Williams v Carlyle Villages Pty Ltd
[2009] QCA 301
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- Unreported Judgment
- Appeal Determined (QCA)
- Williams v Carlyle Villages Pty Ltd[2009] QCA 301
- Add to List
Williams v Carlyle Villages Pty Ltd[2009] QCA 301
Reported at [2010] 2 Qd R 379
Williams v Carlyle Villages Pty Ltd[2009] QCA 301
Reported at [2010] 2 Qd R 379
SUPREME COURT OF QUEENSLAND
CITATION: | Williams v Carlyle Villages Pty Ltd [2009] QCA 301 |
PARTIES: | JOHN JOSEPH WILLIAMS |
FILE NO/S: | Appeal No 13450 of 2008 SC No 921 of 2007 |
DIVISION: | Court of Appeal |
PROCEEDING: | General Civil Appeal |
ORIGINATING COURT: | Supreme Court at Townsville |
DELIVERED ON: | 9 October 2009 |
DELIVERED AT: | Brisbane |
HEARING DATE: | 16 July 2009 |
JUDGES: | McMurdo P, Fraser JA and Wilson J Separate reasons for judgment of each member of the Court, each concurring as to the order made |
ORDER: | Appeal dismissed with costs |
CATCHWORDS: | REAL PROPERTY – RETIREMENT VILLAGES – where the appellant leased a unit in a retirement village from the respondent – where appellant terminated this lease – where respondent subsequently re-leased the unit to another tenant – where appellant claimed he was entitled to the capital appreciation in the value of the leased unit – whether the Retirement Villages Act 1999 (Qld) conferred upon the appellant a right to reside in the unit – whether this right survived the appellant’s lawful termination of the lease – whether this right entitled the appellant to the payment received by the respondent upon re-leasing Retirement Villages Act 1999 (Qld), s 3, s 16, s 37, s 42, s 45, s 52, s 53, s 55, s 56, s 57, s 58, s 59, s 60, s 61, s 62, s 63, s 64, s 65, s 66, s 67, s 68, s 69, s 104 American Dairy Queen (Qld) Pty Ltd v Blue Rio Pty Ltd (1981) 147 CLR 677; [1981] HCA 65, cited Cooper Brookes (Wollongong) Pty Ltd v Commissioner of Taxation (1981) 147 CLR 297; [1981] HCA 26, cited Federal Commissioner of Taxation & Ors v Citibank Ltd (1989) 20 FCR 403, cited Gollin & Co Ltd v Karenlee Nominees Pty Ltd (1983) 153 CLR 455; [1983] HCA 38, cited Jomal P/L v Commercial & Consumer Tribunal & Ors [2009] QSC 3, considered McCann v Switzerland Insurance Australia Limited & Ors (2000) 203 CLR 579; [2000] HCA 65, cited Newcastle City Council v GIO General Ltd (1997) 191 CLR 85; [1997] HCA 53, cited Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451; [2004] HCA 35, cited Potter v Minahan (1908) 7 CLR 277; [1908] HCA 63, cited Ravenscroft v Nominal Defendant [2008] 2 Qd R 32; [2007] QCA 435, cited Regency Media Pty Ltd v AAV Australia Pty Ltd [2009] NSWCA 199, cited Toll (FGCT) P/L v Alphapharm P/L (2004) 219 CLR 165; [2004] HCA 52, cited |
COUNSEL: | C A Cuthbert for the appellant M P Amerena for the respondent |
SOLICITORS: | Williams Lawyers for the appellant Munro Thompson Lawyers for the respondent |
- McMURDO P: The appellant, John Joseph Williams, and his late wife entered into a contract with the respondent, Carlyle Villages Pty Ltd, to lease a unit in the respondent's North Queensland retirement village, "Carlyle Gardens". The Retirement Villages Act 1999 ("the Act") applied to their contractual arrangements. Mr Williams paid the respondent $150,649 as an "Ingoing contribution" under the lease. Almost six years later, on 14 August 2007, Mr Williams terminated the lease. The respondent then entered into a new lease of the unit with a third party who paid an "in-going contribution" under that lease of $345,000. The respondent contended that Mr Williams was entitled under their contract to an "exit entitlement" of $150,296 (his "in-going contribution" of $150,649, less termination administration costs and surplus general services charges). Mr Williams claimed he was also entitled to the $345,000 "in-going contribution" paid by the third party under the new lease. The primary judge declared that Mr Williams was entitled only to the $150,296.29. Mr Williams appealed to this Court from the primary judge's orders.
