Civil and Administrative Tribunal New South Wales Medium Neutral Citation: Christine Leaves v Mountainview Retreat Retirement Village Pty Ltd [2014] NSWCATCD 76 Hearing dates: 17 December 2013 and 3 March 2014 Decision date: 14 May 2014 Before: K Rosser, Senior Member Decision: Application dismissed. Catchwords: Village contract; deferred fee; deferred management fee; whether contract unjust. Legislation Cited: Civil and Administrative Tribunal Act (NSW) 2013 Consumer, Trader and Tenancy Tribunal Act (NSW) 2002 Retirement Villages Act (NSW) 1999 Contracts Review Act (NSW) 1980 Strata Schemes Management Act (NSW) 1996 Cases Cited: West v AGC (Advances) Ltd (1986) 5 NSWLR 610 (CA) Category: Principal judgment Parties: Christine Leaves (applicant) Mountainview Retreat Retirement Village Pty Ltd (respondent) File Number(s): RV 13/42210 reasons for decision Application and background 1The applicant has been a resident in a self-care retirement village which is operated by the respondent since 2008. The units in the retirement village form part of a strata scheme and the applicant purchased her unit in the village from the previous residents. On 7 October 2008, the applicant entered into a Deed for the Provision of Services with the respondent (the Deed). The Deed constitutes a village contract for the purposes of Retirement Villages Act (NSW) 1999. 2Clause 26 of the Deed states that the sale of a unit in the village cannot be completed unless the purchaser executes a deed in the form of the current deed used in the village. Clause 27(b) of the Deed provides for the payment of a deferred fee on sale of the unit, equal to 2.5% per year of the sale price or market value, whichever is the greater, calculated from the time of purchase till the time of sale, for a maximum of twelve years. 3Clause 30 of the Deed provides for a Charge in favour of the operator to be registered on title, to secure payment of sums to which the operator is entitled, including the deferred fee. The applicant executed the Charge on 7 October 2008. The Charge was subsequently registered as an encumbrance on the certificate of title to the applicant's property. 4The applicant seeks orders under section 123 of the Retirement Villages Act declaring the whole Deed as well as the Charge to be void. Alternatively, according to the applicant's written submissions, she seeks an order voiding Clauses 26 and 27(b) of the Deed. The applicant's central dispute with the respondent in the context of this application is the requirement to pay the deferred fee on sale of her unit. 5The applicant also objects to the Medical Authority which she signed as a result of special condition 4(a)(ii) of the contract of sale. This Medical Authority allows the operator to obtain medical treatment for the owner if the owner is unable to obtain such treatment and to take steps to have the owner admitted to "an appropriate medical institution" if the owner "become incapable of caring adequately for himself [sic] in the Unit". 6In response to the application, the respondent argues that the procedural requirements of the Retirement Villages Act were complied with and that there is no substantive injustice in the application of the deferred fee. Proceedings in the Tribunal 7The application was lodged on 5 August 2013. The matter was originally listed for directions on 11 September 2013 and was heard on 17 December 2013 and 3 March 2014. Jurisdiction 8The proceedings were commenced in the Consumer, Trader and Tenancy Tribunal [CTTT] when the Consumer Trader and Tenancy Tribunal Act (NSW) 2001 and the Consumer Trader and Tenancy Tribunal Regulation 2009 were in force. As of 1 January 2014 the Consumer Trader and Tenancy Tribunal Act and Regulation were repealed and the CTTT was abolished and replaced by the New South Wales Civil and Administrative Tribunal. As the application was not determined prior to 1 January 2014, the proceedings are incomplete. 9Transitional provisions in relation to part heard (that is, incomplete) proceedings are set out in Clause 7 of Schedule 1 of the Civil and Administrative Tribunal Act (NSW) 2013. Pursuant to Clause 7(3), the current Tribunal has and may exercise all the functions that the CTTT had immediately before its abolition, and the provisions of the Consumer Trader and Tenancy Tribunal Act and Regulation continue to apply to incomplete proceedings. The application has therefore been determined in accordance with the transitional provisions of the Civil and Administrative Tribunal Act. 10Other issues to do with jurisdiction are dealt with below. Evidence and submissions 11The applicant relies on the following in support of her application: Affidavits of 18 September and 28 November 2013, together with documents annexed to the affidavits and Written submissions handed up on 3 March 2014. 