Civil and Administrative Tribunal New South Wales Medium Neutral Citation: Sakkara Investment Holding Pty Ltd atf Sakkara Landings Trust v Residents Committee The Landings [2017] NSWCATCD 29 Hearing dates: 13 and 14 April 2016; 15 September 2016; 14 October 2016 Decision date: 31 May 2017 Jurisdiction: Consumer and Commercial Division Before: G Meadows, Senior Member Decision: 1 Pursuant to section 115(2)(d) of the Retirement Villages Act 1999 (RV Act) I order that the expenditure is to be as itemised in the enclosed proposed annual budget annexed as Attachment 7 for the financial year commencing 1 July 2015 and ending 30 June 2016 to a total of $ $1,851,072.00 2 Pursuant to section 108(2) of the RV Act I order that the proposed variation to the recurrent charges payable by the residents be set at $701.16 per dwelling per month Legislation Cited: Retirement Villages Act 1999 Category: Principal judgment Parties: Sakkara Investment Holding Pty Ltd atf Sakkara Landings Trust—applicant; Residents Committee The Landings—respondent File Number(s): RV 15/66111 Publication restriction: Nil Table of Contents APPLICATION BACKGROUND EVIDENCE Documentary Evidence Applicant's Evidence Statement of Charles Gordon Cupit Statements of Suzanne Carmel Lawrence Statement of 18 February 2016 Statement of 25 February 2016 Statement of 08 April 2016 Statement of 31 August 2016 Statements of Catherine Jane Montgomery Statement of 17 February 2016 Statement in Reply of 08 April 2016 Statements of David Peter Bedingfield Statement of 17 February 2016 Statement in Reply of 08 April 2016 Statement of Robert Stanley Jones 25 February 2016 Statement in Reply of Alan Dempsey dated 08 April 2016 Statement of Alex Marvelly dated 08 April 2016 Mitchell Burge Report of 17 September 2014 Mitchell Burge Report of 08 April 2016 Statement of Jerram Chippindale dated 08 April 2016 Respondent's Evidence Statements of Andrew Richard Burgess Affidavit of 23 March 2016 Statement of 29 August 2016 Statement of 08 September 2016 Statements of Neil Leybourne Smith Statement of 23 March 2016 LEGISLATIVE FRAMEWORK REGULATING RETIREMENT VILLAGES CONSIDERATION AND DETERMINATION Jurisdiction Preliminary "to facilitate resident input, where desired by residents, into the management of retirement villages" Adequate Provision of Information Capital Repairs, Capital Maintenance and Capital Replacement Item 6: Wages Administration Item 7: Wages Maintenance Item 12: Wages Replacement Staff Item 13: Recruitment Temporary Employees Item 18: Insurances Item 37: Tradesman Repairs Item 45: Security, Annual Fire and Safety Audit Item 46: Temper Valve Compliance Item 48: Electricity Items 63 and 64: Air Conditioning Maintenance Contract and Air Conditioning R&M Materials Item 69: Optional Services Recouped Item 70: Capital Works Fund Attachment 1: FY16-3 Proposed Budget Attachment 2: Items in dispute by budget version (variations compared to FY15) Attachment 3: Items in dispute by budget version showing variation – compared to FY15 proposed budget Attachment 4: Items in dispute by budget version showing variation – compared to FY15 actual budget Attachment 5: proposed budgets for item 37: Tradesman Repairs. Attachment 6: Parties' Submissions Attachment 7: Sakkara Budget 01/07/2015 to 30/06/2016 reasons for decision APPLICATION 1. In these reasons I refer to the applicant as the operator, and to the respondent as the residents. It will be necessary to refer frequently to members of the residents committee or its sub-committees, as they participated in meetings and correspondence with representatives of the applicant. I will refer to those members from time to time as "the residents committee" by way of shorthand only, without identifying the individuals actually involved at any particular stage, unless it is necessary to do so. That is, frequently a reference to "the residents committee" below will in fact refer to one or more representatives of the residents committee. 2. The application was filed by the operator on 10 December 2015 seeking two orders: 1. Under section 115(2)(d) of the Retirement Villages Act 1999 (RV Act) an order that the expenditure is to be as itemised in the enclosed proposed annual budget annexed to the Application and marked Annexure K for the financial year commencing 1 July 2015 and ending 30 June 2016 to a total of $2,081,629: see Attachment 1. 2. Under section 108(2) of the RV Act an order that the proposed variation to the recurrent charges payable by the residents be set at $768.08 per dwelling per month. BACKGROUND 1. There is a lengthy history of litigation in this Tribunal between these parties, principally in relation to budget disputes. Some of that history is set out in Mr Bedingfield's affidavit dated 17 February 2016 at paragraphs 14 to 40. I consider it is not necessary to set this history out in any detail but it will be necessary to consider at least one of the previous decisions in the Tribunal. That decision is RV 14/54814 Sakkara Investment Holdings Pty Ltd ATF Sakkara Landings v Residents Committee, The Landings, which is a decision of Senior Member J Smith in relation to the proposed annual budget for 01 July 2014 to 30 June 2015 ("the FY15 decision"). That decision contains one item which has caused considerable controversy between the parties in relation to the proposed budget for 01 July 2015 to 30 June 2016 ("the FY16 budget"). 2. However, at this stage it will be helpful to set out the nature of the current controversies in relation to the FY16 budget, narrowing the issues down to the specific line items remaining in dispute. It will also be helpful to annex the three versions of the FY16 budget produced during the negotiations between the parties prior to the current proceedings being commenced. 3. The Statement of Suzanne Carmel Lawrence (the "Operations Manager" as at the date of these hearings) dated 18 February 2016 contains three versions of the FY16 budget (that is, the proposed budget) attached at "SL1". The three versions are attached to these reasons. I will refer to each version respectively as FY16-1, FY16-2 and FY16-3. 4. The particular disputes between the parties relate to 13 line items in those versions, being: No. Item No. Line Item 1 6 Wages Administration 2 7 Wages Maintenance 3 12 Wages Replacement Staff 4 13 Recruitment Temporary Staff 5 18 Insurance – General 6 37 Tradesman Repairs 7 45 Annual Fire Safety Certificate 8 46 Temper/Mixing Valve Compliance 9 48 Electricity 10 63 Air Conditioning Maintenance Contract 11 64 Air Conditioning R&M Materials 12 69 Optional Services Recouped 13 70 Contribution to Capital Works Fund It should be noted in particular in the three versions of the FY16 budget attached that Item 70 "Contribution to Capital Works Fund" appears twice in the budgets, first in the "Income" section and again in the "Expenditure Section". It is this item which relates to the FY15 decision of Senior Member Smith. 1. The Tribunal was handed a document, subsequently marked "MFI1", being a useful summary of the changes in each version related to these particular items. This is reproduced (with some minor reformatting for clarity) as Attachment 1 below. 2. I refer to these 13 items as "the disputed items": it is necessary to note that there are other items in dispute, or which were in dispute, between the parties which are not included in this application and should not be included in the category of "the disputed items" in these reasons. 3. I provide the following summary of the monetary dispute between the parties, taken from the Respondent's final submissions: Item Applicant Claim Respondent Claim Annual operating expense $2,008,016.00 $1,624,486.00 deduct conceded ($10,000.00) $1,998,016.00 deduct irrigation subsidy ($8,152.00) ($8,152.00) deduct interest ($859.00) ($9,011.00) ($859.00) ($9,011.00) Total Recurrent Charges Proposed $1,989,005.00 $1,615,475.00 Item Applicant Claim Respondent Claim FY15 FY16 Agrees Disputes Wages Administration - item 6 $289,413.00 $434,878.00 $304,878.00 $130,000.00 Wages Maintenance - item 7 $198,343.00 $222,227.00 $182,227.00 $40,000.00 Wages Replacement - item 12 $9,959.00 $13,547.00 $9,959.00* $3,591.00 Recruitment Temporary Staff - item 13 $0.00 $28,644.00 $0.00 $28,644.00 Insurance - item 18 $103,862.00 $109,318.00 $105,276.00 $4,042.00 Tradesman Repairs - item 37 $39,274.00 $78,913.00 $41,237.00 $37,676.00 Annual Fire Safety Certificates - item 45 $1,382.00 $24,309.00 $9,088.00 $15,221.00 Temper Mixing Valves - item 46 $84.00 $29,718.00 $3,517.00 $26,201.00 Electricity - item 48 $114,627.00 $101,038.00 $88,023.00 $23,015.00 Air Conditioning Maintenance Contract - item 63 $31,420.00 $35,882.00 $22,597.00 $13,285.00 Air Conditioning R & M Materials - item 64 $34,614.00 $68,225.00 $38,225.00 $30,000.00 Optional Services Recouped - item 69 ($30,694.00) ($23,299.00) ($40,731.00) $17,432.00 Contribution to Capital Works - item 70 $174,401.00 $73,614.00 $17,977.00 $55,637.00 Totals $966,685.00 $1,197,014.00 $782,273.00 $424,744.00 The respondent inserted the amount of $0.00 which does not make sense. I have changed this to the FY15 amount. EVIDENCE 1. No doubt both parties will be concerned at the length of these reasons and the consequent delay in publishing them. 2. It may be appropriate to note that Tribunal Members are encouraged to set out clearly the findings of fact made by the Member and to relate those findings to the evidence, showing how any dispute has been resolved. Apart from that, Members are specifically encouraged not to summarise every witness's evidence. 3. I have decided it is appropriate to set out the evidence in some detail, for the following reasons: 1. The extremely lengthy and complex history of litigation in the relatively short life of The Landings; 2. The detailed and particular nature of the evidence and the marked lack of agreement between the witnesses for one party and those of the other party; 3. The varied nature of the evidence, including evidence from residents, the operator, employed staff of the operator, external consultants and references to previous decisions (and the effects of those decisions) of this Tribunal and the Supreme Court; 4. The fact that this is a retirement village, a large retirement village with a high level of interest and concern from both residents (or some of them) and the operator, staff and contractors; and 5. Both parties and quite a number of the individual witnesses have previous experience in providing evidence for Tribunal hearings, and both parties have been legally represented by their current solicitors for some time, including in previous Tribunal proceedings. If both witnesses and their legal representatives consider it was appropriate to include all the material contained in their statements, they are due the respect to acknowledge that effort. 1. As will become clear below, some, or even most, of the individual witness statements contain much material which goes beyond a simple factual presentation of relevant evidence. There is a lot of material setting out the witness's opinions, experiences and emotions about living or working in The Landings. Rather than rejecting these portions of the statements as "merely opinion" or as irrelevant, factors which would normally leading to such material being removed, I have found it is in fact necessary to include and to make findings in relation to that material, in coming to my decisions about the actual issues contained in the formal application. I hope I have made this clear in what follows. 2. In my opinion it will be fair to both parties and all interested persons to set out the nature of the evidence in this one document, allowing easy referral to that evidence when I come to making particular findings. Documentary Evidence Applicant's Evidence 1. The Applicant's evidence consisted of a large bundle of statements, most with numerous attachments, as follows: 10 Alan Dempsey Statement 08 April 2016 12 Alex Marvelly Statement 08 April 2016 2 Catherine Jane Montgomery Statement 17 February 2016 9 Catherine Jane Montgomery Statement 08 April 2016 1 Charles Gordon Cupit Statement 12 February 2016 3 David Peter Bedingfield Statement 17 February 2016 7 David Peter Bedingfield Statement 08 April 2016 8 Jerram Chippindale Statement 08 April 2016 6 Robert Stanley Jones Statement 25 February 2016 4 Suzanne Carmel Lawrence Statement 18 February 2016 5 Suzanne Carmel Lawrence Statement 25 February 2016 11 Suzanne Carmel Lawrence Statement 08 April 2016 13 Suzanne Carmel Lawrence Statement 31 August 2016 Statement of Charles Gordon Cupit 1. Mr Cupit is the principal of Bedford CA which is the applicant's external accountant. In his statement, Mr Cupit sets out his involvement in the preparation of the proposed FY16 budget which included several "pre-budget meetings" with the residents committee. 2. Mr Cupit purports to present himself as "an impartial third party" and he offers the opinion that: "6. … At that time [22 December 2014], I believed (and today I still believe) that the parties' poor working relationship was the real reason why proposed budgets have not been approved in the past, rather than anything contained in past budgets per se. …" 1. Mr Cupit refers to meetings with the residents committee and "Sakkara" (obviously a reference to one or more individuals representing the operator) on 22 December 2014, 14 January 2015 and 09 March 2015. He asserts that the meetings were arranged with the intention of discussing an agreed agenda which, among other issues, included how the parties could obtain an approved FY16 budget. However, that particular matter was not achieved, because, as Mr Cupit states in his statement: "12. These meetings were set with the intention of discussing an agreed agenda, but would typically deteriorate to a discussion of historical issues (eg past defects, which had all been rectified in the previous financial year and so were not relevant to any expenditure in FY 16). 13. I formed the view that the parties could not move forward unless the Residents Committee could let go of 'historical legacies', which they seemed unable to do. I then focused on assisting Sakkara to prepare the proposed FY 16 budget." This gives the appearance that Mr Cupit thereafter ceased attempting to improve the working relationship and restricted himself to preparing the proposed budget, although it is not necessary to make any such finding. 1. Mr Cupit provides a succinct description of his methodology, which I also extract: "15. The budget is an estimate of future expenditure at The Landings. Where the exact cost of future expenditure was known (eg there is a fixed fee for providing 12 months of services) I, or my staff working under my supervision, inserted that figure in the line item. Where the exact cost was unknown, various methodologies were used to estimate the amount of the expense. 16. One methodology commonly adopted was to extrapolate the most recent eight months of expenditure from the accounting records of the current financial year (that is, from 1 July 2015) to arrive at an annualised figure. That is: (Cost incurred over last eight months/8) x 12 = projected cost "17. Where appropriate, I also increased that projected cost by the Consumer Price Index (CPI). "18. This is standard industry practice, and uses past expenditure as an indication of future expenditure. In the absence of accurate detail of future expenditure this methodology ensures that estimates of future expenditure are as accurate as possible. "19. Ms Lawrence and Tracey Dignam (who was the Village Manager at the time) collated a folder containing the proposed FY 16 budget, my calculations for each line item, and any supporting material upon which these calculations were based." 1. The results of that work was the first budget (FY16-1) which was presented to the residents committee on 30 April 2015, following a "budget presentation" (Ms Lawrence's phrase) to the residents in mid-April. 2. Mr Cupit then provides his account of the budget negotiations. The first meeting for that purpose occurred on 05 May 2015. Mr Cupit suggests this discussion "kept reverting to a discussion about historical issues." In response to an indication from the residents committee that they desired to have a better working relationship with the operator, Mr Cupit "explained to the Residents Committee that I believed that such a situation would practically only occur if future issues could be discussed without constant reference to these historical issues". The meeting concluded with a request for additional supporting information for certain line items in FY16-1 3. This meeting of 05 May 2015 discussed a number of issues of relevance at that time, including in relation to the selection of an auditor, the working relationship with Mr Cupit and especially, it appears from the notes at least, in relation to the issues concerning the FY15 budget, then the subject of proceedings before the Tribunal. In relation to the FY16 budget, Mr Cupit advised the operator by email on 06 May 2015 as follows ("CC3"): "2016 Budget With respect to the 2016 I have 3 pages of notes/requests for additional information. Considering the fact they had not been consulted prior to delivery of the budget their requests are not unreasonable, (subject of course to how they receive the information we subsequently provide). They did give us the benefit of explaining their view of the costs so we at least understand what is the differential. Zoe will scan my notes and she and Sue [Lawrence] can work on compiling the information which is necessary in any case. There were no surprises and they actually provided a few sensible suggestions. They did the complain the budget as delivered was not compliant because in their view it was incomplete because we had not at the time of delivery obtained all the quotes necessary, and that they will be meeting with the residents on 27 May where they doubted the budget would be accepted etc." 1. Subsequently, Mr Cupit discussed with Mr Bedingfield by telephone a proposal that the operator may contribute to residents' levies in order to achieve an agreed budget for FY16. He states that Mr Bedingfield agreed to the approach in principle but that any such contribution would be conditional upon the parties agreeing to "a moratorium on litigation and resolving a number of outstanding items". The items are not identified. 2. Mr Cupit then spoke to Mr Burgess by telephone, during which call the meeting on 05 May was discussed and they agreed to form an agenda for a further meeting "about how to improve the working relationship between the parties by resolving past issues". On 15 May 2015 Mr Cupit sent an email to Mr Burgess, in which were listed eight outstanding items in dispute, which, Mr Cupit states, was then referred to as "the eight point agenda". 3. At "CC4" this email sets out the eight points as follows: "1. 2016 Budget to be approved June 2015. 2. 2015 Budget to run its course in NCAT, (final submissions having been made). 3. 2014 – current application before NCAT be set aside and dropped. 4. Defects rectification matters be set aside and dropped and both parties agree to abide by a proposed procedure; 5. There be a 12 month moratorium of listing any matters before NCAT until 1 July 2017, (to encourage the parties to negotiate any issues that arise). 6. Sakkara make good the $14,000, (approximately), deficit as at 30 June 13, (done). 7. Process for the appointment of an auditor for 2015 be agreed. 8. Settlement of correct amounts to be invoiced for 2012." As stated on the phone Sakkara is willing to contribute $100,000 towards the levies subject to agreeing items 1-7 above on Friday." 1. Mr Cupit then sets out his recollections of a number of meetings and discussions with the residents committee during May and June 2015. These meetings related not only to the FY16 budget, but also (and perhaps predominantly) to other issues included in the eight point agenda. In particular, Mr Cupit notes that at a meeting on 24 June 2015 the primary focus was on the role of the Operations Manager. 2. Also at that meeting, the residents committee provided their own form of budget which was adopted to progress the negotiations. The form was stated to be updated on a line-by-line basis to reflect those negotiations. Mr Cupit provides the last version of that form in his possession, at "CC5". As I understand Mr Cupit's paragraph 38, the residents committee's form was used for negotiations after the other issues referred to in the previous paragraph above could not be agreed. 3. Mr Cupit then refers to correspondence between the residents committee and Mr Bedingfield, included at "CC6". Mr Cupit comments that he understood this correspondence to mean that the residents committee opposed the appointment of an Operations Manager (line item 6) on the basis that the position was not necessary to run The Landings. 4. Mr Cupit attended two further meetings with the residents committee. 5. On 29 June 2015, at a meeting with Mr Burgess and Mr Agnew, Mr Cupit states that his recollection is that several FY16 budget issues were resolved and that "each side" left with a list of actions required to be undertaken to achieve an approved budget. Mr Cupit does not list either the resolved items or the action items. 6. On 27 July 2015 Mr Cupit attended a meeting together with Ms Lawrence and Ms Montgomery (by then appointed as Village Manager) with Mr Burgess and Mr Fletcher. Mr Cupit states that when that meeting concluded he believed "that all expenditures other than the Operations Manager wage were capable of being resolved on an 'en globo' basis". He refers also to particular negotiations in relation to the Operations Manager wage and contract. He recalls that the operator stated it could not agree to the proposals from the residents committee because it considered the position was required and it had already made the offer of a substantial contribution to the budget. 7. That was the last time Mr Cupit was involved in the budget negotiations for FY16. However, he notes that he received a letter from Mr Burgess dated 05 August 2015 (although Mr Cupit states the letter was received on 04 August 2015) which identified a number of line items as being in dispute "which was entirely contrary to my recollection of the outcome of our negotiations. Upon reading the letter it was apparent to me that — while the members I met with seemed genuinely motivated to approve a budget and let go of animosity towards Sakkara — the Residents Committee as a whole was not, and clearly the members I met with did not have the authority to change that position". 8. The remainder of Mr Cupit's statement provides submissions in relation to each of the disputed items the subject of this application. Statements of Suzanne Carmel Lawrence Statement of 18 February 2016 1. Ms Lawrence commences her statement with a brief indication of her employment background prior to joining The Landings, and her initial employment at The Landings as a "business analyst" in February 2014. She notes that her wage (except for a holiday relief period) was paid direct by Sakkara. I infer that this means that her wage, or salary, was not paid from residents' levies and therefore was not included in the FY14 and FY15 budget estimates. 2. Ms Lawrence states that Mr Bedingfield asked her to interview residents in relation to complaints received in relation to delays in addressing repair and rectification requests. She was to determine what improvements were required and to implement any necessary changes subject to the operator's approval. In addition, she was required to provide "general assistance" to the then Village Manager, Mr Deery. 3. Ms Lawrence states that during that early period she became familiar with the running of The Landings. She also notes that she was treated "impeccably" by the residents. 4. Between paragraphs 9 and about paragraph 38, Ms Lawrence discusses her review of The Landings operations, her opinions as to the root causes of various problems and in particular her early development of the proposal to split the role of the Village Manager into two separate roles, one being the Village Manager and the other the Operations Manager. 5. Ms Lawrence states at paragraph 5 that she joined Sakkara as a "business analyst". She states the Mr Bedingfield informed her that there had been complaints in relation to delays in addressing repair and rectification requests. She was requested to interview residents "and review The Landings' processes and procedures to determine what improvements ought to be made. I was then to implement these changes, subject to Sakkara's approval." 6. Then, in paragraph 10, Ms Lawrence states: "By about end March 2015, I concluded that there were some delays in actioning certain items. The cause of these delays was primarily the following: Mr Deery's workload being too large for a single person to manage; and The Landings having poor cash flow which caused delays in work being undertaken in a timely manner." 1. In this same portion of her statement, however, the primary focus is in relation to her allegations of poor treatment of her by the residents committee or at least some of the residents. "Poor treatment" is in fact too weak a term for her descriptions which amount to allegations of significant bullying and harassment. In describing this period, she also suggests that other people, particular Mr Deery and Ms Dignam, (previous Village Managers) were similarly treated and affected. She reports (by hearsay) various comments to her by those two people in relation to this harassment issue. 2. From paragraph 39 Ms Lawrence focusses on her role and responsibilities. As the role of the Operations Manager and the cost of employing an Operations Manager is, in my view, one of the main issues between the parties, I consider it is appropriate to set out Ms Lawrence's summary in detail. 3. Ms Lawrence states she works about 62.5 hours per working week, comprised of 10 hours at work and about 2 to 3 hours afterwards at home. 4. Ms Lawrence states at paragraph 40: "…, my main duties include: Managing the lease. During my time at The Landings it became apparent there was no one charged with purely managing the lease to ensure both the resident and the operator are fulfilling their responsibilities under the lease. Strategic operations. I am responsible for reviewing our maintenance program to determine the best and most cost effective methods of maintaining The Landings. For example, I review maintenance requests so Sakkara can arrange for single contractors to perform multiple maintenance works on a single day at a lower rate than sporadic attendances. I implement maintenance programs to minimise repair costs (eg I track equipment failures to determine whether reactive repairs or proactive replacement of all units is cheaper). Property inspections. I inspect all 220 properties each year (five properties per week) to ensure that the resident enjoys capital equipment of a quality and condition promised in the lease. On average each inspection takes two hours to complete and then additional time is spent preparing reports and actioning items. During these inspections, I: update photographic records of capital in Sakkara's assets register; confirm that all specifications reflect the quality promised under the lease – if not, I arrange repairs at Sakkara's cost (eg carpet wear and tear); identify any maintenance issues or safety hazards to be addressed (eg some residents install gardens that create tripping hazards); discuss the residents experiences and expectations of living at The Landings, in order to identify future improvements; and answer any questions that residents and their family members have about their lease and operations at The Landings. Independent living suitability assessments. The Landings is an independent living community with an ageing population of residents. Residents that are no longer suited to this arrangement are at risk and are more likely to harm other residents and employees. I manage ongoing assessments in order to address these risks. Where appropriate, I assist with relocations of residents by liaising with families and doctors. Disaster recovery planning. I prepare and implement safety procedures for events and natural disasters (eg action plans for black outs, evacuating residents if there is a bushfire in the adjacent national park). This extends to resident and staff training. Service contract review. I regularly review contracts to ensure residents receive optimal value for the fees they pay (eg by ensuring all services are being received). Garden management. I liaise with the Resident Gardening Committee and make arrangements on their behalf." 1. Under the heading "Developing the 2015/2016 financial year budget", Ms Lawrence summarises the continuing negotiations between about April 2015 until December 2015, in paragraphs 41 to 72. It is very difficult to summarise these paragraphs without simply producing a summary as long as the original, because Ms Lawrence's statement is detailed and succinct in these paragraphs. I make the following general points. 2. "SL1" is an important attachment as it contains each of the three versions of the budget presented to the residents and then "sub-attachments" in relation to each of the disputed line items, given the same numbers as the line item has in the proposed budgets, that is, items 6, 7, 12, 13, 18, 37, 45, 46, 48, 63, 64, 69 and 70 (as set out in "Attachment 1" below). As necessary, I will refer to these attachments as "SL1-6" and so on. 3. I will now summarise Ms Lawrence's statement in relation to the disputed items. Items 37, 63 and 64 – 'discrete items concept' 1. These three items are "tradesman repairs", "air conditioning maintenance contract" and "air conditioning r&m materials". The issue between the parties is that the residents committee considers these three items to be "capital replacement" items rather than "capital maintenance" items. Ms Lawrence states that their position is "based on a misinterpretation of the decision by Member Meadows in Smith v Sakkara Investment Holding Pty Ltd [2011] NSWCTTT 162". 2. Ms Lawrence states that she understands the residents committee's position is based on the principle that "anything that is a 'discrete item' (being anything that can be removed from equipment and replaced with a new part) is a capital replacement and payable by Sakkara". Ms Lawrence states that she has contacted the Office of Fair Trading and two other retirement villages and that they have not heard of the alleged legal principle. Also, Mr Cupit is stated to be unaware that Smith supports such a concept. 3. Ms Lawrence states that she (and presumably also the operator) regard the three items are capital maintenance. 4. Ms Lawrence then sets out the procedures adopted by Sakkara for reviewing items of expenditure to determine if they are repair, maintenance or replacement. This process used a process called the "Defect Identification Process" developed in consultation with the residents committee following a series of NCAT proceedings in 2015 in which these issues were "argued vigorously". This document is reproduced at "SL23". Item 6 – Wages Administration 1. This item is comprised of the total wages of the Village Manager, the Operations Manager, the Accountant, two Receptionists (making up together one full-time role) and the Social Coordinator. 2. At paragraphs 84 to 100, Ms Lawrence sets out in brief terms the duties of the above positions, submitting that they ensure the residents benefit by receiving high quality services and accommodation at the lowest possible levies. "CM13" (in Ms Montgomery's statement) includes the statements of duty of each position, together with statements of duty of a number of positions reporting to the Operations Manager. I summarise the statements in relation to the Operations Manager and the Village Manager for the purpose of enabling a quick comparison: Category Village Manager Operations Manager Name Ms Montgomery Ms Lawrence Division/Dept The Landings The Landings Location North Turramurra North Turramurra Job Title Village Manager Operations Manager Reports to General Manager Village Manager • Assist the Village Manger to manage The Landings effectively to ensure that it continues to be a leader in independent retirement living. Ensure that the village and its operations are compliant with the Retirement Villages Act 1999, the individual property leases and the relevant Development application. Position Purpose • Manage The Landings effectively to ensure that it continues to be a leader in independent retirement living and a desirable place to live. Ensure that property values increase in line with the local area, whilst working to minimise costs and maximise profitability earned through continual Departure Fees. • Work to progress improvements in service delivery, improved efficiencies in the functioning of the village, enhanced teamwork amongst staff, and improved communication with residents. • Develop and maintain the Landing Business Continuity Plan and Disaster Recovery processes. Hours • Full time position – 40 hours Monday to Friday (with occasional our of hours work required). • Full time position – 40 hours Monday to Friday (with occasional our of hours work required). Roles and Responsibilities • Assist the Village Manager to maintain a high standard of presentation within the village and work to ensure a positive atmosphere within the village community that will contribute to a continued high demand for property at The Landings and maximise property values for residents (aiming for no vacancies). • Maintain a high standard of presentation within the village and work to ensure a positive atmosphere within the village community that will contribute to a continued high demand for property at The Landings and maximise property values for residents (aiming for no vacancies). • Ensure the properties are maintained in accordance with the Retirement Villages Act (1999) and the individual leases through annual property inspections. Asset Management • Oversee planned regular service on capital items/infrastructure to reduce replacement costs and minimise Sakkara's costs. • Administer Village security through the maintenance of the Village Key Register. • Manage the Resident modification process. • Maintain and update village contracts to ensure the property inclusions are accurate. • Work closely with the Village Manager to promote and maintain a caring and pleasant atmosphere at all times for residents and visitors. • Promote and encourage teamwork across all departments. • Manage the day to day functioning of the village that reflects a professional environment that is continually improving, welcoming and caring. • Develop and maintain management information and reporting. • Manage staff including recruitment, rostering, reviews, adherence to policies, training and termination as required. • Maintain processes and policy documentation and promote continuous improvement. Operational • Develop knowledge of, and contact with key local community services, medical & allied health services, leisure services, church groups and other social groups for the benefit of residents. • Conduct customer satisfaction surveys through individual interviews and property inspections. • Manage contractor provision of optional services for residents such as hairdressing, podiatry, catering etc that are cost effective and beneficial for residents and are sustainable for service providers. • Mange problems and develop action plans to reduce impact on residents. • Maintain good relationships with residents, their families and resident groups (Residents' Committee, other committees and volunteers) and oversee effective communication with them. • Manage Defect Identification process and manage the repairs and maintenance programs within the village. • Act as the Village Welfare officer to ensure the duty of care responsibilities of the village are upheld. • Provide an in-house orientation for new residents to demonstrate use of emergency systems and appliances. • Oversee the preparation of annual budgets in consultation with the Residents Committee and provide quarterly and year-end financial reports. • Work with Village Manager to prepare annual budgets Financial • Monitor and control all budgets so as not to incur annual deficit. Authorise payments to staff, suppliers and contractors within budgets. • Carefully Monitor and control operational spending • Ensure Capital spend is supported by sales revenue Corporate • Revise The Landings policies as required. • Develop and produce Management information package • Revise and update The Landings Business Plan annually and coordinate with all areas of Sakkara. • Maintain current knowledge of Retirement Village Act (1999) and Retirement Village Regulations (2009) and ensure continued compliance in all areas. • Understand the Retirement Villages Act 1999 and Retirement Villages Regulations 2009 and how they operate. Ensure compliance and keep abreast of any changes. Implement any changes in management systems to ensure compliance. • Ensure that the village, staff and contractors maintain full compliance with current OH&S policies, and that equipment is maintained in good working order for any emergency. • Ensure that the village, staff and contractors maintain full compliance with current OH&S policies, and that equipment is maintained in good working order for any emergency. • Ensure that the annual safety audit is undertaken and recommended work completed. • Ensure that the annual safety audit is undertaken and recommended work completed. • Ensure that Emergency Evacuation procedure is regularly practised including staff and volunteer fire wardens training and that procedures are communicated effectively to residents (via documents and practise drills as necessary). • Ensure that Emergency Evacuation procedure is regularly practised including staff and volunteer fire wardens training and that procedures are communicated effectively to residents (via documents and practise drills as necessary). Safety, Legal & Compliance • Ensure that the village is staffed appropriately at all times by suitably qualified staff able to effectively respond to emergency situations 24/7 as prescribed in the Emergency Response procedures. • Document and maintain Village Business Continuity plan • Ensure that all contractual obligations to residents are met. • Liaise with Ku-ring-gai council in matters relating to statutory approvals and compliance with Government regulation • Act as Privacy Officer and ensure all staff comply with the privacy policy and ensure that records are maintained and that suitable technologies are in place for this purpose. • Ensure that all contractual obligations to the residents are met. • Comply with all Village policies and procedures as outlined in the Staff Policies & Procedures Manual relating to matters such as Resident Privacy, Manual Handling, Key Control, Emergency Procedures etc. • Ensure all obligations between the Village and contractors are met • Comply with and maintain all Village policies and procedures as outlined in the Staff Policies & Procedures Manual relating to matters such as Resident Privacy, Manual Handling, Key Control, Emergency Procedures etc. • Manage sales and marketing of property re-sales paying attention to any necessary refurbishment Village Promotion • Oversee maintenance of The Landings website to reflect the village and its operations to further the marketing goals. • Invite Local community participation in village life to further maintain and further enhance the position of The Landings as a place of choice for independent living of those over 55yrs from the north shore area. • Real Estate Licence • Experience, knowledge and qualifications relevant to management of a retirement village • Experience, knowledge and qualifications relevant to management of a retirement village • Experience and knowledge of the Retirement Villages Act 1999 and Retirement Villages Regulations 2009 • Effective communication, interpersonal and staff management skills • Effective communication, interpersonal and staff management skills Essential skills/qualifications • First Aid certificate • Sound financial skills in preparing & interpreting financial reports • Sound financial skills in preparing & interpreting financial reports • Proactive approach • Proactive approach • Commercial aptitude • Commercial aptitude • Respect for the dignity and privacy of residents • Respect for the dignity and privacy of residents 1. One primary submission is that there is no overlap between these roles and particularly between the role of the Operations Manager and the role of Village Manager. Ms Lawrence states that "I am confident that this is the bare minimum amount of administration employees that The Landings needs to operate". That submission includes those administration employees who report to the Operations Manager. 2. Ms Lawrence also states that "Sakkara" approached five other villages and found that is has similar if now lower administration employee levels despite having a higher resident population than those other villages. A report in relation to that investigation was prepared by Ms Lawrence and is attachment "SL24". Item 7 – Wages Maintenance 1. This item refers to the wages of maintenance staff including the Facilities Manager, the Maintenance Handyman, and one full-time and one part-time General Hand. Ms Lawrence summarises their duties, which, in my opinion, contain no surprises or unusual duties. She adds that their wages reflect market rates having regard to their skills and experience. 2. This line item has increased due to: 1. small (but necessary and appropriate) increases in salary; 2. promoting one employee to general hand; and 3. employing an additional part-time employee to work on "basic tasks". 1. Ms Lawrence notes that maintenance work is undertaken by Village employees or, where necessary, by third party contractors. "SL25" to "SL27" are summary reports of work undertaken by third party contractors for different periods. 2. At paragraph 111 of her statement, Ms Lawrence repeats her opinion expressed previously in her paragraph 98 and quoted above in paragraph 49. 