Civil and Administrative Tribunal New South Wales Medium Neutral Citation: Maher v The Pines Resort Management Pty Ltd T/as Gateway Lifestyle The Pines; Marsh v The Pines Resort Management Pty Ltd T/as Gateway Lifestyle The Pines [2018] NSWCATCD 35 Hearing dates: 1 May 2018 Date of orders: 03 August 2018 Decision date: 03 August 2018 Jurisdiction: Consumer and Commercial Division Before: G.J. Sarginson, Senior Member Decision: Matter RC 18/01004 (1) The increase in site fees contained in the site fee increase notice dated 19 October 2017 is excessive. (2) The amount of the increase is reduced to the amount determined by application of the following formula: (a) Increase equals site fee at date of notice x 2.2% (4) The site fees for each affected home owner must not exceed the amount calculated by application of the formula in Order 2, from 20 October 2017 to 19 October 2018. (5) This order applies to all affected home owners in the community (other than those who opt out). (6) The operator of the residential community is to refund any affected owners any amount that has been paid in excess of Order 2 on or before 28 days from the date of this decision. Matter RC 17/45603 (1) The application is dismissed. Catchwords: RESIDENTIAL (LAND LEASE) COMMUNITIES – Site fee increase – Whether notice of site fee increase valid – Whether site fee increase excessive Legislation Cited: Civil and Administrative Tribunal Act 2015 Interpretation Act 1987 Residential (Land Lease) Communities Act 2013 Cases Cited: Edmonds v Paultrus Pty Ltd [2016] NSWCATCD 55 Hampton Court Pty Ltd v Crooks [1957] HCA 28; (1957) 97 CLR 367 Harrison v Melhem [2008] NSWCA 67; (2008) 72 NSWLR 380 Jackson v NSW Land and Housing Corporation [2014] NSWCATAP 22 S & G Homes Pty Ltd t/as Pavilion Homes v Owen [2015] NSWCATAP 190 Wall v Baclon Pty Ltd (Matter RP 12/24833, unreported, 20 June 2012) Category: Principal judgment Parties: Matter RC 17/45603 Applicant: Mr P. Maher Respondent: The Pines Resort Management Pty Ltd t/as Gateway Lifestyle The Pines Matter RC 18/01004 Applicant: Ms K. Marsh (as representative owner) Respondent: The Pines Resort Management Pty Ltd t/as Gateway Lifestyle The Pines Representation: Applicant: Ms K. Marsh and Mr P. Maher Respondent: Ms L. Toussaint, property officer File Number(s): RC 17/45603; RC 18/01004 Publication restriction: Nil REASONS FOR DECISION 1. The dispute involves applications by site owners of a residential community within the meaning of the Residential (Land Lease) Communities Act 2013 ('the RC Act 2013') located at Woolgoolga NSW to have a site fee increase notice dated 19 October 2017 set aside or varied. 2. In Matter RC 17/45603, Mr Maher seeks an order that the site fee increase notice dated 19 October 2017 does not comply with the provisions of s 67 (4) of the RC Act 2013, because the notice "lacks minimum details and certain items listed to justify the increase are not relevant to this community". 3. In Matter RC 18/01004, Ms Marsh brings the application as the representative of home owners under s 71 of the RC Act 2013 seeing the site fee increase dated 19 October 2017 be set aside or varied under s 73 of the RC Act 2013 on the basis that: 1. Previous orders of the Tribunal dated 30 April 2014 have not been complied with by the respondent; 2. Common areas continue to deteriorate; 3. Services by the respondent have deteriorate or been removed. 1. At the hearing, Mr Maher and Ms Marsh appeared and gave evidence. Mr Merchant, a site owner, appeared and gave evidence. A number of home owners attended the hearing, but did not give oral evidence or make submissions. Ms Toussaint, property officer, appeared for the respondent ('the operator'). 2. In Matter RC 18/01004, site owners and the operator had attended mediation at NSW Fair Trading on 14 December 2017. The mediation was unsuccessful. On 18 December 2017, Mr King the mediator of NSW Fair Trading issued a letter stating the mediation had failed. The mediation occurred prior to the commencement of proceedings in the Tribunal, in accordance with s 69 and s 71 (1) of the RC Act 2013. Proceedings were filed in the Tribunal on 30 December 2017. The site operator did not dispute that the representative application had been signed by a minimum of 25% of site owners, in accordance with s 69 (2) of the RC Act 2013. 3. However, in respect of Matter RC 18/01004, the operator submitted that proceedings had not been filed in the Tribunal "within 14 days after the date in which the mediation failed" and that the Tribunal had no jurisdiction by reason of s 71 (3) of the RC Act 2013. 4. In respect of Matter RC 17/45603, no mediation had occurred. However, Matter RC 17/45603 was not brought under s 73 of the RC Act 2013. Rather, Mr Maher sought an order under the general remedial provisions of s 157 of the RC 2013 Act on the basis that the site fee increase notice dated 19 October 2017 was defective due to the content of the notice. 5. No issue was raised by the operator that proceedings in Matter RC 17/45603 had been commenced within time. 6. Relevantly, both sets of proceedings had been listed for directions at the Tribunal on 19 February 2018, when a Senior Member of the Tribunal set the matters down for hearing together, and made directions regarding the filing and serving of evidence. The parties also filed and served a written outline of submissions. Matter RC 18/01004 Documentary Evidence and Submissions of the Site Owners 1. The documents relied upon by the site owners were as follows: 1. Written submission of Ms Marsh dated 30 January 2018. 