12The respondent relies on the following in defence of the application: Affidavit of Lynette Purkis dated 15 October 2013, plus attached documents; Affidavit of Jo-Ann Coad dated 15 October 2013, plus attached documents; Certificate dated 1 October 2008 issued under s 109 of the Strata Schemes Management Act (NSW) 1996 in respect of the applicant's property (Exhibit R1); Title search dated 12 August 2008 in relation to the applicant's property, showing amongst other things the names of the former owners and a charge on the title (Exhibit R2); The November 2007 edition of the then NSW Office of Fair Trading's booklet titled "Retirement Village Living" (Exhibit R3); Affidavit of Carol Orr dated 15 October 2013, plus attached letter dated 19 August 2008; Affidavit of Adrienne Lee Robinson dated 15 October 2013 Affidavit of Richard Blair dated 14 April 2011 (Exhibit R4) and Extract from the diaries of the respondent's management staff for 2010 (Exhibit R5). The full diaries for the years 2011 and 2012 were also produced on 3 March 2014. Relevant legislation 13The legislation relevant to this application is contained in provisions of the Retirement Villages Act and in the Contracts Review Act (NSW) 1980. Retirement Villages Act 14As noted above, the applicant seeks orders under section 123 of the Retirement Villages Act. This section relevantly provides: (1) A resident of a retirement village may apply directly to the Tribunal for an order in relation to any village contract (being a contract to which the resident is a party) that the resident considers to be harsh, oppressive, unconscionable or unjust. (2) The Tribunal has, and may exercise: (a) jurisdiction to determine any application made to it under this section, and (b) (Repealed) (c) the same jurisdiction as the Supreme Court, and all the powers and authority of the Supreme Court, in proceedings in which relief under the Contracts Review Act 1980 is sought in relation to a contract between an operator of a retirement village and a resident of the village. Note. Under the Contracts Review Act 1980, the Supreme Court may (among other things) refuse to enforce any or all of the provisions of the contract concerned or make an order declaring the contract void (in whole or in part) or varying (in whole or in part) any provision of the contract. It may also make orders with respect to any consequential or related matter, such as orders for the payment of money (whether or not by way of compensation) to a party to the contract and orders for the supply of services. 15"Village contract" is defined in s 4(1) of the Retirement Villages Act as including a "service contract", which is in turn defined as "a contract under which a resident of a retirement village is provided with general services of optional services in a village". Contracts Review Act 16Section 7(1) of the Contracts Review Act provides: (1) Where the Court finds a contract or a provision of a contract to have been unjust in the circumstances relating to the contract at the time it was made, the Court may, if it considers it just to do so, and for the purpose of avoiding as far as practicable an unjust consequence or result, do any one or more of the following: (a) it may decide to refuse to enforce any or all of the provisions of the contract, (b) it may make an order declaring the contract void, in whole or in part, (c) it may make an order varying, in whole or in part, any provision of the contract, (d) it may, in relation to a land instrument, make an order for or with respect to requiring the execution of an instrument that: (i) varies, or has the effect of varying, the provisions of the land instrument, or (ii) terminates or otherwise affects, or has the effect of terminating or otherwise affecting, the operation or effect of the land instrument. (2) Where the Court makes an order under subsection (1) (b) or (c), the declaration or variation shall have effect as from the time when the contract was made or (as to the whole or any part or parts of the contract) from some other time or times as specified in the order. (3) The operation of this section is subject to the provisions of section 19. 17 S 4(1) of the Contracts Review Act states that "unjust" includes "unconscionable, harsh or oppressive". 18S 9(1) of the Contracts Review Act sets out the matters to be considered in determining a claim that a contract or a provision of a contract is unjust. This section states: (1)In determining whether a contract or a provision of a contract is unjust in the circumstances relating to the contract at the time it was made, the Court shall have regard to the public interest and to all the circumstances of the case, including such consequences or results as those arising in the event of: (a) compliance with any or all of the provisions of the contract, or (b) non-compliance with, or contravention of, any or all of the provisions of the contract. (2) Without in any way affecting the generality of subsection (1), the matters to which the Court shall have regard shall, to the extent that they are relevant to the circumstances, include the following: (a) whether or not there was any material inequality in