3. Finally, in this section, Ms Lawrence refers to the Summary Reports just referred to forming part of the Village Master system, developed for submitting and tracking requests in the Village. She states that her review of "long term trends" using the Village Master confirms that maintenance requests are increasing. Item 12 – Wages replacement employees 1. Ms Lawrence notes that this line item was calculated in error based on the Accountant's and the Village Manager's salary, rather than the Accountant's and the Personal Care Assistant's salary. Although a process of succession planning and cross training is implemented to reduce absentee wages, this cannot be used for the Accountant and the Personal Care Assistant, as other staff do not have the necessary qualifications. That is, replacement staff would have to be employed to replace these positions when the permanent employee is on leave. Item 13 – Recruitment temporary employees 1. This item, obviously, comprises the costs of recruiting employees. Ms Lawrence states that this item increased due to the recruitment fees required to recruit a permanent Village Manager (Ms Montgomery). She refers to advice she received from Mr Bedingfield while she was acting Village Manager as to the difficulties in finding a suitable replacement for Ms Dignam and Ms Lawrence and that it became necessary to look "outside the industry". She offers the opinion that "the cost was unavoidable but necessary to find a good fit for the Village Manager role". Item 37 – Tradesman repairs 1. This item comprises the costs of repairing all capital items (defined in the Village Contract) other than residents' personal items by third party contractors. This line item increased in the FY16 budget in accordance with CPI increases and to correct a GST error. Also, there is an anticipated large scale roof repair to two of the units in the Village. Ms Lawrence refers again to the Summary Reports discussed above. She states that a breakdown of these costs is provided to the residents committee monthly meeting. In order to control costs, Ms Lawrence states the Village obtains several quotations in relation to "large scale work" (not defined) and by accruing minor works to permit a lower per unit cost. Item 45 – Annual Fire Safety Certificate including tagging 1. Under this item, Ms Lawrence asserts that the operator must: 1. maintain fire dampeners annually 2. test fire seals annually in relation to annual fire safety certification; 3. maintain and/or test about 100 anchor points used to attach safety harnesses when conducting certain repairs (such as roof repairs—although it is not stated if or how such anchor points relate to fire safety certification) 1. This line item, besides the above, includes the cost of annual auditing and annual reviews to ensure policies are updated relevant to legislative changes, reflecting "best practice" and noting the premises are adjacent to a bushfire zone. 2. These estimated costs are based on quotations, the relevant quotations being included in "SL21". 3. Ms Lawrence states that the operator "has performed limited testing and tagging in previous financial years, but did not include these costs in previous budgets for the sake of obtaining an approved budget". However, for FY16 "we have decided we cannot continue to absorb these costs without comprising [sic: "compromising"] the longevity of The Landings. It is stated that these costs represent the "full cost" of complying with legislative standards and ensuring the safety of all residents and employees. Item 46 – Temper valves 1. Temper (or tempering) valves are components in the village's hot water system. [I note that the purpose of a tempering valve is to reduce the temperature of the hot water being supplied to outlets in residential premises (such as bathrooms) from the scalding temperature at which hot water in holding tanks is required to be maintained, usually 60�, to a safer temperature, usually 50�, by mixing cold water with the hot water before it is delivered to the user.] Ms Lawrence asserts the operator maintains these valves by servicing each of them 4 times annually and replaces them each 5 years. Ms Lawrence provides a brief description of such a service. Ms Lawrence submits that "the valves are a consumable component of the overall hot water system". 2. The budget estimate for this line item is said to be based on quotations received by the operator and which are included in "SL1". 3. Ms Lawrence states that the residents committee suggested these valves are not necessary. She submits that first of all they are mandatory and so is the maintenance of the valves, and also that such work is essential to residents' safety. Item 48 - Electricity 1. This item was estimated initially by annualising the first 9 months of expenditure based on FY15 actual costs. There was then a reduction of the estimate on the basis that the parties believed there would be a reduction in electricity costs for FY16. That advice turned out to be incorrect (as described by Ms Lawrence) and the estimate was therefore increased again in FY16-3. 2. Ms Lawrence states that she has reviewed actual costs for the period 23 July 2015 to 06 January 2016 (almost 6 months) and taking into account higher electricity use during the year and summer, she states that the forecast for this line item was accurate. Item 63 – Air-conditioning maintenance contract 1. This is one of the items discussed by Ms Lawrence previously: see paragraphs 45 ff above. 2. In relation only to the estimate for this item, Ms Lawrence states that Sakkara engaged a firm called "Licensed to Chill" following a competitive quoting process. The estimate reflects the contract price with that contractor, in relation to preventative maintenance of air-conditioning units. Noting the significant increase between the original estimate of $22,959 in FY16-1 to $35,882 in later estimates, Ms Lawrence states that increase occurred because the contractor increased their price to that amount. Item 64 – Air-conditioning R&M Materials 1. This item is the actual cost of repairing broken air-conditioning units in FY15 annualised from 9 months of costs. Later, the FY15 audit report showed the actual cost for 12 months was $81,227. 2. However, Ms Lawrence states, Sakkara considered that the preventative maintenance programme carried out in FY15 should reduce the costs of repairing broken air-conditioning units in FY16. In addition, the operator allowed the contractor to retain spare parts from the broken units in exchange for reducing its repair fees. As a result of those savings, the line item estimate was only $68,225, 84% of the actual FY15 cost. Item 69 – Optional services 1. This item comprises rent from on-site service providers, personal service charges and telephone and internet recoveries. These sums are deposited into the operator's operating account in order to reduce the total of recurrent charges collected from residents. 2. Apparently by way of additional explanation of this item, Ms Lawrence refers to the following: 1. Rent: amounts received from the sales office operated by Sakkara Investment Holdings Pty Ltd, the hairdresser and the caterer. 2. Personal services recoveries: some residents request personal services from maintenance staff to perform work the residents are unable to perform, such as changing light bulbs. The "nominal fee" is $9.00 per 15 minutes and these amounts are also deposited in the operating account. 3. Telephone and internet recoveries: this refers to Sakkara's arranging, for certain residents (who opt in) discounted service packages. The differences between the FY16-1, FY16-2 and FY16-3 budgets resulted from the operator inserting amounts for the purpose of negotiations rather than the actual cost. However, the estimate for the FY16-3 is said to be estimated based on actual expenditure. Item 70 – Capital Works Fund 1. Ms Lawrence states that this item reflects the quoted cost of "large scale painting works", based on the quotations from Programmed Property Services set out in "SL1". 2. Ms Lawrence submits that maintaining such a fund is "best practice" in retirement village management to ensure the premises are suitably maintained. Using a quoting system ensures best value and quality. 3. During budget negotiations, Ms Lawrence states, the residents committee contested the cost of painting on the basis that it included the cost of painting an area found to be defectively painted in RV 14/14827. Ms Lawrence states this is incorrect and that there is no overlap between the works the subject of prior Tribunal orders and the works in this line item. Statement of 25 February 2016 1. This short statement attaches evidence from Licensed to Chill and Pure Plumbing, prepared specifically for these proceedings as "SSL1" and SSL2". 2. The first is a report in relation to the repairs and preventative maintenance program in respect of "all 361 air conditioning units at The Landings". This figure reflects that total of all units in the common areas and residences of The Landings. The second is a report in relation to maintenance of thermostatic mixing valves under AS3500, dated 24 February 2016. Statement of 08 April 2016 1. Ms Lawrence notes that this statement is a statement in reply, having reviewed the statements of Andrew Burgess, 2 statements of Neil Smith and statutory declarations of Francis Lerner, Clive Glover, Sally Elliott, Graham Laurance, Lindsay McEachern and Richard Fletcher. Ms Lawrence makes the following submissions. 1. Lindsay McEachern The air conditioner referred was one which required replacement and the machine was therefore a new machine, an Actron machine replaced at a cost of $9,865 replacing the previous form of air conditioning unit common across the village. It was found to have a fault within the warranty period, repaired under warranty. "SLS1" is a copy of the quotation from Licensed to Chill dated 13 November 2014 for the replacement cost. 1. Clive Glover 1. Ms Lawrence states that in order to understand Mr Glover's statutory declaration it is important to understand the sales process at The Landings. The sales agency staff explain to prospective residents the Retirement Villages Act and walk through the disclosure statement and the "enquiry statement" for the particular type of residence being considered. 2. The disclosure statement on page 3, point 6 of "Financial Management" states that recurrent charges are not linked to a fixed formula or to CPI. 3. Residents "typically engage their own lawyers" and the disclosure statement and contracts are issued through the solicitors to the residents and their lawyers". 4. Ms Lawrence states that "we have found from experience … that often prospective residents forget what has been said to them". 1. Air conditioning replacement and repairs 1. Ms Lawrence states that the residents' evidence suggests that the maintenance process of the air conditioners was a "fail and fix" process, whereby the operator waited until a unit failed before fixing it. 2. In fact, she submits, the process is more correctly described as follows: * Review of the units to assess current operating status; * A report for each item to identify its condition (examples attached as "SLS2"); * If required work is identified, a quotation is obtained; * The operator would then determine if the work constituted repairs and maintenance or replacement, based on the Defect Identification Process policy referred to at paragraph 79 of Ms Lawrence's statement of 18 February 2016; and * The works would then be carried out. 1. The contractor (Licensed to Chill) is instructed to conduct the review, in two stages, such a review being carried out in FY15, thus explaining why the cost in the audited accounts was larger than normal air conditioning maintenance cost, those accounts being attached as "SLS3". Because of the success of this FY15 maintenance program, the maintenance costs estimated in FY16 are reduced. "SLS4" is a copy of the reports of the six only air conditioners requiring repair following the Autumn 2016 review, two of which are the subject of an insurance claim related to Ausgrid. 2. The Wood & Grieve report included in Mr Smith's statement of 24 March 2016, incorporates costs from both the FY15 year and the beginning of the FY16 year. Some of the costs relate to the insurance claim. 3. The insurance claim is related to "excess amperage" provided by Ausgrid, which caused damage estimated at $125,000 caused to air conditioning units (still the subject of the undecided insurance claim), including machines referred to in the Wood & Grieve report. This issue was discovered during the preventative maintenance review of air conditioners. 4. At a management meeting with residents in about June 2015, residents were advised that failure rates due to no maintenance would fall significantly because the units were operating efficiently and brought up to a proper working standard. 5. Annexure "NS4" to Mr Smith's second affidavit, the Manager's report to the residents, refers to the insurance claim. The cost of the insurance claim is not included in the FY16 budget but the actual repair costs are included as actual costs, the total amount being $70,507, an increase of $47,531 from the budget amount, but this amount will be reduced once the amperage insurance claim is brought into account. 6. Ms Lawrence refers to communication with Mr Nick Agnew on 10 March 2016 and the residents committee on 21 March 2016 in which this insurance claim was discussed. 7. Ms Lawrence restates her submission that actual ongoing maintenance costs for air conditioners has been reduced as a result of the preventative maintenance program, but these savings have been hidden by the amperage fault repairs. 8. Ms Lawrence notes that the replacement cost of air conditioning units is between $9,000 and $11,000, three quotations being attached as "SLS5". Repair or replace air conditioning units 1. Under this heading, Ms Lawrence repeats some of her submissions summarised in the previous section. However, she adds the information that when Licensed to Chill conducts their annual inspection, if a unit fails and the cost of repair is greater than 70% of the replacement value, then that unit is replaced. The same happens when a machine fails and a maintenance request is made. 2. Ms Lawrence states that there has been a significant reduction in failures and that most repairs are within the range referred to in the Wood & Grieve report at page 11, being less than $2,500. 3. The costs of replacing are shown in "SLS6", a schedule of replacement of units at The Landings in the last two financial years. Defects and conclusions of proceedings RV 14/14827 1. These proceedings are stated to have arisen from the residents' application commencing in about 2012, claiming reinstatement of the (operator's) costs of repairing defective works arising from the initial construction of the village. Various applications culminated in the RV 14/14827 proceedings. 2. Consent orders made on 17 July 2015 ("the July orders") included a process agreed at mediation to identify and distinguish "defective works" from "repairs and maintenance works". This is the "defect identification process" included in Annexure E to the July orders, and the balance of the proceedings was dismissed. The orders are annexed as "SLS7". 3. Ms Lawrence states that her involvement in the defects identification process is in line with the agreed process. She states that "[a]t no stage was there any discussion or claim made in relation to any type of defect or claim other than the matters that were dealt with in those orders. All other claims arising were dismissed". 4. The following items relating to the July orders which remain outstanding are: * Fire safety ground floor 2 SNMD; * Stormwater seepage through basement walls; * Stormwater pumps in 2 and 4 SNMD; * Roof leak 6 Caribou; * Southern boundary fence, report item 17, Harrison street; * Loose and broken cobblestones in entry at Bobbin Head Road; and * Various defects in fire trail. 1. Ms Lawrence then sets out some details of a meeting with the residents committee in January 2016 in relation to the outstanding items (minutes attached as "SLS8") and the establishment of the defects identification panel. 2. The process tends to be that the residents committee provides "a long list of matters" claimed to be defects, which are then reviewed and assessed by Ms Lawrence, including confirming with each of the (I infer, affected) residents. 3. Ms Lawrence refers to Mr Smith's first affidavit, paragraph 166, including an extract from a report forming the basis of the claim in RV 12/12787, which was finally determined in the July orders and "absolutely finalised" with the dismissal of the balance of the proceedings in the July orders in RV 14/14827. The issue sought to be raised was the subject of "long and acrimonious litigation" including the matter of painting referred to by Mr Smith which is at an end. Ms Lawrence states firmly that "[t]here is no defective paint work arising from the claims of by the residents in the previous proceedings left in the Village". 4. Programmed Property Services Pty Ltd quoted only in relation to surfaces requiring repainting because the existing coats were up to 12 years old. This is confirmed in the report dated 07 April 2016 at "SLS9". Tradesmen's repairs 1. Ms Lawrence states that it is a common theme presented by residents that repairs and maintenance in the village is overstated because it does not exclude "discrete items of capital" which are said to be the obligation of the operator. She refers to the report by accountant Bishop Collins annexed to Mr Smith's affidavit of 24 March 2016 which lists and analyses the actual expenditure for repairs and maintenance for FY15 and some expenditure from 01 July 2015 (that is, the beginning of FY16). 2. Ms Lawrence refers to her "SLS10" which is a breakdown of the repairs and maintenance to date from 01 July 2015. This breakdown shows the largest item of expenditure relates to "roof", being repairs to the roofs of 7 villas. She states that two quotations were received "for the two separate roofs which are part of the budget documents", consistent with the policy described in her statement of 18 February 2016. These estimates are discussed with the residents committee monthly meetings and are "again tested" by the annual audit. Ms Lawrence reports an extract of a discussion with Mr Burgess at a meeting in February 2016, as follows: Sue: I may not be able to do external cleaning of windows this year because we've had a bit of an increase in roof repairs across the seven villas. Burgess: That is something we should discuss and we can assist by not having it as a withdrawal of service. Roles of Managers: Ms Lawrence makes the following points: 1. Her role with respect to "sales" is consistent with her function of maintaining the village and ensuring the lease is properly carried out with respect to maintenance and operation of the village premises. She does not present the units to prospective residents to inspect, nor discuss issues of lease price and negotiations on those prices. 2. In relation to reviews with respect to independent living, Ms Lawrence states that the average age of residents is increasing and "we" have identified a growing incidence of residents who are becoming more frail and of instances of behaviours "related to dementia". Increasing disturbances have had to be dealt with and that "has given rise to an analysis and review by the management to ascertain how many residents or what residents are potentially susceptible to requiring further support". Ms Lawrence states further that: "Historically, the village has been an independent living environment where care services are the responsibility of the residents. As the village evolves it is clear that the responsibility and the range of services will need to be addressed to deal with that aging population that is becoming more frail." 1. This is stated to be consistent with the Commonwealth government's aging home strategy, with a greater emphasis on home care and the uptake of home care packages within the village. Ms Lawrence states that: 75. "It is my role to ensure that people that [sic] are unable to live independently or can only live independently with support have the support they require and do not interfere with the good operation and management of the village. That includes disturbing the quite enjoyment of other residents but also the incidence of greater cost, eg greater incidence of falls, greater incidence of damage or greater demands upon staff to assist in matters such as transport of domestic chores". 1. Ms Lawrence recollects discussing this issue with Mr Burgess and quotes an extract from that conversation. She states that the "alternative to incorporating this demand or increasing demand for services from staff is to commence a process of charging residents individually for any support". Role of the village manager and operations manager: the role of intimidating communications 1. Ms Lawrence states that it is suggested that the role of a manager should be paid at $65,000 per annum, but the suggestion and the evidence supporting it is "unfair". 2. This submission is related to the residents being "incredibly experienced and educated individuals who have a very strong understanding of their rights and have a very strong will to carry out a lot of work in a short space of time". The result of this situation is stated to be that any matter or issue arising results in numerous and hostile communications from residents, some examples being attached as "SLS11" and "SLS12". 3. In addition, there is harassing communication and bullying tactics used by residents, as shown in "SLS13", attacking Ms Lawrence's integrity, honesty, work ethic, value and credibility but without any evidence being provided. No specific allegation of failure has been provided, rather there is a general objection that Ms Lawrence's role is not necessary. 4. Another example is the emails included in "SLS14", being adversarial and accusatorial. Ms Lawrence states that it is incorrect to describe the residents as "retired" or "retiring" individuals looking for a quiet lifestyle. They are active and healthy "and able to dedicate time and energy to communication". Indeed, certain (named) residents "… have in fact also established a new political party which actually had a time slot on a Sunday program on Channel 9 in mid-February 2016. Such activism is reflected in the degree of interaction and expectation they raise in their dealings with the managers in the Village". Statement of 31 August 2016 1. Ms Lawrence notes that at the conclusion of the second day of hearing, 14 April 2016, I made a request for further information specifically in relation to the issue of what happens to residents, and what extra services may or may not be provided, when residents age and/or become more frail. 2. On 04 August 2016 the proceedings were listed before Principal Member Harrowell for directions, who made, inter alia, the following directions: 6. The Tribunal apparently raised an issue at the original hearing as to the aging of residents and the consequences relevant to the issues raised in the present application and the services available to the occupants (the Aging Issue). The exact issue is not sought to be defined by the previous sentence which is merely descriptive for the purpose of these directions. 7. On or before 31/8/16 the parties are to file and serve any evidence in relation to the Aging Issue. In accordance with those directions, Ms Lawrence provided a further statement on that subject, dated 31 August 2016. 1. Ms Lawrence states that the issue and impact of residents' aging comes within the scope of her functions as Operations Manager. She refers to her previous statement dated 08 April 2016, at paragraphs 67 to 78, and to "CM13" (which includes the job description for Ms Lawrence's role at The Landings) attached to Ms Montgomery's statement of 17 February 2016. 2. I will not repeat the various functions within Ms Lawrence's role which she states are relevant to this issue, but at paragraph 7 of this statement she sets out various items of "independent research" she has undertaken. These include: 1. understood the loss of independence is devastating and needs to be treated discreetly; 2. at property council of Australia forums, the most recent of which focussed on the impact, need and integration of home care services under the aged care act within a retirement village; 3. researched the range of home care and third party providers available in the area; 4. understood the growing role and demand for retirement villages to provide appropriate support; 5. researched the aged care support system for aged people to live at home independently; 6. the process of accessing care and support by an individual requires an external third party to identify the need, to discuss the need with the individual and then to arrange the support and that in all cases the family must be engaged in the process; 7. support processes are maintained and managed through the MyAgedCare website which is difficult to navigate; 8. the most common range of services required to live independently are not related to medical type services, but more to: 1. domiciliary services; 2. clinical support such as medical delivery; 3. physical activities; 4. social interaction to avoid isolation; and 5. connection with the wider community. The Landings provides some of those services, including some domiciliary services, the social programs and activities referred to by Ms Montgomery at paragraphs 13-34 of her statement dated 17 February 2016, regular bus trips to shopping centres and an internet connection throughout the village. 1. Ms Lawrence refers to "CM15" which is the "maintenance request" document utilised in the Village Master computer system. Ms Lawrence sets out in some detail how the system is operated and how it fits within other village policies and protocols for identifying, performing and charging for maintenance work. She states that apart from actually assisting in the maintenance required, the information collected also allows for the identification of emerging issues for individual residents who may require external or family assistance. For example, at paragraph 27, Ms Lawrence states that there has been an increased demand for domestic and personal services by residents, although once those services were being properly charged to residents, that demand decreased (but are starting to increase again). 2. The factors mentioned in the previous paragraph made it clear that there needed to be some sort of policy or protocol developed "to identify when living independently at the Village was no longer the best option for the resident or even the Village and other residents … given the risks of harm …". 3. Ms Lawrence then provides examples of some of the signals or indicators suggesting a resident may have a reduced capacity to live independently, although she insists that "[t]he policy is not designed to require people to leave. It is designed to assist people to live independently. There is however a point where the ability to live independently does reach an end". 4. In paragraphs 43 to 56 of this statement, Ms Lawrence sets out the reasons why a program of regular meetings with residents, in their homes, has been implemented since about January 2016. She provides examples and details of events and circumstances where such meetings, and inspections, have uncovered evidence of residents having difficulty dealing with cleanliness (both personal and within their residence), medical issues (including mental health issues) and resulting effects on other residents. Another result is that the Village has had no alternative but to increase the level of support provided which therefore "impacts the village budget". 5. Ms Lawrence submits that in order to attend to these issues, the Village requires "at least one full-time staff member supervised by myself and/or Catherine as the Village manager". Generally, the operator has no alternative but to increase resources in this area. 6. Attachment "A" to Ms Lawrence's statement is a copy of the "Independent Living Suitability" policy, version 5, dated 12 August 2015, which appears to be a component within "The Landings Policy and Procedures Manual". Statements of Catherine Jane Montgomery Statement of 17 February 2016 1. The next major statement of evidence is that of Ms Montgomery dated 17 February 2016. Ms Montgomery states that she commenced her employment with Sakkara as Village Manager of The Landings on 27 July 2015. Prior to that engagement, Ms Montgomery states, she worked for 15 years in the property industry. In paragraphs 4 to 10 of this statement, Ms Montgomery sets out in summary form some of the issues she had to deal with in this prior experience. At paragraph 8, she states: "8. For the reasons set out below, I have found the role at The Landings to be more difficult purely because we have retired people who were senior executives in their previous working life who were largely defined by their position but now appear to be lacking personal interests other than being involved in the management of the Residents committee. This is compounded by the fact that they have a lot of time on their hands and from the history of the Village, have been able to succeed in maintaining artificially low recurrent charges and intimidate village managers." 1. Ms Montgomery also states in this section of her report that her job was made much more difficult because, primarily from the Residents committee, the attitude towards her was "quite vicious" and in ordinary commercial life would result in claims of bullying and harassment. 2. In paragraphs 11 and 12, Ms Montgomery states that the role of the Village Manager is to oversee the Business Plan, Budget and Resourcing for the village. Her work hours are said to be from 8:30am until 6:00pm and until about 4:00pm she is "in constant communication with residents about particular complaints, rumours, queries, suggestions on the running of The Landings and social events proposals". Her time is spent, otherwise, on: 1. liaising with the Operations and Facilities Managers to ensure smooth running; 2. supervising facilities and reception staff, conducting performance reviews of permanent staff, ensuring WH&S procedures are followed and dealing with staff welfare issues; and 3. developing budgets, capital works projects, streamlining and sharing information with "the team" and working with the Sales Team to present properties for sale and to review the market. 1. From paragraph 13 to 34 Ms Montgomery sets out a useful summary of The Landings under several headings: physical amenities, social activities, personal services, safety and "popularity". This summary is supported by annexures "CM1" to "CM7". 2. From paragraph 35, Ms Montgomery moves on to describe the preparation of the budget. She submits that FY16 "reflects the true minimum cost of running The Landings to maintain the property at an acceptable level", at "only" $785.08 per month per resident. Ms Montgomery repeats the claim that Sakkara has kept levies "artificially low" in past years, although residents "have been promised through their Lease and the Disclosure Statement and expect a luxury lifestyle but have shown they do not want to pay appropriate levies in exchange for that environment". 3. Ms Montgomery states also that levies sought by the operator at The Landings are very reasonable in comparison with other retirement villages, as demonstrated in a report compiled by Ms Dignam at "CM8". "CM9" is a further summary report prepared in February 2016 to the same effect. Further, "CM10" provides evidence to support her claim that the deferred management fee (DMF) or either 25% or 30% spread over 10 years compares favourably to other villages where the DMF can be up to 35%. 4. Ms Montgomery states that the artificially low levies and delays in achieving approved budgets make management roles more difficult. The Village Manager must field calls from creditors seeking payment, the Operations Manager must continually "reprioritise" work where contractors have not been paid for previous work and also the operator is slow to hire new staff because the residents have refused to consent to additional or increases wages in budgets. 5. In paragraphs 48 to 76, Ms Montgomery sets out details of the actual budget negotiations. She refers to two budget meetings, apparently lengthy, on 27 July 2015 and 14 August 2015. She describes the approach of the residents as being to discuss each and every line item, "down to dollars and cents", and that Mr Burgess in particular was more interested in arriving at a total budget figure that he could convince the residents to accept, rather than trying to work out what it would actually cost to operate The Landings. 6. Ms Montgomery stated that because of this approach, she and Ms Lawrence negotiated expenditure below what was actually required, in order to try and achieve consent, although "I always felt uncomfortable" doing so and therefore "I was somewhat relieved that the amount proposed was not accepted". 7. Following these meetings, FY16-2 was distributed to residents on 25 August 2015, containing all the reductions Ms Montgomery and Ms Lawrence had agreed to make. Despite that, the second budget was rejected on 27 August 2015. 8. In paragraphs 62 to 70, Ms Montgomery focusses on two meetings, one held on 17 September 2015, attended by Mr Neil Smith, whom she describes as argumentative and aggressive and continually bringing up "historical matters". This behaviour by Mr Smith was stated to be repeated at the second meeting on 15 October 2015. Ms Montgomery states that Mr Smith advised he would be making a claim about "Elder Abuse". This second meeting became even more tense and aggressive during or following consideration of a letter dated 13 October 2015 from Mr Richard Fletcher to management ("CM11"), in relation to Ms Lawrence's role. Mr Smith was again stated to be aggressive and on being advised by Ms Montgomery that she did not have to put up with such aggressive behaviour, Mr Smith stated that he cannot help being aggressive. Ms Montgomery notes that she responded to Mr Fletcher's letter on 22 October 2015, suggesting that the Residents committee by its actions and correspondence is in breach of the lease and that Mr Smith "is not to attend any future meetings" ("CM12"). 9. Ms Montgomery then notes in paragraph 73 that FY16-3 was distributed to residents on 06 November 2015. In the remainder of this section of her statement, Ms Montgomery describes what she states was said at an impromptu meeting with Mr Burgess and Mr Fletcher attended by Ms Montgomery and Ms Lawrence. The burden of Ms Montgomery's report is that she and Ms Lawrence were strongly criticised in terms of their respective roles. Ms Montgomery states that on the Wednesday she was advised that apparently Mr Burgess had repeated the gist of his remarks to Mr Bedingfield. Finally, she reports on a comment made to her by Mr Burgess during a defect meeting on 19 January 2016 that she was thought to be leaving the village. 10. Ms Montgomery then discusses each of the disputed items in turn, under the heading "Calculating the disputed items", from paragraph 77 to the end of this statement. 11. First noting that she did not join The Landings until after FY16-1 had been rejected, and that as Ms Lawrence had been working at The Landings since 2014, Ms Lawrence was the "lead negotiator". Ms Montgomery then makes the following comments. Ms Montgomery earlier noted that the budget and supporting information for each of the disputed items is contained in "SL1". Item 6 – Wages administration 1. Ms Montgomery states this item reflects the wages of the "administration team" comprising the Village Manager (her role), the Operations Manager (Ms Lawrence's role), the accountant, 2 receptionists (who job share one full time role) and the Social Coordinator. The respective job descriptions are attached at "CM13". A very brief summary is provided of each role and Ms Montgomery notes that each wage is calculated based on market rates for each role, the skillset required and the scope of duties for each person. Some rates have been increased by CPI and based on performance, which "is standard practice to retain good staff". Item 7 – Wages maintenance 1. It appears that this item refers to the wages of those employees employed in relation to the duties of maintaining the premises, and those positions are: 1. the Facilities Manager; 2. the Facilities General Hand; 3. the full time Maintenance Handyman; and 4. a part time Maintenance Handyman. The job description for each of the above roles is included as "MM14". 1. These roles generally cover inspecting maintenance requests to ensure residents are only put to the expense of employing a contractor when necessary (that is, not for simple repairs or instructions), general maintenance such as fixing leaking taps, replacing light globes, "rendering of walls, painting" and general cleaning. 2. Ms Montgomery the describes the procedure for logging requests for maintenance, and also notes the volume is increasing. "CM15" is the maintenance request log for the period 01/01/2015 to 01/01/2016. She also refers to a "trend analysis" for the period up to 01/01/2015, showing an increase in the volume of requests, included in "CM16". This report is not in the same terms or for the same period as "SL28" attached to Ms Lawrence's statement dated 18 February 2016. [I note this document is not the same document referred to by Ms Lawrence at paragraph 57 above. However, I also note that Ms Lawrence is referring to the Village Master software system which I infer is also the system being referred to by Ms Montgomery here.] 3. In addition, Ms Montgomery states that "[s]trategic maintenance employee hiring" reduces other line items, for example: 1. the Facilities Manager and the Facilities General Hand were formerly a builder and carpenter, and a plumber and gasfitter respectively and "can carry out these higher skilled repairs in exchange for their fixed wage. This reduces line item 37, …"; and 2. the Facilities Manager is [also] a former estimator, allowing him to negotiate the best value contracted works, minimising, for example, line items 37 and 70. Item 7 – Wages replacement staff 1. As I understand Ms Montgomery's paragraph 93, she states that this item relates to the temporary employment of an accountant and a personal care assistant (PCA) when those permanent employees are on leave. Such replacements are necessary because the accountant requires specialist skills (which cannot be covered by other Sakkara employees), while the PCA works outside normal hours. If temporary replacements were not employed while each of those persons was on leave, then invoices and salaries would not be paid and attendant care services would not be provided as required. 2. In reference to assessing the cost of a temporary replacement PCA being assessed on the basis of Ms Montgomery's salary, Ms Montgomery notes that: 1. in practice, Ms Lawrence could cover for Ms Montgomery; and 2. the amount of $7,000 representing a temporary replacement for Ms Montgomery (if one was required, which, as she has stated, is not the case), is also a reasonable estimate for the cost of covering a PCA while that officer was on leave. Item 18 - Insurance 1. This item refers to "insurance premiums broker fees" for the insurances maintained by the operator, being "Industrial Special Risks", "Commercial Motors", "Public and Products Liability" and "Voluntary Workers Compensation". It includes interest costs relating to a monthly funding agreement. Ms Montgomery states that this monthly funding agreement was entered into because the operator determined it could not pay lump sum insurance premiums because of reduced recurrent charges paid. The interest component is stated to be 3.99% flat. 2. Another complication in this item is that the policies originally expired in September each year. For the purposes of the FY16 budget, the operator has estimated costs for the same accounting period as the budget, that is, to 30 June rather than to September, so this item has reduced. These figures are contained in "CM18". Item 37 – Tradesman repairs 1. This item relates to estimated costs of external contractors making routine repairs on whitegoods, electrical repairs, general plumbing, garage door repairs, generator maintenance and repair, security works and general repairs. In addition, but it is not stated why, this item also includes the cost of repairing the roofs of 94 and 96 SNMD. 2. The estimates are stated to be based on past costs increased by CPI, except for the repairs to 94 and 96 SNMD which are based on quotations, the Facilities Manager selecting the best value quotation. 3. Ms Montgomery submits that, based on her experience in managing other properties, that these works are typical and necessary to ensure a residential property does not fall into a state of disrepair, and each cost also appears reasonable, "having regard for the works required and size and age of The Landings". 4. Ms Montgomery also submits that these estimates "are very lean", as the Facilities and Maintenance Team make a lot of repairs themselves, and "this line item is still under provisioned". 5. Ms Montgomery notes that this item was disputed throughout the budget process. Ms Lawrence and Ms Montgomery agreed to reduce this item from $79,935 in FY16-1 to $58,181 in FY16-2, but only because they thought this might help reach an approved budget. However, when FT16-2 was rejected, they reinserted the original amount less "pergola washing" and "anchor point certification" which was reinserted at line item 45. In addition, GST was included, having been inadvertently omitted by Bedford CA, the adjusted figure being $78,913. Item 45 – Annual Fire Safety certificate including tagging 1. This item includes: 1. inspecting fire dampers and mechanical ventilation based on quoted costs; 2. testing and tagging capital equipment in residents' dwellings including dishwashers, dryers and telephones, common areas "(eg residual current devices)", power tools, according to AS 3760 (attached as "CM19"); 3. anchor point certification per AS 1891.4; 4. auditing emergency evacuation procedures, professional training by emergency evacuation specialists so the Evacuation Planning Committee and Fire Wardens can effectively implement policies; and 5. external auditing of The Landings' workplace health and safety, which is "standard practice for any business in which employees and contractors provide services to occupants". Item 46 – Temper/Mixing Valve Compliance 1. Ms Montgomery states that this refers to the cost of servicing 190 temper valves, each serviced once every 5 years, cleaning 30 aqua blend water heaters (annually) and cleaning 23 instant heaters (annually). 2. Ms Montgomery states that the operator has been advised "by an expert" that AS3500.4 requires the above testing (at least for the temper valves). The "expert" referred to appears to be Pure Plumbing Professionals in their report of 14 February 2013, attached as "CM20". Ms Montgomery notes that the Facilities Manager has informed her that the contractors are providing this service "at or below market rate". Statement in Reply of 08 April 2016 1. Ms Montgomery commences this statement by setting out her tertiary educational qualifications and a fairly detailed summary of her previous property management roles. She then sets out her responses to some of the residents' evidence as follows. Electricity 1. Under this heading, Ms Montgomery states, in reply to Mr Smith's reference to the cost of electricity, that the operator has monitored the actual cost of electricity since 01 July 2015 and as a result agrees to adjust this line item by reducing it by $10,000. Correction to Previous Statement 1. Ms Montgomery notes that her attachment "CM10" is incorrect. It does not correspond to attachments "CM8" and "CM9" which "are more correct". Residents Committee's reply evidence 1. Ms Montgomery notes she has read the three affidavits and six statutory declarations filed by the residents committee. She responds herein to specific allegations made by Andrew Burgess on 23 March 2016, Neil Smith on 23 March 2016 and statutory declarations by Richard Fletcher and Graham Laurance. She responds also to "the allegations" made against her and "the applicant as a whole". Statutory declaration of Richard Fletcher dated 23 March 2016 1. In relation to paragraph 11 (of Mr Fletcher's statutory declaration) Ms Montgomery denies saying that any lease would be terminated. Rather, she advised that the actions were in breach of the lease and "they must cease these actions". 