2. Letter of the operator to site owners dated 28 February 2015, introducing the new site owner and setting out plans for the site. 3. Letter of the previous operator dated 10 December 2014 4. Notice of site fees increase dated 19 October 2017. 5. Letter of Mr Gaudoin, Community Manager, of the operator dated 17 February 2017 referring to an offer that was made by the operator regarding the 2016 site fee increase. 6. An email from Mr Gaudoin of the operator to Ms Marsh dated 2 November 2016. 7. An email from Ms Holland, legal officer of the operator, to Ms Marsh dated 17 February 2017. 8. A decision of the Consumer Trader and Tenancy Tribunal by Member P. Smith in Matter RP 12/24833 dated 20 June 2012. 9. Statutory declarations of 65 site owners sworn on 24 and 25 January 2018. The contents of each statutory declaration comprise of less than 1 page, and are identical. 1. Ms Marsh also relied upon the documents filed and served by Mr Maher in Matter RC17/45603. Documentary Evidence and Submissions of the Operator 1. The documents relied upon by the operator were as follows: 1. A written outline of submissions dated 22 January 2018. 2. Notice of site fee increase dated 19 October 2017. 3. A decision of the Tribunal by Member Ross (as she then was) dated 26 July 2016 in Edmonds v Paultrus Pty Ltd [2016] NSWCATCD 55 4. Letter of NSW Fair Trading dated 29 November 2017 scheduling the mediation for 14 December 2017. 5. Emails between the operator and NSW Fair Trading on 5 March 2018. 6. A statement (comprising 1 page) of Mr Kemp, Chief Financial Officer of the operator dated 5 March 2018. 7. A schedule of expenses of the operator in respect of the site at Woolgoolga for the periods from November 2015 to October 2016; and from November 2016 to November 2017 attached to the statement of Mr Kemp. 8. A quotation of Harvey Excavations Pty Ltd (undated) in the sum of $76,350 in respect of "Gravity Sewer Upgrade". 9. A quotation of Mick Sharman Plumbing Pty Ltd dated 24 January 2018 in the sum of $605 in respect of "remove unused water pipes from men's shower block-cement up holes in wall". 10. An email quotation of Mr Luke Hynes dated 22 January 2018 in the sum of $4,877.50 in respect of repair work to "men's toilet block". 11. Tax invoice of Mick Sharman Plumbing Pty Ltd dated 6 March 2018 in the sum of $700.15 in respect of repairs to a toilet. 12. 4 undated photographs of the communal kitchen/games room building of the residential community. 13. 9 photographs of the residential community and some of its facilities dated 7 March 2018. Matter RC 17/45603 Documentary Evidence and Submissions of Mr Maher 1. The documents relied upon by Mr Maher were as follows: 1. Written outline of submissions. 2. Photographs of the residential community in March 2018, including photographs of the community hall; swimming pool; and tennis court. 3. A document entitled "General Condition & Safety Report dated 10 March 2018 by Mr Merchant. Mr Merchant is a site owner and was a party to the representative application in Matter RC 17/45603. Mr Merchant is not an independent expert. Mr Merchant states in his report that he is a former residential communities manager and has performed "more than 8 OH & S and business viability audits" in his 10 years of managing various residential communities. Mr Merchant attended the hearing. 4. A "regular duties program 2016" setting out a schedule for maintenance and cleaning by the operator for the residential community in the period from January 2016 to December 2016. 1. Mr Maher also relied upon the documents that had been filed and served by Ms Marsh in Matter RC 18/01004. Documentary Evidence and Submissions of the Operator 1. The documents relied upon by the operator were as follows: 1. A written outline of submissions dated 22 January 2018. 2. The operator also relied upon the documents that had been filed and served in Matter RC 17/45603. Matter RC 18/01004 – The Collective Application by Site Owners Under s 73 of the RC Act 2013 Jurisdiction of the Tribunal-The Limitation Issue 1. Section 73 of the RC Act 2013 states as follows: "73 Orders as to excessive increases in site fees (1) The Tribunal may, on application under section 71 or 72, make any of the following orders: (a) an order declaring that an increase in site fees is excessive, (b) an order reducing the amount of the increase by a specified amount, (c) an order setting aside the increase, (d) an order that the site fees must not exceed a specified amount or specified amounts, either: (i) from a specified day, not being earlier than the day from which the increased site fees were payable, or (ii) during a specified period, (e) an order confirming the increase on the conditions (if any) that the Tribunal considers appropriate, (f) any ancillary order that the Tribunal, in the circumstances, thinks appropriate. (2) The Tribunal may make orders applying to individual participating home owners, groups of participating home owners or all participating home owners. (3) An order applies to all affected home owners in the community (other than those who opt out), unless the Tribunal is satisfied there is a strong reason for making separate orders for different home owners or groups of home owners. (4) The Tribunal cannot make an order that would result in an increase lower than that needed to cover any actual or projected increase (established to the satisfaction of the Tribunal) in the outgoings and operating expenses for the community since the previous increase (if any) in site fees for the community. 