bargaining power between the parties to the contract, (b) whether or not prior to or at the time the contract was made its provisions were the subject of negotiation, (c) whether or not it was reasonably practicable for the party seeking relief under this Act to negotiate for the alteration of or to reject any of the provisions of the contract, (d) whether or not any provisions of the contract impose conditions which are unreasonably difficult to comply with or not reasonably necessary for the protection of the legitimate interests of any party to the contract, (e) whether or not: (i) any party to the contract (other than a corporation) was not reasonably able to protect his or her interests, or (ii) any person who represented any of the parties to the contract was not reasonably able to protect the interests of any party whom he or she represented, because of his or her age or the state of his or her physical or mental capacity, (f) the relative economic circumstances, educational background and literacy of: (i) the parties to the contract (other than a corporation), and (ii) any person who represented any of the parties to the contract, (g) where the contract is wholly or partly in writing, the physical form of the contract, and the intelligibility of the language in which it is expressed, (h) whether or not and when independent legal or other expert advice was obtained by the party seeking relief under this Act, (i) the extent (if any) to which the provisions of the contract and their legal and practical effect were accurately explained by any person to the party seeking relief under this Act, and whether or not that party understood the provisions and their effect, (j) whether any undue influence, unfair pressure or unfair tactics were exerted on or used against the party seeking relief under this Act: (i) by any other party to the contract, (ii) by any person acting or appearing or purporting to act for or on behalf of any other party to the contract, or (iii) by any person to the knowledge (at the time the contract was made) of any other party to the contract or of any person acting or appearing or purporting to act for or on behalf of any other party to the contract, (k) the conduct of the parties to the proceedings in relation to similar contracts or courses of dealing to which any of them has been a party, and (l) the commercial or other setting, purpose and effect of the contract. (3) For the purposes of subsection (2), a person shall be deemed to have represented a party to a contract if the person represented the party, or assisted the party to a significant degree, in negotiations prior to or at the time the contract was made. (4) In determining whether a contract or a provision of a contract is unjust, the Court shall not have regard to any injustice arising from circumstances that were not reasonably foreseeable at the time the contract was made. (5) In determining whether it is just to grant relief in respect of a contract or a provision of a contract that is found to be unjust, the Court may have regard to the conduct of the parties to the proceedings in relation to the performance of the contract since it was made. 19S 19 of the Contracts Review Act relevantly states that "an order made under section 7 (1) (b) or (c) has no effect in relation to a contract so far as the contract is constituted by a land instrument that is registered under the Real Property Act 1900". A "land instrument" is defined in s 4(1) as "an instrument that transfers title to land, creates an estate or interest in land or is a dealing within the meaning of the Real Property Act 1900". Issues 20The issues to be determined in this matter are: Does the Tribunal have the power to declare void the Charge in favour of the respondent which is registered on the title of the applicant's property or the Medical Authority signed by the applicant? Does the Tribunal have the power to declare void the entire Deed or alternatively Clauses 26 and 27(b) of the Deed? If so, is the Charge and/or entire Deed (or Clauses 26 and 27(b) of the Deed) unjust in the circumstances relating to the Deed at the time it was entered into on 7 October 2008? If so, should the Charge and/or entire Deed (or Clauses 26 and 27(b) of the Deed) be declared void? Findings and reasons 21In making a decision in relation to the application, I have considered the evidence and submissions of the parties. I have considered each of the issues in turn. Does the Tribunal have jurisdiction to declare void the Charge in favour of the respondent which is registered on the title of the applicant's property or the Medical Authority signed by the applicant? 22I find that the applicant executed the Charge on 7 October 2008. I am satisfied that the Deed has been registered with the Registrar General and recorded as an encumbrance on the applicant's certificate of title. The Charge is a "land instrument" as defined in s 4(1) of the Contracts Review Act. 23Pursuant to ss 7(3) and 19(1) of the Contracts Review Act, an order made under s 7(1)(b) and (c) has no effect in relation to a contract insofar as the contract is constituted by a land instrument registered under the Real Property Act (NSW) 1900. This means that an order declaring the Charge to be void cannot be effective. 