- This appeal should be dismissed with costs.
- Mr Williams appears to have honestly believed he had an entitlement to the capital appreciation in the value of his leased unit, manifested by the increased price of the "in-going contribution" subsequently paid to the respondent by the third party under the new lease. But in the absence of any suggested vitiating element (for example, misrepresentation, mistake or duress) and without any claim for equitable or statutory relief, what matters is the objective intention of the parties to the contract: Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd;[1] Regency Media Pty Ltd v AAV Australia Pty Ltd.[2]
- Jomal Pty Ltd v Commercial & Consumer Tribunal & Ors[3] is a recent decision concerned with the construction of terms of leases between retirement village residents and a scheme operator under the Act. Douglas J noted:
"… the Act entitles residents to enter into a variety of different arrangements with the scheme operators. In particular, residents can negotiate to acquire an interest in the increase in the capital value of their unit or lease; this is part of their 'exit entitlement'. That is, they can negotiate that on the termination of the lease they will acquire a portion of any increase in the value of their unit or right to reside. Some residents may be entitled to receive 100 per cent of the gain, some receive none, and others might receive 50 per cent."
- In Jomal, the residents, under their various leases and residence contracts, agreed to receive 50 per cent of any capital gain in the value of their units or leases. As Douglas J noted,[4] whether or not a resident receives any part of any ultimate capital gain turns on the contractual arrangements between the parties. Those observations are consistent with references to "selling the right to reside" in units in s 45(1); s 62(1)(c)(ii); s 63(2); s 66(1); s 68(1) and s 104 of the Act. But neither those nor any other provisions of the Act require that the contractual arrangements between residents of retirement villages and scheme operators must specify whether, and to what extent, residents participate in any capital gain in the value of their leased units. There is nothing in the Act to suggest that parliament intended to prohibit residents and scheme operators from entering into contracts under which the residents would not receive the benefit of any capital gain arising when the scheme operators re-lease premises after residents surrender their lease.
- In the present case, neither the contract between Mr Williams and the respondent nor the public information document under s 74 of the Act, made provision for Mr Williams to share in any capital gain resulting from the respondent's subsequent sale of the right to reside in the unit he previously leased from the respondent. Nor was there anything in the Act or in the contractual arrangements between the parties creating in Mr Williams a right to re-sell the right to reside in his unit after he terminated the lease of it. Indeed, their contractual arrangements provided that the respondent, not Mr Williams, had "the controlling right to sell the right to reside" in the unit.[5] There was simply nothing in the Act nor the contractual arrangements to provide for Mr Williams to receive any capital gain in the value of the lease of the unit manifested by an increase in the "in-going contribution" subsequently paid by the third party in this case. It follows that the primary judge was right in declaring that Mr Williams was entitled only to "an exit entitlement" of $150,296.29.
- Those entering into contracts to reside in retirement villages are usually elderly and sometimes anxious to speedily finalise their new residential arrangements. This case is a salutary reminder to prospective retirement village residents to take care to ensure that the objective terms of their contracts meet their subjective intentions and expectations. The requirements of the Act, the public information document and contracts may appear daunting to prospective residents. It may be prudent for them to obtain independent legal advice. The legislature may wish to consider whether s 74(5) of the Act should be amended to provide that the approved form of the public information document relating to a retirement village scheme sets out whether, and to what extent, residents participate in any capital gain in the value of their units or right to reside.
- Subject to these observations, I agree with Fraser JA's reasons and with the order he suggests.
- FRASER JA: The question in this appeal is whether the Retirement Villages Act 1999 (Qld) conferred upon the appellant a statutory right to reside in a unit in the retirement village operated by the respondent which both survived the appellant's lawful termination of his lease of the unit from the respondent and conferred upon the appellant an entitlement to the payment which the respondent received when it subsequently re-leased the unit to another person.
Background
- There is no dispute about the facts, which were established by affidavits.
- In late 2001, the respondent was in the process of establishing a retirement village known as "Carlyle Gardens" which it intended to constitute as a "Retirement Village Scheme" for the purposes of the Retirement Villages Act 1999 (Qld). It was common ground that the Act applied to the disputes which subsequently arose between the appellant and the respondent.
- In late 2001 the respondent gave the appellant and his wife a “public information document”, as was required by the Act. On 13 December 2001 the appellant and his wife entered into a contract with the respondent for a lease and in April 2002, after the unit was constructed, the respondent granted them a lease of an accommodation unit in the retirement village for a term from 4 April 2002 to 4 April 2092. Under the lease the appellant and his wife acquired a right to reside in the unit during that term by lending the respondent $150,649.
