he uses his car to attend meetings with the auditor and the
accountants, take residents shopping, pickup materials for maintenance and
repairs, conduct “market research” of suitable materials for repairs and for
visiting other retirement villages. He said his car allowance ($4,800) is
calculated on the basis of travelling 26 km per day, 240 days per year, that
being 6,240 km per annum, at .76 cents per kilometre.
169. The residents contended, in substance, that Mr Valiakalayi’s claimed duties and
expenses are overstated in order to justify payment of the allowance.
170. The evidence does not support Mr Valiakalayi’s need for a car to perform his
duties. Mr Valiakalayi said he does not maintain a log book, but accepting he
drives residents to the Mawson shops each week, he states that the travel
distance is less than 1 km each way. Assuming, say 50 trips a year, the total
distance is still only 100 km. Mr Valiakalayi said he took a resident to the
airport, but only once in the past three years. It appears clear that taxis for such
minimal travel is a more cost efficient means of meeting this need, and arguably
should be paid by the residents wishing to travel.
171. Visits to the auditor or the accountant would be necessary, I expect, but only
once or twice a year especially where records can be conveyed electronically or
by post and conversations about them can occur by telephone.
37
172. Why Mr Valiakalayi would need to visit other retirement villages, or at least
more than occasionally, was not explained.
173. His need to pick up materials or conduct “market research” for materials for
maintenance and repairs also seems doubtful when he does not do any
maintenance and repairs and engages tradespeople for that purpose.
174. In summary, I am not persuaded that a motor vehicle allowance is warranted,
and so conclude that it should not be added to Mr Valiakalayi’s salary.
Superannuation Guarantee Charge
175. I did not receive any evidence or submission as to the calculation or the
applicable law concerning the superannuation guarantee charge or why it is
even payable. If it is payable, evidence could readily have been produced
regarding the amount previously paid under Mr Valiakalayi’s existing contract
and the fund into which it has been paid. No such evidence has been provided.
176. I return to the abiding concern that in the absence of evidence, either to the
residents or to the Tribunal, expenditure in a proposed budget should not be
allowed. I reject the claim.
Relief manager
177. Again, I did not receive any evidence concerning employment of a relief
manager when Mr Valiakalayi takes leave. I do not know whether this is a past
practice, or only a proposal for the future. Evidence could readily have been
produced regarding the proposed item of expenditure, but no such evidence has
been provided. If a later actual proposal for actual employment of a relief
manager is made, and the respondents agree to it, the budget can be amended
under section 167 of the RV Act. However, as matters presently stand, I reject
the claim.
Rates
178. The rates assessment notice for year ended 30 June 2017 notes the annual rates
for the land is $19,673.88. It was issued on 15 July 2016. For reasons
unexplained, Pines Management did not provide a rates assessment notice for
FY18, presumably issued in July 2017. For budget purposes, I will therefore
38
proceed on the available evidence that the rates for FY18 are materially the
same.
179. As mentioned above, approximately 30% of the land is occupied by a nursing
home, 30% by the retirement village and 40% is vacant.
180. Pines Management submitted that 70% of the rates should be paid by the
residents of the retirement village and so proposed that $14,000 be allowed in
the proposed budget for rates. Mr Christensen submitted that because the
residents have the use and benefit of the vacant areas of the land for their leisure
and enjoyment, the rates attributable to that vacant land should be included in
the proposed budget. Mr Christensen explained (and I accept) that the proposed
sum of $6,000 in the proposed budget was an error calculated by allocating 30%
rather than 70% of the rates to the retirement village.
181. The residents submitted that they should pay 30% of the rates on the basis that
the retirement village occupies 30% of the land, and $6,000 should therefore be
allowed for rates in the proposed budget. They reject the proposition that the
vacant land is in any way maintained, treated or used as part of the retirement
village and so reject the submission that this portion of the land should be
treated as part of the retirement village for rate allocation purposes in the same
way that they reject the claim for gardening and maintenance of the vacant land.