1. Section 71 of the RC Act 2013 states as follows: "71 Application following failed mediation (1) One or more affected home owners may apply to the Tribunal for an order under section 73 if: (a) the home owners object to the increase in site fees, and (b) an application for mediation of the objection was made in accordance with section 69, and (c) mediation was unsuccessful. (2) The application must be made on behalf of all the affected home owners (other than those who opt out of the application) by one or more of them appointed as the representative or representatives by the participating home owners. (3) The application must be made within 14 days after the date on which the mediation failed. (4) The application must be accompanied by a notice from the mediator stating mediation failed on the date specified by the mediator." 1. The operator submits that the Tribunal has no jurisdiction in the matter because proceedings were commenced more than 14 days after the date "on which the mediation failed" under s 71 (3) of the RC Act, because the mediation occurred on 14 December 2017 and proceedings were filed in the Tribunal on 30 December 2017. 2. The Tribunal is satisfied that the proceedings have been commenced within time under s 71 of the RC Act. 3. Importantly, Mr King of NSW Fair Trading stated in its letter to Ms Marsh dated 18 December 2017 confirming that the mediation had been unsuccessful the following information: "… Should you decide to proceed with an application to NCAT, you will be required to indicate on your application form that you have attempted mediation. A copy of this letter will be sufficient. An application to NCAT must be made within 14 days of the mediation having failed, which is the date of this letter". (emphasis added) 1. The Tribunal is satisfied that the appropriate interpretation of s 71 (3) of the RC Act 2013 is that "the date on which the mediation failed" is the date of the letter of NSW Fair Trading, which in the circumstances of this matter is 18 December 2017. 2. When interpreting words in a statute, a construction which would promote the purpose of object underlying the Act must be preferred to a construction that would not promote that purpose or object (s 33 Interpretation Act 1987). The Tribunal must consider the intention of the legislature as expressed by the words of the legislation (Harrison v Melhem [2008] NSWCA 67; (2008) 72 NSWLR 380 at [16] and [160]). The Tribunal must consider each provision in its full statutory context. 3. The objects of the RC Act 2013 are set out in s 3 of the RC Act 2013 as follows: "3 Objects of Act The objects of this Act are as follows: (a) to improve the governance of residential communities, (b) to set out particular rights and obligations of operators of residential communities and home owners in residential communities, (c) to enable prospective home owners to make informed choices, (d) to establish procedures for resolving disputes between operators and home owners, (e) to protect home owners from bullying, intimidation and unfair business practices, (f) to encourage the continued growth and viability of residential communities in the State." 1. Considering the objects and purpose of the RC Act 2013, it is appropriate to interpret "the date on which the mediation failed" under s 71 (3) of the RC Act 2013, not to be the date of the mediation itself, but the date of the letter from NSW Fair Trading confirming the failure of the mediation. 2. In the circumstances of this matter, it is unnecessary to consider whether time starts to run for the purpose of s 71 of the RC Act 2013 from the date the letter is deemed to have been received by reason of the operation of s 184 of the RC Act 2013 and s 76 of the Interpretation Act 1987, because there is no dispute that proceedings were commenced within 14 days of 18 December 2017. 3. By reason of s 71 (4) of the RC Act 2013, an owner cannot file proceedings in the Tribunal unless he or she has "a notice from the mediator stating mediation failed on the date specified by the mediator". The NSW Fair Trading mediator has stated, in the letter of 18 December 2017 that the date the "mediation failed" is the date of "this letter". Accordingly, an owner has 14 days from the date of the letter from NSW Fair Trading confirming the mediation has failed to commence proceedings in the Tribunal, notwithstanding that the mediation may have occurred a few days prior to the issue of the letter. 4. To interpret s 71 (3) of the RC Act 2013 otherwise would have the practical effect of restricting the limitation period to take proceedings in the Tribunal to seek review of a site fee increase under s 73 of the RC Act 2013. Such an approach would be inconsistent with s 71 (4) of the RC Act 2013, and the object and purpose of the RC Act 2013. 5. As the Tribunal is satisfied that the representative proceedings have been filed within the limitation period in s 71 (3) of the RC Act 2013, it is unnecessary make findings whether the limitation period is of a type that can be extended under s 41 of the Civil and Administrative Tribunal Act 2015 and whether the limitation period should be extended applying the principles set out in Jackson v NSW Land and Housing Corporation [2014] NSWCATAP 22 at [22]. 6. However, for the sake of completeness, the Tribunal has considered this issue. As the time period in s 71 (3) of the RC Act 2013 is not expressed in a manner that clearly states the Tribunal has no jurisdiction if proceedings are not commenced within a certain period of time (such as s 48K of the Home Building Act 1989-see S & G Homes Pty Ltd t/as Pavilion Homes v Owen [2015] NSWCATAP 190 at [53]), the Tribunal is satisfied that s 41 of the Civil and Administrative Tribunal Act 2013 allows it to extend the limitation period under s 71 (3) of the RC Act 2013. 