2. At a meeting on 21 March 2016, Mr Fletcher stated that Ms Montgomery told him his lease would be terminated. Ms Montgomery immediately corrected this statement, in the above terms. She states that Mr Fletcher then said: "That's how I interpreted it." Ms Montgomery states that Mr Fletcher misinterpreted what she said and then included that misinterpretation in his file note. 3. In relation to paragraph 15 (of Mr Fletcher's statutory declaration), Ms Montgomery states she emailed a copy of the letter three separate (dated) occasions, and includes a copy of those three emails at "CMR1". Affidavit of Neil Leybourne Smith dated 23 March 2016 1. In relation to paragraph 6 (of Mr Smith's affidavit), Ms Montgomery asserts that his statement in relation to funding of replacements for items of capital, "is not true, [but is] misinterpreted or misconstrued". Ms Montgomery states that the operator has made it very clear that the operator replaces capital items if and when required. It has been stated to residents that the operator could reinvest in "the asset" by way of capital upgrades if it was not spending so much on fees and costs to obtain an approved annual budget each year. 2. Ms Montgomery states in relation to Mr Smith's statement at his paragraph 16 in relation to the strong sense of community in the village, that this "is all made possible by village management and staff who work very hard to deliver an environment that presents well and is safe, secure and supportive". It is "a direct result of the dedication and commitment of village management and staff who look after our residents and create fabulous social events and opportunities for our residents to get to know each other and enjoy each other's company". 3. Ms Montgomery makes a number of brief responses to particular paragraphs in Mr Smith's affidavit, as follows: 1. Paragraph 20: the average levies of $434 per month at other retirement villages are not a fair or appropriate comparison to The Landings. The Landings sits on over 11 hectares of land, comprises a large area of roads, paths, gardens and common areas that must be maintained. "We have, probably, the most active Residents Committee in the industry". "All members have military backgrounds", some members have held executive positions and four members have started their own political party "to drive reform to retirement village legislation". 2. Paragraph 22: "it is important to note that Sakkara runs The Landings, not the residents". 3. Paragraph 22(ii): Ms Montgomery notes that Andy Goldrick has obtained his bus licence, the necessary training taking place for an extended period, so that Mr Dempsey has more time to attend to his management tasks; 4. Paragraph 22(vi): it is essential to add GST so that collection of recurrent charges reflects the actual amount of money expended, and further, a CPI increase is not a contingency but a realistic forecast of the increase in costs. 5. Paragraph 26: Mr Smith's comment on residents voting on Ms Lawrence's performance is incorrect – the vote had nothing to do with performance. It was made pursuant to a personal character assassination of Ms Lawrence completely separate to her performance of her duties. Despite such incidents, Ms Lawrence has always and continues to perform at a high level. 6. Paragraph 31: Ms Montgomery agrees with Mr Smith's characterisation of The Landings as "mini city", and so it requires suitable staffing and resources to run efficiently and effectively. 7. Paragraph 33: Ms Montgomery states that the proof of her statements is the history of getting budgets approved and the barriers by the residents thereto. She repeats her submission from her first statement that the residents committee have a lump sum figure in mind for the total budget, which they think they can get the residents to approve, linked to affordability of some residents. A budgeting process, submits Ms Montgomery, consists of stepping back, identifying what resources and works are required and costing them accordingly. The next step is to assess each item to determine if they are necessary, fair and reasonable. Ms Montgomery states that the Village Manager role has changed hands about 12 times in the 13 years of operation and that "it is not possible that The Landings could have had so many bad managers, one after the other". In her opinion, the Residents committee is the common denominator, being so overbearing so managers leave because of the undue stress. Ms Montgomery states that she has been told by current staff members and friends of Mr Deery that he "was absolutely jaded" by the Residents committee. Ms Montgomery submits that it is a fact that Mr Smith and Mr Burgess "have not been satisfied with the Tribunal's interpretation of how retirement villages are to operate under the legislation" and that they have written to MPs seeking a parliamentary inquiry. She refers to a letter received from Mr Ray Williams, MP of Castle Hill, in about February 2016. Ms Montgomery submits that the Residents committee have "in effect used the Tribunal as a forum to seek to change the legislation via Tribunal decisions". Therefore, it is necessary to have highly experienced managers and higher staffing levels in order to manage the village. She states that the very length of Mr Smith's affidavit reflects management's daily interaction with the Residents committee. "Not a stone is left unturned." 8. Paragraph 35: Ms Montgomery attended the first seven to eight inspections in order to review the process. 9. Paragraph 72: the Safety Audit/Safety Inspection Report is required pursuant to ss 58, 58A and 59 of the RV Act, requiring an operator to provide secure and safe premises, and to conduct regular inspections and to provide an "emergency system" on request. This is also good management practice. 10. Paragraph 74: the Prensa costs are $1,200 plus GST (for a review and audit) and $1,700 plus GST (for training). Statutory declaration of Graham Laurance dated 22 March 2016 1. In relation to paragraphs 5 and 6 of this statutory declaration, Ms Montgomery states that she can only comment on her own experience with Mr Bedingfield. She finds him very reasonable and supportive, and if and when she has required capital items to be replaced, Sakkara provides the necessary approval and funds. 2. Ms Montgomery states that Mr Laurance is "clearly upset" with the original building defects, but these past issues are not relevant to estimating reasonable and necessary costs to properly run The Landings in FY 16. Affidavit of Andrew Burgess dated 23 March 2016 1. Ms Montgomery disagrees with Mr Burgess's claims that there is an absence of honest communication, that there is secrecy and misuse of residents' funds 2. Paragraph 23: from her first day at The Landings, Ms Montgomery states it was evident to her that the Residents committee and some residents believed they had a right to run The Landings. In that regard: 1. Residents have said to Ms Montgomery that it must be difficult having two bosses – Sakkara and the residents. She made it very clear from the outset that she has one boss: she is employed by Sakkara to run The Landings and her one boss is Mr Bedingfield. She provides services to residents "as our customers". 2. Members of the Residents committee and residents have stated that she is answerable to them because they pay her wages: Ms Montgomery is surprised by this misunderstanding and likens it to residents paying Council rates and then telling the Mayor that they must run their district how they are told to. 3. Ms Montgomery's observation and experience is that the Residents committee ask for, and have historically been provided over and above what they should be entitled to as residents "and customers of The Landings". An example is Mr Burgess requesting access to Sakkara's capital replacement and refurbishment budget and has offered to assist "us" in developing Sakkara's capital budget. Ms Montgomery states that "[t]his is not required, nor will it be provided". 4. Ms Montgomery states that "[t]here is a line between management and resident/customer which is defined by the village contract and legislation". 1. Paragraph 29: Ms Montgomery states she has not encountered any situation where her decisions have been challenged or overturned by Mr Bedingfield. 2. Paragraph 51: Ms Montgomery states it is completely untrue that there is secrecy and hidden agendas in every aspect of village management, particularly given the significant involvement and access to information facilitated by Sakkara. Ms Montgomery states that "These ongoing allegations and attitude reflects paranoia". While she understands that residents have experienced uncertainty in the past which might have caused distrust, it is unwarranted and unnatural to assume the worst of everyone and this "endemic distrust" towards Sakkara is not well founded or appropriate. The Residents committee should reflect that The Landings is maintained to a very high standard and the large majority of residents love living at The Landings. Properties are continuing to sell for record prices. There must be a place for objectivity: people stay and want to move to The Landings because it is well run, great value and a fantastic place to live. 3. Paragraph 52: this claim is unsubstantiated. The inspections have received overwhelmingly positive feedback and residents have become more informed about the lease and budget, gained an understanding or their entitlements under the lease, had maintenance items identified and rectified and capital items replaced and been made aware of support services. 4. Paragraph 53: Mr Burgess must respect that it is her job to manage The Landings. It is not the Residents committee's responsibility. 5. Paragraph 56(f): claims of censorship are alarming. In reference to the request to print and distribute a letter, Ms Montgomery states that the communication is ludicrous and amounts to bullying and harassment. Ms Montgomery's duty is to protect staff welfare. She states that a large number of communications produced by the Residents committee are defamatory and numerous items could be referred for legal action. However, she has now almost become immune to the toxic communication of the Residents committee. 6. Paragraph 60: despite continuing to write that Ms Lawrence and Ms Montgomery are inexperienced and inept, Mr Burgess acknowledged at the Residents committee meeting on 21 March 2016 that Ms Lawrence is doing a good job, and he has also previously commended her for her efforts. At this meeting, The Landings's new accountant, Ms Marshall, suggested Mr Burgess make residents aware of his views, although to her knowledge he has not done so. 7. Paragraph 62: Mr Burgess notes that Ms Dignam resigned after five weeks: Ms Montgomery's experience leads her to conclude that previous Village Managers have found dealing with the Residents committee to be untenable. 8. Paragraph 64: insurance costs have been finalised and are clear and concise. As The Landings did not have sufficient cash to pay for insurance in one lump sum, it was necessary to negotiate a new policy as described. 9. Paragraphs 113 – 115: Ms Montgomery states her comments to DONR (the village newsletter) have been honest and are her opinion. She has tried to encourage openness and positivity and has spoken the truth, She is comfortable "in being confrontational in a professional and respectful manner. To my disappointment, my openness and honest[l]y has not been respected by the Residents committee". 10. Paragraph 118: Ms Montgomery states because of her studies and experience, she is very aware of comparing like with like in relation to operating costs. She states that this exercise was first carried out by Ms Dignam and that Ms Montgomery subsequently spoke with and visited other retirement villages to qualify her statements. She stands by her assessment that, at The Landings, a recurrent charge of $785 per residence per month is within market range and great value. General Comments 1. As to allegations about my integrity and honesty: In brief, Ms Montgomery asserts her honesty and integrity, asserts she would not continue in her role unless she can do so with honesty and integrity and with a long career ahead of her, her reputation is everything. 2. As to the difficulties in obtaining an approved annual budget: as explained to residents, Sakkara does not make money out of a budget. Ms Montgomery states that the difficulties in obtaining an approved budget are "ridiculous", especially given the supporting information provided and the operator's "open-book policy" in relation to resident requests to review any invoices and the supply of monthly and quarterly financial reports. "CMR2" is a copy of the monthly management reports from July 2015 to February 201[6]. Budget preparation, negotiation and running applications to the Tribunal is "all consuming" and prevents managers getting on with the job of managing. It is evident that The Landings has been under resourced for a long time and there is considerable "catch up" to be done. The focus of the residents committee and residents is on the increase in recurrent charges but this increase is the result of having maintained artificially low levies for so many years. The focus should be on what charges are being paid in comparable villages and reviewing line items to determine whether the costs are needed, and are fair and reasonable. 3. As to workloads: Ms Montgomery states she would not continue in her role as Village Manager without the role of operations manager in support as the workload would be unsustainable. Given the history of The Landings and the active nature and personalities of the key players, both roles are necessary. Ms Montgomery states that "at present" (that is, as at the date of her statement) she is dealing with RV 15/66111 and two Fair Trading complaints. She states also that The Landings sales team is engaged through Laing + Simmons and they advise her that there is no other village like The Landings in the problems we encounter. Ms Montgomery has received the same advice from one of The Landings' PCA staff. Ms Montgomery estimates her current workload as follows: 1. Liaising with residents and families 19% 2. Liaising with staff 19% 3. Reviewing matters for the residents committee 9% 4. Budget preparation 5.7% 5. Tribunal matters 5.7% 6. Team meetings 4.3% 7. Sakkara/Bedfords meetings 4.3% 8. Residents committee meetings 3.7% 9. Invoicing/paying creditors 3.7% These activities comprise 75% of Ms Montgomery's time. If there were no arguments over budgets and arguing over "basic matters", Ms Montgomery would spend less time liaising with staff, reviewing matters for the residents committee, budget preparation and Tribunal matters, and would be able to focus more on the role she was engaged to do, by: 1. Ensuring a positive atmosphere in the village to create a high demand for property at The Landings and maximising property values and to provide strategic planning for future development and improvement of The Landings; 2. Taking a greater role in interacting with the local community to find opportunities for the residents and to find ways to draw on the experience and expertise of the residents to assist and support the broader community; and 3. Have more time to review and explore optional services opportunities to enhance the services and income opportunities to minimise the running costs of The Landings and to streamline processes to make the management team and the village more efficient. 1. As to moving forward: Ms Montgomery asserts that although The Landings has had historical issues with building defects, these have been exhaustively dealt with at the Tribunal and have been actioned. The residents committee should "draw a line in the sand" and be realistic about what it really costs to run The Landings. Obtaining appropriate funds to "get on with the job" would provide certainty for the residents and reduce the need to pay unnecessary legal fees to obtain an approved fair and reasonable budget. Stress to residents is another factor: Ms Montgomery reports that a resident dropped into her office "last week" grumbling about paying a contribution towards residents' legal costs: this resident had voted to approve the budget at $785 monthly recurrent charges. Further, on being advised by Ms Montgomery that he was not bound to pay that contribution, the resident responded to the effect: "You know the politics around here". Ms Montgomery considers this sort of pressure on residents is "undue and verging on harassment". She believes the large majority of challenges in running The Landings would be removed if residents simply approved the budget at $785 per month per residence. Ms Montgomery also considers useful benchmarking and comparable information could be provided by the Property Council of Australia and the Australian Property Institute. Statements of David Peter Bedingfield Statement of 17 February 2016 1. Mr Bedingfield has been a Director of the operator since 18 April 2012. He notes that the operator has owned and operated The Landings from 2009. He states that the operator is part of a broader property development company that develops residential, industrial and commercial property in Australia and overseas. He states: "I am the director primarily in charge of overseeing the management of the retirement village asset of the group, being The Landings". 2. Mr Bedingfield states: "5. In this role I have: (a) Been involved with the appointment and monitoring of the performance of Village managers at The Landings (Village Manager) and where necessary provided support to the Village Manager in the conduct and management of The Landings, including attending meetings with residents, attending resident forums and meeting with the Residents Committee; (b) Overseen through the village management, the preparation of the proposed annual budgets for each financial year in accordance with s 112 of the Retirement Villages Act 1999 (NSW) (proposed budget) and where necessary, assisted those employees negotiate with the Residents Committee in relation to line items of these proposed budgets; (c) Liaised with Sakkara's external accountant Charles Cupit of Bedford Chartered Accountants, in respect to preparation of the proposed budget and his attendance at meetings with the Residents Committee on this issue; an (d) Assisted with instructing Sakkara's solicitors in respect of budgets, disputes or other matters relating to the operation and management of The Landings. 6. In my role I am responsible for hiring senior management positions namely Village managers and executive staff to provide Village Management services at The Landings 1. Mr Bedingfield provides a verbal sketch of the nature of The Landings and its grounds and states that it "operates at the higher end of the independent living units market. The level of ingoing contribution paid by residents under their registered loan/lease village contracts is an average of $1,000,000". 2. Between paragraphs 14 and 26 in this statement, Mr Bedingfield sets out his brief history of disputes between the partes, noting that as well as disputes in relation to budget estimates per se, there were also disputes between the operator and the builder in relation to defective building works, and between the operator and the residents in relation to whether the operator was classifying some of the defective works as repair works to be paid for by the residents. 3. Mr Bedingfield sets out brief details of several applications in the Tribunal or its predecessor, the CTTT, culminating in the final decision in RV 14/14827. 4. At paragraph 26, Mr Bedingfield states "All rectification works in relation to those orders have been completed and were completed by the first quarter of 2015". 5. From paragraph 27 onwards, Mr Bedingfield sets out his submissions in which he states that because so many village budgets have not been agreed "and the continued compromises made by Sakkara to reach an agreed village budget meant that the resident funds to meet the operating costs of The Landings were significantly reduced". The result of this state of affairs, according to Mr Bedingfield, is that Sakkara has had to use its own funds to meet operating shortfalls and cash flow requirements. 6. Another consequence suggested by Mr Bedingfield, is that all the litigation and the restricted cash flows "have put immense pressure on village management" and as a result "I began to receive complaints from residents that certain tasks were not being actioned in a timely manner". To resolve, or assist to resolve, both issues, Mr Bedingfield employed Sue Lawrence as a "business analyst" to review operations. 7. By that stage, the operator was preparing the FY15 budget. Despite Mr Bedingfield approving "significant reductions to the essential expenditure items", the residents refused to agree to any form of the FY15 budget. As a result, the operator lodged application RV 14/54814 [Sakkara Investment Holdings Pty Ltd ATF Sakkara Landings v Residents Committee, The Landings 26 May 2015 - J Smith Senior Member]. This decision included an amount of contribution to the CWF. This contribution, submits Mr Bedingfield, has been disputed by the residents and some residents have refused to pay the amount to Sakkara. 8. Sakkara had also filed applications RV 11/29123 (FY12 budget) and RV 12/32770 (FY13 budget). The decision on those matters was made on 14 November 2014 [The Residents Committee, The Landings v Sakkara Investment Holdings Pty Ltd ATF Sakkara Landings Trust [2014] NSWCATCD 228 – Senior Member J Bordon]. Mr Bedingfield notes that the approved recurrent charges were higher than the amounts actually collected by the operator for those years. Mr Bedingfield states that invoices were sent to residents reflecting the approved budgets and those invoices have been disputed by the residents. 9. At paragraph 35, Mr Bedingfield states: "35. By May 2015, Sakkara had achieved approved budgets for all previous financial years. Many residents were not paying those invoices, on the advice of the Residents Committee. The outcome was that Sakkara was still unable to collect the recurrent charges due and payable to it under approved budgets." 1. Mr Bedingfield states that its problems were compounded when the residents refused to accept the FY16 budget (the subject of the current proceedings) and had to defend application RV 14/57001 (Residents Committee of The Landings Retirement Village v Sakkara Investment Holding P/L atf Sakkara Landings Trust [2015] NSWCATCD 113 – Senior Member Coleman). Mr Bedingfield states that the orders made by Senior Member Coleman on 03 September 2015 "in effect frustrated the November Orders and that decision has been appealed. At the time Mr Bedingfield drafted his statement, the appeal had not been decided but the Appeal Panel published its decision on 23 February 2016: Sakkara Investment Holdings Pty Ltd as trustee for Sakkara Landings Trust v The Residents Committee of The Landings Retirement Village [2016] NSWCATAP 52. [That important decision will be considered in detail below.] 2. At paragraph 41 of his statement, Mr Bedingfield turns to the "History of Village Managers": between paragraphs 43 to 48, Mr Bedingfield provides a brief outline of Mr Deery's employment as village manager. He suggests the pressures on Mr Deery resulting directly or indirectly from the Residents Committee caused Mr Deery to resign as the position "was becoming too much for him". 3. Having already employed Ms Lawrence, as noted previously, Mr Bedingfield requested she act as village manager until a permanent replacement could be found. 4. Mr Bedingfield sets out the reasons why it was decided to employ a new village manager from outside the industry and that a person of "a higher calibre and wider set of skills" than a "typical" village manager, with a higher salary to match, would be sought. He notes that the two identified suitable candidates, Ms Tracey Dignam and Ms Catherine Montgomery, were interviewed with Andrew Burgess of the Residents Committee, as "a gesture of goodwill to the Residents Committee". Ms Dignam was appointed, according to Mr Bedingfield that being Mr Burgess's preference. 5. Mr Bedingfield states that Ms Dignam almost immediately advised she could not manage all her duties without help and that she was uncertain this was a role which suited her. She resigned only about one month after taking up her job. Mr Bedingfield states that she told him that she was leaving because the Residents Committee were too rude and difficult to deal with and that she was concerned that the personal attacks she had witnessed against Ms Lawrence may be directed towards her. 6. Almost two months later, on 27 July 2015, Ms Montgomery accepted an offer to become the new village manager. Mr Bedingfield states: "… I have checked in with her [Ms Montgomery] from time to time. I believe she is adjusting to this role, although I recall she has informed me that she is surprised at the behaviour of residents on occasion. … she was surprised at how far residents will go to make life difficult for her and how far they will go to pursue something". 7. Between paragraphs 66 and 81, Mr Bedingfield sets out his history of negotiating the FY16 budget. Three versions, or iterations, of the proposed budget were provided to the residents. Mr Bedingfield sets out the negotiations in regard to each version: 1. FY16-1: this budget was prepared by Mr Cupit with the assistance of Ms Lawrence and other employees. Mr Cupit was requested to attend meetings with the Residents Committee and to answer their questions. Mr Cupit was authorised to amend the budget in order to achieve approval, subject to final approval by the operator. Mr Bedingfield authorised Mr Cupit to offer to the residents a reduction in levies of $100,000 for FY16, on conditions (approving the budget without removing "essential expenditure items" and agreeing on a 12 month moratorium on litigation). This offer was made and renewed but was neither accepted nor rejected. The residents and the operator exchanged correspondence providing further detail about the Residents Committee's position on disputed items: this correspondence is contained in annexures "DB2", "DB3" "DB4" and "DB5". Mr Bedingfield states at his paragraph 74: "At this stage, I formed the view that the Residents Committee was not genuinely interested in resolving the issues between the parties. Rather, it appeared to me (and still appears to me) that the Residents Committee is using the budget as some sort of means of entertainment. For this reason, I left the budget negotiations to Mr Cupit from about this date." [I note "this date" is a reference to 22 June 2015.] 1. FY16-2: Mr Bedingfield deals very shortly with the second version of the budget, merely stating that it was issued on 25 August 2015 and rejected on about 27 August 2015. However, he does state that in attempting to obtain consent to a budget, the operator had "reduced a lot of necessary expenditure" and as that had been rejected he instructed Ms Lawrence and Ms Montgomery to prepare a third form of budget "that reflected a reasonable estimate of expenditure necessary to run The Landings". 2. FY16-3: the third version was issued to residents on 03 November 2015. Despite his comments summarised in the previous paragraph, Mr Bedingfield states that at a Christmas function on 09 December 2015, he reiterated his offer to contribute to recurrent charges (the $100,000 offer referred to above). He states that in reply, Mr Burgess advised him that the residents would not approve a proposed budget until agreement was reached as to what the budget should contain: "DB6" is an email from Mr Burgess confirming his position. 1. Mr Bedingfield's final paragraph is: "81. I have come to believe that the Residents Committee is not concerned by the increase in levies. The Residents Committee did not appear interested in my offer to reduce the levies – not only was my offer rejected but I also received no firm counter offer." Statement in Reply of 08 April 2016 1. This statement is made in reply to the affidavits of Mr Burgess (23 March 2016) and Mr Smith (23 March 2016 and 24 March 2016). 2. Mr Bedingfield suggests that Mr Burgess had made disparaging and defamatory remarks against him. He rejects and completely refutes all statements made by Mr Burgess as to his character, trustworthiness, the information provided to Mr Burgess and his management abilities and skills. Mr Burgess's remarks should be completely ignored as misstatements of the facts and without any supporting evidence. Mr Bedingfield states he has always treated the residents and the members of the residents committee in a professional and courteous manner. History of ownership of the village 1. Mr Bedingfield states that although this is not a relevant issue, it is important to clarify the operation of the village by Sakkara. The current operator took ownership and operation of the village in 2009. Sakkara Investments Holdings Pty Limited as trustee for the Sakkara Investment Holding Trust did not exist prior to then. 2. The current operator acquired the village from the owners of the land, being RAAF (Landings) Ex-Servicemen Charitable Fund Pty Limited ("RAAF"). RAAF had appointed a management company which was a different entity to the operator. Although there are some principals of the previous management company who principals of the current operator, the individuals who had day to day management of the village at the (previous) time are not associated with the current operator. Mr Bedingfield states that he was not involved with the previous management company. 3. Mr Smith and Mr Burgess refer to "Ground Crew Pty Limited": that company was the developer of the village in conjunction with RAAF. The current operator acquired the village from RAAF and did not enter into or have any contractual arrangement with the prior management entities of The Landings. Village Manager and operations manager and management of the Village 1. Under this heading, Mr Bedingfield starts by repeating the submissions in his earlier statement as to the relationship between the village manager and staff and himself. 2. He then turns to explaining the development of the need for a village manager and an operations manager. 3. This process commenced with Mr Deery advising he found his dealings with the residents committee becoming overwhelming because of the frequency of questions and emails requiring response and preparation. Mr Bedingfield states that he could see this mounting pressure and came to the view that additional management resources were required. He states that the following items were not being carried out: 1. Regular property inspections; 2. Regular inspections and interviews with aging residents to identify emerging issues; 3. Staff not being adequately managed; 4. IT systems not being maintained or appropriately introduced; 5. Adequate safety inspections; and 6. Proper surveillance of compliance issues. 1. As a result, Mr Bedingfield asked Ms Lawrence to undertake an "exception report", attached as "DBS1". He states that it was clear from that report that sufficient work existed to require operation support to the Village Manager. In addition to the operational need, there was the additional burden of litigation. The workload for the latter fell on the Village Manager. Mr Bedingfield provides at "DBS2" a summary of Tribunal, Appeal Panel and Court applications. 2. Mr Bedingfield repeats his statement as to the residents appearing to treat the process of argument as a form of entertainment and diversion. 3. Resulting from all the above, it was decided that the operator would introduce the role of an Operations Manager. Village Manager Selection 1. It is under this heading the Mr Bedingfield states that from his observations, he would not feel comfortable as an employer allowing just one member of the executive staff to attend a residents meeting alone, because of the "overarching sense of bullying and harassment". 2. In about October 2014, the operator briefed the firm of Maxwell Fulton to assist in preparation of a brief to find a Village Manager. "DBS3" is an email from that firm setting out the elements of the skills required and a salary guide in the range of $115,000 to $125,000. Some information as to potential candidates and comparable salary information from other villages. Some information is redacted for privacy reasons. 3. Mr Bedingfield then states that observations by Mr Burgess and Mr Smith about the low rate of sales in the village being relatively low are correct, "which is reflective in fact of how residents enjoy living in the village". 4. Mr Bedingfield then provides "DBS4" which is an email from Maxwell Fulton in relation to a prospective candidate having experience as a Village Manager in a village with a history of acrimony. Aging Residents 1. Noting that the average age of residents has increased to 82 years, Mr Bedingfield notes that this does not mean all residents age at the same rate. It is therefore necessary for the operator to understand where the different rates of aging "may be occurring" and to identify individual needs resulting therefrom. 2. Finally, Mr Bedingfield notes that while there is no "strict" obligation under the lease and independent living at The Landings to provide services, it is nevertheless important for the operator to identify "how we could assist in facilitating the provision of those services where needed to the individuals". Statement of Robert Stanley Jones 25 February 2016 1. This statement serves only to attach a report prepared by Mr Jones as "SJ1". Mr Jones is a consultant to MCS Group Holdings Pty Ltd ("MCS") who were engaged by the operator to prepare an expert report in support of its application RV 15/66111. 2. "SJ1" is headed "Expert Report" and is directed to Ms Lawrence, dated 25 February 2016. Mr Jones states that he has read "NCAT Procedural Direction 3—Expert Witnesses (Effective Date 7 February 2014" and he agrees to be bound by the Expert's Code of Conduct included therein. 3. Mr Jones describes his "instructions" as follows: "I am instructed to prepare a comprehensive Review of maintenance requirements of all common elements and areas and facilities of The Landings Retirement Village at 440 Bobbin Head Road, North Turramurra, together with comments on payments previously made to contractors." 1. In his "Preamble", Mr Jones notes: "This Review endeavours to tabulate and itemise all components of all common rooms and areas together with notations regarding maintenance cycles and indicative cost estimates. This review does not differentiate between items which may be considered to be maintenance related and items which may be considered to be items of capital expenditure. … Some items are specifically out of scope for the purposes of this report and those items include repair/maintenance of: 1 Mechanical installations 2 Electrical installations 3 Hydraulic installations 4 Fire Systems' 5 Stormwater Detention Systems 6 Hot Water Systems 7 Air Conditioning Systems 8 Pool Equipment 9 Lifts and Dumb Waiter 10 Commercial Kitchen Equipment 11 Security and EWIS Systems 12 PABX 13 All areas of landscaping … Note that comments on various Villa roofs are based on inspection from ground level as accessible. Comments on Apartment roofs are based on inspection from a distance as available. My examination of the Villa units was restricted in inspection of external components of the buildings, inspection of internal common areas and comments on developer maintained appliances within. My examination of Clubhouse and Reception building, Indoor Pool and Gym building Rotunda was restricted to common areas. …" 1. The bulk of the body of the report is a summary of Mr Jones' observations. I will not attempt to summarise these detailed notes. They generally take the form of: "The roofs are generally in good/reasonable condition, there are loose tiles, the carpet/paint needs replacing in 5/10 years" and similar. 2. In relation to his instructions to comment on previous invoices paid by the operator, Mr Jones' comments can be summarised as follows: Contractor Comments Phil Coventry Carpentry (lists invoices) No times have been provided on the labour charges. Also there is no indication whether GST is included. I am therefore not able to comment on the fairness of the payments made. JG Tiling and Building Services Pty Ltd (invoice number) No details or labour times have been provided. I am therefore not able to comment on the fairness of this invoice. Vergola (invoice number) There is only minimal detail, but I consider the charges made to be fair and reasonable for the work done. Roofs Above and Beyond (invoice numbers) No details of labour times have been provided. I am therefore not able to comment on the fairness of these invoices. All Clean Blinds (invoice number) Sufficient details were provided of materials and labour. I consider the charges made in this invoice to be fair and reasonable. Absolute Professional Cleaning (invoice numbers) No details of labour times have been provided. I am therefore not able to comment on the fairness of these invoices. Dorma Australia Pty Ltd (invoice numbers) carpentry services In my opinion, the call out fee and the hourly labour rates of $100 are excessive. In my opinion, $85 per hour would be more appropriate. Danmarcas (invoice numbers) plastering No material/labour break-ups have been provided. No labour times have been provided. I am therefore not able to comment on the fairness of these invoices. Wizard Glass (invoice numbers) glazier No labour times have been provided. I am therefore unable to comment on the fairness of these invoices. Guidaci Interiors (invoice numbers) plasterer Sufficient details were provided of labour and materials. I consider the charges made in these invoices to be fair and reasonable. NGS (invoice numbers) door servicing No labour times have been provided. I am therefore unable to comment on the fairness of these invoices. 1. In relation to current contracts, Mr Jones refers to the contracts with Programmed Property Services for repainting of several areas of the village. He states that in his opinion the tendered prices are fair and reasonable "and have been used below as part of my suggested maintenance costing". 2. Mr Jones then summarises his estimates of maintenance/repairs required now, as in the following schedule: Area Estimate Clubhouse and Reception Building $3,000 Pool & Gym Building $3,000 94 SNMD building $3,000 96 SNMD building $2,000 2 SNMD building $2,000 4 SNMD building $2,000 Villas in the complex $20,000 1. Apart from the exclusions noted above, Mr Jones has not included maintenance estimates of appliances within individual units. There is also no estimate in relation to gutters, downpipes, louvres etc. which he states "is more of a cosmetic item", but he then states that a budget for this work would be "of the order of $100,000 with the recommendation that the cleaning be done every 3 years. A more economical alternative would be to paint the gutters and downpipes. A budget cost for this work would be in the order of $40,000 and should be repainted every 5 years". The latter figures is used in the maintenance costing schedule and table for ongoing maintenance provided by Mr Jones. Statement in Reply of Alan Dempsey dated 08 April 2016 1. Mr Dempsey is the Facilities Manager at The Landings and he sets out brief details of his work experience, including running his own business (Country Comfort Kit Homes Pty Limited), Clerk of Works, Licensed Building Supervisor and running his own maintenance business in the Eastern Suburbs (presumably in Sydney) from 1980 to 1986. He notes his qualifications are in "building", not in any particular trade. He holds appropriate licenses for removal of asbestos, operation of elevated work platforms, electrical testing and tagging, and similar. At "AD1" Mr Dempsey has attached his qualifications and builder licence. Mr Dempsey also lists the members of his team. 2. Mr Dempsey states that when he commenced at The Landings in 2014, the state of repairs and maintenance needed improvement. He states he was brought in specifically for that purpose. On joining The Landings he worked with Ms Lawrence to develop policies for maintenance and upkeep and looking for improvements and economies. 3. Mr Dempsey notes that in the current application, there are the following matters subject to budget dispute on which he comments: 4. Tradesmen's Repairs: Mr Dempsey is responding to the report of Bishop Collins. He states he is familiar with each of the items referred to in the list at page 62 for the work done in the second half of 2015, as he was involved in ordering the work to be done. 5. Mr Dempsey states that the conclusion that the work is not repairs and maintenance is incorrect for the following reasons: 1. JG Tiling: related to sealing tiles to stop a leak which is repair work and the low dollar amount also supports the view it is repair work; 2. Roofs Above and Beyond: roof repairs resulting from degeneration of roof structures over time at 94 and 96 SNMD which are approaching 14 years of age; 3. Neil's Glass Service: in relation to sash balances, which is maintenance of the function of windows or maintaining the operation of a window. Mr Dempsey also suggests that referring to this as "fix the window" or the window "won't stay open", rather than someone asking for "the sash balance to be replaced" also suggests repairs and because "most people would not know the technical description of the parts of a window". The sash balance is an integral part of the window like a hinge or trimming or lock. 1. Thermostatic Mixing Valve: Mr Dempsey refers to the report of Wood & Green Engineers of 23 March 2016 in relation to the hot water system. The reference in that report to the regulated maximum temperature of 50� in the villas is incorrect because measurements were taken of hot water in all the villas in February and March 2016 to ensure insurance compliance. This requires compliance with AS3500.4.2015 which states that thermostatic valves are to be serviced to maintain a temperature of not more than 45� for the aged. The valves are maintained by a yearly service by Pure Plumbing Professionals and by a full strip down and service every 5 years. 2. Mr Dempsey then describes the structure and operation of such a valve in some detail and submits that the maintenance requirements under the Standard are part of maintaining the operation of the valves. 