182. The basis of the residents’ liability to pay rates at all is unclear. The Service
Agreement provides for an ‘Annual Expenditure Budget’ defined to mean the
budget for the operation of the ‘Resort’ for a financial year and an ‘Annual
Recurrent Charges Budget’, defined to mean the budget for the recurrent
charges to be paid by the residents during a financial year addressing the
outgoings of the ‘Resort’. The Service Agreement defines “Outgoings of the
Resort” to mean all of the expenses listed in Annexure 1 paid by the Manager in
respect of the resort – meaning the retirement village – which includes all rates,
taxes, charges, levies, assessments and other outgoings in respect of the resort.
183. Why outgoings of the resort includes general rates is unclear. General rates are
not payable by Pines Management: they are payable by the Crown lessee, Pines
Living. Also, it is not clear why they are payable as an outgoing of the Resort
39
(or retirement village): they are payable by reference to the unimproved (i.e.
vacant) value of the land. General rates would be payable if the retirement
village did not even exist.
184. However, in relation to the current dispute, the residents take issue only with
their liability in respect of the vacant portion of the land. In that respect, I agree
that they should not be liable to pay the rates in relation to that part of the land
for the same reason that I have determined that they are not liable to pay for the
maintenance and gardening of the vacant land. It is land that does not concern
the retirement village.
185. For this item, I allow $6,000.
Telephone & internet
186. Regarding the claim for telephone, Mr Valiakalayi stated that Pines
Management maintains a “fire phone” which is connected to a fire alarm and a
“lift phone” which operates as an emergency phone in the lifts. He provided
invoices to evidence that these phone lines cost $30 and $58.19 per month,
respectively.
187. Regarding the claim for internet services, Mr Valiakalayi stated that Pines
Management obtains access to the internet through a “NBN box” in unit 9
occupied by Mr NK Aggarwal. This provides unlimited internet usage for Pines
Management and Mr Aggarwal. The line also provides a telephone service for
Pines Management and Mr Aggarwal. Mr Valiakalayi provided an invoice to
evidence that the service costs $59.90 per month.
188. Mr Valiakalayi explained that it was not possible for Pines Management to
obtain an independent internet service, and so it “piggybacks” on the service
provided to Mr Aggarwal’s unit.
189. Mr Valiakalayi said that the budget proposes that the monthly cost be a
apportioned as $20 for Pines Management’s “Business Centre”, which I
understand to mean Mr Valiakalayi having access to the internet; $19.90 for
Pines Management’s use of a business telephone; and $20 for Mr Aggarwal’s
personal use of the internet and telephone.
40
190. The residents raised many queries about the charges. Questions arose about
whether the invoices fluctuate from month to month, whether a better monthly
rental can be achieved and whether there is unnecessary duplication between
the different services. It is not enough to raise queries. The Tribunal must
determine an appropriate amount to allow in a budget by reference to evidence.
191. On balance, I am prepared to accept that the monthly costs for the fire and lift
phones, and the apportionment to Pines Management for the cost of the internet
and telephone service to unit 9 are reasonable. Taking the monthly costs, the
annual costs for the fire phone, lift phone and phone are $360, $698.28 and
$478.80, respectively, to a total of $1537.08.
192. For this item, I allow $1,600.
Electricity
193. Pines Management makes a claim of $7,500 for electricity. The residents,
understandably, objected on the grounds that invoices had not been provided to
evidence the amount sought.
194. After the hearing, Pines Management provided tax invoices variously dated
between 28 June 2016 and 13 June 2017 from ActewAGL directed to Pines
Living in support of the claim. Why they are directed to Pines Living, not Pines
Management is unclear. However, I will assume that they relate to electricity
supplied to the retirement village. Each invoice identifies the supply and
consumption charges over a monthly period.
195. Mr Valiakalayi stated that from September 2016 there have been two electricity
meters: one for the retirement village and one for the nursing home, and that the
electricity costs used in the construction of the nursing home were reimbursed
to the retirement village. The installation of separate meters seems to be
reflected in the tax invoices, each of which shows a marked decline in
electricity usage from August 2016.
196. The tax invoices issued after December 2016 evidence a monthly supply charge
of approximately $36 and a monthly consumption charge varying between $600
41
in the summer and $700 in the winter. I will take an average of $650 per month
for consumption to a total of $686 per month.