7. Considering proceedings were filed in the Tribunal on 30 December 2017 and included two days of public holidays (which by reason of s 36 of the Interpretation Act 1987 are to be disregarded in respect of the limitation period), if the proceedings were out of time, the period of delay is minimal, and there is no prejudice to the owner by reason of any delay. Even if the owner's submission that time starts to run under s 71 (3) of the RC Act 2013 were correct, the Tribunal would exercise its discretion under s 41 of the Civil and Administrative Tribunal Act 2013 to extend the limitation period. The Notice of Site Fee Increase Dated 19 October 2017 1. The notice under s 67 of the RC Act 2013 dated 19 October 2017 relevantly states: "… Your increased site fees will be $136.40 per week. This is an increase of $5.25 per week from your current site fees of $131.15 per week. The increased site fees are payable on and from 20/12/2017 Explanation of the increase: We have assessed the following issues as they impact on the community since the previous increase: The Consumer Price Index (Sydney All Groups) for the March year end Actual increase in the outgoings and operating expenses for the community including: Government rates and charges Sewerage and drainage Electricity Water Communications-telephone, internet, computer and technology expenses; Insurance premiums and related costs public liability and workers compensation insurance; Landscaping and gardening; Accounting and audit fees, legal fees, professional fees; Site management and supervision; Waste disposal and removal maintenance; Wages-superannuation contributions, payroll processing, payroll tax, Maintenance program to continue upgrades to the community OH & S and fire safety protection These costs as well as the commercial reasoning associated with these issues impact directly upon the operation and sustainability of the community. The site fee increase of $5.25 for (sic) and help to maintain the continued viability of the community". 1. In Matter RC 18/01004, the owners do not assert that the notice is invalid because it fails to comply with the provisions of s 67 (4) of the RC Act 2013. That issue is raised by Mr Maher in Matter RC 17/45603, and will be considered separately in these reasons. 2. In respect of the issues to be considered regarding whether or not a site fee increase is excessive, s 74 of the RC Act 2013 states: "74 Matters to be considered about excessive increases (1) The Tribunal may have regard to any or all of the following factors when deciding whether to make an order under section 73: (a) the frequency and amount of past increases in site fees for the community, (b) any actual or projected increase in the outgoings and operating expenses for the community as provided by the operator since the previous increase (if any) in site fees for the community, (c) any repairs or improvements to the community: (i) carried out by the operator since the previous increase (if any), or (ii) planned by the operator for the period covered by the increase being reviewed, (d) the general condition of the community including its common areas, (e) the range and average level of site fees within the community, (f) the value of the land comprising the community, as determined by the Valuer-General, (g) the value of any improvements to the community (including common areas) paid for or carried out by home owners, (h) any explanation for the increase provided by the operator by notice in writing to the affected home owners, (i) variations in the Consumer Price Index (All Groups Index) for Sydney, (j) whether the increase is fair and equitable in the operation of the community, (k) any other matters prescribed by the regulations. (2) The regulations may require the Tribunal to disregard any specified matters (not being a matter referred to in subsection (1)), in any specified circumstances, when deciding whether to make an order under section 73." Submissions and Evidence of the Parties 1. The submissions and evidence of the home owners can be summarised as follows: 2. The 2017-2018 site fee increase is a 4% increase. There was no site fee increase in 2014 or 2015, as the previous owner informed the owners that any site fee increase had been "delayed" while the business "settles down" after being acquired, and the new owner seeks quotations "on the cost of improving the roads and related drainage". At that stage, Tasman Lifestyle Continuum Group was the site owner. 3. In 2016, the site fee increase was 0.09%, by agreement between the owners and the operator. 4. The site fee increase notice provided no information from which the owners could work out the projected increase in outgoings and operating expenses. 5. There had been very little maintenance performed at the residential community and the facilities were in poor condition. In particular, the roads were "unsafe and falling apart"; rubbish bins were "overflowing"; and the community hall had no maintenance work or improvements in the last 10 years. 6. The Consumer Price Index (Sydney All Groups) used in the notice was the March 2017 quarter (2.4%) rather than the June 2017 quarter (2.2%). 7. The sewerage system was a septic system and had not been upgraded. 8. Electricity and water utility expenses were charged separately, and had not increased. 9. No landscaping or gardening had been performed in the last 12 months. 