3. Mr Dempsey then refers to Part 9.2 of the Wood & Green Report in relation to 94 and 96 SNMD being supplied with hot water from the central gas fired hot water storage system. He states this is incorrect as: 1. Those two dwellings are apartments, not villas and are contained within Stage 1 of the Village; 2. The hot water system in those apartments are gas hot water systems; and 3. Stage 4 is not a gas fired hot water system: its primary heat source is a heat pump with a gas backup which brings the temperature to 63� to prevent Legionella disease. 1. Mr Dempsey then describes the general working of the heat pump system. 2. Air Conditioning: Mr Dempsey refers to section 7.4 of the Wood & Green report in which they categorise 3 broad types of air conditioning maintenance: 1. Run to fail/reactive; 2. Preventative; and 3. Condition monitoring/predictive. 1. Mr Dempsey states that when he commenced working at The Landings the maintenance practice was run to fail/reactive. Since then, a preventative maintenance process has been implemented, starting with a review by Licensed to Chill, and then two assessments in each year. "AD3" and "AD4" are examples of reports prepared by the technician Mr Luke Eagleton of two units. If work is recommended, a quotation is provided and Mr Dempsey would then discuss that work with Ms Lawrence and it would be prioritised for repair or replacement. 2. It is Mr Dempsey's opinion that this program has significantly reduced the ongoing incidence and cost of repairs and maintenance of air conditioning units. He notes also that replacing a unit may involve more than simply removing the housing and the machine, it may also involve "re-piping" which can increase the cost of replacement. 3. Reasonableness of expenses: Mr Dempsey states that from his experience as a builder, the costs paid to contractors for repairs and maintenance at the village are fair and reasonable and good value for money. If "we" suspect it is not good value, the contractor will be required to justify the charge. 4. Painting: Mr Dempsey states he has spoken to the paint suppliers and they are very aware of the scrutiny under which painting is undertaken at the village and that if the paint quality is not excellent there would be significant repercussions. Statement of Alex Marvelly dated 08 April 2016 1. Mr Marvelly is employed as Office Manager by Licensed to Chill Air Conditioning Australia Pty Ltd. He notes that Licensed to Chill has been contracted to provide air conditioning repair service and to implement a preventative maintenance program at The Landings since about July 2014. 2. Mr Marvelly states that Licensed to Chill was requested by the operator to provide two reports in relation to their work at The Landings, each report prepared by a Mr Mitchell Burge who appears from the reports to be a Director of Licensed to Chill. The reports are dated respectively 17 September 2014 and 08 April 2016 and are attached to Mr Marvelly's statement. Mitchell Burge Report of 17 September 2014 1. The Landings has installed "McQuay units" which experience shows to be of poor quality and design. McQuay currently have minimal technical support and have been taken over by another manufacturer. Spare parts are almost unavailable. The units at The Landings are in poor condition and if no action is taken units will continue to fail. The units are at the end of their lifespan. 2. The Landings has 220 McQuay units installed in residences and 15 in common property. If left to operate to destruction, the operator would incur a cost estimated at $2,350,000 + GST (which is calculated by an estimated unit replacement cost of $11,000 (incl GST) x 235). 3. Planned procedures: 1. Implement a stringent maintenance program; 2. Budget allocation of $40,000 per annum for minimum 4 units replacement for controlled allocated replacement; 3. Allocate a large area for the storage of spare equipment; 4. Failed units to be dismantled and usable parts itemised and stored with quarterly audits; and 5. Outdoor condensers have suffered deterioration and are electrically unsafe: estimate a cost of $30,000 to replace in 150 villas but proposed method could be accomplished for $14,800. 1. Budget per annum estimate: $131,420.00. If this proposal is implemented, Licensed to Chill estimate the air conditioning units can be kept operational "for many years to come" with a slow and controlled replacement program. Mitchell Burge Report of 08 April 2016 1. This report is prepared in response to the Wood & Grieve report, sections 7 and 8 (although the report does not refer to section 8, going from section 7.1 to 7.7.1 and then to section 10 "Conclusion".) It is addressed to "To whom it may concern". 2. In relation to refrigerant "R22", Mr Burge states this refrigerant is not going to be phased out until 2029 and "the vast majority of units in Australia today are operational on R22 gas". 3. In relation to "maintenance documentation", Mr Burge states there is a current maintenance plan in place (and lists what appear to be plan numbers), the specific site reports being available on request. Mr Burge also states that there is a twice annual site evaluation and thorough quarterly maintenance. 4. Mr Burge states that the Clubhouse air conditioning system recently had a "major overhaul" as it was damaged by "incorrect power supply". He states that "most major electrical components were replaced, including Compressor Units, Compressor Contactor Units, Thermal expansion valve units, R-22 units and Bi-Flow Liquid Line Drier Units. He says that these units can be maintained for the foreseeable future and the system is now in good working order. 5. In relation to "review of maintenance", Mr Burge claims that if reviewed now, there would be a clear decrease in expenditure "and an increase in the unit's reliability". There has been a maintenance plan in place since 2014 and the previous "run to fail" system has been discarded. 6. Mr Burge states that in relation to expenditure from 2014-2015 there were many issues which date back to the initial construction, and since those years the number of breakdowns has decreased but there was a lot of expenditure relating to the "power supply issue". He says: "You will find that our expenditure actually went down which does not reflect on the overall system's conditions". 7. Noting that many of the systems do have significant corrosion, Mr Burge states that the units beyond repair are replaced with new Actron systems while the other original machines are maintained using decommissioned parts "therefore spreading out the cost of replacement over many years … and the associated cost saving evident". 8. Under the heading "Conclusions", Mr Burge asserts that the number of gas leaks (as shown in the expert witness report) is excessive, and "many of these units have not failed again". Licensed to Chill routinely replaces Schrader valves when repairing any gas leak, so as to alleviate future gas leaks and minimise the escape of R22. 9. Under the hearing "Component Failure Modes", Mr Burge states that the Wood & Grieve statement implying the systems are non-maintainable is incorrect. He supports this by describing the maintenance being carried out, suggesting that the repair of small problems prevents larger problems occurring. 10. Mr Burge states that he (or rather Licensed to Chill) is authorised to replace a maximum of 4 units per year, but it is his intention to gain approval for another 4 units per year. In relation specifically to 18/94 and 9/94 SNMD, he states that there is no other choice but to repair rather than replace because the interconnecting pipe installed during construction, as I understand his evidence, is a low pressure pipe only fit for R22 gas. He states that replacing the current old units with new units would require "major construction work". In the same way, the fact that the new units are "often" larger in size would also mean increased construction costs.' 11. In relation to the W & G review of invoices, Mr Burge states that the invoices contain only minimal information because the information is contained in the original quotation. 12. Under the heading "Conclusion" Mr Burge makes a number of assertions in relation to the maintenance program and future economic life of the McQuay air conditioning units and repeats some of his former statements and concludes by noting that whether the old units are kept or are replaced by new units, regular maintenance will still be required. Statement of Jerram Chippindale dated 08 April 2016 1. Mr Chippindale is a qualified plumber currently (as at the date of the statement) employed by Pure Plumbing Professionals and states he has provided hydraulic maintenance services to The Landings for several years. He was instructed by the operator to review and respond to the Wood & Grieves Engineering report dated 23 March 2016 in relation to the maintenance of temper mixing valves at The Landings. 2. Mr Chippindale's "report" consists of 5 short paragraphs as follows: Attention: Alan Dempsey On reviewing the expert witness report, his reference to AS 3500 part 3.1.9.2a is correct. 45 degrees Celsius at sanitary fixtures primarily used for personal hygiene purposes of the aged, the sick, children or people with disabilities in health care or aged care buildings, early child care centres, primary and secondary schools, nursing homes or similar facilities for the aged, the sick and people with disabilities. However the expert witness reference to the removal of thermostatic mixing valves is incorrect. The Australian Standards state that, in aged care facilities, the maximum temperature for hot water must be 45 degrees Celsius. The only allowable and controllable method to achieve hot water at a maximum temperature of 45 degrees is through a thermostatic mixing valve. If the Thermostatic mixing valves are removed the heaters at The Landings will deliver hot water at a higher maximum temperature that what is allowed by the Australian Standards. If you have any questions …" Respondent's Evidence 1. The respondent's evidence consisted of a large bundle of affidavit and statutory declaration evidence as follows: 1 Andrew Burgess Affidavit 23 March 2016 2 Andrew Burgess Statement 08 September 2016 3 Andrew Burgess Statement 29 August 2016 4 Clive Glover Statutory Declaration 23 March 2016 5 Frances Lerner Statutory Declaration 23 March 2016 6 Francis Brian Fitzpatrick Statutory Declaration 29 April 2016 7 Gadens 04 March 2016 objecting to scope of summons 8 Graham Laurance Statutory Declaration 22 March 2016 9 Guy Smith Statutory Declaration 24 April 2016 10 Lindsay McEachern Statutory Declaration 23 March 2016 11 Neil Leybourne Smith First Affidavit 23 March 2016 12 Neil Leybourne Smith Second Affidavit 24 March 2016 13 Richard Fletcher Statutory Declaration 23 March 2016 14 Sally Elliott Statutory Declaration 23 March 2016 15 Sally Elliott Statutory Declaration 20 April 2016 16 Sydney Roof and Gutter Email 19 October 2015 quotation for anchor points 1. Mr Burgess's affidavit was 56 pages long and comprised 226 paragraphs and included 15 annexures. Mr Smith's first affidavit was 54 pages long and comprised 186 paragraphs and included 25 annexures. The remaining documents were generally very brief. That is, the great bulk of the residents' documentary evidence was included the affidavit of Mr Burgess and the first affidavit of Mr Smith. 2. Both Mr Burgess and Mr Smith also gave oral evidence and were cross-examined. Statements of Andrew Richard Burgess Affidavit of 23 March 2016 1. Mr Burgess provides a succinct summary of his career before entering The Landings in April 2007. 2. Mr Burgess's affidavit is clearly written in response to the statements of Ms Montgomery and Ms Lawrence. Mr Burgess states that contrary to the assertions by those two managers that he represents a problem to the smooth running of The Landings, in fact he has been voted as Chairman by the residents, and that therefore he considers the residents are thankful that the residents committee stands up for fairness and equity in representing their interests. 3. Mr Burgess suggests that good and appropriate management principles are missing in The Landings. He especially suggests that Mr Bedingfield lacks management skills and relies on others, previously a Sakkara director Mr Bevan and now Deacons ("Gadens" as they were and as Mr Burgess names them). He also suggests Mr Bedingfield lacks integrity and is fundamentally untrustworthy. 4. Mr Burgess states that in his affidavit he considers it imperative to highlight "the misinformation and untruths contained in the four sealed statements made by Mr Bedingfield, Mr Cupit, Ms Montgomery and Ms Lawrence simply to show how residents [have] been denied proper, honest, and transparent information on which to base their decisions with respect to the three versions of the FY16 Proposed Budget". Village Operator and Management Overview 1. Mr Burgess suggests that the operator's management has been marked by secrecy, misuse of residents' funds and the absence of honest communication, and the record of claims to the Tribunal show that. 2. The changing position descriptions of Village Manger, Operations Manager and Facilities Manager demonstrate the level of secrecy. Mr Burgess submits that the position descriptions in "CM13" (which have references relating to the operator's solicitors) "have been prepared to suit the now new arguments of management by shuffling responsibilities around between the three to justify their positions". A demonstration of this can be seen in Mr Deery's signed position statement ("SL2") which bears little relationship to the latest versions. 3. As a result, residents have had little choice other than to "pursue" the operator through Tribunal proceedings, and he lists no fewer than 11 separate Tribunal applications. Despite all this litigation (due to the litigious nature of Sakkara directors), an harmonious relationship has still not been achieved. 4. In the past, village managers have not been empowered to make decisions in dealing with residents and decisions have been overturned. 5. Mr Burgess refers to prior communications in 2014 between the residents committee and Sakkara, especially in relation to an admission by Mr Deery that he spent up to 60% of his time doing work for the operator (including defect rectification instead of a full time qualified Project Manager being appointed as ordered by the Tribunal), rather than managing the village. 6. Turning to Ms Montgomery and Ms Lawrence, Mr Burgess suggests they did not have the benefit of appropriate experience or qualifications and that Ms Montgomery in particular adopted an arrogant and obstructive stance in dealing with residents. He describes as a "misconception" management's opinion that residents are free to leave the village if it becomes too expensive. Once the village's status changed from its original charitable basis, cost became a concern and residents (or some of them) are effectively "trapped". 7. Mr Burgess alleges that a failure on the part of the operator to introduce proper practices and procedures, including reporting, for maintenance has resulted now in the cost of maintenance to catch up with asset replacement and maintenance. 8. Mr Burgess returns to discuss the continuing finalisation of defects and suggests Ms Lawrence's long hours could be partly due to her involvement in that work. He also suggests that some of the works ordered by Member Vrabac have still not been properly certified. 9. Next, Mr Burgess notes that the residents committee proposed an inspection of residents' dwellings to ensure records could be properly maintained and agreed. Now, however, he disputes the need for annual inspections of appliances, which imposes a time burden on management and is not required anyway, as an individual resident would be quick to report any issues. Mr Burgess suggests this is a device by the operator to suggest the existence of a heavy workload. 10. In addition, the inspections have caused anxiety to many residents who believe the inspections are a surreptitious method of assessing whether residents should be seeking to move to a higher care environment. Also, Mr Burgess suggests the residents committee could assist in that regard and have suggested that to the operator, but their offers have not been taken up. He submits that such assistance would not be extensive and the submissions by Ms Lawrence and Ms Montgomery that it is, is a further effort to justify their roles. The fact that photographs have been taken during such inspections by the operator is, he suggests, a breach of a resident's right to privacy, a key essential in the job description for both Ms Montgomery and Ms Lawrence. "Five Star Myth" 1. In paragraphs 55 and 56 of his affidavit, Mr Burgess provides submissions and examples to argue that the facilities and the quality of facilities do not measure up to a 5 star rating, due to the "general ineptitude of managers at all levels" during his (then) 9-year residence in The Landings. FY16 Budget Items in Dispute 1. Mr Burgess next turns to the disputed budget items, dealt with separately after some introductory paragraphs suggesting generally the residents could not agree to budgets due to a lack of information although action by the residents committee has now resulted in more information being provided. He notes he has been involved in budget assessment and analysis for (then) 7 years. 1. Wages and Administration (6): Mr Burgess submits that the core issue in administration of The Landings is the duplication of roles between inexperienced village managers on the one hand, and Ms Lawrence on the other. He suggests that Ms Lawrence "by her own actions and behaviour" became the subject of residents' complaints. Proposals by the residents to suggest a staff structure with a greater emphasis on asset management were rejected by the "stubborn belligerence" of the operator and this item could not be agreed. Instead, management insisted that the residents form the barrier to agreeing a budget. 2. Wages Maintenance (7): again, Mr Burgess submits there was insufficient information provided and while residents were prepared to accept increases in the maintenance area they also sought to have management recognise the overlap with defect rectification. He notes again a Project Manager should have been employed. He states that management simply ignored and rebuffed the residents committee. 3. Wages Replacement Staff (12): Mr Burgess refers to the "confusion" when Mr Deery resigned and then Ms Lawrence was employed and then Ms Dignam resigned. He submits that management must manage leave and unforeseen absences and suggests that increased costs in this item "arise more out of chaos than necessity". 4. Recruitment Temporary Staff (13): Mr Burgess refers here to the cost of recruiting a new village manager and states that it had not appeared in village accounts prior to FY16. He states that the inclusion of this amount in FY16-3 reversed a previous agreement and that FY16-3 includes "punitive changes". 5. Insurance (18): Mr Burgess states that the information was confused and could not be reconciled. Efforts to gain clarification were not successful. 6. Tradesman Repairs (37): one aspect of this dispute is the confusion between village operating costs and defect rectification costs, and also the reluctance of management to accept responsibility for capital replacement. He claims that checks of invoices by residents (with the accountant) found "time and again" that operator costs had been charged to the operating account. He suggests this issue was the subject of Tribunal claims and that it continues today. In relation to "SL28", Mr Burgess states that the trend analysis does not take into account the reintroduction of charging residents for optional maintenance services. He submits that residents "naively" believed that as they pay the wages of village staff to do village work, the expenses would be correctly allocated to the responsible party. He suggests that the operator's strategy, aided by Ms Montgomery being no different to predecessor managers and continuing to incorrectly allocate costs, is to avoid having to part with "a single dollar". 7. Annual Fire Safety Certificates (45): the issue here is, quite simply, the information provided was not clear, given the FY15 budget was $1,328.00 and the proposed budget for FY14 was $24,309.00. No information was provided as to how tenders were called or awarded. The issue of tagging of electrical equipment is dealt with in the residents' expert report. 8. Temper Mixing Valve Compliance (46): one issue in this item is said to have arisen because the operator failed to answer residents' queries as to why a TMV was required in water heaters with factory preset maximum temperatures. This was explained by an expert report obtained by the residents, after the operator failed to obtain its own report as requested. The second issue was that the operator failed to get expert advice as to why replacement of TMVs was required on a 5-yearly service regime. Instead, the residents were simply expected to accept the budget. 9. Electricity (48): Mr Burgess refers to the advice that electricity charges would be reduced from July 2015, and the acceptance of this advice initially by Mr Cupit and then the FY16-3 budget ignoring any reduction on the basis that, as asserted by Ms Lawrence, contracts had been negotiated the previous year. Mr Burgess notes that the Profit and Loss account as at 29 February 2016 shows the cost of electricity is 25% below the FY15 budget. 10. Air Conditioning – Contract (63): Mr Burgess states the issue here is again lack of clarity and the failure by management to provide clear specifications and scopes of work when calling for tenders. Residents are concerned that management control is deficient. 11. Air Conditioning R & M Materials (64): Mr Burgess states that the actual year to date cost for maintenance in FY15 was 139% above budget, much greater than the recognition in the legislation of "minor variances". He notes that residents obtained their own expert advice and claims that this indicates that management sought to hide from residents the fact that the equipment is obsolete and is not supported by the manufacturer and should be replaced (at the cost of management). He submits that resident suspicion was vindicated by this expert advice. 12. Optional Services Recouped (69): this relates to the residents' argument that commercial terms should be charged to third party service providers. The amount budgeted in FY16-2 of $40,731.00 was reduced in FY16-3 by 43% to $23,299.00, a reversal without any discussion. 13. Contribution to Capital Works (70): noting the engagement of Programmed Property Services, Mr Burgess states that this was not adequately explained to the residents committee during negotiations, although he submits that the clearly enunciated proposal would have been supported by residents. This is therefore another example of management's inability to be transparent. Overview and Detailed Comments on the Statements of Mr Bedingfield, Mr Cupit, Ms Montgomery and Ms Lawrence 1. Mr Burgess commences by asserting that the statements referred to represent a "concerted effort to besmirch the efforts of Residents Committees and the reputation of certain residents including myself". 2. With great respect to Mr Burgess, I have concluded it is not necessary to summarise these comments in detail, as set out in paragraphs 81 to 143. However, I note that Mr Burgess makes trenchant and direct criticisms of these statements (and the persons who signed them) but I consider these issues are adequately covered in other evidence, by witnesses for each party. Residents Committee Survey 1. Mr Burgess sets out the process by which the residents committee surveyed residents' satisfaction and attaches the results as "AB12". Sakkara Cost Obligations 1. At paragraphs 148 to 160, Mr Burgess, under this heading, makes a number of references to discussions and negotiations with, among others, Mr Bedingfield and Mr Cupit. He also refers to the changing of the village accountant with some frequency. As I understand the general submission being made in this section of his affidavit, Mr Burgess is concerned with the efforts of the operator to avoid expense and to make a profit and the consequent difficulties of the operator in obtaining funds for capital replacement (funded by Lease Departure Fees) because of low turnover of residents. In this section of his statement, Mr Burgess is particularly critical of Mr Bedingfield's role and character. FY16 Proposed Budget Process 1. This last, very long, section of Mr Burgess's affidavit comprises paragraphs 161 to 226. It is largely a comprehensive and detailed itemisation of the history of the village and in particular of the budget negotiations, including the FY15 budget. Mr Burgess rejects Mr Bedingfield's statements to the effect that budget negotiations are "entertainment" for residents. He suggests they are "no fun at all", intrude on residents' lives and in some cases their health and the quiet enjoyment of their leases. 2. The great detail provided by Mr Burgess in this section of his affidavit does not permit efficient summarisation. Apart from the recitation of facts, there is frequent reference to the lack of experience or ability on behalf of various managers and renewal of the submissions in relation to lack of communication and transparency. He notes also that the residents committee put proposals to the residents regarding the proposed budget, but that residents were expected to and did make up their own minds. 3. Mr Burgess refers to particular issues of disagreement and summarises what was communicated to and from the operator. The purpose of these summaries is to demonstrate the particular reasons why resident consent was not forthcoming, especially in relation to the disputed items the subject of these proceedings. 4. Mr Burgess renews his submission that the operator prefers litigation to resolution and "maliciously" derides the residents' perseverance. In his final paragraph, Mr Burgess suggests resident consent could be achieved by: 1. incorporating NCAT orders consisting of past precedents and current rulings into the budget information; 2. revising the information involving the 13 [disputed] issues so that it is factual, transparent and understandable; 3. redefining the role of the Village Manager to Village Operator's Representative. This change is to reflect the reality that in the absence of a Sakkara Corporate support capability the function should be recognised for what it is and be paid entirely by Sakkara; 4. confirming by way of discussion between the residents committee and the Operations Manager whose title should be changed to "Village Manager" the operational management of the village and the resultant position description; 5. reworking Version 3 of the FY16 proposed budget in cooperation with the residents committee to reflect the above changes; and 6. completing all the above within 30 days of Orders so that a revised Version 4 FY16 proposed budget can be put to residents for their consent before the end of May 2016. Statement of 29 August 2016 As with Ms Lawrence's statement of 31 August 2016, this statement of Mr Burgess is in response to Principal Member Harrowell's orders extracted above at paragraphs 86 and 87. Mr Burgess commences this statement by summarising the history of the "purpose" of The Landings: it was conceived originally to be the provision of affordable housing to retired Defence Force personnel. Without going into the detailed history of The Landings, Mr Burgess notes that it opened on 01 December 2003 but that by September 2009 the RAAF Association (RAAFA) had concluded it was no longer practical to retain ownership and the village was purchased by Sakkara (who had operated the village from its opening). Mr Burgess then extracts part of "one of Ku-ring-Gai Council's documents outlining the scope of expected 'care' arrangements to be put into place; …". This extract includes two sections, being "2.2.12 Ownership and Occupation" and "2.2.13 Support Services". The latter section is as follows: "Personal assistance packages may be purchased by residents which will be optioned to include: • Lawn mowing • Emergency response • Cleaning • Heavy housework only • Meal deliveries • Shopping • Home nursing Meals will be prepared on site and will be available 3 times a day, 7 days a week. An emergency button will be fitted to the primary bathroom of each dwelling with an option for either a second button in the main bedroom or a pendent or both. The assistance package will comply with the provisions of the Retirement Villages Act 1989 [sic] and SEPP No. 5 Amendment No. 1." 1. Mr Burgess then refers to: "and in 2001, the Land & Environment Appeals decision (10973) – Rosecorp v Ku-ring-Gai Municipal Council stated: '83. To enable the 'ageing in place' philosophy to be achieved in Ku-ring-gai: Prior to the occupation of each relevant stage, documentary evidence is to be provided to Council's satisfaction, of an agreement with suitably qualified service provider(s) for the provision of the following services if and when required by any of the residents of the development: Personal care, including bathing and dressing; Housekeeping, including cleaning and laundry; Home delivered meals; and 24 hour a day monitored emergency call system. The documentary evidence is to include the following details: Proposed cost to residents of each of the services listed in (a) above; and Proposed means of altering the cost to residents of these services. This may include: linking costs to the Consumer Price Index or a proportion of the Aged Pension; or by selecting a new service provider. A comprehensive residents/ manual is to be provided to all residents which includes information of relevance to them, such as doctors, churches and other community services and facilities." 1. Under the heading "Present position relating to services on offer to assist the ageing process", Mr Burgess sets out the following: 1. Personal Assistance Packages: there are no "personal assistance packages as stated in the first extract above and when residents require such assistance it is mostly arranged by the individual or their family. The residents committee about 4 years ago arranged a contact system with the Catholic Community care service providers and gave these procedures to the operator, assuming it would adopt the system. This did not occur. RAAFA's specifications for welfare support have not been implemented by Sakkara which has, to the contrary, emphasised the "independent living" nature of the village. Past incidents have occurred where Sakkara management have assessed that certain residents are unable to cope "and have been quick to contact relatives …", or to suggest the resident move out of their home and into a care facility. 2. Meals: 21 meals per week have never been available. At present three meals per week are available, plus optional delivery of hot meals to residents when the kitchen is open and some meals are packaged and frozen for later purchase. The provider has exclusive possession of the commercial kitchen and dining room, and functions and services open to non-residents are often held. Mr Burgess submits the operator does not properly meter or measure the service providers' operational costs, even though they are paid from recurrent charges. 1. Under the heading "Availability of maintenance, personal services and assistance in homes", Mr Burgess notes the previous provision of certain services and then states that a mobile dental service is available periodically and a respite facility is provided but is not used for that purpose and remains locked. 2. Mr Burgess then provides two further extracts from a "Support Services Statement" issued by Ku-ring-gai Council under SEPP 5. He states that management has "scant regard" for the services and facilities required to be provided under the development consents, and again criticises the village manager and the operations manager (Ms Montgomery and Ms Lawrence), saying they do not consistently attend on site nor arrange any personal services, in contrast the "more professional" village manager in 2013 (that is, Mr Deery). The latter was unable to continue in that role without damaging his health because of the requirement to involve himself in defect management. 3. Under the heading "… 5 star services to residents is really a myth: …" Mr Burgess provides two definitions of "Five Star Service" and suggests Sakkara is at best a "1-to-03 star service". He also provides a schedule he states provides a comparison chart with the services provided by several other retirement villages. 4. Finally, Mr Burgess submits that provision of optional personal services falls short of residents' expectations under the disclosure statements and the development consents. He states that "value for money" is not being provided. Statement of 8 September 2016 1. This brief statement is a response to particular statements in the applicant's written submissions dated 31 August 2016 provided pursuant to the directions of Principal Member Harrowell on 04 August 2016. The submission paragraphs are extracted by Mr Burgess and are as follows: "179. The Tribunal confirmed in proceedings RV 14/54814 at paragraphs 48 – 51 that any remaining work from previous orders relating to alleged defective works had been finalised as again set out in the proceedings RV 14/54814. That issue between the parties is complete and it is submitted vexatious of the Respondent to attempt to continue to raise the issue. 180. If the matter is pressed, the Applicant would submit that specific orders be made to impose a condition on the Respondent not to raise the issue of outstanding matters from previous proceedings again otherwise risk an application for costs against the Resident Committee for vexatious litigation. 181. For these reasons the item should be allowed to remain." [I note at this point that paragraph 181 quoted above is a reference to the submission by the applicant in relation disputed item 70: "Contribution to capital works fund".] 1. Mr Burgess's submission in response is that of 33 defects evident at 19 January 2016, and listed in the agreed notes of the Defects Identification Process (DIP) meeting held on that date, 12 'types' of defects remain to be discussed at a DIP meeting to be held on 12 September 2016 (that is, in the future at the time Mr Burgess's statement was drafted). He then lists those defects and states that five of the six "major defects" acknowledged by Sakkara to still exist in mid 2015 (and specifically mentioned by Senior Member Vrabac in relation to RV 13/65453 and RV 14/14827) are included. 2. Mr Burgess submits that "obviously" not all remaining defects have been rectified and therefore he strenuously rejects the allegation of "vexatious" action. He submits this is another example of the operator's failure to face reality. Statements of Neil Leybourne Smith Statement of 23 March 2016 1. Mr Smith's first statement is lengthy and densely argued with frequent references to the evidence attached both to it and to other statements he refers to, particularly those of Ms Montgomery and Ms Lawrence. 2. Mr Smith's statement, like most of the other statements provided by the various witnesses, sets out a very brief summary of his background and career. In particular, Ms Smith notes he is, or was, a professional accountant. His first statement is presented, in some ways, in the form of an expert report, referring to certain evidence and then providing his opinion. 3. Of course, Mr Smith cannot be regarded as an independent expert, in the sense of an expert witness, or indeed any sort of expert, in his evidence as a resident of The Landings. However, it is, in my view, always clear when he is offering his own opinion based on, for example, accounting principles, as compared to his own observations of facts and incidents and his opinions as "an ordinary citizen" in reply to the words or actions of other people. 4. As will become clear, this clarity of expression by Mr Smith has been of great assistance in enabling me to understand some of the issues and the evidence in these proceedings. If I may say, with great respect to other witnesses, Mr Smith's evidence has been particularly persuasive because of the generally meticulous way in which he has attempted to analyse the actual evidence in the proceedings rather than tending to adopt a fixed position on the honesty, competence or otherwise of various people (although he does offer some opinions in that regard as well). 5. Mr Smith sets out his understanding of the reasons why the various versions of the budgets were not approved in a very lengthy paragraph 22 of his first affidavit, under a series of subheadings corresponding to each line item in dispute. I adopt his numbering for the purposes of this summary. 6 – Wages administration: $434,878:- "Perhaps" $130,000.00 of this amount is the extra management position claimed as required by Sakkara because of increased workloads, but really because of management inexperience, exacerbated by Sakkara's unwillingness to compensate for this inexperience by consulting with the residents; also, Sakkara staff are performing tasks (and charging this time to residents via recurrent charges) which are properly Sakkara's liability, such as fixing defects, refurbishing vacant dwellings, attending Tribunal hearings and others, and no evidence is provided as to how that time has been charged appropriately back to Sakkara; Sakkara has attempted to impose increased charges onto the residents by unsubstantiated comparisons with other retirement villages; and the qualifications and experience of the current occupants of the Village Manager and Operations Manager positions do not relate to retirement villages. 7 – Wages maintenance: $222,227:- a reduction between $20,000.00 to $40,000.00 is "feasible" in this item if Sakkara was to be fairly invoiced for work involving rectification of defects and similar; the Facilities Manager does little physical work but rather is involved in office work such as arranging contractors for rectification of defects; the "Village Master" software program allegedly used to plan all tasks is in reality recording "Tweet" type data which does not need to be recorded or for mundane information; and the Facilities Manager spends an estimated 4 hours per week driving the Village bus. 12 – Wages replacement staff: $13,547:- this should be entirely deleted because insufficient information was provided to justify the proposed charges or to substantiate why certain staff must be temporarily replaced when on leave; the Accountant should be able to pre-prepare for payments while on leave; and Sakkara has "referenced" an amount of $7,000.00 but there is no link to any specific entry. 13 – Recruitment temporary staff: $28,644:- this amount is a "head-hunter's fee" to employ the new Village Manager which is Sakkara's liability to supply pursuant to the Village contracts; and Mr Bedingfield agreed to remove this amount in the FY16-2. 18 – Insurance – general: $109,318:- the amounts of $3,981.75 (interest) and $60.00 (fee) should be removed because Sakkara elected to pay insurance premiums monthly because of asserted cash flow shortages caused by the failure of residents to approve budgets; Mr Smith contends that poor cash flow is "systemic" because previous deficits have not been paid pursuant to s 120C of the RV Act; Sakkara's spending is "uncontrolled" because the restrictions of the last approved budget have been ignored and there is already a deficit up to 20 February 2016 of $226,295.00, contributed to by the employment of the Operations Manager; as cash flow problems are Sakkara's responsibility, they should pay any incurred interest charges; the internal Appeal Panel, through Member Harrowell, commented on 01 December 2015 that the operator of a retirement village is obliged to enable residents to understand information put to them [a reference to the hearing in Sakkara Investment Holdings Pty Ltd as trustee for Sakkara Landings Trust v The Residents Committee of The Landings Retirement Village [2016] NSWCATAP 52]; there is a lack of transparency when attempting link the amounts in FY16-3 to the supporting information. 37 – Tradesman repairs: $78,913:- Sakkara has refused to accept the residents' fundamental concept, based on previous Tribunal decisions, that "discrete" items when replaced within an item of capital are to be treated as capital replacement and therefore the operator's responsibility; Sakkara has also added a CPI component as a "contingency", contrary to Regulation 20 of the RV Reg: in this one line item the alleged "contingency" amounts of $4,924.00, well in excess of the $100.00 allowed in Regulation 20; analysis of some FY15 invoices demonstrate that at least $30,695 should not be residents' cost, which, increased by a nominal 5% for FY16 suggests the sum of $46,500 should be removed from that budget; Sakkara's practice of "annualising" costs based on a part-year cost can only be "honest and acceptable" if the base is not inflated; and there are no quotations in evidence to support any proposed works, and some of the additions in Sakkara's attachment sheet are incorrect. 45 – Annual fire safety certificates: $24,309:- no electrical appliances owned by Sakkara and located in residents' dwellings require annual testing and certification, being exempted by WorkCover from that requirement, and therefore $13,186 should be removed from FY16; statutory testing of fire dampers and ventilators is accepted but there are no quotations to support the estimate of $2,398; and there is no evidence to support the claimed estimates of $2,035 (certifying roof anchor points) or auditing of evacuation procedures $3,190) or "health and safety ($3,500) which is unsubstantiated in scope in any event. 46 – Temper mixing valve (TMV) compliance: $29,718:- first, Mr Smith contends Sakkara's claim that TMVs are being serviced 4 times per year is untrue and since 2004 only "spasmodic and periodic testing" has been performed; Mr Smith disagrees that HosPlan requires that retirement villages must have TMVs in place; Sakkara should explore the possibility of eliminating TVMs altogether by relying on settings within the individual water heater; the "major service" proposed by Sakkara in fact relates to capital replacement of "discrete" items 48 – Electricity: $111,038:- the support detail provided in relation to this item does not allow a clear understanding if this amount is reasonable; Sakkara has not properly attempted to obtain a reasonable discount for electricity charges; there is no justification provided for Sakkara obtaining an 18% discount when residents can obtain a 29% discount for electricity charges; the current proposed annual amount is based on annualising the first 6 months of the financial year but the calculation sheet contains errors; electricity is wasted because of inappropriate lighting times of street lights; and almost 40% of total consumption in the village relates to the Clubhouse but there is no recovery shown from "user pays" services. 