24Furthermore, under s 123 of the Retirement Villages Act, the Tribunal may only make orders in respect of village contracts. I am not satisfied that the Charge constitutes a village contract. The Tribunal therefore has no power to declare the Charge void. 25In relation to the Medical Authority, I am not satisfied that the Authority is a village contract as defined in s 4(1) of the Retirement Villages Act. The Tribunal therefore has no power to declare the Authority void under section 123 of the Retirement Villages Act. In any event, if the Medical Authority does amount to a power of attorney, then it is void because of the operation of section 64(2) of the Retirement Villages Act Does the Tribunal have the power to declare void the entire Deed or alternatively Clauses 26 and 27(b) of the Deed? 26I am satisfied that the Deed was executed into on 7 October 2008. I am further satisfied that the Deed constitutes a services contract and therefore a village contract within the meaning of section 4 of the Retirement Villages Act. Under s 123 of the Retirement Villages Act, the Tribunal may make orders in respect of village contracts. The Tribunal therefore has power to deal with the application insofar as orders are sought declaring void all or certain clauses of the Deed. Is the entire Deed (or are Clauses 26 and 27(b) of the Deed) unjust in the circumstances relating to the Deed at the time it was entered into on 7 October 2008? 27The onus is on the applicant to establish the basis for the orders sought. This means that she must establish that the Deed is (or Clauses 26 and 27(b) thereof are) unjust in the circumstances relating to the Deed as at 7 October 2008. 28In West v AGC (Advances) Ltd (1986) 5 NSWLR 610 (CA), McHugh JA, with whom Hope JA agreed, noted at 621 that a contract may be unjust because its terms, consequences or effects are unjust ("substantive injustice") or because the methods used to make the contract were unfair ("procedural injustice"). McHugh JA stated that "In most unjust contracts will be the product of both procedural and substantive injustice". 29In summary, the applicant claims that the Deed is unjust because: She was told by a representative of the respondent that she would be "cared for" if she entered Mountainview Retreat Retirement Village. The Disclosure Statement the respondent gave to her was misleading as to which facilities and services are provided by the respondent and which are provided by the Owners Corporation. Because the Disclosure Statement was misleading, the reasonableness of the charges under the Deed could not be assessed. She was not informed prior to signing the Deed that services and facilities referred to in the Disclosure Statement were provided by the Owners Corporation and not the respondent, that most of the services referred to were either not provided by the respondent or were only provided on a minimal basis and that there were conditions in the development consent for the village with which the respondent had not complied. She would not have entered into the Deed and executed the Charge if she had known the true situation in relation to the provision of services. The Deed is poorly drafted and difficult to understand. There are serious doubts about whether the retirement village is being operated in accordance with the letter and the spirit of the legislation and in the best interests of the residents. There is no provision of nursing services, no provision of domiciliary services and the provision of services is limited to access to certain rooms in the village. In accordance with Clause 26 she cannot sell her apartment without the purchaser signing a deed containing the same excessive charges, annexed to which is a misleading Disclosure Statement. The deferred fee is grossly excessive having regard to the limited services and facilities provided by the respondent and having regard to the services which were to be provided under the conditions of the development consent. Under Clause 27 the respondent has the power to appoint a valuer to determine the market value of the property and is entitled to require the payment of the deferred fee based on market value rather than on the price actually obtained. There are serious issues about the budget and the way in which the village's accounts are audited. 