10. There had been a reduction in staff levels and operating hours. Prior to December 2016, the community was managed by an office manager working between 8.30 am to 4.30 pm; an outside supervisor; and two grounds staff. This has been reduced to a manager in the office from 8.30 am to 4.30 pm; one fulltime grounds staff; and one part time grounds staff. 11. The pool has not been maintained, and it is owners who clean leaves from the pool. 12. The community centre is in poor condition and has not been maintained or improved for a number of years. 13. The operator had not complied with orders of the Tribunal in Matter RP 14/04932 (a copy of the orders of the reasons of the Tribunal were not contained in the owners' documents) and the owners had agreed to an increase on the basis that such orders would be complied with. 14. No documents had been provided to the owners to support the operator's assertion that its expenses had increased. 15. The submissions and evidence of the operator can be summarised as follows: 16. The notice of site fee increase dated 19 October 2017 was sufficiently detailed to comply with s 67 of the RC Act. 17. In the period from November 2015 to October 2016; and from November 2016 to October 2017, the financial records of the owner in respect of the site of 'the Pines' at Woolgoolga showed a 7 % increase in expenses, and by reason of s 73 (4) of the RC Act, the Tribunal could not set aside or reduce the site fee increase, because if was for an amount less than what was needed to cover the increase in expenses since the last site fee increase. The site fee increase dated 19 October 2017 equates to a 4% increase. 18. The community hall was in its current condition prior to the last increase in site fees, and has not deteriorated further since then. 19. The septic system at the site is "in the process of being upgraded to a sewerage system". 20. The operator "will consider road repairs" after the sewerage system is upgraded. 21. The entrance to the site has "recently been upgraded". 22. There has been no reduction of staff within the period since the last increase. Issues Regarding the Weight to be Given to the Evidence of the Parties and Assessment of Evidence 1. In this matter, there are evidentiary deficiencies on both sides. Rules of evidence do not apply in the Tribunal, but the Tribunal must assess the probative value and weight of the evidence provided in the process of making factual findings. Limited evidence, particularly if there is no contrary evidence provided by a party who is easily able to provide evidence but does not do so, may be sufficient to make factual findings (Hampton Court Pty Ltd v Crooks [1957] HCA 28; (1957) 97 CLR 367). 2. 65 statutory declarations were provided from home owners. However, the content of the statutory declarations is exactly the same. The statutory declarations simply state briefly that (i) last year's site fee increase was 0.9%; (ii) other than "overdue maintenance on the pool" no repairs or maintenance at the residential community have occurred; and (iii) no repairs or improvements have been foreshadowed by the owner since the last site fee increase. 3. The lack of detail in the statutory declarations, and the fact that they are in identical form and appear to have been drafted by one person as a single document to be adopted by each of the deponents, does not significantly assist the home owners in proving their case, nor assist the Tribunal in determining the real issues in dispute under s 36 of the Civil and Administrative Tribunal Act 2013. 4. However, a number of home owners attended the hearing, and the representative of the operator at the hearing did not seek to cross examine the deponents of the statutory declarations on the brief factual evidence contained in the documents. 5. Further, the submissions of Ms Marsh and Mr Maher contained factual assertions regarding the condition of the residential community since the last site fee increase, and the representative of the operator did not seek to cross examine Ms Marsh or Mr Maher. 6. Both parties also provided a limited number of photographs of the residential community. 7. The document served by the home owners that gives the most substantial amount of detail regarding the condition of the residential community is the document of Mr Merchant. Mr Merchant, despite his background and experience, is not an independent expert because he is also a site owner. However, his "report" contains a number of photographs and sets out in some detail his perceptions regarding the state of repair of the amenities, roads, and gutters of the residential community. 8. Again, the representative of the operator did not seek to question or challenge Mr Merchant on the assertions contained in his "report". 9. The operator's documentary evidence was also limited. There was no statement from the manager of the residential community setting out information regarding the condition of the residential community; what repairs and maintenance had been done since the last site fee increase; what repairs, maintenance or improvements where schedule to occur in the 12 month period from 19 October 2017; or increasing expenses. 10. The submissions of the operator refer to the sewerage system being upgraded from a septic system to a sewerage system. No evidence was provided when this is to occur. The operator's documents contained a quotation of Harvey Excavations for a "gravity sewer upgrade" in the amount of $76,350 inclusive of GST. However, the quote was undated, and no further documents were provided to shed light upon when the sewerage upgrade is to occur. 