63 – Air conditioning maintenance contract: $35,882:- this contract is already let to "Licensed to Chill" (L2C): two other quotes related to different scopes of work and to FY15, not FY16; there is no scope of work in evidence; there is no transparent plan to allow evaluation of the proposal to keep maintaining worn-out air conditioners by cannibalising parts; and there is no explanation of the increase in the quoted price in FY16-1 and FY16-3 from $22,597 to $35,882. 64 – Air conditioning repair and maintenance materials: $68,225:- there is a repeat of the assertion in relation to "discrete" items and Sakkara assert that all proposed charges in this item do not include "replacement" costs; Sakkara ignored the residents' analysis of FY15 actual costs and that $51,292 of the total $93,360 in that year could be classified as "discrete" items; another $38,650 costs of replacement of 19 air conditioners Schrader valves with new gassing could also be capital replacement; the above factors leads to an overstatement of a fair projected amount in FY16 of about $30,000; Sakkara's "boast" that the FY16 proposed estimate is 84% of FY15 actual ignores the fact that the FY15 actual exceeded the Tribunal ordered budget by 134.7%; and there is no transparent disclosure to residents explaining the increase from $54,663 in FY16-2 to $68,225 in FY16-3. 69 – Optional services recouped: -$23,299:- in FY16-2 the proposed amount was $40,731. In FY16-3 this was reduced to $23,229 with no explanation, this being a lack of transparency; a proper cost-accounting system should be implemented to calculate actual costs and recoveries; the evidence provided by Sakkara is in the form of invoices issued to the caterer, the hairdresser and the real estate agent but these cannot be reconciled to the total Clubhouse costs; in FY16 up to 29 February 2016 there is no evidence of any recoupment at all being banked; the residents are not consulted in relation to any contractual arrangements with third party providers. 70 – Contributions to capital works: $73,614:- the amount of $55,637 for FY16 should be omitted because residents were not advised that this amount was only the first year of a 3-year contract for a minimum of $116,911 for painting certain buildings; more fundamentally, that amount should not be included because contrary to Sakkara's assertions, that repainting (that is, the first year) relates to rectification of defective painting which had not been completed in relation to these specific buildings; a capital works fund (cwf) should relate to specific projected costs, rather than something akin to a sinking fund from which management can expend funds as and when it chooses – that is not the intention of s 99 of the RV Act; the residents have provided an expert report finding that these painting works remain "as originally defective"; FY15 included a repainting program in relation to 2 buildings being 94 and 96 Sir Neville McNamara Drive, for which the Tribunal ordered a contribution by residents of $174,402 into a capital works fund [a reference to Sakkara Investment Holdings Pty Ltd atf Sakkara Landings v Residents Committee, The Landings (unreported) 26 May 2015]; 94 Sir Neville McNamara Drive was not repainted as asserted by Sakkara and therefore $40,000 was incorrectly paid out of FY15 budget and should be repaid to the residents. I should note at this point that much of the material in paragraph 22 could reasonably be objected to as material not to be included in affidavit evidence as being irrelevant or a matter of opinion. As I will discuss in greater detail later in these reasons, I have summarised the material as evidence of why the residents may have failed to accept the proposed budget, rather than as evidence why the proposed budget should have been or should not have been rejected by the residents. 1. At paragraphs 25 to 30 of his first affidavit, Mr Smith suggests that Sakkara has not controlled expenditure in FY16 (as demonstrated by the already incurred deficit of $226,295) pursuant to s 115(3)(b) and s 116(3) of the RV Act, specifically in relation to the employment of Ms Lawrence. Ms Smith states that he "senses" Sakkara's decision to denigrate the residents rather than properly examining their concerns. He refers to and extracts a portion of the recording of part of the hearing in Queens Lake Village Residents Association v Queens Lake Village Pty Ltd [2010] NSWCTTT 582 in relation to possible inequality and unfairness to residents "if an operator can simply employ who it likes without justifying the need and cost to residents". Mr Smith's responses to statements by Sakkara's witnesses 1. The remainder of Mr Smith's first affidavit is a very lengthy and detailed response to the statements filed on behalf of Sakkara, especially the statements of Ms Montgomery and Ms Lawrence. 2. In my opinion, these parts of Mr Smith's affidavit include particularised objections and comments, based on an apparently tireless commitment to examining the various assertions made by the authors in terms of the supporting evidence. 3. Unfortunately for the reader, it is appropriate and indeed necessary to summarise this material. Ms Montgomery 1. Mr Smith commences by making some general remarks about Ms Montgomery, including 1. she lacks relevant experience to assist the residents; 2. that she holds inappropriate and unsubstantiated opinions of the residents (including as examples that they have "a lot of time on their hands", that they are "lacking personal interests other than being involved in the management of the Residents Committee" and that they "have been able to succeed in maintaining artificially low recurrent charges and intimidate village managers"); 3. that her remarks that the residents keep "bringing up historical matters" and "focus on the past which was not going to achieve anything" demonstrates she does not understand and will not accept the significance of the financial ramifications of Sakkara's failure to comply with previous Tribunal orders, the payment of defect rectification out of levies and the importance of previous Tribunal decisions; and 4. Ms Montgomery, together with Ms Lawrence, has attended residents' dwellings to conduct Sakkara's private survey which, while commendable in itself has resulted in some residents expressing concern that they are covertly being assessed as to whether they were still capable of living independently in this retirement village. 1. Mr Smith next discusses the difficulty of negotiating with Ms Montgomery on the issue of "discrete" items of capital, given that she, in Mr Smith's view, refuses to acknowledge this concept and is unwilling to discuss its effect on proposed and former budgets. In this regard Mr Smith refers to my decision in Smith v Sakkara Investment Holding Pty Ltd [2011] NSWCTTT 162 and the decision of former Senior Member Connolly in Carey Bay Retirement Village Residents Committee v Anglican Care [2011] NSWCTTT 497. Mr Smith refers also to a conciliated agreement reached in Tribunal matter number 10/31615 in which paragraph (3) reads: "(3) It is agreed the criteria for the definition of what constitutes 'repairs and replacements' will be Snr Member Meadows statements in his judgment in RV 10/33211 on 20.4.11." Mr Smith states that "Ms Montgomery and Ms Lawrence simply ignore this vital agreement as though it does never existed [sic]". 1. Mr Smith also refers to a "seeming" assertion by Ms Montgomery in her paragraph 64 that she felt harassed and threatened at the meeting on 15 October 2015 in relation to Mr Smith mentioning the "Elder Abuse Parliamentary Inquiry, and "categorically" denies making any threat or suggesting the operator abuses the elderly. Mr Smith comments in some further detail on this meeting, although it is not necessary that I summarise those points. 2. Mr Smith expresses his concern at Ms Montgomery's comments about low turnover of properties in the village, stating that in his opinion it is not her place, as the manager charged with managing residents' welfare and facilities, paid for out of residents' funds, while also charged with the duty of furthering Sakkara's financial objectives. 3. In paragraphs 50 and 51 of his first affidavit, Mr Smith seeks to refute Ms Montgomery's assertion that The Landings offers "five star accommodation" and her comparison of this village to several other villages which, according to Mr Smith, offer different services to those on offer in The Landings. Mr Smith asserts that preparation of a village budget is an essentially simple process of adding up the legitimate expenses required to run the village and dividing that number by the number of contributors. 4. Mr Smith then turns to a number of particular issues. These include: Cash flow issues arising from deficits and unauthorised overspending: this covers a variety of topics as follows: Mr Smith asserts Ms Montgomery's "accusation" that residents are responsible for cash flow shortages because they would not agree on budgets "ridiculous", as all three FY16 proposed budgets had multiple unsubstantiated or incorrect items in them and in any case residents are entitled under the legislation to reject items until agreement can be reached; Ms Montgomery does not understand that the legislative framework requires the operator to spend only according to the income available, but Mr Smith agrees with her that cash flow is affected by the amount of time management and staff duties are taken up in preparing Tribunal hearings and recording unnecessary activities in the "Village Master" computer system, and indeed staff levels would not need to be so high if this extra work could be removed; in relation to Ms Montgomery's paragraphs 57, 58, 59 and 61, Mr Smith criticises Mr Bedingfield's $100,000.00 "on the table" offer, especially in relation to the conditions that residents give up their rights and entitlements under the legislation, and he describes this as unacceptable "horse-trading"; Mr Smith refers again to the issue of painting 94 Sir Neville McNamara Drive and the residents' retaining Mr Tompson to provide an expert painting report, suggesting that Sakkara is using this particular issue to avoid spending about $40,000.00; rejects Ms Montgomery's assertion that each wage is calculated based on market rates, increased by CPI and performance as unsupported by evidence, and he provides his own research on that point Mr Smith repeats his assertion that Sakkara staff are involved in work which is the financial responsibility of Sakkara itself, rather than the residents, its failure to continue to employ a Project Manager and its failure to provide details of invoices charged to Sakkara by resident-paid staff despite the evidence in "CM15" (attached to Ms Montgomery's statement) showing that many data entries relate to refurbishing and other sales responsibilities; and again in relation to "CM15", Mr Smith suggests that this 129-page list of some 3,500 entries includes very many items of a trivial, useless or unrelated to maintenance issue, and that the work involved in maintaining this document could a major contributor to the necessity to employ extra staff. Wages for replacement staff – 12 - $13,547: Mr Smith makes two points in relation to this item: first, it is impractical to appoint a temporary accountant while the permanent account is on leave: all regular payments can be pre-prepared (so it is not true that "invoices and salaries would not be paid" as asserted by Ms Montgomery) and, as well, it would be impractical to train a replacement accountant in the necessary procedures for a term of a few weeks only; second, in paragraphs 93 and 94 of her first statement, Ms Montgomery refers to Tab 12 in "SL1" (Annexure 1 to Ms Lawrence's first statement) explaining the reference to "the $7,000 that represents my temporary replacement", but there is no appearance or explanation of that sum anywhere in Tab 12 to "SL1". Insurance – 18 - $109,318: Mr Smith submits as follows: first, Mr Smith notes that Ms Montgomery blamed cash flow issues for the necessity to refinance insurances by making monthly payments instead of one lump sum payment: Mr Smith suggests that had Sakkara promptly made good past deficits (including for the first 7 months of FY16), caused by overspending, this refinancing would not have been necessary; Mr Smith then states that the support information for FY16-3 did not reconcile with the budget figure shown in the "Annual Proposed Budget" document provided to residents on 06 November 2015 which was the document on which the residents voted. He refers to the support documents containing a quote from a broker named "elantis", headed "Offer to borrow money to fund insurance premiums" which contains the following figures: "Total premium (incl. FSL, S/Duty, GST) $132,974.11 Total charges: $5,305.67 Total to be repaid: $138,279.78 Interest rate (flat) 3.99%" Mr Smith notes that the FY16-3 budget figure is $109,318 and in the support summary the "Premium Funding Cost" is shown as $4,623. Mr Smith suggests some possible explanations for the discrepancies but concludes by stating: "… lacking transparency, there appears to be no explanation or reconciliation is provided as is vital if residents are expected to approve that line item"; finally, Mr Smith submits that had invitations to hold discussions prior to the issuing of FY16-3 been accepted by Ms Montgomery, this discrepancy would have been eliminated. CPI and GST increases as a contingency: Mr Smith describes this item as a "generic issue" although he is referring to paragraph 104 of Ms Montgomery's statement which is contained under the heading "Item 37 – Tradesman Repairs". He submits as follows in relation to two issues: first, Mr Smith refers to Regulation 20 of the RV Reg: "20 Limit on contingencies in annual budget For the purposes of section 115A of the Act, the maximum amount that may be allocated for contingencies in a proposed annual budget is $100." Mr Smith provides as an example calculations in relation to tradesman repairs on page 66 of Ms Lawrence's statement (being part of tab 37 in SL1). He states that a CPI increase of 1.9% has been added "but then Ms Montgomery has added GST as a second contingency, then resulting in a new proposed expense total of $64,822 for FY16, which is an increase of $4,924" which far exceeds the Regulation amount. Mr Smith suggests that the " 'blanket' type" of contingency addition of CPI and GST should be disallowed by the Tribunal; the second objection is that it should not be accepted that "past year's expenses" were correct, necessary and reasonable, because although such an accounting approach might seem sensible, in this instance it is submitted that "FY15 expenditure was overstated because many charges had been debited to Recurrent Charges which should rightfully have been paid by Sakkara". Mr Smith provides a list of such possible charges in "nsF" which he had proposed to discuss with Ms Montgomery at the meeting of 17 September 2015. Mr Smith suggests that Ms Montgomery's refusal or unwillingness to discuss these matters reflects her aim to forget historical past issues and that if she could avoid dealing with a matter it would disappear. Roof repairs - $11,946 (included in Tradesman Repairs – 37 - $78,913): in this item Mr Smith is referring to Ms Montgomery's paragraphs 104 ff and to the information provided in tab 37 of "SL1" at page 66. Mr Smith submits that this work involved replacing inadequate timbers and flashing in 94 and 96 Sir Neville McNamara Drive and also installing new anchor points on the roof which were never installed in the first place. Mr Smith submits this should be categorised and rectification of defective works, not capital maintenance. In support of that submission Mr Smith refers to page 81 in tab 37 referring to "re-support … with correct timber" (Mr Smith's phrase is "replaced with correct timber" which is not actually used) and to page 91 in tab 37, which is identical. Tagging appliances in residents' homes - $13,186 (included in Annual Fire Safety Certificates - $24,309): first, Mr Smith notes this is the first time this issue has been "seriously" proposed, that it begs the question that if Sakkara itself owns all these items it should bear any alleged cost of tagging and that there has been no evidence of any "electrical mishap" to date; second, he notes that such tagging is not required by WorkCover—see Sakkara's own evidence at page 121 in tab 45 of "SL1"; finally, none of the electrical equipment said to require tagging is operated in a "hostile operating environment": see page 115 in tab 45 of "SL1" and page 385 in "CM19". External 'management' audit - $3,500 (included in Annual Fire Safety Certificates - $24,309): this references paragraphs 110(e) and 112 in Ms Montgomery's first statement. It should be recalled that Ms Montgomery stated that "this is standard practice for any business in which employees and contractors provide services to occupants" (110(e)) and "[e]ach expense is essential to avoid breaching legislative or industry standards, and to ensure the health and safety of residents, employees, contractors and visitors to The Landings". Mr Smith submits: the Village Manager should be well qualified and experienced to assure maintaining of these fundamental standards, especially as The Landings employs a Village Manager, an Operations Manager and a Facilities Manager and in any case it must be the responsibility of Sakkara to ensure its manager is observing statutory requirements; next, Mr Smith refers to two pages in particular in tab 45 of "SL1", being page 107 and page 125 (although he does not specifically refer to page 125): each of these pages contains the budget documents including "Annual WHS Audit". Mr Smith notes that in each case, under the heading "Estimate" the documents state "refer attached proposal". The only "attached proposal" is an email on page 126 of tab 45 which is an email from a Mr Billy Dash proposing an "SSRA" ("site specific risk assessment") at a cost of $3,500.00 and, as Mr Smith notes, because the scope is still undefined there is no actual proposal; in the same way, trying to "refer attached proposal" in relation to "Emergency Management Audit and Training" in the amount of $6,190.00, there is a fee proposal from "Prensa) but none of the quoted amounts shown on pp 115-136 of tab 45 add up that amount; there is another quotation on p 108 of tab 45 being $2,398.00 for "Fire Damper Certificate" and "Annual Fire Statement" by Norec Services Pty Ltd but there is no proposal document, no document explaining necessity or scope and no competitive quotes. (I note at this stage, for the sake of completeness, that page 140 of tab 45 sets out the cost of this item at $2,398 for "2015 year annualised" while the estimate for the FY16 budget is $2,436 "Increased by CPI".); and finally Mr Smith notes that there are no explanatory materials for "Anchor Point Certification" (but see page 109 of tab 45 which is an email from "Sydney Roof and Gutter" dated 14 August 2015 which relates to certification of anchor points but only suggests a price of $407 for up to 20 anchor points and "if there are more then [sic] 21 anchor points though this price will be higher"). Temperature Mixing Valves (TMV) – 46 - $29,718: Mr Smith submits as follows: Ms Montgomery states in her paragraph 115 that "she has been advised by an expert that the temper valves must be tested annually and replaced every five years under AS3500.4" but no expert report has been submitted nor even the name or credentials of the quoted "expert"; the residents have been suggesting that instead of an annual argument about this item, Sakkara should progressively have each hot water heater reset to meet the "statutory temperature" (most heaters having that facility) but the requests have been ignored. Ms Lawrence 1. As noted previously, Ms Lawrence's statements contain the bulk of the documentary evidence provided by the applicant in relation to the line items in dispute, together with the statements of Ms Montgomery. These statements have been summarised above. Turning now to Mr Smith's discussion of Ms Lawrence's statement, it will again be necessary, in my opinion, to set out in some detail Mr Smith's submissions, as I have done in the previous section in relation to Ms Montgomery's statement. As before, this is because Mr Smith has taken the trouble both to analyse the information provided in the actual statement and to then review the supporting information contained in the attachments to the statement. As previously, this necessitates a lengthy exposition of Mr Smith's submissions. 2. I note also that it might appear there is a considerable amount of duplication in Mr Smith's statement, especially as he refers to the disputed items in paragraph 22 of his statement, again included in his comments Ms Montgomery's statement at paragraphs 31 to 77 of his statement and now again in his comments on Ms Lawrence's statement commencing at paragraph 78 of his statement. 3. Now, without seeking sympathy, it is quite a burden in terms of working hours to undertake these detailed summaries of Mr Smith's statement. I do not do so for the sheer enjoyment of performing this work, but I am satisfied this summarising is necessary to understand not only the issues raised by Mr Smith but also the attitudes of the applicant's witnesses to these items and it is also appropriate to note that different information and opinions are provided by the witnesses to the same disputed line items 4. It appears clear that Ms Montgomery and Ms Lawrence worked together in drafting or constructing the proposed budgets and in providing the applicant's documentary evidence, or at least were utilising the same materials. To a very limited extent there is some overlap to be expected. I have found that Mr Smith did not, as a rule, merely repeat his submissions and information in regard to these same issues but instead acknowledged on occasion where his comments in one part of his statement apply also to another part of his statement. 5. Having provided that short introduction, I now summarise those items I consider to be relevant to these proceedings in Mr Smith's submissions and evidence in relation to Ms Lawrence's statement. General and introductory statements: Mr Smith refers to "SL2", specifically the position description of "The Landings Village Manager", signed by Mr Deery and dated 10 October 2011. The "Function" is described as: "Manage The Landings to maximise its profitability through the continual increase of Departure Fees earned and by minimising the costs incurred by Sakkara." Mr Smith suggests that this puts the Village Manager in a conflict of interest in relation to this role and the duty to care for the wellbeing and welfare of residents; Mr Smith notes this is the single "Function" provided for in this document; next, Mr Smith notes that under the heading "Role & Responsibilities", the Village Manager was to "Manage the effective sales and marketing of re-sales", which, pursuant to Regulation 26, must not be financed by recurrent charges, yet residents were "never reimbursed" by Sakkara for the time spent by Mr Deery in those roles. Mr Smith notes also that the Village Manager was and is required to hold a Real Estate Licence; in paragraphs 9 to 30 of her statement, Ms Lawrence sets out her opinions of the inability of village management to cope with all their tasks, that the residents committee is unreasonable and demanding and that what was required was to appoint more managers, or at least one more manager; Mr Smith comments on Ms Lawrence's evidence in relation to alleged bullying, comments on her personal life and what he describes as Ms Lawrence's purpose to denigrate residents' reasonable requests for information and justification of expenditure; in relation to the appointment of Ms Lawrence from 01 July 2015 (which of course is the beginning of FY16), Sakkara had decided to increase expenditure despite there being no budget approved and despite their knowledge that the residents had not accepted her position or salary and therefore Sakkara has not complied with s 115 (3) of the RV Act in that this expenditure was not "reasonably and necessarily" required; Mr Smith asserts that the village workload has "dramatically increased" but that was as a result of frequent Tribunal hearings and decisions which in turn was caused by Sakkara's failure to "take independent control" of rectification works or to "make good" expenditures wrongly paid from recurrent charges in compliance with Tribunal orders; Mr Smith suggests that the owners should have set up a separate structure under their control in relation to defect rectification works, refurbishing and dealing with problems associated with the construction of 48 new dwellings "during those two years" (the years not being specified but apparently referring to 2013 - 2015 approximately). Instead, village management and staff had to deal with those issues instead of dealing only with their functions looking after residents for which they were and are paid from recurrent charges; Mr Smith makes a number of further submissions in relation to Ms Lawrence's paragraph 40 which lists her "main duties": I do not need to describe all these matters although I do note Mr Smith's submissions in relation to Ms Lawrence's paragraph 40 (g) – "Garden Management" which Mr Smith describes as demonstrating duplication of management effort, which he calls "double management", and also Ms Lawrence's claim that her "Strategic Operations" includes management of village maintenance, another kind of "double management"; in paragraphs 99 to 103 of his first affidavit, Mr Smith makes submissions in relation to the process of negotiation and the failure of Sakkara to provide proper scopes of work or any defined tendering process, thus failing to provide sufficient information for residents to be able to accept any of the proposed budgets. "GST – generic": Mr Smith submits that GST should be automatically included in budget preparation by being included in quotations obtained from prospective contractors and that failing to do so is a "fundamental error". Mr Smith queries the contribution made by Mr Cupit and the former village accountant Ms Pivnic, given the apparent misunderstandings and problems associated with incorporating GST into budgets. " 'Discrete' items replaced in items of capital – generic": obviously this item relates to the issue discussed above. Mr Smith notes Ms Lawrence's reference to this issue in relation to line item 37 (Tradesman repairs) and 63-64 (air-conditioning expenses) and my reasons in Smith v Sakkara (supra). Mr Smith submits in detail in relation to Ms Lawrence's declarations that "discrete" is not a statutory term and is not recognised by Fair Trading or other retirement villages consulted by her. Mr Smith is concerned both that Ms Lawrence did not give details of these discussions, nor does she understand the significance of concepts set down in previous decisions. (I am not suggesting that this particular decision of mine had such significance, although my formulation has obviously been adopted by some of the residents in the current proceedings.) "Maintenance Requests and Works Orders: this issue will be considered in detail below, but at this point Mr Smith submits: although Ms Lawrence refers to the "agreed 'Defect Identification Process', approved by NCAT", "CM15" lists every single request made, rather than first classifying defect rectification work, and that many matters listed do not in fact refer to "maintenance" requests at all. Mr Smith analyses a few randomly chosen pages from "CM15" in support of his submission; Mr Smith also refers to Ms Lawrence's paragraph 83 in relation to charges for air-conditioning maintenance/repairs, submitting that a significant part of these charges should be classified as capital replacement. (I note also for the sake of clarity that Ms Lawrence's paragraph 83 is actually included in the section of her statement headed "Items 37, 63 and 64 – 'discrete items concept' "); finally Mr Smith expresses his concerns that the amount of data entry demonstrated by "CM15" and "SL25" – "SL27" is a waste of expensive staff time and money. Although Mr Smith accepts the necessity that important issues need to be recorded, many, if not most, of the issues in fact recorded are mundane or temporary issues. "Recruitment temporary employees – 13 - $28,644": this item refers first to the cost of replacing the accountant and Personal Care Assistant ("PCA") during leave periods (although Ms Lawrence included this issue under the separate heading "Item 12 – Wages replacement employees"). Ms Lawrence referred to an error in basing this line item on the Accountant and the Village Manager's salary, but, Mr Smith suggests, does not set out what effect this error in any proposed budget total. Mr Smith also submits that there should be no requirement for a replacement PCA as all staff are required to hold "a senior First Aid Certificate and be trained in handling emergencies". Furthermore, in practice it is usual to call 000 and in fact all employees, including PCAs, are instructed not to assist fallen residents to regain their feet but rather telephone for an ambulance; in relation to proper "recruitment temporary employee" fees, it appears to me that both Mr Smith and Ms Lawrence have included recruitment fees for at least one permanent employee in error in this category: the recruitment of the replacement Village Manager after Mr Deery resigned and Ms Lawrence acted as temporary Village Manager; Mr Smith notes that he understands from a report to the Financial Advisory Team ("FAT") by Mr Burgess, that when Mr Burgess was discussing FY16-2 with Ms Lawrence, Ms Montgomery and Mr Cupit, the last mentioned "tacitly agreed" that this cost should be borne by Sakkara, as the provision of a Village Manager was the responsibility of the operator under the lease. Mr Smith suggests that this amount was then removed from FY16-2 but that it has been added back into FY16-3. "Tradesman repairs – 37 - $78,913": in her paragraph 124 Ms Lawrence states that the quotations used to calculate this item are in "SL1" (specifically tab 37): Mr Smith submits that there are insufficient quotations in "SL1" to support the amount estimated but instead a "conglomeration" of many duplicated pages applicable only to replacing roof timber and supplying and installing new anchor points in 94 and 96 Sir Neville McNamara Drive (which he submits is capital improvement, not capital maintenance); Mr Smith also submits that the NCAT-ordered amount for "Tradesman repairs" for FY15 was $39,274, and that the current estimate of $78,913 is more than a 100% increase; after realising that Sakkara was using FY15 actual costs as the basis to calculate FY16 estimates, Mr Smith states that on 17 August 2015 he carried out a "spot check" of about 20% of the available invoices comprising "Tradesman Repairs" for FY15 (although he does not specify where or how he obtained those invoices) he prepared a document analysing 21 items which appeared to him not to be capital maintenance, and handed that document ("nsF") to Ms Lawrence and Ms Montgomery but has received no response. He also notes that no change was made to recurrent charges for FY15. "Trend Reports": Mr Smith suggests that Ms Lawrence has used questionable data to project her results. He also submits that although Ms Lawrence states that she has improved the "Village Master" system, she has not produced information to support that claim. "Tagging and anchor points – Tagging: $13,186, Anchor points: $2,035 (in Annual Fire Safety Certificates - $24,309): Mr Smith notes first that he has already dealt with "tagging" issue (see paragraph 111(vi) above); he also notes Ms Lawrence appears to have not read, or to have ignored, her own evidence at page 121 in tab 45 of "SL1" that tagging is not necessary, and at pages 115-116 in tab 45 of "SL1" that a retirement village is not a hostile environment; Mr Smith also notes that he helped draft a notice in relation to the above ("nsQ") which the residents committee sent to Ms Montgomery on 27 November 2015, but no acknowledgement was received; Mr Smith refers to Ms Lawrence's paragraph 132 in which she states that she and Ms Montgomery referred to quotations received in relation to tagging and anchor points: he states that there are no competitive quotations and queries why two senior managers are required to make this decision and also that the Facilities Manager (who he understands is a licensed builder) would be in the best position to decide on such technical matters anyway; Mr Smith suggests that Ms Lawrence's statement in her paragraph 133 that tagging costs were not included in previous budgets for the sake of obtaining approval of the budgets, but that Sakkara can no longer continue to absorb those costs is "misleading nonsense". He submits there has never previously been any action associated with tagging of residents' appliances (and therefore no costs to be absorbed); and finally, Mr Smith submits in relation to Ms Lawrence's reference in her paragraph 130 to "approximately 100 anchor points in The Landings that must be certified annually" lead the residents committee to request supporting information about these anchor points, but no such information has been provided. Also, the installation of new anchor points would be the responsibility of the operator (as capital additions). "Temper Mixing Valves – 46 - $29,718": Mr Smith submits as follows: Ms Lawrence's claim in her paragraph 134 that the TMVs are serviced 4 times per year is incorrect, noting that the TMV in his villa was last serviced in 2013 and that the service takes about 15 minutes, based on his experience of a plumber from "Pure Plumbing Professionals" ("PPP") who serviced a TMV in his villa on 04 March 2016; Mr Smith notes further that PPP provided one of the two quotations at page 145 in tab 46 in "SL1", and that quotation quotes for servicing 190 TMVs at a cost of $26,201. At that rate, each service averages $137.90, and based on his estimate that the parts would cost no more than $20.00 and the time taken for the service in the previous section, he estimates the hourly rate quoted is $472.00; Mr Smith also notes that PPP, in their quotation, state that "Hosplan require the valves to be inspected and checked": he suggests this statement is unsubstantiated but has been accepted by Sakkara even though he believes Hosplan requirements would not be applicable in an independent-living retirement village; Mr Smith notes that the second quotation in relation to TMVs, from Omega Service Solutions (at pp 151-152 of tab 45 of "SL1") is not comparative because the scope of works is not shown: Mr Smith notes that the residents committee has requested tender documents from Sakkara in order to permit a proper comparison between quotations, but these have never been made available and Mr Smith submits they do not exist; Mr Smith refutes Ms Lawrence's claim in her paragraph 137 that the residents committee seeks simply that TMVs be removed, by noting that in fact the residents committee suggests that individual water heaters can be legally adjusted pursuant to manufacturer's specifications, thus bypassing the need to fit TMVs; Mr Smith refers to a meeting to discuss FY16 budget issues (but does not provide further details as to when this meeting occurred) in which he claims that Ms Montgomery agreed to obtain an independent report from an MBA recommended expert to comment on the need for "blanket" replacement of TMV valves, but notes that no such expert evidence has been provided. Mr Smith recalls objecting to such blanket replacement of all valves regardless of whether they needed replacing or not; further, Mr Smith submits that he pointed out at the same time that not all residences had 5-year old TMVs, and that some had none at all, yet 220 were being quoted for, and that recently constructed dwellings did not need TMVs because their water heaters could be individually set to an appropriate maximum temperature, thus eliminating the need for services; and finally, Mr Smith refers to an invoice he reproduces in "nsR" from PPP, which states: "Recommendation: Install new pre-set 50 degree hot water service. This will be most cost effective as it will be a one-off payment for the installation. Installing a new valve costs money to install including cost for annual servicing/testing." [As I will refer to again below, this invoice goes further: it suggests that the original installation of this particular hot water service was an illegal installation because it did not have the required thermostatic mixing valve. Presumably, this heater is Sakkara's property and was installed by them or by their builder at the relevant time. This raises the additional issue as to whether this work should be classified as rectification of defective work.] Electricity – 48 - $111,038: recall that Ms Lawrence stated that the original budget proposal was calculated by annualising the first 9 months based on FY15 costs. The residents committee requested this be reduced by 20% as a resident had received advice that electricity costs would discounted by that amount in FY16. Then, Ms Lawrence stated that "our electricity provider later informed us that this did not apply to The Landings" because Sakkara had already negotiated an 18% discount for FY15 and this would continue for FY16. Ms Lawrence also suggested that the actual expenditure for 23 July 2015 to 06 January 2016 was consistent with the estimate and that the "forecast" was accurate. Mr Smith submits: there are actually 3 providers at The Landings: Origin Energy, Energy Australia and ERM Business Energy; referring to the supporting documents in tab 48 in "SL1" and also the documents in "SL30", the year to date cost (up to 29 February 2016) is 25% lower than the FY15 budget and if annualised would be 26% below the proposed estimate in FY16-3; the estimate in FY16-3 is $111,038 but, submits Mr Smith, several of the yearly calculations on these 2 pages are incorrect – 8 out of the 12 calculations. Mr Smith states that it is not possible to determine the correct amounts without details of rates and discounts provided by each of the separate providers; Mr Smith makes a number of submissions about the Clubhouse in particular, including that Sakkara have not provided sufficient information in the support documents to demonstrate how they measure electricity usage and have budgeted to recover realistic costs; in relation to recoveries from "Pinnacle Catering", Mr Smith submits that the restaurant caters for approximately 190 events per year, and at a total recovery of $5,506.89 that is merely $29.00 per event for electricity. Given the lack of information provided by Sakkara, Mr Smith states that it is not possible to assess what a realistic recovery would be; in relation to street lights, Mr Smith states that he has been requesting Sakkara to adjust the lighting times so as to avoid unnecessary electricity usage when street lighting is not required. He provides in "nsS" his calculation of possible savings but notes he is not able to use actual rates. Air Conditioning – maintenance contract – 63 - $35,882: Mr Smith commends Ms Lawrence's statement in her paragraph 146 that preventative maintenance avoids total failure of air conditioning units, but submits that the various quotations (4 in number) provided in her supporting information (tab 63/64 in "SL1", pp 162 – 212) do not appear to be quoting in relation to the same scope of works or the same time period; Mr Smith submits there is no published scope of works; in her paragraph 149, Ms Lawrence states that the quoted amount in FY16-1 was $22,959 based on FY15 cost plus CPI, but that when that budget was rejected, Ms Lawrence stated "Licensed to Chill informed us that the price would increase to $35,882". Mr Smith notes that Ms Lawrence does not explain why this increase occurred; Mr Smith refers to the Licensed to Chill quotation (pp 167 – 175) dated 14 April 2015, which, on p 172 the period of 12 months being 01 July 2014 to 30 June 2015 and that he can see "no relativity" to the later amounts; Mr Smith notes that the quotation is in the sum of $27,500 plus GST which is $30,250 including GST; and the budget item issued to the residents before voting, shown on p 162 in tab 63/64 in "SL1", includes the sum of $1,672 for "Common area Refrigeration" which, Mr Smith submits, is "associated solely with the operator's contracted restaurateur who has sole custody of the kitchen being used as a commercial operation charging market prices for meals … this amount should not even be included in any budget but be included in the operator's budget … if Sakkara chooses, it can then recharge the costs to its contractor but not even involve the residents". "Air conditioning R&M materials – 64 - $68,225": Mr Smith submits that the various ledger amounts listed in pp 205 [sic: 206] to 212 are not reconciled to any final audited accounts and also many of those amounts have been questioned by residents as not being legitimate maintenance amounts (that is, I infer, Mr Smith is suggesting residents consider those payments to be capital renewal); Mr Smith submits that despite searching for comparative amounts on pp 205 and 209, he cannot relate the annualised amounts provided by Ms Lawrence; although Ms Lawrence points out the FY16 budget estimate was only 84% of the FY15 actual cost (attributed to projected savings resulting from preventative maintenance), in fact the FY15 budget estimate was only $34,614, so the final FY15 cost was overspent by $46,661, a major proportion of the FY15 deficit; the major overspend in this item in FY15 has not been explained by reference to any preventative maintenance and replacement program; no reason is provided to explain the increase from the estimate in FY16-2 $54,663) by 25% ($13,562) by FY16-3 At paragraphs 153 and 154 of his affidavit, Mr Smith refers to the "relativity of Ms Lawrence's reference in paragraph 146 [sic:145] that 'this line item is addressed above in relation to the "discrete item" concept' ". I note that Ms Lawrence's paragraph 145 is contained in the section of her statement relating to the air conditioning maintenance contract (line item 63), not in relation to air conditioning R&M materials (line item 64). It appears clear to me this relates to the dispute over whether certain air conditioning expenditure is capital maintenance or capital renewal and is a repeat of previous discussions about the validity of the "discrete items" concept or principle. Deduction for Optional Services Costs Recouped – 69 – ($23,299): Mr Smith notes that he has been personally involved in the residents committee's requests to Village Managers to review their cost-accounting methodology and that the residents committee believed residents were unfairly subsidising these services from recurrent charges. He states such requests have been largely ignored; Mr Smith states he sought a commitment from management to obtain realistic commercial terms, that agreement in principle had been reached in relation to FY16-2 with a budgeted recovery of $40,731, but that the estimate had dropped to $23,299 in FY16-3 without explanation; Mr Smith states he has analysed the information provided in "SL31" at pp 421 to 427 and he