197. The residents do not challenge their liability to pay electricity consumption
charges. Their concern was the lack of transparency about the proposed budget
figure of $7,500.
198. On the evidence, a monthly sum of $686 computes to $8,232 per annum.
199. For this item, I allow $8,300.
Water
200. Mr Valiakalayi stated that there is a single water meter on the land, which
measures water consumption for both the retirement village and the nursing
home. Icon Water invoices Pines Living for a quarterly sewerage supply charge,
water supply charge and water consumption charge without distinction between
the retirement village and the nursing home.
201. Mr Valiakalayi stated that there is a sub-meter to measure water used only by
the nursing home. He stated that he inspects the sub-metre and, after reading the
meter, he deducts the amount of water used by the nursing home from the total
water bill to derive the water used by the retirement village. He provided, by
way of evidence, a tax invoice dated to December 2016 from Icon Water on
which he had handwritten his calculations of the retirement village water
consumption.
202. The residents complain that this is a poor system for calculating their liability
for water and sewerage. There is no transparency regarding the calculations, nor
evidence to suggest that the nursing home has reimbursed the retirement village
for its share of the supply and consumption charges. These concerns are
understandable, and spending not in accordance with the budget could later be
challenged under section 166 of the RV Act, but they are separate to the
immediate question of determining a proposed budget for sewerage and water
supply and for water consumption.
203. The evidence is deficient in that I am provided with only one tax invoice for the
period 1 October to 31 December 2016. The invoice indicates that water usage
42
fluctuated markedly. Consumption in the September quarter was approximately
half the consumption in the November quarter. Questions also arise as to
whether the charge of $2.61 per kL remains current and whether there is a finite
amount of water that is provided at a lower charge rate.
204. Pines Management proposed that the sewerage and water supply charges be
shared equally between the nursing home and the retirement village. I agree:
supply is a fixed cost.
205. Regarding water consumption, Mr Valiakalayi’s handwritten calculation
suggests that the nursing home takes approximately 50% of the water
consumed.
206. Doing the best I can, I allow an average total quarterly consumption of 600 kL,
and allow 300 kL attributable to the retirement village at a cost of $2.61 per kL
to arrive at a total budgeted water consumption cost attributable to the
retirement village for FY 18 of $3,132.
207. The total supply charges to the land, based on the evidence I have, is $630.92. I
attribute 50% of that cost to the retirement village: $315.46.
208. After adding the two amounts, to a total of $3,447.46, for this item I allow
$3,500.
Contingencies
209. Pines Management proposed an allowance of $2,500 for “contingencies”,
meaning unexpected costs that it might incur during the financial year.
Mr Christensen submitted that flexibility for unexpected expenses should be
provided.
210. As the residents pointed out, section 164 of the RV Act provides:
A regulation may limit the amount a proposed annual budget may allocate for contingencies.
211. As they also pointed out, section 38 of the RV Regulation provides a limit on
contingencies in an annual budget. It provides::
43
38 Limit on contingencies in annual budget – Act, s 64
The maximum amount that may be allocated is -
(a) For an annual budget of $200,000 or less $1000; and
(b) For an annual budget that exceeds $200,000 0.5% of the total amount of the annual budget.
212. It is of concern that Pines Management, in the business of administering a
retirement village, would be unaware of such an explicit statutory provision.
213. In Beattie v Wesley Mission13 the NCAT Appeal Panel agreed with the
statement made in the decision under appeal:
“Contingency” is otherwise not defined in the RV Act or the RV Regulations. I understand the word to be used in the sense of an unknown or unforeseeable incident, occurrence or expense, rather than in the sense of an attempt to estimate brackets or even guess) what may possibly or probably happen as in this particular case”.