11. The other quotations and tax invoices provided by the operator are also of limited evidentiary weight. Two quotations for work to the men's toilet block, and one tax invoice for toilet repairs in January 2018 do not give the Tribunal any significant assistance in understanding what repairs or maintenance have been carried out since the last site fee increase and the increase identified in the notice dated 19 October 2017. 12. The letter of Mr Kemp dated 9 March 2018 and attached extract of financial records lacks detail. Mr Kemp states that the operator is listed on the Australian Stock Exchange, and that each of the sites it operates is a separate legal entity with its own financial records. Mr Kemp states that the operator has "accounting software in place by Oracle" and that "the financials presented in Appendix 1 are an honest extract from Oracle and reflect the expenditure of The Pines Lifestyle Resort Pty Ltd for the periods referenced". 13. Annexure 1 is a table for the periods "Nov 15 to Oct 16; Nov 16 to Oct 17". The table lists a number of items of expenses, and appears to show that total expenses have increased from $477,832 to $511,989, which is a "7%" increase. A further table then correlates each item of expenses to reflect a "Change $ per site per week" which is said to total $5.86. 14. However, the letter of Mr Kemp and Appendix 1 to his letter provides no explanation at all for the changes in the various expenses. For example, "rates, taxes and utilities" increased between the two periods from $137,009 to $180,419, yet "repairs and maintenance" expenses decreased from $74,173 to $63,795. 15. Further, Appendix 1 does not clearly explain how the percentage change in each expense correlates to a "$ per site per week" change which totals $5.86 per week. 16. In considering the evidentiary deficiencies regarding the operator's assertions that its expenses have increased, the Tribunal is not asserting that the operator's records are inaccurate; or that an operator in every case involving s 73 of the RC Act 2013 is required to provide an extensive report by an accountant. The Tribunal does not suggest that a meticulous forensic examination of each and every item of expenses is always necessary or appropriate, because if that were the case this type of proceedings would involve lengthy and costly debates about the accounts of an operator. Each case depends upon its own particular facts. 17. However, the operator in this matter is a large organisation, and there is no obvious reason why the operator did not provide a more detailed explanation to support its assertion that its expenses have increased, and that such an increase provides the basis upon which the operator has increased site fees. Findings and Decision Is the Notice a Valid Notice under s 67 of the RC Act 2015? 1. The validity of the notice has been raised by Mr Maher in Matter RC 17/45603, and is pertinent to the issue of jurisdiction in Matter RC 18/01004, because if the notice is invalid, no issue arises as to whether the site fee increase amount should be varied under s 73 of the RC Act 2015. 2. Section 67 of the RC Act 2013 states: "67 Increase of site fees by notice (1) This section applies to a site agreement that provides for the increase of the site fees by notice (otherwise than by a fixed method). (2) An increase in the site fees is not payable unless the fees are increased in accordance with this section. (3) The site fees must not be increased except by notice in writing given to all the home owners in the same community at the same time under site agreements to which this section applies. (4) The notice must: (a) specify the amount of the increased site fees, and (b) specify the day (the effective day) on and from which the increased site fees are payable, and (c) include an explanation for the increase, and (d) include such other information as may be prescribed by the regulations, and (e) be in the approved form (if any). (5) The day specified as the effective day must not be earlier than 60 days after the day on which the notice was given. (6) Site fees must not be increased more than once in any 12-month period under this section. This is calculated by reference to the day from which the increased site fees are payable. (7) Increases under this section in site fees payable by home owners in the same community under site agreements to which this section applies must take effect on the same day (and not on different days). (8) A notice under this section may be cancelled. (9) A later notice may provide for a lesser increase than that specified in an earlier notice under this section. A later notice has effect instead of the earlier notice and takes effect from the date on which the earlier notice was to take effect. (10) If the site fees payable under a site agreement are increased under this section, the terms of the agreement are varied accordingly. (11) If a person becomes a home owner after a notice has been given under this section to other home owners in the community but before the date the increase takes effect: (a) the operator must notify the home owner of the notice and its contents and effect, and (b) the increase applies as if the notice had been given to the home owner at the same time as it was given to other home owners." 1. The residents argue that the notice does not comply with s 67 (4) of the RC Act 2013 because does not provide any explanation or detail of the owner's increased expenses; refers to items where there is no evidence of an increase of expenses; and is generic in its form. 2. In respect of s 67 (4) of the RC Act 2015, Senior Member Ross stated in Edmonds v Paultrus Pty Ltd [2016] NSWCATCD 55 as follows (at [16]): "The Act does not require that the explanation be in any particular form or provide any minimum amount of detail. It must simply be an explanation…However, it must be contained within the notice as discussed above". 