30The applicant claims that both procedural and substantive injustice affects the Deed. I have considered whether the evidence provided by the parties supports the applicant's claim in this regard. I make the following findings of fact in relation to the circumstances surrounding the signing of the Deed. 31I find that at the time the applicant executed the Deed she was 60 years of age. I further find that the applicant has previously been employed in a position in a bank, has taught and has operated her own events organisation business. The applicant's evidence indicated that she was familiar with strata title. Her evidence was that she was able to read and understand the Deed. While the applicant had undergone shoulder surgery in the period prior to executing the Deed, there is no evidence that she was suffering any cognitive incapacity at that time. Further, I am not satisfied that she was suffering any significant physical incapacity at that time, as she was able to personally inspect the village, enter into discussions with village staff and with her own adviser and undertake such activities as the collection of contract documents from the vendor's representative. While I note the applicant's assertion that she was told she would be "cared for", I am not satisfied that the applicant understood such a statement to mean that she was buying into something other than a self-care retirement village. 32I find that in accordance with s 18 of the Retirement Villages Act and Clause 9 of the Retirement Village Regulation 2000, as in force at the date the Deed was executed, the applicant was given a Disclosure Statement in the prescribed form. I note that the applicant was given two versions of the Disclosure Statement, one by the agent for the vendors of the unit she purchased and the other annexed to the Deed. While there are differences between the two versions, they are slight and not relevant to the specific issues of concern in this application. The Disclosure Statement clearly identifies the deferred fee and its method of calculation. I note that under cross-examination the applicant stated that she read and understood the information about the deferred fee which was contained in the Disclosure Statement. 33I find that on 29 August 2008, the applicant collected proposed contractual documents from the vendor's representative, Coleman Greig, solicitors, including a copy of the then Office of Fair Trading's booklet titled "Retirement Village Living". Provision of this booklet to the applicant was in accordance with s 19 of the Retirement Villages Act as was then in force. Page 24 of that booklet refers to deferred fees under the heading "Fees and charges upon termination", giving an example of a deferred fee similar to the deferred fee provided for in Clause 27(b) of the Deed. 34I find that the applicant obtained the advice of a licensed conveyancer, Ms Carol Orr of Access Conveyancing Services, whom the applicant chose because of the recommendation of the agent the applicant used to sell her previous property. According to the applicant's evidence, she used Ms Orr's services because she was experienced in retirement village contracts. There is no evidence that Ms Orr had any connection to the respondent or that the respondent in any way influenced the applicant's choice of adviser. 35In her affidavit, Ms Orr states that she has had over 40 years of experience in real estate, including acting on many transactions for clients purchasing units in retirement villages. She further states that she met with the applicant on 15 August 2008, discussed with her the proposed purchase and advised her regarding the terms and conditions of sale. Ms Orr also states that she advised the applicant that she would be entering into a Deed for the Provision of Services and that a Charge would be registered on title following settlement. Ms Orr states that the applicant "appeared to have a good understanding of the proposed transaction and of the obligations being undertaken by her in entering into the Contract". 36Ms Orr was not required for cross-examination. On this basis, I accept her affidavit as evidence of the content of her discussion with the applicant and of her opinion of the applicant's understanding of the contract. 37I find that in a letter dated 19 August 2008 (Annexure A to Ms Orr's affidavit), Ms Orr relevantly advised the applicant as follows: 10. We also note a Charge in favour of the Management Company is to be registered in priority to any Mortgage and we note you are making inquiries with your incoming Mortgagee as to whether it will accept a Charge in priority to its mortgage. We confirm our advices that we are of the opinion the Bank will not agree to this. ... 14. Special Condition 6 states that you are to enter into a Deed for Provision of Services and hand a copy to the Manager of the Village signed together with a signed medical authority in the form annexed to the Contract. 16. Special Condition 35 states that the Vendor will provide you with a Deed for the Provision of Services... You will also have to provide your Purchaser with this Deed at your Expense if you sell the property. 17. Special Condition 36 refers to the Charge you are required to enter into. We note that you are providing the incoming Mortgagee with a copy of this condition for approval as noted above. ... 