has projected those amounts over a period of 12 months: he states that they indicate that the catering contractor contributes rent of only about $6,000 per annum for use the commercial kitchen, air conditioned dining rooms, all refrigeration and maintenance costs and staff time to set up tables. His opinion is that collecting "rent" of only $115 per week falls well short of covering realistic costs; Mr Smith makes further submissions in relation to electricity and other items and states that there is no evidence to demonstrate how income from recoupment is related to actual cost recoveries; referring to Ms Lawrence's paragraphs 160-161, Mr Smith submits in relation to "personal services recoveries" that Ms Lawrence's "chargeables in the graph" do not appear as an income line item in the FY16-3 budget; and Mr Smith notes that in Ms Lawrence's paragraphs 162 – 164 she refers to telephone and internet recoveries but that he cannot find any such line items, nor is there any figure shown for the statement that "Sakkara proposes to deposit the excess in the operational account". Capital Works Fund – 70 - $73,614: in this lengthy item Mr Smith submits as follows: at page 216 in tab 70 of "SL1" there is an amount proposed for painting of 8 two-storey villas and 4 villa-apartment blocks in the sum of $55,637 including GST. (I note that each of the 12 properties is identified in the Programmed Property Services ("PPS") quotation dated 17 July 2015 at pp 229 to 252 in tab 70 in "SL1".) Mr Smith notes that the "fine print in the actual quote" (page 240) shows that this is only the first year of an intended 3-year contract for a total of $166,911. Mr Smith asserts that residents were not advised of that fact although the residents would have to commit to that amount, which could change because of possible contingency variations; the second item, painting program for clubhouse offices and siderooms, costed at $17,575 in the PPS quotation dated 15 July 2015 at pp 217 to 228 in tab 70 in "SL1" (but I note as $17,977 in the budget item itself, on page 216), has, Mr Smith asserts, been carried out already but has not been accepted by residents; Mr Smith notes that adding the two amounts in the quotation sums to $73,212, but the budget estimate in FY16-3 is $73,614, the $402 discrepancy not being explained, although the residents committee raised this after FY16-1 was rejected; Mr Smith refers to Ms Lawrence's statement in her paragraph 166 that "maintaining capital works fund (CWF) is standard best practice at any retirement village" and suggests that while that statement might be true for strata owned dwellings in a retirement village, in The Landings all dwellings are leased and residents pay a "hefty" lease departure fee. Mr Smith states that in his opinion those "hefty" lease departure fees would provide ample money for the lessor to maintain the dwellings. Mr Smith notes that there is nothing in the lease or disclosure statement to the effect that he would have to contribute to a CWF. He suggests Ms Lawrence considers a CWF is a "sinking fund" rather than "the specific project related contribution fund envisaged in the legislation"; Mr Smith's main submission appears to me to set out in his paragraph 167: "I contend that the operator's proposal to collect and use resident's money for repainting the masonry on the eight two-storey villas and four villa apartments needs to be reconsidered within a review to carried out of the operator's alleged failure to fully comply with Tribunal orders explained within the Reasons for Decision' of Senior Member J Bordon RV14/14827 (et al) issued on 14 November 2014". The basis of Mr Smith's submission in this regard appears to relate to the previous Tribunal applications and decisions in The Residents Committee The Landings v Sakkara Investment Holdings Pty Ltd atf Sakkara Landings Trust [2014] NSWCATCD 228. That decision related to the following applications: RV 14/14827, RV 13/65446, RV 13/65436, RV 13/65453, RV 11/29123 and RV 12/32770. Mr Smith refers specifically to the statement of Member Bordon at paragraph 11: [11] … In earlier proceedings RV 12/12787 the operator had conceded that defectively painted metal and masonry was its cost responsibility. In my decision of 19 April 2013 I noted that Sakkara had agreed that it was its responsibility to rectify the defectively painted metal and masonry surfaces in accordance with the Tyrell's and the Core report. What Mr Smith asserts is that the term "masonry surfaces" was defined in the Tyrrell's report, being "throughout the entire village", that 94 and 96 SNMD and all the villas and the four villa terrace apartment blocks, being construction stages 1 and 2, forming 196 dwellings in total, were all constructed and all painted at "roughly" the same time by the same painter using the same type of paint. In Mr Smith's paragraph 167 (which itself contains several paragraphs) Mr Smith states in the final paragraph on page 49 of his statement that the residents committee requested he obtain an expert report with the objective, as I understand his submission, of determining whether the paint work on the subject 12 buildings referred to in this budget item is the same paint and the same paint work referred to by Member Bordon as being the responsibility of Sakkara. (With great respect to Mr Smith that is my understanding of the first sentence in this paragraph at the bottom of page 49 which is otherwise difficult to understand.) [I note that in this paragraph 167, Mr Smith is referring to a report by Mr Tompson of Paint Solutions and Associates ("PSA") dated 17 March 2016, which Mr Smith has annexed as "nsT". The report at "nsT" appears to be provided in full in an original form in the correct format for expert reports in the Tribunal. There is further reference to Mr Tompson and an earlier report prepared by him, in the following paragraph 168.] Mr Smith submits that having agreed to repaint all these buildings, Sakkara painted "at least 120 buildings but they obviously missed painting these buildings and now they hope that residents will pick up the costs"; Mr Smith's paragraphs 168 and 169 complete his argument, or submissions, in relation to this item. Mr Smith notes that Ms Lawrence, in her paragraph 168, refers to the orders made in RV 14/14827. [Mr Smith notes that Ms Lawrence places a copy of the orders in "SL32" and he states those orders "go to summarise the full 'Reasons for Decision' I have annexed as "nsP" …". Those reasons are not in "nsP" in my copy of Mr Smith's statement, however, the reasons were published online on the NSW Caselaw website and are therefore freely available.]; Mr Smith states that "I and other RC" had observed by early 2015 the masonry painting of 94 SNMD had not been painted. He states that expert evidence previously provided had indicated the estimated cost of this work would be about $40,000. Then, before PPS began painting, in October 2015, the residents committee requested Mr Smith obtain expert evidence opinion as to whether the work had been carried out [as ordered by the Tribunal]. This report, or rather an extract of the report, is annexed as "nsJ". [As noted above, Mr Smith's "nsT" contains a report by Mr Tompson dated 17 March 2016. The report referred to in this paragraph is dated 10 November 2011.] Mr Smith states that Mr Tompson opines that the work, that is, the repainting of the masonry, had not been carried out referring to Ms Lawrence's paragraph 168 again, Mr Smith notes that Ms Lawrence attached at "SL34" certification that the work had been carried out but he notes that Mr Tompson also considered this certification at page 6 of his report (to which I will refer again below). Also, Mr Smith states that at the meeting dated 15 October 2015 with Ms Montgomery and Ms Lawrence he had asked about the warranty of the painting work and that Ms Lawrence had indicated she would make contact with the painter and ask about the warranty, although no further information on this topic has been provided by either Ms Montgomery or Ms Lawrence; and finally, in relation to Ms Lawrence's statement, Mr Smith notes that despite Mr Tompson's expert opinion, Ms Lawrence claims the work has been correctly carried out and that Sakkara paid an estimated $40,000 for that work. Mr Smith notes that the operator has not provided any invoices to support that assertion, although they were summonsed "under order No 8 issued on 24 February 2016". Mr Smith concludes this section of his statement by requesting an order from the Tribunal that Sakkara repay any such payment of $40,000 into the "residents funded CWF". Mr Cupit 1. First, Mr Smith refers to Mr Cupit's comment that "the Residents Committee would not let go of 'historical legacies' which the seemed unable to do". Mr Smith's submission is that Sakkara needed to understand the residents' opinion that earlier favourable decisions (presumable, "favourable" to the residents) needed to be observed when calculating proposed expenditure because if not, as I understand Mr Smith's submission, basing proposed expenditure on FY15 expenditure might be referring to "inflated amounts". Mr Smith is regretful that the residents' requests were simply dismissed. 2. Mr Smith next refers to Mr Cupit's comment at his paragraph 56, that "wages were increased to reflect the increased workload caused by increased maintenance callouts". Mr Smith suggests that Ms Lawrence's "boosting" of the Village Master system greatly increased the recording of every single incident in the village which was itself a contributory factor to the "increased workload". Mr D Bedingfield 1. Mr Smith notes the references to "original developers" in Mr Bedingfield's paragraph 8 and to Sakkara acquiring The Landings, "as though this was some new discovery …". Mr Smith notes that Sakkara in fact owned 50% of the developer, "Ground Crew at Turramurra Pty Ltd", states that Sakkara "fully controlled it", was the operator from the first day and so "Sakkara alone is fully responsibility [sic] for allowing the poor construction of the village". 2. Mr Bedingfield referred in his paragraphs 15 to 18 to defective construction works and the subsequent claim against the builder and/or the builder's insurer. He noted in paragraph 17 and 18 that the "residents" were partially successful in their claim in the Tribunal in relation to certain items of expenditure in the FY10 budget. [I note this is another reference to Smith v Sakkara Investments (supra).] Mr Smith asserts that the residents' success resulted in "a considerable monetary refund" because of my ruling in relation to "discrete items". 3. Mr Bedingfield's reference to "all rectification works in relation to those orders have been completed and were completed by the first quarter of 2015" is disputed by Mr Smith. Mr Bedingfield notes that a number of applications were finally disposed of in RV 14/14827 (a renewal of application RV 12712787) and it is those orders which are "those orders". Mr Smith states that the residents committee and himself contend some defects are still not certified in order to comply with Tribunal orders and these are listed his "nsU". 4. Mr Smith also disputes Mr Bedingfield's statement in his paragraph 34 that "this contribution to the capital works fund has been disputed by the residents and some residents have refused to pay the amount to Sakkara". Mr Smith states that "to the best of my knowledge" all residents accepted the Tribunal decision and paid accordingly (or else entered payments terms to do so). In response to Mr Bedingfield's statement in his paragraphs 33 and 35 that some FY12 and FY13 invoices to selected residents have not been paid, Mr Smith suggests that is because the calculations on those invoices are incorrect and require reissuing, and are also tied up with the Appeal Panel decision against Member Coleman's orders and are now the subject of further discussions to resolve the issue by adopting "a sensible approach". 5. Finally, responding to Mr Bedingfield's comment that "it appeared to me (and still appears to me) that the Residents Committee is using the budget as some sort of means of entertainment", suggests that Mr Bedingfield is simply unable to understand and participate in the legislated budget process and to appreciate the "honest integrity" of volunteer residents to represent all residents who refuse to allow Mr Bedingfield to take advantage of them through his lack of ability to "correctly handle their collected Recurrent Charge money under what should be a simple budget if it was handled professionally". Ms Lawrence Supplementary Statement dated 25 February 2016 1. Mr Smith notes Ms Lawrence's reference to 361 air conditioning units, and suggests that "I note that now 361 air con units are being somehow used in only 220 dwellings plus Clubhouse and a Pool-house, so assume the unsubstantiated estimate of $225,000 is also incorrect". This "unsubstantiated estimate of $225,000" is a reference to the "Report" dated 18 February 2016 from Licensed to Chill, which comprises the "SSL1" annexure to this statement. 2. In addition, although the "SSL1" document refers often to maintenance service, there are no "useful numbers quoted" to assist analysis of the real position, other than the statement "that there are no units requiring replacement". 3. Mr Smith then refers to the expert report the residents committee asked him to provide, being the Wood and Grieves report comprising annexure "nsV". Mr Smith submits the Wood and Grieves report paints a very different picture in relation to the increasing costs and possible use of environmentally unacceptable gases. He suggests further investigation should be demanded before any further proposed budget is prepared. 4. Ms Lawrence's supplementary statement also contains a letter from Pure Plumbing Professionals dated 24 February 2016 in relation to Thermostatic Mixing Valves and Tempering Valve: Mr Smith states this document adds no additional points to this issue, and his contentions have already been made earlier in his affidavit. Supplementary Statement dated 25 February 2016 by Mr R S Jones 1. As far as I can ascertain, Mr Jones has provided only one statement, that dated 25 February 2016 annexing "SJ1". 2. The only relevant comment made by Mr Smith is to agree in general terms with the comments by Mr Jones in relation to his examination on invoices from some of Sakkara's various contractors on pages 26 and 27 of "SJ1". Concluding Statements 1. Mr Smith refers to his portrayal by Ms Lawrence and Ms Montgomery as aggressive and threatening and suggests that their statements "contain little more than spurious claims, bluster and assertions … as their reasons for their difficulties in coping with their budgeting responsibilities". 2. Mr Smith notes his voluntary work supporting and assisting residents, using his commercial accounting experience to expose "inept handling of residents' money" by Ms Lawrence and Ms Montgomery, is distressing to him. 3. Adding all the issues described above, Mr Smith states that he and other equally concerned residents have formally requested "formal Government action" to appoint a specialist administrator to take over budgeting and accounting responsibilities in The Landings, and to remove current management personnel. LEGISLATIVE FRAMEWORK REGULATING RETIREMENT VILLAGES 1. As was stated in Sakkara Investment Holdings Pty Ltd atf Sakkara Landings Trust v The Residents Committee of The Landings Retirement Village [2016] NSWCATAP 52 at [39]: [39]. The RV Act was enacted in 1999 and established a detailed, legislative regulatory regime for retirement villages. Previously, retirement villages had been regulated by way of a mandatory industry code of conduct which had been found to be ineffective in providing adequate protection for retirement village residents – Retirement Villages Bill 1999, Second Reading Speech (New South Wales Legislative Assembly, Parliamentary Debates (Hansard) 27 October 1999 at 2089). This important decision provides a lengthy and detailed description of many of the relevant provisions of the RV Act between [40] to [79] and it is not necessary to make this decision any longer by setting those provisions out again. 1. Member Charles (as he then was) provided another useful and succinct summary of the legislative framework in a matter which has been frequently referred to in these proceedings: Alloura Waters Retirement Village Residents Committee v Living Choice Australia Pty Ltd [2014] NSWCATCD 68 at [14] to [30]. That summary is particularly relevant and useful in understanding the issues in the current proceedings and extends far beyond the particular issue referenced by the parties hereto, being the distinction between capital replacement and capital maintenance/repairs. 2. However, it will be useful to set out the objects of the RV Act s 3 and the sections of the Act under which the orders are sought by the applicant: 3 Objects of Act The objects of this Act are: (a) to set out particular rights and obligations of residents and operators of retirement villages, and (b) to facilitate the disclosure of information to prospective residents of retirement villages, and (c) to require contracts between residents and operators of retirement villages to contain full details of the rights and obligations of the parties, and (d) to facilitate resident input, where desired by residents, into the management of retirement villages, and (e) to establish appropriate mechanisms for the resolution of certain disputes between residents and operators of retirement villages, and (f) to encourage the retirement village industry to adopt best practice management standards. 1. The first order is sought pursuant to s 115(2)(d) of the RV Act: 115 Determination of expenditure by Tribunal (1) If the residents of a retirement village refuse consent to the expenditure itemised in the proposed annual budget, the operator or a resident may apply to the Tribunal for an order in respect of the expenditure proposed for the financial year concerned. (2) If an application is made under this section, the Tribunal may do one or more of the following: … (d) order that the expenditure is to be as itemised in the proposed annual budget, … 1. The second order is sought pursuant to s 108(2) of the RV Act: 108 Determination by Tribunal (1) An operator of a retirement village may apply to the Tribunal for (and the Tribunal may make) an order in respect of a proposed variation of recurrent charges if: (a) the consent of the residents of the retirement village is required before the proposed variation can take effect, and (b) the residents do not consent to the proposed variation under section 107. (2) The Tribunal may, on application by the operator: (a) order that the proposed variation is to take effect, with or without modification, or (b) order that the proposed variation is not to take effect. (3) An order under subsection (2) (a) may: (a) specify the date from which the variation is to take effect (which may be a date other than the date specified by the operator in the notice given under section 106), and (b) order that the recurrent charges are not to be further varied for a specified period, being a period that does not exceed 12 months. (4) In determining an application made under this section, the Tribunal may have regard to the following: (a) the general market level of recurrent charges paid at similar retirement villages in the locality of the retirement village concerned or a similar locality, (b) the level and cost of services and facilities provided for in the proposed annual budget or approved annual budget (as the case may be), (c) any proposed variations (including additions) to those services and facilities, being variations to which the residents have consented, (d) the cost of general services required to be provided by the operator, (e) the frequency and amount of past variations of the recurrent charges, (f) if the retirement village is subject to a community land scheme or strata scheme—the amounts of levies and other contributions payable by the residents under the Community Land Management Act 1989 or the Strata Schemes Management Act 2015, (g) any other relevant matter. CONSIDERATION AND DETERMINATION Jurisdiction 1. There is no dispute and I find that the Tribunal has jurisdiction to hear and determine this application under the RV Act. Preliminary 1. As should be obvious from the summarised evidence and submissions above, a great documents, much oral evidence and submissions have been provided in relation to issues which may appear to be of no or marginal relevance to this consideration. 2. These issues include but are not limited to: 1. whether all defective items have either been rectified or been dismissed in prior Tribunal proceedings, or whether some of the ongoing maintenance matters are really remaining building defects; 2. whether the residents or their spokespersons engage in budget negotiations for the purpose of entertainment, rather than genuinely attempting to reach agreement; and 3. the relationship between management staff (particularly Ms Lawrence and Ms Montgomery) and residents (particularly Mr Burgess and Mr Smith). "to facilitate resident input, where desired by residents, into the management of retirement villages" 1. Mr Bedingfield states: "I formed the view that the Residents Committee was not genuinely interested in resolving the issues between the parties. Rather, it appeared to me (and still appears to me) that the Residents Committee is using the budget as some sort of means of entertainment." When questioned in cross-examination about that statement he responded: "Why would I change my mind?" In other words, this is a considered and long-held opinion of a Director of the applicant, being the Director with specific responsibility for the operator's sole retirement village. 2. Ms Montgomery states: "For the reasons set out below, I have found the role at The Landings to be more difficult purely because we have retired people who were senior executives in their previous working life who were largely defined by their position but now appear to be lacking personal interests other than being involved in the management of the Residents committee. This is compounded by the fact that they have a lot of time on their hands and from the history of the Village, have been able to succeed in maintaining artificially low recurrent charges and intimidate village managers." This statement is also a considered statement, supported by the "reasons set out below". 3. Mr Cupit states: 12. These meetings were set with the intention of discussing an agreed agenda, but would typically deteriorate to a discussion of historical issues (eg past defects, which had all been rectified in the previous financial year and so were not relevant to any expenditure in FY 16). 13. I formed the view that the parties could not move forward unless the Residents Committee could let go of 'historical legacies', which they seemed unable to do. I then focused on assisting Sakkara to prepare the proposed FY 16 budget." 1. It is significant, in my opinion, that these three persons were, at least initially, the "front line" negotiators on behalf of Sakkara in relation to the FY16 budget. Ms Montgomery continued to be so involved, together mainly with Ms Lawrence. 2. I do not find any such general opinion stated by Ms Lawrence in her statements. This cannot be because of her heightened sensitivity or diffidence, because, as I have summarised above, Ms Lawrence most forthrightly describes and expresses her opinions about how she feels she has been treated by certain residents, particularly Mr Burgess and Mr Smith. Ms Lawrence either does not hold such an opinion or is more circumspect about expressing it. 3. I have gone to the trouble of repeating these opinions because I find they demonstrate in a quite blatant fashion attitudes of senior management and consultants which do not comply with the legislation. 4. The heading of this section is taken from s 3(d) of the RV Act, one of the objects of the Act. Management should be seeking to implement the objects of the Act to facilitate resident input rather than regarding such input as an imposition. 5. It is appropriate to note that I am not suggesting, or making a finding, that the all residents have behaved impeccably at all times. Ms Lawrence and Ms Montgomery in particular have made serious allegations of behaviour that, if true, would not be regarded as appropriate in terms of bullying and harassment. Similarly, the residents' evidence also includes suggestions that there have been incidents of harassment on the part of management. It is not my function to determine such issues, unless they affect the issues the subject of these proceedings, and I find there is insufficient evidence to make such a finding. 6. The frequency and intensity of the complaints made by Mr Bedingfield, Ms Lawrence and Ms Montgomery about the scope of the residents' requests for information and the residents' provision of information and their opinions in relation to the management of The Landings is something to be encouraged, indeed it is a requirement under the Act, rather than something to be deplored. 7. In my opinion, that encouragement should extend to the issues of importance to residents. It is not appropriate and nowhere can I find any requirement under the RV Act, to discourage or ignore issues of importance to residents. In this category I put the residents' concerns in relation to "historical issues" and "defect rectification". The latter in particular remains a live issue according to the residents and they have gone to considerable trouble and expense in attempting to demonstrate and prove their concerns, especially in the provision of expert evidence. 8. I find it is not a sufficient response from Sakkara to repeat, as a mantra, "these issues were all dismissed by Senior Member Vrabac". I note that no material from those proceedings specifically in regard to all the remaining dismissed issues has been provided by Sakkara, apart from repeating the terms of that particular order. 9. I note in relation to the so-called "historical issues", that Mr Cupit's statement creates the impression that once he became aware of the residents "inability" to "let go" of these issues, he abandoned further attempts to reach a better understanding with the residents and reverted to focussing on assisting Sakkara to prepare the proposed FY16 budget. It is abundantly clear that his assistance was at best not completely effective, given the later history of negotiations, of course without the benefit of Mr Cupit's assistance. 10. The residents' submissions, supported as they are above by the operator's own evidence, are persuasive that the operator sees its role as developing the budget without requiring, but grudgingly allowing, input from the residents. This attitude is also demonstrated in relation to the provision of information, to which I now turn. Adequate Provision of Information 1. It could not be more clear on the basis of evidence from both parties, that budget negotiations are characterised by frequent complaints on the part of residents that there is insufficient information provided in relation to proposed budgets, at least in relation to the 13 disputed items. It is also clear, however, that the residents, through Mr Burgess and Mr Smith concede that there has been an improvement in the provision of information. 2. On behalf of the operator, Ms Lawrence and Ms Montgomery provide examples of information that was provided to residents. However, I find that Mr Smith's statements, which comprehensively consider each disputed item in turn with specific reference to the information provided particularly in "SL1" and its 13 sub-tabs, show the unsatisfactory nature of much of this evidence. I will not review every such reference but I have been careful to check every reference made by Mr Smith and confirm that his statements are correct. 3. The issues demonstrated by Mr Smith include lack of relevant supporting evidence of quotations and scopes of work or other tender documents. He provides also examples of budgeted amounts for which support cannot be found in the documentation provided. 4. I found it constructive and illuminating to consider the various proposals in relation to several of the disputed items, attempting to put myself in the place of a resident seeking to understand that item. I am not including here any argument about whether the item is capital repair or capital replacement, or whether the item was ever included before. Rather, the exercise is simply to understand the meaning of what information is being presented. 5. As an example of that exercise, I examined the various proposed budgets put forward by Sakkara in relation to disputed line item 37: Tradesman Repairs. 6. This information is included in tab 37 of "SL1". There are 38 pages of supporting evidence, comprising: 1. 6 line item 37 budgets prepared or updated on different dates and showing different amounts – I have reproduced those 6 documents in Attachment 5 below [I have rearranged the order of these documents in their respective dates "updated" as items 5.1 to 5.6. However, in "SL1" tab 37, pages 66 and 67 are equivalent to attachment 5.6 and 5.5 respectively; 2. page 68 is an email from Sydney Roof and Gutter dated 14 August 2015 providing a quotation (but incomplete in relation to "recertification" of anchor points because the company was not aware how many anchor points there were to be recertified) but no actual quotation is attached; 3. pages 69 to 72 consist of a schedule headed "Account Transactions [Accrual]" from 01/07/2014 to 30/06/2015. The schedule has a sub-heading "6-3030 Tradesman Repairs", showing a net cost of $66,738.94 for that year which matches the "Total Estimated Tradesman Repair Costs" for "2015 Year Actual" in line item budgets 5.2 and 5.3 in Attachment 5. (If the reader is unable to determine the difference in the FY16 proposed budget between those two draft budgets, 5.3 contains an additional item for FY16 being $2,035 for anchor points certification @ $20.35 per point for 100 points.); 4. page 73 is schedule showing "Appliance Repair Quotations", being "verbal quotes obtain by Dan Barnes". Four contractors gave "verbal quotes" for the cost of a "Service Call Fee"; 5. page 74 is a document from "Roofs Above and Beyond" over the signature of Mr Brent Garratt, General Manager, Roof Tiling. This document is not dated and it is not clear if it attached to the documents following it at pages 75 to 81. It is a quotation for certain roof works in the sum of $7,139.00 incl GST. That following document is dated 28 may 2015 and contains material one would expect to find in a quotation from a building contractor. 6. page 81 is similar to page 74, but this time for different roofing works in relation to tiling, in the sum of $4,807.00 incl GST. As with page 74 it is undated and is attached to several pages of pictures, also undated. It is not clear if pages 74 to 84 comprise one or two documents; 7. pages 86 and 87 are equivalent to attachments 5.3 and 5.4 respectively below; 8. page 87 is another copy of page 73, being the verbal quotes obtained by Dan Barnes; 9. pages 88 – 90 is a schedule headed "General Ledger [Detail] from 01/07/2014 to 31/03/2015, again with the sub-heading "6-3030 Tradesman Repairs" and bears a resemblance to the documents at pages 69 to 72. Like those documents, these documents appear to be mainly "Purchase" with a block of "Tradesman Repairs" items. The purchases as shown as debits, the repairs as credits. Many of the items match items for those dates in pages 69 to 72, but there are some differences. In these items, total debits are $58,988.16, total credits are $11,031.00 and the ending balance is $80,025.83. A hand-written calculation shows debits – credits = $48,875.16, while "Annualised = 48,875/9 x 12 = $65,167". Now that sum matches the figure shown in attachments 5.1,5.2, 5.3 and 5.4 below, either in the column headed "Ver 1" or the column headed "2015 YEAR Annualised"; 10. pages 91 to 101 appear to be another copy of pages 74 to 84; 11. pages 102 and 103 are equivalent to attachments 5.2 and 5.1 respectively; and 12. pages 104 – 106 comprise a copy of pages 88 – 90, but in reverse order. 1. Ms Lawrence discusses this item at paragraphs 122 to 128 of her statement of 18 February 2016. She makes some brief comments in relation to minimising costs and states that she has been able to track maintenance requests using the Village Master system. She does not explain the variations in the supporting documents, although one cause is obvious: the accumulation of action FY15 data. She does not explain why the roofing works in 94 and 96 SNMD are maintenance costs. I note that one quotation refers to installing anchor points, which in my opinion must be a capital cost if there were no anchor points previously, and the other quotation appears to refer to changing timber works, a point referred to by Mr Smith. 2. I am not at this stage suggesting that these are not legitimate estimates but in my strong opinion the documents and the bewildering variations in estimates are examples of the lack of clarification referred to by Mr Burgess in particular. I find it entirely understandable if residents sought additional or clarifying information when discussing this budget item. I find that similar criticisms can be made in relation to other items in the disputed list, for example item 13. Attachment 1 below lists that item as "Recruitment Temporary Staff" but the supporting documents demonstrate charges in relation to Ms Dignam (who turned out to be temporary but was not apparently hired on that basis) and Ms Montgomery. How can that be characterised as "temporary"? No explanation is provided. I find that the operator has not provided complete and clear supporting documentation in relation to at least some of the disputed items, which must militate against achieving an agreed budget. Even assuming difficult residents, as the operator does, I find that the operator itself has caused difficulties in this regard. 3. As will become clear when I consider the separate disputed items below, this lack of completeness or clarity considered only as an example in this section, occurs also in other items. Capital Repairs, Capital Maintenance and Capital Replacement 1. The debate between the parties and the frequency of Tribunal decisions in relation to this issue demonstrates the intractable nature of deciding in any particular instance what is capital repair or maintenance and what is capital replacement. 2. There is no dispute that the RV Act requires that capital replacement is a cost of the operator, while capital maintenance is a cost to the residents and can be paid for out of recurrent charges. Unfortunately, that does not assist the parties in these proceedings (and, of course, other parties in other proceedings) to reach an agreement. The RV Act defines the two terms in s 4 as follows: capital maintenance means 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. capital replacement means works carried out for the purpose of replacing an item of capital, but does not include capital maintenance. In my opinion and experience, that definition also does not assist these parties to reach agreement. 1. In these proceedings, there is an associated but quite distinct issue, which is whether certain items which would otherwise be regarded as capital maintenance should be considered in the light of ss 93, 96 and 97 of the RV Act. The relevant sections in this regard are: 93 Obligations of operator with respect to certain capital maintenance or replacement (1) The operator of a retirement village is to maintain each item of capital for which the operator is responsible in a reasonable condition having regard to the following: (a) the age of the item, (b) the prospective life of the item, (c) the money paid to the operator by the residents under a village contract (including ingoing contributions). (2) If it is not practical to maintain an item of capital in accordance with this section, the operator may replace the item. (3) The operator of a retirement village must carry out the maintenance of, or replace, an item of capital for which the operator is responsible within a reasonable time after becoming aware of the need for the maintenance or replacement of the item. … 96 Tribunal may make orders for capital maintenance and replacement (1) If a resident of a retirement village is of the opinion that the operator of the retirement village is not maintaining or replacing items of capital for which the operator is responsible when necessary, the resident may apply to the Tribunal for (and the Tribunal may make) an order directing the operator: (a) to carry out specified maintenance of an item of capital within the time specified in the order, or (b) to replace a specified item of capital within the time specified in the order. (2) If the operator of a retirement village is of the opinion that a resident of the retirement village has caused damage to an item of capital for which the operator is responsible, the operator may apply to the Tribunal for (and the Tribunal may make) an order directing the resident to reimburse the operator for the cost of the maintenance or replacement of the item of capital as a result of the damage. (3) Subsection (2) does not apply to damage caused by fair wear and tear. 97 Funding of certain capital maintenance and capital replacement (1) The operator of a retirement village may fund the cost of capital maintenance in respect of which the operator is responsible from the following sources: (a) the capital works fund for the retirement village (if any), (b) recurrent charges. (2) The operator of a retirement village must bear the cost of capital replacement in respect of an item of capital 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 retirement village, (b) any work arising from the breach of a statutory warranty (within the meaning of the Home Building Act 1989) in respect of which proceedings may be commenced under Part 2C of that Act, (c) the depreciation of items of capital, (d) the refurbishment of vacant residential premises within the retirement village, (e) such other things as may be prescribed by the regulations. 1. The effect of those sections, in my opinion, is that if certain capital items have deteriorated and have effectively reached the end of their reasonable life such that it becomes uneconomic to continue repairing those items, then the operator "may", or if so ordered by the Tribunal "must", replace those items. 2. In these proceedings, it is a controversial issue as to whether the air conditioners in residences should continue to be repaired or should they be replaced. I note that the replacement option, especially of all old air conditioners were to be replaced at once, would be an expensive option for the operator. On the other hand, if continued repairs are made to old machines sufficient to keep them working at least for a period, the accumulative effect of those repairs will be an expensive option for the residents. 3. There is also the vexed issue of how to decide whether a repair to a machine which consists of removing a particular part and replacing it with a new part should be characterised as capital maintenance or capital replacement. 4. Both parties referred to prior Tribunal decisions in support of their interpretations. With great respect to the parties, those decisions are of little assistance, in my opinion, in the present proceedings. 5. It may seem odd to make that finding, given that one of the prior decisions, referred to more than once by both parties, is my own decision, referred to above, in Smith v Sakkara Investment Holding Pty Ltd (Retirement Villages) [2011] NSWCTTT 162 published on 20 April 2011. The other decision referred to frequently especially by the operator is Member Charles' decision in Alloura Waters Retirement Village Residents Committee v Living Choice Australia Pty Ltd [2014] NSWCATCD 68. 6. At paragraphs 83 to 94 of his decision, Member Charles sets out a discussion in relation to the discrimination between maintenance or replacement. At [86] he states: A repair involves restoring the efficiency of function of the property without changing its character and may include restoration to its former appearance, form, state or condition. A repair replaces something or corrects something that is already there and has become worn out and dilapidated by ordinary wear and tear, by accidental or deliberate damage, or by the operation of natural causes. A minor incidental degree of improvement, addition or alteration may be done to property and still constitute a repair; however, if the work amounts to substantial improvement, addition or alteration it will be capital replacement: … 1. Whether this formulation actually assists in a particular case is not clear to me. I note, for example, in Alloura Waters itself, Member Charles refers to the earlier decision in Carey Bay Retirement Village Residents Committee v Anglican Care [2011] NSWCTTT 497 "where Senior Member R Connolly (at paragraph 21) found that the costs incurred in the labour and materials for obtaining and replacing a defective WC Cistern improved an item of capital beyond its original condition and that it must therefore be treated as a capital replacement item". However, later in Alloura Waters at [106] Member Charles found that work including replacing toilet cisterns was maintenance. As he stated at [95], each case must be decided on its own facts. 2. For the benefit of the parties in these proceedings, I state by way of clarification, that I remain of the view I expressed in Smith, that replacement of, say, a power amplifier in a hi-fi system (made up of separate components) would be a capital replacement, even if the replacement component was exactly the same as the discarded component, and noting that the hi-fi system would not work without a power amplifier. That was the sense in which I described the component as a "discrete item". (I actually wrote "discreet" in error, but Mr Smith, I believe it was, kindly corrected me.) The item is properly characterised as an item of capital, not merely a component within a system. 3. However, in some "systems", replacement of a component would in my opinion be a capital repair. I have concluded in this case, for example, that a temper mixing valve in a hot water system would be a component of the capital item and its replacement would not be a capital replacement, provided it was replaced by a similar or identical component. If a new type of mixing device came onto the market and was used to replace the old valves because it was more efficient, or cheaper or easier to replace, that would arguably be a capital replacement. 4. In its submissions, the operator suggested that replacing a battery in a motor car would be capital maintenance: the car needs the battery to operate at all and replacing a worn out battery is simply replacing a consumable. But suppose a new battery which did not require maintenance and never required replacement became available, again that would arguably be a capital replacement in my view. 5. If certain components were not originally included in a machine or a building, and it was decided to install those items because of safety or legislative requirement, then in my view that would be a capital addition and therefore a cost to the operator. 