214. In Beattie v Wesley Mission14 the NCAT Appeal Panel commented on the
reasoning behind the budgetary process and, implicitly, why such a small
amount can be allocated to contingencies (noting that a maximum of $100
applied in NSW at the time):
42. When the overall scheme of the budgetary process in Part 7 of the Act is considered, it is apparent that the purpose of section 115A is to ensure that any budget proposed by the operator and eventually approved by residents breaks estimated expenditure down into identifiable (and meaningful) categories of expenditure, for which a reasonably informed estimate can be made. In the words of the Tribunal’s reasons, it requires “...an attempt to estimate (or even guess) what may possibly or probably happen as in this particular case”. It does so by prohibiting, in section 115A, the allocation of any significant amount of expenditure to an innominate and unspecified class of potential expenditure: what the Tribunal’s reasons call “...an unknown or unforeseeable incident, occurrence or expense”. Colloquially, the Act requires that a budget divide proposed expenditure into labelled “buckets” of proposed outgoings; what it prohibits is the substitution for these “buckets” to any significant degree of a general “bucket” labelled “Contingencies” (which might loosely be described as a “slush fund”).
13 Beattie v Wesley Mission [2017] NSWCATAP 12 at [40]14 Beattie v Wesley Mission [2017] NSWCATAP 12 at [42]
44
215. The NSW Regulation no longer provides for a “slush fund”. The maximum
amount that may be allocated for contingencies in a proposed annual budget is
now set at $1.15
216. However, for present purposes, the residents agree to the maximum amount
allowable for contingencies of $1,000, although it is difficult to understand why
$1,000 for “contingencies” does not duplicate $1,000 for “petty cash expenses
by manager”. Nevertheless, where the residents agree to this budgeted item for
this amount, I allow it.
217. For this item, I allow $1,000.
Capital works fund
218. Pines Management propose that $4,000 be approved in the annual budget to be
set aside in a capital works fund for funding future capital maintenance. I had
no evidence as to how the proposed amount was derived. The residents point
out that there has not been a capital works fund in previous financial years.
219. Section 143 of the Act provides for a capital works fund as follows:
143 Capital works fund(1) This section applies if an approved annual budget for a retirement village provides for the setting aside of any part of the recurrent charges for funding capital maintenance in a period that extends beyond the end of the financial year to which the budget relates.(2) The operator of the village must establish and maintain a capital works fund.(3) However, this section does not require that a separate fund be established for each financial year.(4) A capital works fund must be held in an account with an authorised deposit-taking institution or as otherwise prescribed by regulation.(5) The operator must pay the following into the capital works fund:
(a) an amount of the recurrent charges as may be needed under an approved annual budget;
(b) any interest received from the investment of the whole, or part of, the capital works fund.
220. The residents have concerns about the detail of the proposed quantum and its
purpose. In my view, several factors allay those concerns.
221. First, once approved in the annual budget, Pines Management must establish
and maintain a separate fund (the capital works fund) into which that money is
placed.
222. Second, sections 137, 141 and 143 together make clear that money held in the
capital works fund may only be used to fund capital maintenance. Sections
141(2) and 141(3) make clear that funds in the capital works fund cannot be
used to cover the costs of capital replacement of a capital item or any of the
items listed in section 141(3). In Alloura Waters Retirement Village Residents
Committee v Living Choice Australia Pty Ltd,16 the NCAT said:
23. Residents of a retirement village pay amounts referred to as "recurrent charges" (defined in s 4 RVA) under a village contract on a recurrent basis. Most villages, including Alloura Waters, have a "capital works fund" (defined in s 99 RVA). It is a fund where any part of the recurrent charges is set aside for longer term capital maintenance (i.e. funding capital maintenance for the village in a period that extends beyond the end of the financial year to which the budget relates). Therefore, the costs of capital maintenance can be paid from the recurrent charges or from the village's capital works fund (s 97 RVA).
24. However, recurrent charges and the capital works fund cannot be used to substantially improve a capital item beyond its original condition or to maintain or repair an item of capital that it would be more cost effective to replace (RVR reg 5). These are not capital maintenance items for the purposes of the RVA and the RVR or, to put it another way, these are capital replacement items.
223. I recognise that much debate can (later) occur as to whether a cost should be
characterised as capital maintenance or capital replacement, but that is not a
reason to limit the creation or the quantum of a capital works fund to be used
for its proper purpose.
