R.S.L. v Walker and Ors [1999] NSWSC 81

New South Wales Supreme Court CITATION : R.S.L. v Walker and Ors [1999] NSWSC 81 CURRENT JURISDICTION : FILE NUMBER(S) : 30122/96 HEARING DATE(S) : 02/12/97 JUDGMENT DATE : 17 February 1999

The Returned and Services League of Australia (New South Wales Branch) PARTIES : William Ammon Walker John Alexander McKenzie Alan George Buxton JUDGMENT OF : Dowd J

COUNSEL : Mr M D Young Mr C Lonergan SOLICITORS : Shailer Dawson & Hickey Christopher Pacey CATCHWORDS : Administrative Law; Retirement Village Industry Codes of Practice; Requirement of having dispute heard by Retirement Village Disputes Committee before having dispute heard by the Residential Tenancies Tribunal Residential Tenancies Act 1987 (NSW) ACTS CITED : Retirement Villages Act 1989 (NSW) Fair Trading Act 1987 (NSW) Retirement Village Industry Code of Practice Regulation 1995 DECISION : Appeal allowed in so far as it relates to the jurisdiction of the Tribunal; Proceedings to be stayed until Defendants have fulfilled the requirements of s.14 of the Retirement Villages Act 1989; Defendants to pay the Plaintiff's costs of the Summons