19. A copy of the Deed for Provision of Services is annexed and we have discussed this with you also... 20. On sale of the property, all costs in relation to the release of the Charge are payable by you. 21. A fortnightly management service is payable which will be increased annually by CPI. At no time is the fee to be less than the previous year... 22. On sale of the property a deferred fee will be payable to the Manager equal to 2 ½ % per annum of the sale price or the market value whichever is greater accruing on a daily basis from the date of purchase of the property by you until you vacate the property, but will not be payable for any period in excess of twelve (12) years prior to the date you permanently vacate the premises. This fee is payable out of the proceeds of sale. 23. The cost of preparation of the Charge and Deed shall be born [sic] equally by the owner and the manager. ... 25. By-laws are attached to the Contract. These are the rules of the complex and you should read same to familiarise yourself with them. ... 38I am satisfied that Ms Orr's letter to the applicant accurately reflects key elements of the contract to the applicant and specifically sets out key elements of the Deed, specifically in relation to the Charge to be registered on title and the payment of a deferred fee. I am satisfied that this advice was given to the applicant in a manner which she could understand and in sufficient time for her to seek further information and advice and/or to approach the respondent to in relation to any specific clauses of the Deed with which she disagreed. Whether the advice Ms Orr gave should have been more extensive or whether Ms Orr advised the applicant, as the applicant claims, that the contract of sale and the terms of other documents were not negotiable does not mean that the advice in relation to the specific issues concerning the operation and effect of the deferred fee and the Charge are incorrect. 39The applicant was not bound to accept Ms Orr's advice in relation to the non-negotiability of particular terms. The applicant had had direct discussions with staff of the operator and it was open to her to raise issues of concern with the operator prior to executing the Deed. Moreover, it was open to her not to purchase the unit if she was not satisfied with the conditions of the sale contract or the Deed. I am not satisfied that the respondent exerted any undue influence, applied unfair pressure or used unfair tactics to induce the applicant to purchase the unit and execute the Deed. Even if Ms Orr's advice to the applicant could arguably have been more comprehensive, it does not follow that the circumstances surrounding the Deed are affected by procedural injustice. 40I am not satisfied that the applicant had any less bargaining power than any other purchaser of a unit in a retirement village and I consider that she had more bargaining power than many such individuals because of her relatively young age as at the date of purchase and business background and experience. Overall, I am satisfied that the applicant was reasonably able to protect her own interests in the transaction. This conclusion is supported by the affidavit of Adrienne Lee Robinson, the agent for the vendor, who was not required for cross-examination. 41The applicant claims that the Disclosure Statement was misleading as to what facilities were provided by the respondent and what facilities were provided by the Owners Corporation. The Disclosure Statement refers to facilities at the village available for the use of the residents. I accept that the swimming pool and the visitors' parking are facilities controlled by the Owners Corporation. I also accept that the activities which take place within areas such as the activities room and the arts and crafts room are run by the residents. However, I am not satisfied that the failure to specify this in the Disclosure Statement is misleading. The Disclosure Statement merely notes the facilities available for use by residents. It does not state that all of the facilities are controlled by the operator. Nor does it suggest that the operator organises any activities which take place in those facilities. Further, in relation the provision of services, the Disclosure Statement makes it clear that in a strata scheme, those services may be provided by the owners corporation rather than by the operator. 42I note the applicant's evidence that the Council development consent requires the operator to provide some services and facilities which are not provided. While the Disclosure Statement indicates that there are no additional services and facilities which are required to be provided, I am not satisfied that the applicant was misled by being given to believe that she would be receiving services that were not in fact going to be provided. I do not consider that the applicant was prejudiced in relation to entering into the contract by being told that she would not be provided with additional services. Overall, I am not satisfied that the applicant was relevantly misled by the Disclosure Statement. 