6. In these proceedings I find on the basis of the limited evidence before me, that the installation of roof anchor points is such a capital cost to the operator. 7. It is also necessary to differentiate between capital replacement or addition and capital maintenance on the one hand, and defect rectification on the other. The latter is clearly a cost to the operator and as I understand the parties' evidence and submissions, that is not disputed. Whether any of the disputed items in these proceedings include such defect rectification is vigorously in issue of course, but that is also a separate issue. 8. The operator's own evidence suggests that some hot water systems were not properly installed and the operator's contractor suggests those installations were defective. As just noted, in my view that evidence suggests that the cost to rectify those installations is a cost to the operator. 9. I now turn to consider the disputed items in turn. Item 6: Wages Administration 1. I find the employment of an Operations Manager is not reasonable or necessary. I state at the outset that this conclusion has nothing to do with Ms Lawrence's capabilities or competence. Indeed, in my view she was the most effective witness for the operator and displayed the greater understanding of management's role and tasks in operating The Landings. 2. I am persuaded by submissions of the residents in relation to the original development of this role and the differing accounts given by David Bedingfield in their evidence in chief which were not clarified by them under cross-examination. I do not accept David Bedingfield's account while Ms Lawrence's account is more detailed and more persuasive. I am also persuaded by the evidence in relation to the involvement of Mr Deery in relation to managing defect rectification as explaining the problems he was experiencing in his role as Village Manager. I do not accept the evidence by the operator's witnesses in relation to Ms Dignam's alleged problems with residents. Indeed, there is little evidence in that regard at all, apart from the operator's view of the residents as set out above in the section discussing resident input as an object of the RV Act. 3. Despite David Bedingfield's attempt to suggest the idea of an operations manager first occurred towards the beginning of 2014, there is no contemporaneous evidence in support of that claim, while Ms Lawrence's evidence makes it clear the role was being actively developed and considered during 2015, contemporaneously with the budget negotiations the subject of these proceedings. The evidence of Ms Lawrence and Ms Montgomery, including unsigned contracts, suggests that the intention of the operator was to bolster its case that an operations manager was needed, but the reality is such need is not demonstrated on the evidence. 4. As I review the evidence of Ms Montgomery and Ms Lawrence including the attachments to their various statements, and in particular reviewing my summary of "CM13" above, I find there is considerable overlap in these roles which can be seen directly by comparing the roles as set out in that summary. 5. I find the evidence of Ms Montgomery to the effect that the necessity to deal with residents' demands for input and clarification as taking up a great deal of her time, does not equate with her evidence as to how her time is spent. Budget negotiations and "Tribunal matters" amount to no more than 11.4 % according to her own evidence. This is hardly overwhelming. 6. Furthermore, as I have found above, the operator's attitudes and methods in regard to formulating proposed budgets and negotiating with residents itself adds to their workload. Item 7: Wages Maintenance 1. Ms Lawrence notes at paragraph 102 of her first statement that the estimate for this item increased due to small increases in wages, a promotion and employing an additional part time staff member. In addition, Ms Lawrence states that the Village Master system demonstrates an increase in maintenance requests. 2. The residents' objection to this item is not to a reasonable estimate of maintenance staff costs, but because they consider maintenance staff are actually employed to some extent in relation to refurbishing and defect rectification. 3. The residents' first objection is expressed as a "belief". That belief may be accurate, but it is not supported by evidence and therefore it is rejected. 4. The second issue is the "trend analysis" developed by Ms Lawrence. In my opinion such an analysis could be a useful tool to an operator attempting to estimate future costs. As implemented in these proceedings, however, I find it is not effective. First, the requests for maintenance, as suggested by the residents, appear to include all sorts of items not properly regarded as notification of problems requiring maintenance. More to the point at this stage, however, is that the operator's claim that such requests are increasing is clearly incorrect. 5. Simply by looking at the graph, it is clear that the requests jumped dramatically from July 2014 (about the time when Ms Lawrence commenced working at The Landings) and then since November 2014 has been in decline. The former effect presumably results mostly from Ms Lawrence's adoption of the system to record requests – in itself, as noted, a useful procedure. The second effect is also obvious simply bo looking at the graph. I do not use that impression to make a finding that requests are in fact continuing to decrease, especially as the data are now quite old. However, I find that Ms Lawrence's evidence of an increasing trend is not established. 6. Does that make any difference to the estimate? I am unable to determine that it does, given the evidence that this cost relates to the employment of several staff, rather than a cost per request or something similar. There is no submission from the residents that the reasons for increase in this item mentioned above are unreasonable or unsupported by evidence. There is no evidence at all that a reduction of some kind in the amount of requests, or that a more sparing use of the Village Master system would result in lower costs. 7. For those reasons I accept the evidence of the operator on this item. Item 12: Wages Replacement Staff 1. This item relates to the cost of employing a temporary accountant and a personal care assistant (pca) during the periods the permanent staff in those positions are on leave. The operator notes that the estimates were based on the Village Manager's salary and the accountant's salary in error. Ms Montgomery states at [93] that Ms Lawrence could cover for her while Ms Montgomery was away on leave, and also that her salary is a reasonable measure of the cost of replacing the pca. Ms Lawrence also states that the operator implements "succession planning" and "cross training" to minimise costs. 2. The residents submit that this amount should be disallowed in full, given the lack of supporting evidence, apart from the mere opinions expressed by Ms Montgomery and Ms Lawrence. However, at the same time, the residents accept the amount of $5,959 which was the FY15 budget. 3. Mr Burgess and Mr Smith object that proper planning should remove any necessity to employ a replacement accountant, such as by pre-drawing cheques for payments known to be required during the period of leave, and by the fact that The Landings staff are required to hold first aid certification. The residents also give evidence that pca care is very limited, as the standing instruction is that in the event of a fall, for example, an ambulance is to be called rather than a pca or other staff member assisting a resident to rise. That evidence, although it is not refuted by the operator, is not sufficiently detailed to convince me that no allowance should be made. 4. However, I am persuaded that it would not be necessary or economic to employ a temporary accountant while the permanent employee is on leave. There is no evidence from the operator as to what training would be required, or the extent to which the permanent accountant could pre-prepare items required while he or she was on leave. On the very slim evidence of Ms Montgomery at paragraph 95 of her first statement, I allow an estimate of $7,000.00 for this item. Item 13: Recruitment Temporary Employees 1. As noted previously, this appears to be a misnomer. The the evidence in the supporting documents at "SL1" 13 refers to costs associated with recruiting Ms Montgomery and earlier Ms Dignam. How can that be a reference to temporary staff? 2. Even if the issue is simply misnaming this item, I accept the submission of the residents that provision of a Village Manager is required by the Contract and should be at the cost of the operator. 3. There is no evidence from the operator to support this item, which is not mentioned by Ms Montgomery in her statement, and Ms Lawrence justifies the cost by stating that "it became apparent" the operator would have to look outside the industry to find a suitable replacement. There is no evidence in support of that claim. 4. This item is not allowed. Item 18: Insurances 1. I note the residents object to the comparatively minor amount related to the method of funding insurances, not the actual cost of the insurance. The evidence in relation to the number of residents, or of the amount of money involved, regarding the payment of the capital works component carried over from the Tribunal decision in relation to FY15 is not clear. I accept the evidence of the residents in the Bishop Collins report that although this method of funding is not unusual, the decision to fund the insurance costs in this manner was a decision of the operator. I allow the amount of $105,276.00. Item 37: Tradesman Repairs 1. I have earlier discussed in some detail the lack of clarity in this particular item. 2. Many of the arguments raised in the parties' submissions on item 37, in my opinion, do not relate clearly to this item, including the disputes on discrete items. 3. Doing the best I can on the evidence available, I note that the first 8 items are based on FY15 "Actual" costs increased by CPI and GST. I have not checked those calculations but they are not disputed by the residents. 4. I do not allow the additional roofing costs in relation to 94 and 96 SNMD. These claims are not developed in the operator's evidence or submissions, except seeking to refute the residents' general assertions in relation to the capital maintenance/capital replacement dispute. On the evidence of the quotations themselves as described above, both claims appear to be to relate to capital additions (the anchor points) or defect rectification (timber replacement). The latter is not expressed to be to replace deteriorated or worn-out timber. The former, with its reference to "installing" anchor points, seems to be adding to the roofs by installing anchor points not previously installed. 5. I therefore allow $66,967 for this item. Item 45: Security, Annual Fire and Safety Audit 1. In my opinion the evidence of both parties demonstrates that testing and tagging of items in residences is not required by law nor by manufacturers' specifications. I accept the submissions of the residents in that regard. I am not persuaded by the operator's argument of an "overriding obligation" in this regard. I am not persuaded by the argument that these electrical items are part of the operator's employees workplace, not by the reference to numerous clauses and sub-clauses in the Contract. Nowhere in the Contract does it suggest, let alone make clear, that such testing and tagging is required. 2. I come to a similar conclusion in regard to the evidence concerning anchor point certification. There is insufficient evidence to support that requirement at all and the evidence in relation to how many such points there are is unclear. 3. The evidence in relation to the requirement for emergency management audit and training, and a workplace health and safety audit is minimal to say the least, but in my view is sufficient to support these items. 4. I allow the amount of $9,628.00. Item 46: Temper Valve Compliance 1. As I have found above, I do not agree with the residents that testing and eventually replacing temper valves is capital replacement. I regard temper valves as one component within a discrete system. 2. The issue as to whether the operator is actually, or will actually, conduct regular maintenance and inspections, and regular replacement every 5 years (assuming that is the manufacturer's recommendation) is not an issue with which I can deal in these proceedings. 3. In relation to the estimated costs, they are supported by the available evidence. I allow the amount estimated of $29,718.00 Item 48: Electricity 1. This item is surprisingly difficult to assess because of the confusing history of negotiations, of apparent offers by utility providers to offer discounts and by the operator's claim that previous charges were already discounted. 2. I do not accept the resident's submission that Mr Cupit's offer to discount this charge by 20% should be the end of the matter. Further negotiations clearly proceeded on the basis that previous offers or agreements no longer applied. 3. I note the operator's current offer, however, is to reduce this estimate by $10,000.00. 4. Based on the figures in "SL1" 48 at pages 154-155, I allow the amount of $101,038.00. Items 63 and 64: Air Conditioning Maintenance Contract and Air Conditioning R&M Materials 1. These two item are a major source of dispute, as they have been in previous Tribunal proceedings. Reading the summaries of evidence included above, there is clearly a strong difference of opinion between the parties as to whether it is appropriate to continue to maintain the original but old "McQuay" brand units. Mr Burge, the operator's preferred contractor, describes these units as being of poor design and quality, are in poor condition and are at the end of their lifespan. 2. Despite that opinion, Mr Burge strongly supports the operator's intention to continue to maintain these old units, to the extent that in my opinion he was not an independent witness but tended to act as an advocate for the operator while in cross-examination. I listened to his evidence more than once and I also made a note to that effect during his evidence. I agree entirely with the residents' submissions in that regard. 3. Of course, given the previous policy that air conditioning units were allowed to "run to fail", whereas since then a preventative maintenance program has showed marked benefits in reducing, or in being estimated to reduce, repairs in future. Given the previous destructive approach, one would expect such a result initially. However, the question must be asked again: is it economic and in accordance with the RV Act to continue to inspect and repair into the future, with a very minor replacement program of 4 units per year, or should the operator be required to replace these items? 4. Neither party provided evidence in relation to that issue, nor were there any submissions in that regard. It is not appropriate for me to make an order in relation to capital replacement of air conditioning units in those circumstances. 5. The operator estimates total expense of $104,107 for FY16, assuming a 20% reduction in required repairs. There is evidence from Mr Burge to the effect that he is authorised to replace up to 4 units per annum but he also gave oral evidence that he would be permitted to replace up to 8 units per annum. There is no indication to that effect from the operator, nor any indication of putting a replacement program into place. 6. In relation to item 63, Ms Lawrence states at [149]: "This line item was only $22,959 in the first proposed budget. This was the FY 15 cost plus CPI. After that budget was rejected, Licence [sic] to Chill informed us that the price would increase to $35,882." I am surprised Ms Lawrence left this in the form the contractor "informed us …" with no discussion or evidence as to why, in a financial year when there was supposed to be a 20% reduction in repairs, the price simply "increased" by 156%! 7. The only details supporting the work required in items 63 and 64 is contained in the detailed Licensed to Chill quotations in "SL1" – 63/64. 8. There are three quotations as follows: MFA140415A dated 14 April 2015, pages 167 - 174. This quotation is headed "Air Conditioning Preventative Maintenance". It includes an "inspection schedule" and the cost is $27,500.00 plus GST, or $30,250.00. That figure does not match any figure for either item 63 or 64 in any of the three proposed budgets for FY16. This quotation appears to relate only to item 63, and it includes provision for a report to management outlining faults or potential problems. MFA140415C dated 14 April 2015 pages 181 to 187. This quotation is headed "Common Area Air Conditioning Preventative Maintenance". It apparently relates to the "Administration Building" and the "Swimming Pool Building". The cost is $1,200.00 plus GST per visit. There is no estimate or quotation of a possible annual cost. MFA140415B dated 14 April 2015 at pages 190 to 196. This quotation is headed "Common Area Refrigeration Preventative Maintenance" and the cost is $380.00 plus GST per visit. As with the previous quotation, there is no estimate or quotation of annual cost. 1. I cannot relate these documents to the various estimates for items 63 and 64 as shown in Attachment 2 below. I note that the budget line item on page 162 of "SL1" 63/64 includes the following note: "Planned maintenance of Clubhouse Refrigeration & Air Con. Equipment including villas and common areas", so it appears that all three quotations are somehow added together to make up item 63. How that is done is not shown. 2. The same page, in relation to item 64, contains the note: "Breakdown Repairs of air-conditioning & ventilation equipment. R&M Refrigerant, gas, etc.". Also, on page 162 of "SL1" against line item 64 is a further note: "20% due to the benefits of preventative maintenance". If that is mean to indicate a reduction for the FY16 of 20% compared to the FY15 actual cost (as shown on this document: $81,225) the correct figure would be $64,980. 3. On the basis of this very unsatisfactory evidence I would allow a total of the original quotation by Licensed to Chill of $22,959, and a 20% reduction for FY15 actual being $64,980, a total of $87,939. Item 69: Optional Services Recouped 1. There are no supporting documents in "SL1" 69 but Ms Lawrence provides copies of tax invoices issued to Sakkara for the sales office, and to the caterer, Pinnacle Catering, in "SL31". Those documents show the amounts charged but there is no supporting information or submissions answering the residents' submissions that these (and other) operators are being charged a reasonable commercial rent. 2. There is also no explanation for the wide variation in these estimated recoveries in the three version of the FY16 budget shown in Attachment 2 below. Between FY16-2 and FY16-3 there is a reduction in the estimate of about 43%, completely unexplained by Ms Lawrence at paragraphs 155-156 of her statement. 3. Although Mr Smith makes a spirited argument in relation to his belief that the rentals charged are not commercial rentals, he is otherwise unsupported by persuasive evidence. 4. This is yet another of those issues in which the Tribunal is required to make a determination on the basis of very unsatisfactory evidence. The best I can do is to take into account all the estimates of the operator and take an average: I allow $31,830.00. Item 70: Capital Works Fund 1. This item (CWF) has obviously caused a great deal of concern to the residents and therefore to the operator. 2. In my opinion, Member Smith's allowance of $174,401, essentially for major painting works, was intended to be expended in the FY15 year. Member Smith rejected an argument that large scale painting works were more akin to capital replacement than maintenance and I agree with that opinion. As the residents did not agree with the proposed FY16 budget, the total budget and recurrent charges approved for FY15 continued unchanged for FY16 in practice, until this decision is published. Some residents adopted an attitude that the operator should not collect the total levies as they include that sum of $174,401 which was specifically for painting in FY15. It appears that the operator at some stage decided, during FY16, to put the CWF component into a separate bank account, and then apparently decided to expend all or part of that money on FY16 expenditure. Some residents regarded that transactin with great suspicion. 3. During the hearing, I commented that I could understand the residents concern in the sense that this transaction could appear "dodgy" to them, but in fact such a conclusion could not be made until I made this decision and account could be taken of the elements of this decision. 4. In my opinion that is the case because if the Tribunal sets the annual budget and recurrent charges for FY15 and the residents don't agree on the FY16 budget, the FY16 recurrent charges are effectively fixed at the FY15 level, although in the end, based on my decision, recurrent charges and the annual budget may differ from FY15. What effectively happens to the FY16 collections of recurrent charges cannot be accounted for until then. If, for example, it was argued and determined that item 70 should be, say, $200,000.00, then residents would be required to pay more than the component of approximately $66.00 assumed to be amount due to the FY15 CWF allowance. 5. In addition, no final accounting can be made until every line item is taken into account. Until then, it cannot be stated that any component in the actual recurrent charges collected during FY16 relates to any particular line item. There could be a complete restructuring of the FY16 budget so that it bears little resemblance, on a line item basis, to the FY15 budget. 6. For additional clarity, I find that there is no evidence before me that the operator has misused or expended inappropriately any of the recurrent charges collected by the operator from residents from 01/07/2015. 7. Returning to item 70: it is not clear to me whether the operator has established a capital works fund pursuant to s 99 of the RV Act. The evidence of the operator concedes that the amount estimated for CWF relates to an accepted quotation from Programmed Property Services (PPS) which is apparently for a 3-year period. The actual FY16 budget does not include that entire period or suggest that the amount estimated for FY16 actually extends into future financial years. That is, it appears that if the operator seeks an additional budget for the next two years, it will be required to include each of those years into the equivalent FY budget. There is no information before me as to the operator's intentions in that regard. 8. Therefore, in my opinion I am required to consider item 70 on the usual basis. 9. Another issue in relation to this item is the vigorous objection of the residents that some or all of this painting works (which makes up the entirety of this item) relates to defect rectification. The operator maintains just as vigorous a position that all defective works have been completed subject to previous Tribunal decisions and that the residents should withdraw all assertions and submissions in relation to defect rectification. The residents, in reply, are clearly fully aware of the operator's argument but do not accept it. Mr Burgess and Mr Smith both provide quite extensive opinions in relation to this contentious issue and the expert report of Mr Tompson on its face supports their submissions. 10. With great respect to the residents and indeed to their expert, I am not convinced by their arguments. The findings attributed to Member Bordon in the matters decided by him, especially to the effect that large scale painting is more than maintenance, if that is what Member Bordon said, is answered above already. If Member Bordon did say so, I respectfully disagree with his opinion and agree with the opinion of Member Smith discussed above. I have already answered the submission of the residents in relation to whether the operator did not disclose the 3-year contract with PPS above. Furthermore, as a matter law I consider the residents' submission in relation to Parliament's intention by the withdrawal prior to 01 March 2010 of Reg 5(1)(a) is incorrect. I cannot read into that withdrawal (if that is what happened) and intention by Parliament that residents should not pay for painting. 11. As for the estimated cost based on the PPS proposal, in my opinion that is a proper procedure to follow for planned maintenance (and indeed had such procedures been followed previously in this and other items the level of dispute would most likely have been much reduced – because of the transparency and completeness of the information). Both parties and particularly the residents' expert Mr Tompson agree that the work is required (apart from any dispute in relation to defective works) and that the quality of the work is more than acceptable. I allow the full estimated amount. 12. In relation to the disputed items, my findings are as follows: Item No. Line Item FY16-3 Amount 6 Wages Administration $304,878 7 Wages Maintenance $222,227 12 Wages Replacement Staff $7,000 13 Recruitment Temporary Staff $0.00 18 Insurance – General $105,276 37 Tradesman Repairs $66,967 45 Annual Fire Safety Certificate $9,628 46 Temper/Mixing Valve Compliance $29,718 48 Electricity $101,038 63 Air Conditioning Maintenance Contract $22,959 64 Air Conditioning R&M Materials $64,980 69 Optional Services Recouped ($31,830) 70 Contribution to Capital Works Fund $73,614 Geoffrey Meadows Senior Member NSW Civil and Administrative Tribunal 31 May 2017 Attachment 1: FY16-3 Proposed Budget THE LANDINGS AT TURRAMURRA ANNUAL PROPOSED BUDGET FOR THE YEAR ENDED 30 JUNE 2016 BUDGET ACTUAL VARIANCE PROPOSED INCREASE INCREASE Proposed Budget Year: Year: Over & Above Over & Above 2014/2015 Year: 1/7/2014 to 30/6/2015 Year: 2014/2015 2015/2016 2014 / 2015 2014 / 2015Proposed Budget % Proposed Budget Recurrent charges per resident per month $653.42 $785.08 131.66 20.15% Recurrent charges per resident per year $7,841.05 $9,420.99 1,580 20.15% Number of properties (divisor) 220 220 Estimated Income From recurrent charges $1,725,031 $2,072,619 $347,587 20.15% INCOME Levies Resident Levies 1 1,550,630 1,517,974 (32,657) 1,999,005 448,374 28.92% Utilities Adjustment Charge 2 - Operator Contribution / Unsold Stock 3 - 8,000 8,000 8,152 8,152 Resident Levies For Capital Works Fund 70 174,401 174,401 - 73,614 (100,787) -57.79% Cont. Vacant Land Council Rates 4 - - Interest Income 5 1,355 1,477 121 859 (497) -36.64% Total Operating Income 1,726,387 1,701,851 (24,535) 2,081,629 355,243 20.58% EXPENDITURE. Employment Costs Wages Administration 6 289,413 312,767 23,353 434,878 145,464 50.26% Wages Maintenance 7 198,348 204,943 6,595 222,227 23,879 12.04% Wages PCA 8 86,581 108,663 22,082 88,199 1,618 1.87% Annual Leave Loading 9 3,983 2,093 (1,891) 1,863 (2,120) -53.23% Superannuation 10 54,915 56,856 1,941 71,227 16,313 29.71% Payroll Tax - 4,466 4,466 Insurance - Workers Comp 11 21,168 (21,168) 27,379 6,211 29.34% Wages Replacement Staff 12 9,959 13,846 3,887 13,547 3,587 36.02% Recruitment Temporary Staff 13 - 28,644 28,644 Staff Training 14 2,925 2,866 (59) 3,447 522 17.83% PCA Emergency Callouts 15 425 701 276 701 276 64.86% Staff Meeting Time 16 - 619 619 - - Uniforms 17 1,026 1,286 260 1,863 837 81.58% Total Employment Costs 668,744 704,638 35,894 898,439 229,695 34.35% Administration Expenditure Insurance - General 18 103,862 92,687 (11,175) 109,318 5,456 5.25% Computer and Office Equipment 19 8,000 10,748 2,748 14,639 6,639 82.98% Photocopy & Printing 20 11,718 8,855 (2,863) 8,878 (2,840) -24.23% Stationery & Office Supplies 21 5,548 4,060 (1,488) 4,196 (1,352) -24.36% Residents Committee Expenses 22 799 799 - Admin Telephone 23 5,294 4,003 (1,291) 5,651 357 6.74% Admin Internet 24 840 1,537 697 1,344 504 60.00% Postage 25 335 199 (136) 202 (133) -39.60% Newspapers 26 272 74 (198) 447 175 64.22% Staff Amenities 27 513 513 992 992 Subscriptions 28 827 - (827) - (827) -100.00% Audit Fees (William Buck, HLB Mann Judd resigned) 29 21,600 12,100 (9,500) 12,100 (9,500) -43.98% Bank Fees 30 2,697 3,251 554 3,313 616 22.83% First Aid Supplies - 381 381 - - Total Administration Expenses 160,993 139,206 (21,787) 161,080 87 0.05% Grounds Maintenance Garden Maintenance 31 63,328 62,072 (1,256) 84,232 20,904 33.01% Lawn Cutting & Edging 32 23,650 24,363 713 25,150 1,500 6.34% Materials, Plants & Shrubs 33 4,800 4,616 (184) 4,771 (29) -0.60% Tree Removal & Tree Lopping 34 3,404 1,760 (1,644) 18,453 15,049 442.11% Total Grounds Maintenance 95,182 92,812 (2,370) 132,607 37,425 39.32% Building Repairs & Maintenance Window/Gutter Cleaning 35 46,554 17,858 (28,696) 40,447 (6,108) -13.12% Cleaning Materials & Equipment 36 1,136 2,613 1,477 2,662 1,526 134.37% Tradesman Repairs 37 39,274 60,774 21,500 78,913 39,639 100.93% Painting 38 - - - - - Maintenance Consumables 39 7,841 14,528 6,687 15,016 7,175 91.50% R&M Electrical/Light Globes 40 9,684 7,535 {2,149) 10,098 414 4.28% Plumbing and Sewer R&M 41 7,757 6,838 (919) 10,627 2,870 37.00% Pest Control 42 6,132 7,133 1,001 7,480 1,348 21.98% TV Maintenance/Foxtel Contract 43 4,158 3,943 (214) 4,128 (30) -0.72% R&M Locksmiths 44 699 253 (446) 690 (9) -1.27% R & M Equipment 2,580 2,580 - - Total Building Repairs & Maintenance 123,235 124,055 821 170,061 46,826 38.00% Legislative Requirement Costs Annual Fire Safety Certificate 45 1,382 - (1,382) 24,309 22,927 1658.97% Temper/Mixing Valve Compliance 46 84 - (84) 29,718 29,634 35278.57% Fire/Essential Services - Tests & Parts 47 13,248 21,064 7,816 19,834 6,586 49.71% Total Legislative Requirement Costs 14,714 21,064 6,350 73,860 59,146 401.97% Utilities Electricity 48 114,627 106,372 (8,255) 111,038 (3,589) -3.13 Gas 49 17,693 11,706 (5,987) 14,106 (3,587) -20.27% Total Energy 132,320 118,078 (14,242) 125,144 (7,176) -5.42% Council/Water Rates & Waste Municipal Rates 50 89,768 90,258 490 93,586 3,818 4.25% Water Service - Fixed Charge 51 15,776 22,301 6,525 22,725 6,949 44.05% Wastewater (sewerage) - Fixed 52 101,893 93,390 (8,503) 95,164 (6,728) -6.60% Water Usage 53 54,514 68,385 13,871 70,623 16,109 29.55% Trade Waste 54 1,684 8,094 6,410 8,153 6,469 384.14% Total Council/Water Rates & Waste 263,635 282,428 18,793 290,251 26,616 10.10% Vehicle Expenses Bus Expenses 55 5,616 3,144 (2,472) 5,876 260 4.63% Carts Maintenance 56 773 820 47 850 77 9.98% Toyota Ute Expenses 57 2,402 1,516 (886) 2,421 20 0.82% Total Vehicle Expenses 8,790 5,480 (3,310) 9,147 357 4.06% Elevators Elevator Contract, R&M and Registration 58 29,265 25,505 (3,760) 35,008 5,743 19.62% Elevator - Telephones 59 2,397 759 (1,638) 2,097 (300) -1232% Total Elevators 31,662 26,264 (5,398) 37,105 5,443 17.19% Emergency Call System Emergency Calls - Batteries 60 367 - (367) 372 5 1.43% E/call System - R&M 61 2,070 6,495 4,425 9,404 7,334 354.30% E/call System - Pagers 62 - - _ . - Total Emergency Call System 2,437 6,495 4,058 9,776 7,339 301.16% Air Conditioning Maintenance Air Conditioning Maintenance Contract 63 31,420 31,653 233 35,882 4,462 14.20% Air Conditioning R&M Materials 64 34,614 81,225 46,611 68,225 33,611 97.10% Total Air Conditioning Maintenance 66,034 112,878 46,844 104,107 38,073 57.66% Swimming Pool Maintenance Pool Chemicals 65 1,000 824 (176) 286 (714) -71.40% Pool Repair & Maintenance 66 605 1,570 965 4,773 4,168 688.89% Total Swimming Pool Maintenance 1,605 2,394 789 5,059 3,454 215.19% Clubhouse & Kitchen Bowling Green Expenses 67 3,040 1,447 (1,593) 8,603 5,563 183.00% Tea, Coffee & Clubhouse Supplies 68 9,211 5,878 (3,333) 6,075 (3,136) -34.04% less Optional Services Recouped 69 (30,964) (21,000) 9,964 (23,299) 7,665 -24.76% Total Clubhouse & Kitchen (18,713) (13,675) 5,038 (8,620) 10,093 -53.93% Contribution to capital works fund 70 174,401 174,401 - 73,614 (100,787) -57.79% Total Operating Expenditure 1,725,039 1,796,518 71,479 2,081,629 356,591 20.67% Surplus/Deficit 1,348 (94,666) (96,014) - Attachment 2: Items in dispute by budget version (variations compared to FY15) Item No. Line Item FY16-1 FY16-2 FY16-3 Amount Variation Amount Variation Amount Variation 6 Wages Administration $437,284 51.09% $434,878 50.26% $434,878 50.26% 7 Wages Maintenance $213,495 7.64% $210,428 6.09% $222,227 12 Wages Replacement Staff $13,554 36.09% $13,537 35.29% $13,547 13 Recruitment Temporary Staff $769 [New] $805 [New] $28,644 [New] 18 Insurance – General $95,949 -7.62% $88,974 -14.33% $109,318 37 Tradesman Repairs $79,935 29.08% $58,181 48.14% $78,913 45 Annual Fire Safety Certificate $2,436 76.29% $9,088 557.6% $24,309 46 Temper/Mixing Valve Compliance $29,718 35,278.57% $29,718 35,278.57% $29,718 [New] 48 Electricity $110,029 -4.01% $88,023 -23.21% $111,038 63 Air Conditioning Maintenance Contract $22,959 -26.93% $35,882 14.2% $35,882 14.2% 64 Air Conditioning R&M Materials $65,697 89.8% $54,663 57.92% $68,225 69 Optional Services Recouped ($31,459) 1.6% ($40,731) 31.54% ($23,299) 70 Contribution to Capital Works Fund $139,679 -19.91% $73,212 -58.02% $73,614 Attachment 3: Items in dispute by budget version showing variation – compared to FY15 proposed budget 1 2 3 4 5 6 7 8 9 10 11 12 FY15 Budget and FY16 variation Item No. Line Item FY15 Budget FY16-1 FY16-2 FY16-3 Amount Amount Variation Check Amount Variation Check Amount Variation Check 6 Wages Administration $289,413 $437,284 51.09% 51.09% $434,878 50.26% 50.26% $434,878 50.26% 50.26% 7 Wages Maintenance $198,348 $213,495 7.64% 7.64% $210,428 6.09% 6.09% $222,227 12.04% 12.04% 12 Wages Replacement Staff $9,959 $13,554 36.09% 36.10% $13,537 35.29% 35.93% $13,547 36.03% 36.03% 13 Recruitment Temporary Staff $0 $769 [New] N/A $805 [New] N/A $28,644 [New] N/A 18 Insurance – General $103,862 $95,949 -7.62% -7.62% $88,974 -14.33% -14.33% $109,318 5.25% 5.25% 37 Tradesman Repairs $39,274 $79,935 29.08% 103.53% $58,181 48.14% 48.14% $78,913 100.93% 100.93% 45 Annual Fire Safety Certificate $1,382 $2,436 76.29% 76.27% $9,088 557.60% 557.60% $24,309 1658.97% 1658.97% 46 Temper/Mixing Valve Compliance $84 $29,718 35278.57% 35278.57% $29,718 35278.57% 35278.57% $29,718 35278.57% 35278.57% 48 Electricity $114,627 $110,029 -4.01% -4.01% $88,023 -23.21% -23.21% $11,038 -90.37% -90.37% 63 Air Conditioning Maintenance Contract $31,420 $22,959 -26.93% -26.93% $35,882 14.20% 14.20% $35,882 14.20% 14.20% 64 Air Conditioning R&M Materials $34,614 $65,697 89.80% 89.80% $54,663 57.92% 57.92% $68,225 97.10% 97.10% 69 Optional Services Recouped ($30,964) ($31,459) 1.60% 1.60% ($40,731) 31.54% 31.54% ($23,299) -24.75% -24.75% 70 Contribution to Capital Works Fund $174,401 $139,679 -19.91% -19.91% $73,212 -58.02% -58.02% $73,614 -57.79% -57.79% Attachment 4: Items in dispute by budget version showing variation – compared to FY15 actual budget 1 2 3 4 5 6 7 8 9 10 11 12 FY15 Actual and FY16 variation Item No. Line Item FY15 Actual FY16-1 FY16-2 FY16-3 Amount Variation Check Amount Variation Check Amount Variation Check 6 Wages Administration $315,631 $437,284 51.09% 38.54% $434,878 50.26% 37.78% $434,878 50.26% 37.78% 7 Wages Maintenance $204,943 $213,495 7.64% 4.17% $210,428 6.09% 2.68% $222,227 8.43% 8.43% 12 Wages Replacement Staff $13,846 $13,554 36.09% -2.11% $13,537 35.29% -2.23% $13,547 -2.16% -2.16% 13 Recruitment Temporary Staff $0 $769 [New] N/A $805 [New] N/A $28,644 [New] N/A 18 Insurance – General $92,626 $95,949 -7.62% 3.59% $88,974 -14.33% -3.94% $109,318 18.02% 18.02% 37 Tradesman Repairs $66,739 $79,935 29.08% 19.77% $58,181 48.14% -12.82% $78,913 18.24% 18.24% 45 Annual Fire Safety Certificate $3,995 $2,436 76.29% -39.02% $9,088 557.60% 127.48% $24,309 508.49% 508.49% 46 Temper/Mixing Valve Compliance $84 $29,718 35278.57% 35278.57% $29,718 35278.57% 35278.57% $29,718 35278.57% 35278.57% 48 Electricity $97,579 $110,029 -4.01% 12.76% $88,023 -23.21% -9.79% $111,038 -88.69% -88.69% 63 Air Conditioning Maintenance Contract $31,653 $22,959 -26.93% -27.47% $35,882 14.20% 13.36% $35,882 14.20% 13.36% 64 Air Conditioning R&M Materials $93,360 $65,697 89.80% -29.63% $54,663 57.92% -41.45% $68,225 -26.92% -26.92% 69 Optional Services Recouped $34,184 ($31,459) 1.60% -192.03% ($40,731) 31.54% -219.15% ($23,299) -168.16% -168.16% 70 Contribution to Capital Works Fund $174,401 $139,679 -19.91% -19.91% $73,212 -58.02% -58.02% $73,614 -57.79% -57.79% Attachment 5: proposed budgets for item 37: Tradesman Repairs. 5.1 - Budget dated 28 April 2015 – "37 Tradesman Repairs" page 103 Date Prepared: 14/04/2015 Prepared By: MP Date Updated: 28/04//2015 Updated By: ZDJ CPI % Increase 1.60% 2015 YEAR 2016 YEAR Description ANNUALISED BUDGET Residence dishwasher, cooktops, oven, microwaves 16,667 15,918 Increased by CPI Electrician (lighting and electrical) P Selosse 12,189 12,384 Increased by CPI Plumber 14,281 14,509 Increased by CPI Garage doors 3,435 3,490 Increased by CPI Telephone 997 1,013 Increased by CPI Annual Generator Maintenance Charge (Kenshaw) 2,259 2,295 Increased by CPI Repair window sashes 4,752 - Moved to capital works Repair to Clubhouse Atrium - 4,054 Quote by Guidaci Interiors R&M Equipment/General Repairs 1,299 1,319 Increased by CPI General 10,289 10,453 Increased by CPI 65,167 65,435 New Expenses Equipment Hire – Cherry Picker 4,000 Quote to follow CO2 Sensors & fans in 2 SNMD 8,500 Quote to follow Vergola Servicing 2,000 $500*4 TOTAL ESTIMATE TRADESMAN REPAIR COSTS $65,167 $79,935 ITEM 37 Landings Village Budget 2016 Version 1 5.2 - Budget dated 01 June 2015 – "37 Tradesman Repairs" page 102 Date Prepared: 14/04/2015 Prepared By: MP Date Updated: 1/06/2015 Updated By: TD CPI % Increase 1.60% 2015 YEAR 2016 YEAR Description Ver 1 ACTUAL BUDGET Residence dishwasher, cooktops, oven, microwaves 15,667 8,503 8,639 Increased by CPI Electrician (lighting and electrical) P Selosse 12,189 1,177 1,196 Increased by CPI Plumber 14,281 15,391 15,637 Increased by CPI Garage doors 3,435 4,409 4,479 Increased by CPI Telephone 997 1,559 1,584 Increased by CPI Annual Generator Maintenance Charge (Kenshaw) 2,259 2,089 2,122 Increased by CPI Repair window sashes Removed from budget as per NCAT orders RV 14/54814 Security 1,557 1,602 Increased by CPI R&M Equipment/General Repairs 1,299 15,824 16,078 Increased by CPI Once off charges from last year Incl Window Sashes 15,041 16,210 One off charges allocated in FY15 not required in FY16 Recoupments Sakkara (8,797) 65,167 66,739 51,337 TOTAL ESTIMATE TRADESMAN REPAIR COSTS $66,739 $51,337 ITEM 37 Roof Repairs 96 SNMD 4,807 Quote attached – Roofs Above & Beyond incl gst Roof Repairs 94 SNMD 7,139 Quote attached – Roofs Above & Beyond incl gst TOTAL ESTIMATE TRADESMAN REPAIR COSTS $66,739 $63,283 ITEM 37 5.3 - Budget dated 01 June 2015 – "37 Tradesman Repairs" page 85 Date Prepared: 14/04/2015 Prepared By: MP Date Updated: 1/06/2015 Updated By: TD CPI % Increase 1.60% 2015 YEAR 2016 YEAR Description Ver 1 ACTUAL BUDGET Residence dishwasher, cooktops, oven, microwaves 15,667 8,503 8,639 Increased by CPI Electrician (lighting and electrical) P Selosse 12,189 1,177 1,196 Increased by CPI Plumber 14,281 15,391 15,637 Increased by CPI Garage doors 3,435 4,409 4,479 Increased by CPI Telephone 997 1,559 1,584 Increased by CPI Annual Generator Maintenance Charge (Kenshaw) 2,259 2,089 2,122 Increased by CPI Repair window sashes Removed from budget as per NCAT orders RV 14/54814 Security 1,557 1,602 Increased by CPI R&M Equipment/General Repairs 1,299 15,824 16,078 Increased by CPI Once off charges from last year Incl Window Sashes 15,041 16,210 One off charges allocated in FY15 not required in FY16 Anchor Point Certification 2,035 Annual Certification of Anchor Points $20.35 x 100 points Recoupments Sakkara (8,797) 65,167 66,739 53,372 TOTAL ESTIMATE TRADESMAN REPAIR COSTS $66,739 $53,372 ITEM 37 Roof Repairs 96 SNMD 4,807 Quote attached – Roofs Above & Beyond incl gst Roof Repairs 94 SNMD 7,139 Quote attached – Roofs Above & Beyond incl gst TOTAL ESTIMATE TRADESMAN REPAIR COSTS $66,739 $65,318 ITEM 37 5.4 - Budget dated 01 June 2015 – "37 Tradesman Repairs" page 86 Date Prepared: 14/04/2015 Prepared By: MP Date Updated: 1/06/2015 Updated By: TD CPI % Increase 1.60% 2015 YEAR 2016 YEAR Description ANNUALISED BUDGET Residence dishwasher, cooktops, oven, microwaves 15,667 15,918 Increased by CPI Electrician (lighting and electrical) P Selosse 12,189 12,384 Increased by CPI Plumber 14,281 14,509 Increased by CPI Garage doors 3,435 3,490 Increased by CPI Telephone 997 1,013 Increased by CPI Annual Generator Maintenance Charge (Kenshaw) 2,259 2,295 Increased by CPI Removed from budget as per NCAT orders RV 14/54814 Repair window sashes 4,752 R&M Equipment/General Repairs 1,299 1,319 Increased by CPI Once off charges from last year Incl Window Sashes 16,210 One off charges allocated in FY15 not required in FY16 General 10,289 65,167 50,928 TOTAL ESTIMATE TRADESMAN REPAIR COSTS $65,167 $50,928 ITEM 37 Roof Repairs 96 SNMD 4,807 Quote attached Roof Repairs 94 SNMD 7,139 Quote attached TOTAL ESTIMATE TRADESMAN REPAIR COSTS $65,167 $62,874 ITEM 37 5.5 - Budget dated 19 August 2015 – "37 Tradesman Repairs" Date Prepared: 14/04/2015 Prepared By: MP Date Updated: 19/08/2015 Updated By: sl CPI % Increase 1.60% 2015 YEAR 2016 YEAR Description Ver 1 ACTUAL BUDGET Residence dishwasher, cooktops, oven, microwaves 15,667 8,503 8,639 Increased by CPI incl GST Electrician (lighting and electrical) P Selosse 12,189 1,177 1,196 Increased by CPI incl GST Plumber 14,281 15,391 15,637 Increased by CPI incl GST Garage doors 3,435 4,409 4,479 Increased by CPI incl GST Telephone 997 1,559 1,584 Increased by CPI incl GST Annual Generator Maintenance Charge (Kenshaw) 2,259 2,089 2,122 Increased by CPI incl GST Security 1,557 1,602 Increased by CPI incl GST R&M Equipment/General Repairs 1,299 7,028 7,140 Pergola/timber work Washing 1800 9 x 200. Quoted (allowance for State 4 Villas only) Anchor Point Certification 2,035 Annual Certification of Anchor Points $20.35 x 100 points Recoupments Sakkara 50,126 41,732 46,235 TOTAL ESTIMATE TRADESMAN REPAIR COSTS $41,732 $46,235 ITEM 37 Roof Repairs 96 SNMD 4,807 Quote attached – Roofs Above & Beyond incl gst Roof Repairs 94 SNMD 7,139 Quote attached – Roofs Above & Beyond incl gst TOTAL ESTIMATE TRADESMAN REPAIR COSTS $41,732 $58,181 ITEM 37 Increase/(Reduction) $16,448.71 5.6 - Budget dated 19 October 2015 – "37 Tradesman Repairs" page 66 Date Prepared: 14/04/2015 Prepared By: MP Date Updated: 19/10/2015 Updated By: SL Chart of accounts 6_3030 CPI % Increase 1.90% 2015 YEAR 2016 YEAR Description Ver 1 ACTUAL BUDGET Residence dishwasher, cooktops, oven, microwaves 15,667 13,735 15,997 Increased by CPI incl GST Electrician (lighting and electrical) P Selosse 12,189 11,296 13,157 Increased by CPI incl GST Plumber 14,281 17,123 15,000 Increased by CPI incl GST Garage doors 3,435 3,923 4,569 Increased by CPI incl GST Telephone 997 2,145 2,498 Increased by CPI incl GST Annual Generator Maintenance