1. The home owners submit that in Wall v Baclon Pty Ltd (Matter RP 12/24833, unreported, 20 June 2012) Member Smith of the Tribunal held, in respect of the predecessor legislation to the RC Act 2013, that the notice of site fee increase required a detailed list of projected expenses. A copy of this decision was contained in the owner's documents. 2. However, the interpretation by the owners of Member Smith's findings is incorrect. Member Smith, at paragraph [13] found that the owner had not provided any evidence to verify projected expenses. However, Member Smith was not referring to the issue of whether the notice of site fee increase was a valid notice, but the issue of whether the increase should be set aside or varied, taking into account the state of repair and general condition of the premises. 3. The Tribunal applies the interpretation of s 67 (4) of the RC Act 2015 by Senior Member Ross in Edmonds v Paultrus Pty Ltd [2016] NSWCATCD 55 and is satisfied that the notice of site fee increase dated 19 October 2017 complies with s 67 of the RC Act 2013. 4. In respect of the criteria which the Tribunal must consider regarding whether or not to make an order under s 73 of the RC Act 2013, s 74 of that Act states: 74 Matters to be considered about excessive increases (1) The Tribunal may have regard to any or all of the following factors when deciding whether to make an order under section 73: (a) the frequency and amount of past increases in site fees for the community, (b) any actual or projected increase in the outgoings and operating expenses for the community as provided by the operator since the previous increase (if any) in site fees for the community, (c) any repairs or improvements to the community: (i) carried out by the operator since the previous increase (if any), or (ii) planned by the operator for the period covered by the increase being reviewed, (d) the general condition of the community including its common areas, (e) the range and average level of site fees within the community, (f) the value of the land comprising the community, as determined by the Valuer-General, (g) the value of any improvements to the community (including common areas) paid for or carried out by home owners, (h) any explanation for the increase provided by the operator by notice in writing to the affected home owners, (i) variations in the Consumer Price Index (All Groups Index) for Sydney, (j) whether the increase is fair and equitable in the operation of the community, (k) any other matters prescribed by the regulations. (2) The regulations may require the Tribunal to disregard any specified matters (not being a matter referred to in subsection (1)), in any specified circumstances, when deciding whether to make an order under section 73. 1. The Tribunal considers the matters under s 74 of the RC Act 2013 as follows: The frequency and amount of past increases in site fees for the community (s 74 (a) of the RC Act 2015 1. There was no dispute that the December 2016 increase in site fees was 0.09%, and in the two previous years there was no increase. In regard to the December 2016 increase, emails of Mr Gaudoin dated 2 November 2016 and Ms Holland dated 17 February 2017; and a letter of Mr Gaudoin dated 17 February 2017 indicate that the owner had agreed "over the next 12 months" to "connect to the new sewerage pump station across the road, then repair the road & kerbs and per Tribunal order". Any actual or projected increase in the outgoings and operating expenses for the community as provided by the operator since the previous increase (if any) in site fees for the community (s 74 (b) of the RC Act 2013) 1. The Tribunal discussed the adequacy of the operator's evidence in respect of this issue previously. 2. The Tribunal accepts that there is evidence of an increase in expenses since December 2016. However, due to the lack of sufficient detail the Tribunal cannot be satisfied that the increase in expenses correlates to the percentage amount of site fee increase contained in the site fee increase notice dated 19 October 2017. Any repairs or improvements to the community: (i) carried out by the operator since the previous increase (if any), or (ii) planned by the operator for the period covered by the increase being reviewed (s 74 (c) of the RC Act 2013) 1. The evidence of the owners, although it could have been provided in more detail, is sufficient to establish that there have been minimal repairs of improvements to the community since the previous site fee increase. As discussed previously, there was no evidence from the manager of the residential community in regard to this issue, and minimal evidence of quotations or invoices. Further, the financial records of the operator indicate there was a reduction in repairs and maintenance expenses of $10,378 in the November 2016 to October 2017 period compared to the previous year, which supports the evidence of the owners that repairs and improvements have been minimal. 2. As discussed previously, there was no evidence regarding when a sewerage upgrade is going to occur, or an upgrade to kerbs and roads, despite the representations of Mr Gaudoin and Ms Holland of the owner in late 2016 and early 2017 that such work would be done "in the next 12 months". 