43The applicant had experience as an owner within a strata scheme previously and I am satisfied that she was aware of the responsibilities of owners corporations. I am satisfied that the Disclosure Statement and the Deed are relatively easy to read and not confusing to a person of the applicant's background and skills. I am satisfied that the applicant was aware that she was buying into a self-care village where services would be limited. I note the applicant's assertion that she would not have executed the Deed had she been aware that the Owners Corporation was responsible for the provision of a number of the facilities. I am not satisfied that I can place any weight on the applicant's assertion in this regard. It is self-serving and not corroborated by any persuasive evidence. 44In summary, I am satisfied that at the time the Deed was executed, the applicant was not suffering from any cognitive or physical impairment which affected her ability to understand the details of the contract she was entering into. I am satisfied that the Deed and the Disclosure Statement are expressed in sufficiently clear language for a person of the applicant's background to understand. I am satisfied that she read and understood the provisions of the Deed. I am satisfied that the applicant was familiar with the operation of strata schemes. I am satisfied that the applicant was given the Office of Fair Trading's Retirement Villages booklet. I am satisfied that the applicant obtained independent advice and that she was given accurate advice about the provisions of the Deed and about the effect of the Charge. 45I am not satisfied that the applicant would not have executed the Deed if she had realised that some of the facilities or services referred to in the Disclosure Statement were provided by the owners corporation. I am not satisfied that any pressure was placed on the applicant to purchase the unit or to execute the Deed. I am satisfied that the requirements of the retirement villages legislation were complied with. Overall, I am not satisfied that the circumstances surrounding the execution of the Deed demonstrate any procedural injustice. 46I have considered whether the provisions of the Deed are substantively unjust. Central to this issue is the role of the deferred fee. In relation to this, I note paragraph 138 of Mr Dalgliesh's written submission, in which he quotes the Department of Fair Trading's Final Report of its "Review of Regulation of the NSW Retirement Village Industry". Deferred fees are dealt with at paragraph 4.3.3. The report concluded: The committee does not accept that legislative restrictions on deferred fees are necessary. If the purpose and method of calculating deferred fees is clearly explained to prospective residents they have the choice to enter into a contract on that basis or look elsewhere...The level and duration of deferred fees should be open to competition among village operators. ... Village operators argue that such charges are necessary to maintain their involvement in a retirement village. The committee accepts this argument. Without an ongoing profit source some village operators may withdraw from the market. If a village operator was required to make all of their profit from the original sale of units the price they would need to set may be above the ability of many older people to pay. This could result in a dramatic decline in the level of retirement village development. 47I accept that deferred fees will generally have the effect of reducing the entry cost of strata title retirement village units and I accept the submission made on behalf of the respondent that it is logical that a unit to which a deferred fee is attached will command a lower price than a unit in respect of which there is no such fee. The lower price makes it easier for a person whose borrowing power is low to purchase a unit. The affidavit of Jo-Ann Coad includes part of a report by Nelson Partners Australia, registered valuers, which support such a conclusion. 48A person such as the applicant who purchases a unit in a strata title retirement village gains an advantage at the time of purchase, because of the lower price attracted by a unit subject to a deferred fee. Having obtained the benefit of a lower price at the time of purchase, the purchaser then pays for that on the way out in the form of the deferred fee. I am not satisfied that such an arrangement is unjust, as it assists retirees to purchase a unit in a retirement village at an affordable price. 49In this case, I am satisfied that there is another reason why the deferred fee is not unjust. The evidence demonstrates that the respondent has operated at a deficit since 2002. While there may be questions about the details of the accounts, I am satisfied that the recurrent charges are below the cost of providing services. Under the Retirement Village Act, such deficits must be made good by the operator and I am satisfied that the deferred fee allows the respondent to fund the deficits and provide a return on capital and a profit incentive. I am satisfied that an arrangement by which residents can effectively defer paying the full cost of services provided to them until they have the funds available from the settlement of the sale of their unit to a new purchaser is of benefit to residents. 