- 30 - THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION

DOWD J 17 February 1999 No. 30122/96 R.S.L. v WALKER and Ors

REASONS FOR JUDGMENT

1 This is an appeal brought under s.107 of the Residential Tenancies Act 1987 ("the Act") from a decision of the Residential Tenancies Tribunal ('the Tribunal') delivered on 25 October 1996. This appeal relates solely to the jurisdiction of the Tribunal. 2 The proceedings before the Tribunal, nos. 24034, 24035 and 23338 of 1995, concerned a retirement village known as Rowland Village ("Rowland") at Galston owned by the plaintiff, the Returned and Services League of Australia (New South Wales Branch) ("the RSL"). Rowland had been set up by the plaintiff as a retirement style village for persons who were eligible to be members of the RSL. The defendants, William Walker, John McKenzie and Alan Buxton, were three of the original residents at Rowland. 3 In 1993, a dispute arose between the defendants and the RSL concerning financial arrangements in existence between the parties. The practice at Rowland had previously been that prospective residents of the village were given a document headed "Finance" ("the finance sheet") prior to each entering into a licence agreement to secure a unit at Rowland. The finance sheet provided that prospective residents of Rowland were to make a formal interest free loan to the RSL in return for the grant of a licence by the RSL to occupy a unit at Rowland. The loan would be subject to two categories of non-refundable deductions. The first was a $10,000 deduction upon entering the village. This deduction was described in the finance sheet as being one "to assist with ongoing care and village amenities". The second was a series of 3% deductions on the principal loan after the $10,000 had been deducted, each year for a period of five years. The 5 x 3% deductions were earmarked as "a depreciation factor", "to cover long term maintenance", the purpose being "to enable management charges to be kept as low as possible." 4 A formal dispute arose when the Rowland Village Residents' Association ("the Association") referred the issues to the Rowland Village Disputes Committee ("the Disputes Committee") by letter dated 5 September 1994. The Disputes Committee was a body set up in accordance with the Retirement Village Industry Code of Practice Regulation 1989 ('the 1989 Code'), which was subsequently repealed and replaced by the Retirement Village Industry Code of Practice Regulation 1995 ('the 1995 Code'). The Codes were created and given effect by the Fair Trading Act 1987 (NSW). 5 It was claimed by the Association in its letter that, on the basis of the finance sheet, the Rowland residents had an expectation that the loan deductions would be placed in dedicated accounts to "ensure their preservation for their stated purpose". The residents also believed that the interest earned on the surplus in each account would be credited to the "Village Maintenance Revenue Account". 6 It was claimed that the RSL, in July 1992, without consulting Rowland Village residents, removed from its finance sheet the words relating to the purpose of the $10,000 deductions, and then those words relating to the 3% deductions were removed in October 1993. As a result of this, the residents complained that no money had been set aside for amenities since mid 1992, no income had been received from interest on surpluses in the dedicated accounts; that they had no guarantee of long-term maintenance; and, the expectations of incoming residents in relation to amenities at Rowland was reduced, thus reducing the attractiveness of units being sold by outgoing residents. 7 The final two paragraphs of the letter to the Disputes Committee provided as follows: "We requested the R.S.L. in our Rowland Village Residents Council letters dated 3/11/93 and 5/5/94 to re-instate the original Finance Sheet and to credit interest on the dedicated accounts to Village maintenance revenue account. We are in dispute because the R.S.L. in their letters JS:IC 3470/9 of 17/3/94 and JS/AC of 20/5/94 refused to re-issue the earlier Finance Sheet containing the deduction qualifications and to credit residents with any interest earned on the two funds." 8 It was the RSL's case that the finance sheets had been given out by mistake, by an agent who had for a brief time been involved in marketing the units, to residents who had bought units in the early years. The RSL discovered the error in 1992 and 1993 and wished to stop the practice of handing out the finance sheet. 9 In October/November 1995, there being no determination by the Disputes Committee, there were two unsuccessful attempts at mediation at the Commercial Disputes Resolution Centre. In November 1995, the defendants applied to the Tribunal for the following orders under the Act seeking: "1. An order requiring the administering authority to restore the original (1988) wording of the "Finance" Sheet issued to potential residents enquiring about Village entry and costs. 2. An order requiring the administering authority to fully account for and protect [the respective applicant's] interests in these funds [being the funds which had been set up for the $10,000 deductions and the 5 x 3% deductions] in the event of the Village being sold to another organisation." 10 The third defendant further sought orders, as set out: "1. An order requiring the administering authority to carry out work or take such other steps to make good the broken terms of the residence contract. 2. A dispute committee was formed May '94. Nothing resolved to date. 3. Dispute is between Admin. Authority and Rowland Village Residents' Association. 4. Following the appeal, the Commisioner (sic.) of Consumer affairs approved a mediation process hearing which was held Friday 3-11-95 at O.R.E.S., Sussex Street. Mr George Sarris, Compliance Officer, said to contact him if necessary, ph. 377-9234. 5. The main subjects of dispute were not discussed because the dispute committee had not reached its judgment. 6. Other relevant orders will need to be added if and when the sale of R.V. occurs as the repayment of unspent funds to R.V.R.A. will be a major consideration." 11 The Disputes Committee did not hand down its determination until 11 January 1996, notwithstanding the provision in its Charter requiring that determinations be made and notified in writing within 30 days of receiving an application to have a dispute heard. The Disputes Committee found: "The RSL has the right to remove the Finance sheet and other promotional material at its discretion at any time and therefore was acting within its rights when those documents were withdrawn in 1992 and 1993. The withdrawal of those documents, however, does not mitigate the RSL's obligations to the Initial Residents in respect of both long term maintenance and the provision of the promised amenities." 12 The Disputes Committee also made two recommendations: "The Committee recognises that the discussions over the past twelve months have canvassed many issues outside the ambit of the initial disputes. To assist in ameliorating the current situation, this committee recommends: 1. That the balance of $125,000 which remains from the $10,000 amounts contributed by the Initial Residents be made available for the provision of further amenities as outlined in the Initial Selling Brochure, and that this amount would be in full settlement of the claims in respect of amenities detailed in the initial selling brochure. 2. Attached is a report on the Rowland Village visit of Messrs Danks and Lang in which the inspection revealed the Village to be in first class order and that it was evident that long term maintenance would be minimal, requiring only life cycle maintenance. "For residency comfort, a short deed or letter should be issued for attachment to the initial Residents' contracts confirming that life cycle maintenance will be provided as necessary to resident's (sic) buildings without cost to the residents." 13 The RSL was therefore substantially successful before the Disputes Committee. It subsequently complied with all aspects of the determination, and wrote to all residents on 22 January 1996 undertaking to provide life cycle maintenance as necessary to residents' buildings without any cost to the resident. 14 Then on 31 July 1996, some six months after the Disputes Committee's determination had been given, the defendants (applicants before the Tribunal) wrote to the Registrar attaching amended orders which they proposed to seek at the next hearing date. The "Amended Orders Sought" were as follows: "1.That the administering authority prepare a correct Balance Sheet and financial information as at 31/12/95 in respect to "Rowland Village" so that it reflects the position that the maintenance provision of $1,783,627 (being the total of $1,503,068 - Maintenance Provision, and $280,559 - Capital Receipts) is a sum to be set aside "to cover long term maintenance; 2. That all of the amount, calculated at 3% for 5 years on the principal loan after deducting $10,000 paid by residents, be applied by the administering authority for the purpose for which it was, and is, collected, namely "to cover long term maintenance". 3. That the administering authority be required to deposit into an account reserved for that purpose on the 31/12 each year a sum equal to the 3% for 5 years on the principal loan after deducting $10,000 from each lender and that the money so accumulated be used "to cover long term maintenance". 4. That the administering authority be restrained from transferring the amount (and any future amounts collected) to "against cost of village" and that that amount and future sums collected or accumulated from the same source be used and applied towards "the cost of long term maintenance". 5. That the administering authority provide in tis accounts that any and all non-refundable contributions of $10,000 received from past, current and future residents in accordance with the "Finance" document given to residents at the commencement of their residency is to be a reserve sum "to assist with ongoing care and village amenities". 6. That the administering authority be restrained from transferring any portion of the $10,000 received from residents to "against the cost of village" in its accounts and that such sums be used for the purpose for which they were and are received namely "to assist with ongoing care and village amenities". 7. That the administering authority be required to create a reserve account into which shall be deposited an amount equal to each of the non-refundable contribution of all residents less any sum(s) properly expended to date and that such funds be used and applied only for the purpose for which such contributions are made and received, namely to "assist with ongoing care and village amenities". 8. That the reserve accounts referred to in orders sought 3 and 7 hereof be created prior to the administering authority entering into any agreement to sell the Retirement Village and that each resident be given an audited statement setting out the manner in which the sum deposited to create the two reserved accounts is calculated. Such statement shall set out the total amounts received by the authority and the amount and purposes of all expenditures and/or transfers within the accounts of the authority. 9. That the administering authority be restrained from restricting the movement of residents from the Rowland Village self care accommodation to the Rowland Court and that as residents of Rowland Court they be entitled to full care services without the requirement of medical assessment." 15 By letter of 21 August 1996, the solicitors for the RSL, the respondent before the Tribunal, advised the defendants that the RSL would object to the amended orders sought on the ground that the Tribunal had no jurisdiction to hear the matters raised by the amended orders.