3. The operator's written submissions stated that an upgrade to the sewerage system had "commenced". However, as discussed above, there was no documentary evidence to support this, other than quotations (one undated) and no evidence from the residential community manager in respect of whether or not any contract to perform such work had been entered into and when the work would be completed. The general condition of the community including its common areas (s 74 (d) of the RC Act 2013) 1. The evidence of the owners is that significant aspects of the community are in poor repair. The photographs of the park provided by the owners, particularly in respect of the community hall, are support such a finding. Although the photographic evidence of the owner in regard to the condition of the entrance area; swimming pool; and a toilet/shower block show areas of good repair, such photographs in the absence of any evidence from the manager of the residential community do not carry significant weight. The range and average level of site fees within the community (s 74 (1) (e) of the RC Act 2013) 1. The owners submitted that site fees ranged from $114.84 per week to $140.00 per week. There was no evidence from the operator to dispute this. The value of the land comprising the community, as determined by the Valuer-General (s 74 (1) (f) of the RC Act 2013) 1. No evidence was provided by either party in this regard. The value of any improvements to the community (including common areas) paid for or carried out by home owners (s 74 (1) (g) of the RC Act 2013) 1. No evidence was provided by the owners that they had paid for any improvements to the community. Any explanation for the increase provided by the operator by notice in writing to the affected home owners (s 74 (1) (h) of the RC Act 2013) 1. The notice of site fee increase dated 19 October 2017 does not provide a detailed explanation of the basis of the site fee increase. Although the notice has sufficient detail to comply with s 67 (4) of the RC Act 2013, it does not explain how the various expense items referred to increased in the relevant period. Variations in the Consumer Price Index (All Groups Index) for Sydney (s 74 (1) (i) of the RC Act 2013) 1. The parties agreed that the Consumer Price Index for the March 2017 quarter was 2.4%. The owners submitted, however, that the Consumer Price Index for the June 2017 quarter was 2.2% which was the CPI quarterly increase contemporaneous to the site fee increase notice dated 19 October 2017. Whether the increase is fair and equitable in the operation of the community (s 74 (1) (j) of the RC Act 1. The Tribunal is satisfied that circumstances where there has been some increase in the expenses of the operator, it is fair and equitable that there is a site fee increase for the period commencing 19 October 2017. 2. However, having considered all the criteria under s 74 of the RC Act, the Tribunal is not satisfied that a 4% increase is fair and equitable. Rather, the Tribunal is satisfied that the appropriate increase is 2.2 %, representing the Consumer Price Index quarterly increase for the June 2017 quarter. Any other matters prescribed by the regulations (s 74 (1) (k) of the RC Act 2013) 1. There are no other matters prescribed by the regulations. The Issue of s 73 (4) of the RC Act 2013 1. As discussed previously, the Tribunal cannot make an order regarding a site fee increase under s 73 of the RC Act which would "result in an increase lower than that needed to cover any actual or projected increase (established to the satisfaction of the Tribunal) in the outgoings and operating expenses for the community since the previous increase (if any) in site fees for the community". 2. The operator submits that the 4% increase is less than the 7% increase in expenses since the last site fee increase. 3. However, in respect of s 73 (4) the increase in outgoings and operating expenses must be "established to the satisfaction of the Tribunal". 4. Due to the deficiencies in the evidence of the operator to explain the outgoings and operating expenses for the community since the previous increase, the Tribunal is not satisfied that s 73 (4) prevents it from making an order under s 73 (1) of the RC Act 2013 in the circumstances of this matter. Conclusion – Matter RC 18/01004 1. The Tribunal is satisfied that the owners have established that the site fee increase dated 19 October 2017 is excessive, and that a site fee increase reflecting a CPI increase of 2.2% for the owners is appropriate. Orders 1. The Tribunal makes the following orders: 1. The increase in site fees contained in the site fee increase notice dated 19 October 2017 is excessive. 2. The amount of the increase is reduced to the amount determined by application of the following formula: 1. Increase equals site fee at date of notice x 2.2% 1. The site fees for each affected home owner must not exceed the amount calculated by application of the formula in order 2, from 20 October 2017 to 19 October 2018. 2. This order applies to all affected home owners in the community (other than those who opt out). 3. The operator of the residential community is to refund any affected owners any amount that has been paid in excess of order 2 on or before 28 days from the date of this decision. Matter RC 17/45603 – Orders 1. As the Tribunal has found that the notice of site fee increase dated 19 October 2017 complies with s 67 of the RC Act 2013, the application is dismissed. G.J. Sarginson Senior Member Civil and Administrative Tribunal of New South Wales 3 August 2018 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: 19 October 2018