224. Third, under section 168(3) of the RV Act, Pines Management commits an
offence if it does not give a copy of the retirement village’s quarterly accounts
to the residents committee not later than the prescribed time after the end of
each quarter. I presume this has been occurring. Under section 169 of the RV
Act, Pines Management commits an offence if it does not give a copy of the
16 Alloura Waters Retirement Village Residents Committee v Living Choice Australia Pty Ltd [2014] NSWCATCD 68 at [23] – [24]
46
retirement village’s annual accounts to the residents committee, which (under
section 169(3)(ii)) must include details of the balance of the capital works fund.
These provisions should give sufficient transparency regarding the amount held
in, and expenditure from, the capital works fund.
225. It is difficult to question the appropriateness of the proposed quantum ($4,000),
but where it must be quarantined for a precise legislative purpose, and where
any interest received from its investment forms part of the capital works fund17
it is in my view a reasonable sum with which to commence the fund.
226. For this item, I allow $4,000.
Approval of recurrent charges
227. I turn to Pines Management’s application for approval and increase in recurrent
charges from $515.67 per month to $585 per month. As I understand it, the
monthly amount is calculated by reference to 24 units to arrive at the proposed
total annual income of $168,480.
228. Whilst I will make an order under section 163(2)(g) of the RV Act regarding
spending, per an amended budget, it does not follow that recurrent charges
should be set only by reference to the amended budget. Section 154(4) of the
RV Act lists other factors that the Tribunal may consider.
229. Section 154(4)(g) of the RV Act provides that the Tribunal may consider “any
other matter the ACAT considers relevant.” Issues that might be relevant, and
about which I have not received submissions, include:
(a) Why Pines Management proposed a budgeted operating loss (on its
revised figures) of more than $20,000, rather than a balanced budget.
(b) Whether recurrent charges should take into account that many (but not all)
unit holders have differing contractual limits on the amount they must pay
by way of recurrent charges.
(c) Whether Pines Living or Pines Management should pay (or is paying) the
recurrent charges for the 6 unsold units, noting it is liable to pay the same
17 Section 143(5)(b)
47
amount as every other resident of a unit under section 147 of the RV
Act.18
(d) The date from which residents should be liable to pay the amended
recurrent charges.
(e) The amount of recurrent charges that have been paid during the applicable
financial year, and by who.
(f) How Pines Management has covered its expenses since 1 July 2017.
(g) Whether an order should be made that the recurrent charges not be further
amended for a stated period.
230. Cases such as Carey Bay Retirement Village Residents Committee v Anglican
Care (Retirement Villages)19 and Deahm v The Fairways Partnership
(Retirement Villages)20 illustrate the complexities and areas of dispute that can
arise when determining recurrent charges for a retirement village.
231. For these reasons, I will re-list the matter for further hearing in mid-January
2018 on a date suitable to the parties on the question of the proposed
amendment to recurrent charges.
Costs
232. At the resumed hearing I will also hear from the parties as to whether any order
for costs, or payment for any other reason, should be made.21
………………………………..
18 Deahm v The Fairways Partnership (Retirement Villages) [2011] NSWCTTT 232
19 Carey Bay Retirement Village Residents Committee v Anglican Care (Retirement Villages) [2011] NSWCTTT 497 at [7] – [18]
20 Deahm v The Fairways Partnership (Retirement Villages) [2011] NSWCTTT 232
21 Section 181 of the RV Act provides that the Tribunal may make an order for the payment of an amount of money. This includes costs: Deahm v The Fairways Partnership (Retirement Villages) [2011] NSWCTTT 232
48
Presidential Member G McCarthy
49
Schedule 1
Doug Eastick First Respondent Ann-Marie Eastick Second Respondent Connie Praag Third Respondent Myra Cooper Fourth Respondent John Cooper Fifth Respondent Doreen Henson Sixth Respondent Roy Henson Seventh Respondent Wendy Hotchkiss Eighth Respondent Dianne Mitchell Ninth Respondent Greg Mitchell Tenth Respondent Krishnan Aggarwal Eleventh Respondent Kathy Carscadden Twelfth Respondent David Carscadden Thirteenth
Respondent Marcia Else Fourteenth
Respondent Noeline McGuffin Fifteenth Respondent Arthur McGuffin Sixteenth
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