Charge (Kenshaw) 2,259 6,071 2,145 Increased by CPI incl GST Security 3,559 4,191 Increased by CPI incl GST R&M Equipment/General Repairs 1,299 8,078 9,408 Increased by CPI incl GST 50,126 65,969 66,967 GST ADDED TO LEDGER TOTALS TOTAL ESTIMATE TRADESMAN REPAIR COSTS $65,969 $66,967 ITEM 37 Roof Repairs 96 SNMD 4,807 Quote attached – Roofs Above & Beyond incl gst Roof Repairs 94 SNMD 7,139 Quote attached – Roofs Above & Beyond incl gst TOTAL ESTIMATE TRADESMAN REPAIR COSTS $65,969 $78,913 ITEM 37 RETIREMENT VILLAGES ACT 1999 – SECT 93 93 Obligations of operator with respect to certain capital maintenance or replacement (1) The operator of a retirement village is to maintain each item of capital for which the operator is responsible in reasonable condition having regard to the following: (a) the age of the item, (b) the prospective life of the item, (c) the money paid to the operator by the residents under a village contract (including ingoing contributions). (2) If it is not practical to maintain an item of capital in accordance with this section, the operator may replace the item. (3) The operator of a retirement village must carry out the maintenance of, or replace, an item of capital for which the operator is responsible within a reasonable time after becoming aware of the need for the maintenance of replacement of the item. Attachment 6: Parties' Submissions Note that the following are rough notes summarising the parties' well prepared and presented submissions, included in this form to at least partly reduce the size of these reasons. Submissions Applicant's Submissions Lists documentary evidence Law: Principles set out in Alloura Waters on 'repair', 'maintenance', 'replacement' and 'consumables' and Sakkara v Residents Committee RV 14/54814 (Member Smith decision FY15) Rejects principle of 'discrete' item – specific to that case ("Meadows' Law") History of litigation shows repetition of objections: 1. Repairs and maintenance 2. Historical defects 3. Air con 4. Temper valves 5. Capital works fund 6. Wages of staff 7. Insurance Assert the objections are "fundamental", not on a reasoned contractual or legal basis. Applicant has taken positive steps to engage high level management Note fundamental distrust by Mr Burgess and Mr Smith Credentials, skills and attributes of managers are appropriate and necessary and they have always acted honestly, openly and transparently Intensive program of preventative maintenance. Applicant sought to introduce Mr Cupit so as to remove direct management contact in process – refers to Mr Cupit's evidence of the process Current form of village contract in "CM4". Submit structure of the Act requires specificity in objections not general objections. Respondent objections did not relate to contractual basis, but to: 1. Legislative entitlement of Applicant to charge 2. Excessive nature of expenditure 3. Need for expenditure Sets out summary of negotiations, including Member Smith decision on 29 May 2015 June 2015 Respondent submitted proposal for better working relationship, rejecting role of Operations Manager ("DB5") Applicant prepared amended budgets on 25/08/2015 and 06/11/2015. Respondent rejected FY16-2 4 items: 1. Admin and wages 2. Tradesman repairs 3. Temper valves 4. Air con cost Residents Committee recommendations to residents frustrated cash flow – "SL18". Mr Smith cross examination re RT Act "sympathetic" to withholding cash shows fundamental misconception which led him to oppose the information and explanation provided by the Applicant and influenced the residents to oppose the budget on no rational basis. The evidence shows the Applicant: 1. Had Deery resign because of stress dealing with residents 2. Engaged another Village Manager who resigned because of stress dealing with residents 3. Engaged another VM, CM, in 07/2015 4. Had CC go on leave and cease involvement in negotiations 5. Determined that no single manager could or should negotiate directly with Respondent because of potential H&S concerns All prolonging the process to 12/2015. Demonstrated in Respondent's evidence: Mr Burgess paragraph 161ff. Clear that Respondent objections continuously "moved" band alternated between particular items and then the whole budget FY16-3 rejected on 02/12/2015 because of line items 6, 12, 18, 37, 45, 46, 48, 63 and 64, and the following additional items added: 7, 13, 69 and 70. Review of evidence shows Respondent conflated disparate and extraneous issues from the history of proceedings between the parties and the negotiations became confused and intertwined. Primary objections are: 1. Reject role of OM 2. Reject that all previous defects and claims have been resolved and accepted by the Residents Committee : see RV 14/14827 and SLS7 3. Lack of self-awareness by Respondent that continuing to withhold full funding impacts the usual expenditure on maintenance programs and insurance causing a rearrangement of funding for those items and delays 4. Fundamental rejection and misunderstanding of prior Tribunal decisions 5. Rejection of Applicant's obligation to maintain safe environment requiring regular safety certificates 6. Rejection of defect id process being applied to air con and temper valves 7. Rejection of capital works fund Respondent does not trust the Applicant to adhere to its promises and representations nor its statutory responsibilities and the fear that items were included in the budget that had been previously argued see Mr Burgess and Mr Smith 23ff. Tribunal should have regard to s 115(6) including "any other relevant matter", such matter including the history of the disputes, impact of litigation on the Applicant's ability to manage the village and the impact on the positive steps taken by the Applicant. The Respondent's fears are misplaced as the Act contains safeguards and the process adopted by the parties themselves including: 1. Quarterly accounts 2. Annual audited accounts Submits that Respondent has appeared ambiguous and Respondent has taken an "all or nothing approach" eg providing McClelland report "which was an extended audit of the budget as opposed to providing an expert opinion on the proposed budget". Submit McClelland conceded instructions were to provide a report on the Applicant's ledger, not the budget and that his report does not assist the Tribunal – should be rejected The Tribunal should make observations on the process to be undertaken in the budget process to assist the parties to avoid protracted negotiations and disputes in future. Item 48: Applicant agrees to reduce 48 by $10,000.00 Item 6: Applicant's evidence in SL 18/02 @ 84-100, SL 08/04 @ 67-92, CM 17/02 @ 79-84 and CM 08/04 @ 2-3, 39-81. Budget papers are at pp 24-28 "SL1". Respondent's dispute is duplication of tasks, Village Manager doing head office work, contract is for a single Village Manager only and the Village Manager and the Operations Manager are inexperienced. Also Mr Burgess and Mr Smith distrust management and this is one of the main reasons for the impasse, they are unreasonable and illogical and Applicant's evidence should be preferred. There are over 7 residents committees and supporting these committees and their demands for information requires significant work by management. Applicant submits one officer is not sufficient, both roles are essential and necessary. See contract at "CM4": the appointment of Operations Manager is permitted as part of the decision making ability of the operator to determine what is the appropriate management support. Applicant denies job description of Ms Montgomery is designed to support the Applicant's claim and the description in "CM13" is the one that defines her role. Both roles are necessary as: 1. Village is a high level facility and required high level management and admin support 2. Growing frailty of residents 3. Recent emphasis on home care services 4. History of litigations brings pressure on resources 5. Attitudes and demands of residents 6. Operating without an approved budget puts increased workload on staff 7. Director and current and previous managers all say two positions are needed Further develops the above. Respondent has not shown how the tasks are duplicated, or what 'head office' tasks are being done. Respondent puts emphasis on the individuals not the roles and the Respondent's own evidence supports the establishment of a role for plans and programs for checking and maintaining village assets: AB's evidence. Item 7: Applicant's evidence: SL 18/02 @ 101-113; CM 17/02 @ 85-92; Schedule 1 "CM4" lists the services. Requests shown in "CM15". Typically maintenance staff perform more personal service eg replacing batteries, moving heavy pots, removing curtains for cleaning ("CM15" p 1 70). Charged to the resident but still allocated to maintenance staff. Deny staff are being employed to rectify defects: litigated and determined in RV 14/54814 orders 17/07/2015: "SLS7". Maintenance requests continue to increase. Mr Smith's denials of such requests for domiciliary assistance show he is unaware of the need, but Mr Burgess was aware but reverted to labelling The Landings as an independent living facility – denying the reality. Respondent claims information insufficient but see Mr Burgess 23/03 at 59 shows Respondent received a lot of information and work related to defects Mr Burgess 23/03 @ 61 and Mr Smith 23/03 at 22(ii) Item 12: Applicant evidence at SL 18/02 @ 114-116; CM 17/02 @ 93-96. Comes under the same provisions as for hiring of staff under the village contract and is a normal incidence of any business operation and reflects the cost of replacing the accountant and PCA. Also Village Development Approval requires this. Respondent in its statement of issues objects to this but there is no direct evidence to explain the disagreement. Mr Burgess 23/03 states Respondent not against relief coverage only that it is obtained as a result of good management i.e. Respondent agrees the cost and character is reasonable and the item should be accepted in full. Item 13: Applicant evidence SL 17/02 117-121: typical and usual, not unreasonable claim. Respondent complains the village contract requires Applicant to provide a village manager at its expense: claim is without foundation and the cost of hiring and firing staff falls within the definition of operating costs under the lease, and there is no limitation on hiring only one manager. Village has a history of high turnover because of difficult work environment Item 18: Applicant evidence CM 17/02 97-102. Complaint relates to funding cost, not to the insurance cost itself: insurance cost should therefore be allowed (without funding cost) immediately. Interest claim is reasonable as Respondent specifically advised residents not to pay full amount of recurrent charges per FY15. Respondent expert Bishop Collins agrees not an unusual business practice. See Mr Smith 24/03 p 4ff. Item 37: Applicant evidence SL 18/02 @ 74-83 and 122-128; SL 08/04 @ 60-66; CM 17/02 @ 103-109. Based on historical costs, applies to repairs and maintenance only, anticipates increase in roof costs, quotes in support in "SL1" 37. Applicant explains and Respondent knows previous years' expenditure reduced because of disputes over defects and reduced recurrent charges. See line item 37 increase by CPI and additional maintenance for: 1. Residence white goods; 2. Electrician lighting and electrical 3. Plumbing 4. Garage doors 5. Telephone 6. Annual generator maintenance 7. General repairs Additional item was roof repairs, quotes provided. None of the items are other than ordinary repairs and maintenance. In cross examination Mr Smith said: 1. Capital items in residences are owned by the A 2. Applicant's responsibility to maintain these items and to ensure safe function 3. Agreed that is consistent with s 101 of RV Act Increase in maintenance charges reasonable given size of village. Relies on Ms Lawrence re "discrete items". Respondent's dispute rests on argument that these are really replacement costs of capital items- Mr Burgess 23/03 and Mr Smith 23/03 @ 22(vi). During cross examination, Mr Burgess agreed: 1. Defects identification process [DIP] introduced to overcome the discrete items argument 2. Aware residents required Applicant's assistance 3. Agreed such support due to increasing frailty eg dementia. During cross examination Mark Craig agreed: 1. Item of capital such as an air conditioning analogous to a motor vehicle treated as "one whole item" 2. In an air conditioner if a major component failed the whole would not work, the component needed to be repaired or replaced for "the whole capital item", ie the air conditioner, to work 3. Description on an invoice is not indicative of the expenditure character 4. Inspection and maintenance should be on the basis of the manufacturer's specifications These elements are consistent with Alloura Waters. During cross examination Mr Burgess and Mr Smith agreed with the principles in para 136 of Alloura Waters. Submitted that: 1. No claim for defective works before Applicant or before Tribunal 2. All claims for defective works dealt with in RV 14/14827, RV 12/12787: AB 23/03 @ 25 3. Principles in Alloura Waters should be applied in determining whether items of capital are repaired or replaced Item 45: Applicant evidence SL 18/02 @ 129-133; CM 17/02 @ 110-112. Refers to supporting documents in "SL1" 45. Proposed expenditure is for: 1. Annual tests for fire dampeners and fire seals 2. Tests and tagging of electrical equipment to provide maintenance and assure a safe workplace 3. Residents Committee D testing 4. Anchor point certification 5. Emergency evacuation training 6. Annual safety audit per RV Act s 58A Respondent's argument that above not required fails in light of the "overriding obligations on the Applicant. If Applicant did not undertake these tasks and something failed, would Applicant be criticised for not meeting its obligations under the Act and village contract @ 7.1, 31.3, 19.1 (g), (l), (p), (q), (t) and (u). Respondent's complaint was that the information was unclear Mr Burgess 23/03, no objection to nature or reasonableness of the expenditure. Tagging must be considered in light of overriding obligation of Applicant, reject Respondent's argument that there is no legitimate reason for tagging. Noting Mr Smith 23/03 @ paragraph 22(vi) that Applicant owns equipment in residences, it is submitted that: 1. Applicant's responsibility to maintain under the Act 2. Should be maintained 3. Costs of maintenance forms part of village budget 4. Items must be kept safe in accordance with obligations under the Act Respondent's own expert Bishop Collins confirms this expense is a normal requirement to ensure safety of residents and infrastructure Item 46: Applicant's evidence SL 18/02 @ 134-139; CM 17/02 @ 113-116 and supporting documents in "SL1" 46. Applicant repeats obligations referred to in Item 45. Amount proposed based on quotes. Respondent argues work is "replacement" but Applicant repeats principles in Alloura Waters and temper valve maintenance is not a cost of replacement. Respondent's argument is not about TMP replacement but an alternative method and system – not relevant to maintenance issue. Mr Burgess 23/03 @ 67 is without foundation. Bishop Collins confirms a normal expense Mr Smith 24/03 @ 12 & 13. Mark Craig agreed correct approach is to follow manufacturer's recommendations: annual inspections and major maintenance every 5 years. Item 63: Applicant's evidence SL 18/02 @ 74-83 and 145-149; SL 25/02/16 Licensed to Chill Report; SL 08/04; CM 17/02 @ 113-116; supporting documents "SL1" 63. Relates to repairing and maintaining air conditioner units, according to DIP, based on quotes obtained. Respondent submits lack of clarity and control on process of pricing: Mr Burgess 23/03 @ 69. Should be rejected. Bishop Collins confirms this expense is correctly valued, classified and accurate: Mr Smith 24/03 @ p14 Item 64: Applicant's evidence SL 18/02 @ 150-154; SL 25/02 Licensed to Chill report; SL 08/04 @ 12-59; CM 17/02 @ 113-116 and supporting documents in "SL1" 64. Respondent primary contention is that Applicant needs to undertake capital replacement program and Respondent seeks clarification. This expense is proposed repair and maintenance program for the year, calculated by annualising actual repairs to 30/06/2015 reduced by 20% reflecting success of previous preventative maintenance program. Classified according to DIP and Ms Lawrence's evidence makes clear a decision is made whether repair is cost effective or not. Notes electrical surge lead to increase in maintenance and Respondent was aware of this. Applicant system is in place to clarify this issue. Respondent does not question appropriateness of allowance only quantum: submitted is appropriate. When analysed shows a reduction from previous 2015 year. Appropriateness of expenditure will ultimately have to be made when incurred, rather than beforehand at budget stage. DIP and audit sufficient for this. Residents Committee can review expenditure at quarterly intervals. This should overcome the "fear" of expenditure. Mr Burgess 23/03 states repair is in the nature of replacement and a lack of info: should be rejected. The Respondent's expert report confirms preventative maintenance is appropriate incl cannibalising spare parts. Item 69: Applicant's evidence: SL 188/02 @ 155-164; SL 25/02 Licensed to Chill; SL 08/04 @ 12-59; CM 17/02 @ 113-11 6 and supporting documents in "SL1" 69. Correctly analysed should be ignored but anyway optional services recouped depends on use of services by residents and proposed income is based on historical performance. Respondent's evidence supports Applicant's approach: Mr Burgess 23/03 @ 71; Mr Smith 23/03 @ 22. Respondent actually supports the Resident Maintenance Request process. Item 70: Applicant's evidence SL 18/02 @ 165-168; SL 08/04 @ 42-59; CM 17/02 @ 113-116; Supporting documents in "SL1" 90. Determined by reference to "a program developed with external consultants and trades. As Ms Lawrence states, must commence from the position that all outstanding defects have been resolved in RV 14/14827. Following discussion with Residents Committee a maintenance program was introduced. Supporting documents has a detailed quote for a 3-year and a 7-year option. The budget includes the 3-year option. Legitimate pursuant to s 99 of the RV Act to fund capital maintenance for a period extending beyond the particular financial year. The decision in RV 14/54814 should be considered. Even if the program itself is delayed the principle remains sound. Proposed work relates to painting (as accepted by the Tribunal) and is prudent and sensible. [Respondent sought refund of capital works fund from budget FY13 in 12/32770: orders of Tribunal confirm this repayment] RV 14/54814 @ 48-51 confirms any remaining work from previous orders relating to defective works had been finalised as set out in RV 14/54814 [sic: RV 14/14827?]. The issue is complete. Respondent's evidence actually supports the program: Mr Burgess 23/03 @ 72: re PPD proposal. Also Respondent's own expert PSA 17/03/2016 in Mr Smith 23/03 @ pp118-175 – maintenance required. Brian Tompson in cross examination : 1. Agreed subject buildings required maintenance painting 2. Applicant prudence operator would paint and maintain 3. None of the buildings in the proposed maintenance program were subject of defect claims. Proposed item should be allowed in full. Respondent's Submissions 1. Approved budget should be $1,633,452.00 2. Monthly charges $611.92 3. Plus CWF $ 6.81 4. Applicant pay Respondent's costs Procedural history The Respondent submits that Member Smith approved FY15 $1,725,039.00 as "total recurrent expenditure" @ 80, but this included $174,401.00 "which is non-recurring" because this amount was for "specific capital works" which therefore could not be recurring and therefore Member Smith incorrectly classified that sum as being "recurrent". The "true" recurrent expenditure could therefore only be $1,550,638.00. Also, Member Smith @ 81 acknowledged that his own recalculation was based on an 'agreed formula and by application of the total expenditure' and so it appears his intention was to keep the two levy amounts separate. If so, the CWF portion should have been paid into the "capital works fund" under s 99(1), (2), (3) and (4)(a). The amount proposed is $2,071,629.00 (although this does not take into account the agreed $10,000.00 reduction for electricity). This represents a 20.15% increase. Notes the Applicant did not rely on any expert evidence. Submissions Applicant distinction should be drawn between: 1. The items per se 2. The increased expenditure in connection with that item. In the main, the Respondent does not dispute the item per se, rather it disputes the increased expenditure and the reality of "who should pay" in relation to items 6, 7, 18, 3 7, 45, 46, 63, 64 and 70. Items 12 and 13 are disputed entirely by Respondent. Suggests the Applicant expects Respondent to make decisions based on incomplete, inconsistent and incorrect information and that Respondent's behaviour has been prejudicial to the effective management of the village. Applicant has sought to demean the Residents instead of using their skills and experience. Applicant relies at least implicitly on a submission that the Residents are opposed to any increases and are abrasive, hostile etc. Applicant fundamentally misconceived the legislative intention of the Act. Submits Respondent concedes increases in line items but not the amounts claimed by A. Legislation Sets out relevant sections of the Act: 108, 115. Submits resolution depends largely on findings of fact and credibility of witnesses. Wages admin – item 6 FY15 budget: $289,413; FY16 budget: $434,878; Respondent agrees with: $304,878. The primary reason for the increase in expenditure can be attributed to the salary of the Operations Manager. The Respondent submits that this increase should not be permitted for three main reasons: 1. On the correct construction of the Contract: detailed submissions are provided in relation to the contractual identification of the "Manager" and other management staff; 2. The evidence: this relates firstly to the differing versions of the original development of the Operations Manager role by David Bedingfield and Ms Lawrence and also to the evidence of substantial overlapping of the two roles and the reduced role of Ms Montgomery in actually acting as Village Manager, most of that work being left to Ms Lawrence. 3. Finally, Respondent submits in relation to the self-serving nature of the Applicant's documents in relation to the two roles, being obviously prepared for the litigation and not as genuine business records. Respondent notes the documents were produced during the budget negotiations and the litigation itself. The documents were not signed. The Respondent submits particularly in relation to the genuineness of the so-called "exception report" ["DBS1"] and the unpresented "matrix" document and the absence of evidence from Mr Deery despite his earlier offer to be of assistance. Wages Maintenance- item 7 FY15 budget: $198,343; FY16 budget: $222,227; Respondent agrees with: $182,227. Respondent submits the information supporting this item was insufficient to understand what management was actually doing in this area. In any case, Respondent's case is that they are not objecting to the process of budgeting for actual maintenance wages, but that Respondent believes the amount is overstated by $20,000 to $40,000 because maintenance staff are engaged partly in refurbishing and rectifying defects. Respondent seeks an offset for that amount. The second main submission by Respondent is in relation to the evidence by Applicant that maintenance requests were increasing according to Ms Lawrence's "trend analysis": in fact that evidence shows the requests are reducing in FY16. In this regard particular attention is drawn to Ms Lawrence's email @ "SL28" p 402: "need to rectify" data before "the Residents Committee's expert witnesses review the maintenance team". On cross examination on this her evidence was not satisfactory. Wages Replacement Staff – item 12 FY15 budget: $9,959; FY16 budget: $13,547; Respondent agrees with: $9,959. Respondent submits this should be disallowed in full because insufficient detail has been provided: Mr Smith @ p8. The submission is that the FY16 proposed amount was based initially on Ms Lawrence's consultant rate initially, although the Applicant states this was later corrected. Ms Montgomery does not provide evidence to support the figure other than her own opinion: "CM1" @ [95]. Recruitment Temporary Staff – item 13 FY15 budget: $0; FY16 budget: $28,644; Respondent does not agree. Respondent notes this was originally agreed to but there are now 4 reasons why it should not be allowed: 1. Applicant agreed Applicant should pay this amount in FY16-2; 2. Fee never previously charged; 3. Applicant has an obligation to provide a Village Manager and a recruitment cost is not for the "operation, management and conduct" of the village; 4. Ms Lawrence's evidence that this is a standard fee (and therefore reasonable) should be rejected, her opinion only, no other quotes or estimates were provided. This has not been demonstrated to be a reasonable and necessary cost (per RV Act). Respondent notes that "curiously", now that FY16 audited accounts are available the amount is an unexplained actual amount of $47,344. Insurance – item 18 FY15 budget: $103,862; FY16 budget: $109,318; Respondent agrees with: $105,276. Dispute is in relation to the interest charged for the financing of insurance premiums by paying insurance monthly and because of cash flow issues from reduced levies. Respondent submits the cash flow issues result from the failure, inter alia, to repay previous deficits and by paying out of recurrent charges the salary of the Operations Manager. The submission by Applicant @ [146] is wrong: the residents are paying the recurrent charges (only some are not paying the CWF amount). Respondent submits should accept evidence of Bishop Collins that this is a head office decision and is the operator's expense. Note also that Ms Montgomery says the levels of recurrent charges are too low, not that specific amounts are being withheld. Tradesman Repairs – item 37 FY15 budget: $38,274; FY16 budget: $78,913; Respondent agrees with: $41,237. Respondent submits that FY15 plus 5% should be allowed. FY16 is inflated because it is based on: 1. Decision to use Applicant's "purported" actual cost for FY15 of $60,774; 2. Adding a contingency (CPI plus GST) to several previous years estimates which adds $4,924; and 3. Incorrect categorisation or otherwise based on unsubstantiated quotes and estimates. In relation to each of those, Respondent submits: 1. McClelland the auditor opines that $27,069 of repairs should be reclassified to capital replacement; 2. Reg 20 of RV Regulations provides maximum contingency amount is $100; 3. McClelland reports that for the period 01/07/2015 to 31/12/2015 (first half of FY16) he requested but did not receive evidence of quotations, tender documents or scope documents for this item. McClelland opines that based on that period, $18,909 of repairs should be reclassified, which annualised amounts to $37,818. Alternatively, the Tribunal could deduct that amount from FY16. McClelland was not shaken in cross examination . Ms Lawrence's evidence was that this item and items 63 and 64 was based on past expenditure plus CPI which has been audited and agreed with. Ms Lawrence also said that even if her assessment of "discrete items" was incorrect that did not affect the assessment because those line items were based on audited financials plus CPI with the additional item of repairs to roof. In relation to the auditor's report the Respondent submits: 1. Applicant is responsible for the preparation of the financial reports, the auditor does not make a determination about the classification of capital maintenance or replacement; 2. Auditor noted "significant" repairs and capital maintenance costs during FY15 incurred in repairs and maintenance of air conditioning, ie and aberration. That is the only comment an auditor can make; 3. Auditor notes the current litigation and states it is not possible to quantify the effects of those cases on recurrent charges: "SLS2" @ p 32; 4. McClelland notes the auditor referred to only two standards: "SLS2" @ p31. There are 5 applicable standards therefore Note 1 is deficient; 5. In any case the auditor's report does not determine these issues and cannot be used as a panacea by Applicant. Re Applicant's submissions @ [158]-[160]: no comparative quotes were provided, the roof work is not just repairs it is for long-standing rectification work per Tyrrells' report (previously accepted by the Tribunal as the record of defective works and for which the Applicant was responsible to rectify) – see the list of previous cases in the Tribunal. Re Applicant [166]: that is rejected: the DIP process is not the final panel that decides defects issues, it relates only to what is a defect and what is not. Applicant's submission re dementia and assistance is not to the point. [196] is misleading: Mr Burgess was not questioned in relation to Alloura Waters and no questions were asked of Mr Smith in the manner suggested by Applicant. In fact, it was put to Mr Smith that his responses were contrary to Alloura Waters, denied by Mr Smith. In any case, Alloura Waters is only one of several cases on this issue. Annual Fire Safety Certificates – item 45 FY15 budget: $1,382; FY16 budget: $24,309; Respondent agrees with: $9,088. Amount agreed to represents the reasonable cost of the annual emergency audit and fire statement: "SL1" @ p 125 – only one of those pages discloses the cost: p 126. Respondent contends: 1. Testing and tagging ($13,186) is not required under the Standards relied upon by the Applicant: the Applicant's own evidence shows appliances are exempt in private dwellings and they are not hostile environments; 2. Cost of certifying 100 anchor points ($2,035) is not supported – the invoices dated 24/11/2015 are unclear for the installation of unknown number of roof points; and 3. Auditing and emergency procedures for evacuation costs have not been substantiated. It is not "simply" submitted by Respondent that the information was unclear and it is wrong for the Applicant to submit "there is no objection to the nature of the expenditure …" – this is nonsensical given the evidence of Mr Smith and Mr Burgess and the cross examination of the Applicant's witnesses. The Applicant argues in relation to the first dot point above by quoting an "amorphous" concept of "overriding obligations" imposed by the RV Act but that is not the reason relied upon by the Applicant to substantiate the cost – Applicant relied on alleged mandatory requirements under the Standards. Tagging and testing not required is consistent with Mark Craig's note that there was no evidence of any such T&T on any appliances inspected and he also opines on "hostile environments" and that there is no evidence in that regard. CM's evidence under cross examination that an assessment for insurance purposes had been undertaken is not a relevant assessment. At [180] of Applicant's submissions they conflate the opinion of McClelland: "this expense" in his report refers to the Annual Fire Certificates re general safety, not T&T: he defers in that regard as he is not an electrical engineer. Temper Mixing Valve – item 46 FY15 budget: $84; FY16 budget: $29,718; Respondent agrees with $$3,517. Respondent evidence in Mr Burgess @ [67] and Mr Smith @ p10(viii). Respondent contends TMVs have been serviced once in 3 years, not every year, reflected in the fact that there was no proposed or actual expense for this line item in FY15. Allow $3,517. Electricity – item 48 FY15 budget: $114,627; FY16 budget: $111,038, Applicant conceded $10,000 to $101,338; Respondent agrees with: $88,023. Respondent's evidence Mr Burgess @ [67] and Mr Smith @ p10(viii). Tribunal should accept there was a reduction in electricity cost in FY16. Respondent relies on previous agreement to reduce this line item during budget negotiations: Mr Cupit states there was an agreement to reduce electricity by 20%: @ [79] and in the absence of any further evidence the Applicant should be bound by that agreement. Air conditioning maintenance agreement- item 63 FY15 budget: $31,420; FY16 budget: $35,882; Respondent agrees with: $22,597. Respondent's evidence Mr Burgess @ [69] and Mr Smith @ p11(x). Ms Lawrence: this is the contract price of Licensed to Chill @ [146]. Ms Montgomery does not deal with this in chief. Mr Cupit states the original estimate was obtained by extrapolating the costs over the previous 8 months, and was changed when the quote from Licensed to Chill came in. Also Mr Cupit states the Residents Committee supported that quote because they [the Residents Committee] considered their quality of service was higher for the price charged although higher than other quotes. Respondent states no evidence to support that statement and there is evidence to the contrary from Mr Burgess to Mr Cupit in "CC8" – "increase unexpected". Not put to Mr Burgess or Mr Smith in cross examination . Ms Lawrence agrees re initial estimate then says "CM1" at [82] "Licensed to Chill informed us the price would increase to $35,882. Also see "SL1" @ [149]. Respondent submits that the Licensed to Chill quote comes from FY15 as do the only other quotes obtained which however are for differing scopes of work. Note McClelland asked for but did not obtain evidence of quotations for services or tender documents or scoping documents for this maintenance contract. Substantiation is deficient. [See also following submissions in relation to Licensed to Chill evidence] Air conditioning Respondent &M materials – item 64 FY15 budget: $34,614; FT16 budget: $68,225; Respondent agrees with: $38,225. Respondent evidence Mr Burgess @ [70] and Mr Smith @ p11(xi). Ms Lawrence states FY16 based on actual cost of repairs of broken units in FY15 annualised over the last 9 months. Ms Montgomery does not deal with this in chief. Note the purported actual expense in FY15 was $81,225 = increase of 134.7% over the NCAT approved amount of $36,614. See also McClelland: asked for but did not get any quotes etc. etc. so cannot opine whether this is a fair market value. McClelland also estimates $38,702 of FY16 should be reclassified as capital replacement @ p10 – he was not challenged. Mr Craig, who has appropriate qualifications, reported on air conditioners in detail, including "run to fail", at end of life, approaching replacement cost, invoices did not provide hourly rates or the number of hours so could not be estimate as reasonable or otherwise. Mr Craig cross examined about manufacturer's specifications for operation but noted he requested these manuals and was expressly refused ["go online"]. Both McClelland and Craig cross examination: both impressive witnesses. Mr Burge Licensed to Chill should be rejected. Not an expert witness, has a financial interest although he sought to deny that interest because "I'm a Christian" repeated over and over. Claims he "bankrolled" the village although he conceded at the date of hearing there were no outstanding payments. Submitted he was prepared to give evidence that would advance his financial interests and should be accepted only with caution. Less Optional Services – item 69 FY15 budget: ($30,964); FY16 budget: ($23,299): Respondent agrees with: ($40,731). Respondent evidence Mr Burgess @ [71] and Mr Smith @ p12(xii). FY16-2 proposed ($40,731) which was reduced without explanation in FY16-3. Original amount (about $40,000) noted in email of Mr Cupit to Mr Burgess on 30/07/2015 and Mr Burgess replied on 31/07/2015 'accepted with appreciation'. Respondent submits that should end the matter. Otherwise no reasons for the decrease have been provided by Applicant. Respondent submits an increase should be granted because: 1. Sales office operated by Applicant runs on "cost recovery" only, not a commercial rent, allegedly because, as Applicant says, it provides a high net worth service to the residents: Mr Cupit @ [86]. Should note it provides a high net worth to the Applicant, which charges a non-negotiable 3.3% of the ongoing contribution in selling to residents who pay DMF. 2. Caterer, Pinnacle Catering, pays below market rate: Mr Cupit @ [85]. Applicant private company servicing outside private and commercial entities selling meals at full market prices. An excellent deal for them and explains why they exercised their option to extend the rental agreement. 3. No evidence of any rental moneys banked at least to 29/02/2016; and 4. Invoices provided as evidence by Applicant and commented on by Mr Smith indicate that electricity and gas from the caterer cannot be considered as fairly calculated amounts. Ms Montgomery does not deal with this in chief. Contribution to Capital Works – item 70 FY15 budget: $174,401 (per Member Smith); FY16 budget: $73,614; Respondent agrees with: $17,977. Respondent evidence in Mr Burgess @ [72] and NS @ p13 et al. The disputed amounts should not be passed on to the residents because: 1. The painting of the 12 buildings should have been carried out under earlier "defect" agreements: see reasons for decision of Bordon dated 19/04/2013 in RV 11/29123, RV 12/12787 and RV 12/32770. The external structures of these buildings were not painted then and have now suffered further deterioration: see Tompson report; 2. The previous decision of Bordon suggested such large-scale painting was "more than maintenance"; 3. Parliament did not intend that residents should pay for painting as expressed by the withdrawal prior to 01 March 2010 of Reg 5(1)(a) which would have placed cost of external painting onto residents; 4. Applicant did not disclose the FY16 costs was only the first year's cost of a proposed 3-year contract; and 5. Applicant should have been aware of the poor painting prior to purchasing the village and taken account of that in the purchase price to recover their cost of doing the painting, or sought a reduced price because of the existence of defects. Respondent rejects Applicant submission @ [235]: plainly false, Residents Committee never involved in any prior discussions about a 3-year contract and nor were residents advised in any of the three versions of Fy16. Other Matters 1. Applicant concerned at low level of departures (and hence low recovery of departure fees) and acted to increase levies to encourage or force departures: see Village Manager job description; 2. Actions taken by Applicant to make it difficult for original entrants to remain, including: 3. Intro of OM; 4. Removal of services – reduction of in-house maintenance tradesmen from 3 to 1, intro of bureaucratic method of maintenance control leading to delays and more expensive through use of external contractors; 5. Charing residents rather than Applicant for time on work which benefits Applicant more than residents such as remediation of defects, refurbishment of dwellings and time on sales and legal work on behalf of A; and 6. Use of CWF monies to fund village operating costs. 7. Applicant spends monies in accordance with the very high proposed budget rejected by the residents, suggesting a belief that Applicant can determine itself what is reasonable and necessary, a major move from the intention of the Act. Costs Respondent applies for costs. ATTACHMENT 7: SAKKARA BUDGET 01/07/2015 TO 30/06/2016 Proposed Budget 2015/2016 Recurrent charges per resident per month $701.16 Recurrent charges per resident per year $8,413.96 Number of properties (divisor) $220.00 Estimated Income From recurrent charges $1,851,072.00 INCOME Levies Resident Levies 1 $1,777,458.00 Utilities Adjustment Charge 2 Operator Contribution / Unsold Stock 3 $8,152.00 Resident Levies For Capital Works Fund 70 $73,614.00 Cont. Vacant Land Council Rates 4 Interest Income 5 $859.00 Total Operating Income $1,860,083.00 EXPENDITURE. Employment Costs Wages Administration 6 $304,878.00 Wages Maintenance 7 $222,227.00 Wages PCA 8 $88,199.00 Annual Leave Loading 9 $1,863.00 Superannuation 10 $71,227.00 Payroll Tax $4,466.00 Insurance - Workers Comp 11 $27,379.00 Wages Replacement Staff 12 $7,000.00 Recruitment Temporary Staff 13 $0.00 Staff Training 14 $3,447.00 PCA Emergency Callouts 15 $701.00 Staff Meeting Time 16 Uniforms 17 $1,863.00 Total Employment Costs $733,250.00 Administration Expenditure Insurance - General 18 $105,276.00 Computer and Office Equipment 19 $14,639.00 Photocopy & Printing 20 $8,878.00 Stationery & Office Supplies 21 $4,196.00 Residents Committee Expenses 22 Admin Telephone 23 $5,651.00 Admin Internet 24 $1,344.00 Postage 25 $202.00 Newspapers 26 $447.00 Staff Amenities 27 $992.00 Subscriptions 28 Audit Fees (William Buck, HLB Mann Judd resigned) 29 $12,100.00 Bank Fees 30 $3,313.00 First Aid Supplies Total Administration Expenses $157,038.00 Grounds Maintenance Garden Maintenance 31 $84,232.00 Lawn Cutting & Edging 32 $25,150.00 Materials, Plants & Shrubs 33 $4,771.00 Tree Removal & Tree Lopping 34 $18,453.00 Total Grounds Maintenance $132,606.00 Building Repairs & Maintenance Window/Gutter Cleaning 35 $40,447.00 Cleaning Materials & Equipment 36 $2,662.00 Tradesman Repairs 37 $66,967.00 Painting 38 Maintenance Consumables 39 $15,016.00 R&M Electrical/Light Globes 40 $10,098.00 Plumbing and Sewer R&M 41 $10,627.00 Pest Control 42 $7,480.00 TV Maintenance/Foxtel Contract 43 $4,128.00 R&M Locksmiths 44 $690.00 R & M Equipment Total Building Repairs & Maintenance $158,115.00 Legislative Requirement Costs Annual Fire Safety Certificate 45 $9,628.00 Temper/Mixing Valve Compliance 46 $29,718.00 Fire/Essential Services - Tests & Parts 47 $19,834.00 Total Legislative Requirement Costs $59,180.00 Utilities Electricity 48 $101,038.00 Gas 49 $14,106.00 Total Energy $115,144.00 Council/Water Rates & Waste Municipal Rates 50 $93,586.00 Water Service - Fixed Charge 51 $22,725.00 Wastewater (sewerage) - Fixed 52 $95,164.00 Water Usage 53 $70,623.00 Trade Waste 54 $8,153.00 Total Council/Water Rates & Waste $290,251.00 Vehicle Expenses Bus Expenses 55 $5,876.00 Carts Maintenance 56 $850.00 Toyota Ute Expenses 57 $2,421.00 Total Vehicle Expenses $9,147.00 Elevators Elevator Contract, R&M and Registration 58 $35,008.00 Elevator - Telephones 59 $2,097.00 Total Elevators $37,105.00 Emergency Call System Emergency Calls - Batteries 60 $372.00 E/call System - R&M 61 $9,404.00 E/call System - Pagers 62 Total Emergency Call System $9,776.00 Air Conditioning Maintenance Air Conditioning Maintenance Contract 63 $22,959.00 Air Conditioning R&M Materials 64 $64,980.00 Total Air Conditioning Maintenance $87,939.00 Swimming Pool Maintenance Pool Chemicals 65 $286.00 Pool Repair & Maintenance 66 $4,773.00 Total Swimming Pool Maintenance $5,059.00 Clubhouse & Kitchen Bowling Green Expenses 67 $8,603.00 Tea, Coffee & Clubhouse Supplies 68 $6,075.00 less Optional Services Recouped 69 -$31,830.00 Total Clubhouse & Kitchen -$17,152.00 Contribution to capital works fund 70 $73,614.00 Total Operating Expenditure $1,851,072.00 Annual Levy $8,413.96 Monthly Levy $701.16 Surplus/Deficit $0.00 ********** 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: 07 June 2017