50The degree of benefit to residents depends on the nature and level of services provided. The applicant has argued that there is a low level of service provided by the respondent and that the bulk of facilities and services are provided either by the owners corporation or by the residents. As noted above, the Disclosure Statement makes it clear that some services would be provided by the owners corporation rather than by the operator. As noted above, the respondent operates a self-care village and I accept that services and facilities are therefore more limited than they would be in a village where a higher level of care is provided. 51However, I am satisfied on the basis of the affidavit of Lynette Purkis, the manager of the village, that facilities and services are provided which are consistent with those referred to in the Deed and the Disclosure Statement. I accept that the provision of services in the form of diary extracts Ms Purkis refers to in her affidavit do not reflect the totality of services provided over a particular period, but are examples only. These services include social activities and outings, the delivery of meals to units, monitoring of the emergency alarm system, the arrangement of some domestic services upon request, security, general support and assistance, and arrangements for the provision of home nursing and emergency medical services. I am not satisfied that the deferred fee is excessive taking into account the services provided. 52I am not satisfied that the power given to the respondent under Clause 27 to appoint a valuer to determine the market value of the property or the respondent's entitlement to require the payment of the deferred fee based on market value rather than on the sale price operate unjustly. I am satisfied that those provisions are reasonably necessary to protect the respondent's legitimate business interests, by preventing the sale of the property to, for example, a family member or friend at a below market value price thereby subverting the purpose of the deferred fee. 53I note the applicant's concerns about the operation of the village, the budget and the way in which the village's accounts are audited. However, I am not satisfied that the applicant's concerns in this regard are relevant to whether the Deed is unjust in the circumstances relating to the contract at the time it was made. 54In summary, I am not satisfied that the provisions of the Deed in general or the deferred fee in particular are substantively unjust. I am satisfied that the deferred fee is reasonably necessary for the protection of the respondent's legitimate interests in that it covers deficits in operating costs, provides a return on capital and a profit incentive. Further, by keeping down the purchase price of a strata retirement village unit, it makes retirement village living more accessible and also allows residents to defer paying the full cost of services and facilities provided to them until they dispose of their unit. 55I consider it in the public interest for retirement village living to be as accessible as possible for retirees on fixed incomes. I am satisfied that the imposition of a deferred fee is a legitimate method of achieving this outcome. In the absence of such a fee, the continued viability of an operator's business would depend on the ability to obtain income from elsewhere. This is likely to lead to the imposition of ingoing contributions, higher recurrent charges or reduced services. I am satisfied that compliance with the Deed in general and the payment of the deferred fee in particular is in the public interest. I am not satisfied that compliance with the provisions of the Deed will lead to injustice. Conclusion 56In summary, having regard to the public interest and the circumstances of the case, I am not satisfied on the balance of probabilities that the Deed in general or specific provisions of the Deed in particular are affected by either procedural or substantive injustice. As I am not satisfied that the contract between the parties is unjust in the circumstances relating to the contract at the time it was made, I have dismissed the application. K Rosser Senior Member Civil and Administrative Tribunal of New South Wales 14 May 2014 I hereby certify that this is a true and accurate record of the reasons for decision of the New South Wales Civil and Administrative Tribunal. Registrar ********** I hereby certify that this is a true and accurate record of the reasons for decision of the Civil and Administrative Tribunal of New South Wales. Registrar DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 31 July 2014