- After the appellant's wife passed away in December 2002 the appellant continued to reside in the unit. In order to correct some inaccuracies on the plan attached to the lease the appellant and respondent entered into a replacement lease on 30 September 2003.
- The contract for lease, the appellant's lease, and terms expressed in the public information document, together comprised what the Act called "the residence contract".
- The public information document provided that: "A resident has a right to terminate a right to reside by giving one (1) month's written notice to the scheme operator." The respondent was the "scheme operator". Similarly, the appellant's lease relevantly provided that the appellant might at any time during the term of the lease give written notice to the scheme operator terminating the lease and that the lease terminated one month after the date the notice was given.
- On 14 August 2007, the appellant gave the respondent notice of termination of the lease. It was common ground that by this notice the appellant lawfully terminated the lease with effect from 14 September 2007. On that date the appellant vacated the unit. The appellant nevertheless continued to pay rental expenses from then until 31 March 2008.
- The respondent subsequently made a contract with a third party for a lease of the unit under which the third party paid the respondent $345,000, by way of a loan, for the right to reside in the unit.
- The appellant claimed that he was entitled to that $345,000. He sought declarations that he had acquired a "right to reside" in the unit at the retirement village, that upon the sale of that right he was entitled to the whole of the "proceeds of that sale", that the respondent was not entitled to share in any part of the proceeds of that sale, and "that the disposal of the right to reside be by sale". The respondent cross-applied for declarations that the residence contract had been duly terminated, that the amount of the appellant's "exit entitlement" under the Act was $150,296.29, that other than for that “exit entitlement” the respondent was entitled to the whole of the sale proceeds, if any, and that the appellant was not entitled to any further payment from the respondent.
- The trial judge dismissed the appellant’s application, declared that the amount of his entitlement under the Act was $150,296.29, and declared that, other than for that exit entitlement, the appellant was not entitled to the payment of any further monies from the respondent.
- The Retirement Villages Act 1999 (Qld) was assented to on 6 December 1999 and it has been amended on numerous occasions since then. The most substantial amendments were made by the Retirement Villages Amendment Act 2006 (Qld) (Act No 6 of 2006), which was assented to on 15 March 2006 and most provisions of which commenced on 1 January 2007. I have thought it appropriate generally to refer to the provisions of the Retirement Villages Act 1999 (Qld) in the form it took on 30 September 2003 when the respondent granted the replacement lease which the appellant later terminated. I describe that version of the Retirement Villages Act 1999 (Qld) as “the Act”. I will refer to some of the subsequent amendments to the Act, but no relevant amendment was so expressed as retrospectively to enhance the appellant’s right of residence under the residence contract.[6]
Summary of the trial judge’s reasons and the parties’ arguments
- The trial judge rejected the appellant's claims.[7] I will briefly summarise his Honour’s reasons. When the appellant terminated his lease the respondent acquired the right to grant a new lease over the unit. Because the interest formerly held by the appellant was only a leasehold interest, his rights following termination were limited to those contained in the residence contract or the Act. The residence contract did not confer upon the appellant any entitlement to recover the value of the unit he had formerly leased from the respondent. Under the Act the effect of the appellant’s termination of his lease was that he was entitled to be paid his “exit entitlement”, which was the full amount of his "incoming contribution" less some expenses. The Act and the public information document given under it did not confer upon the appellant the right he claimed.
- The trial judge observed that:[8]
"[37]Practically, the relief sought by the applicant simply cannot be what was intended by the respondent. If the applicant were to be entitled to the full amount he paid by way of incoming contribution and the amount the third party paid by way of incoming contribution, the applicant would in effect have lived in Unit 196 rent-free for the entire period of his occupation.
[38] In addition, although the form of contract has since changed, presuming that the residence contracts signed by the other residents in the retirement village were on similar terms, the conclusion sought by the applicant does not make sense economically. The effect of the applicant’s conclusion would be that the retirement village would always be paying an outgoing resident more money than it would have made from that resident’s incoming contribution. The retirement village would simply not be able to survive financially."
- The appellant's counsel accepted that the residence contract did not expressly confer upon the appellant the right for which the appellant contended. She argued that the trial judge erred by failing to conclude that, where the contract between the parties was silent on that issue, upon the proper construction of the Act the appellant, rather than the respondent, was entitled to the proceeds of the sale of that right, less the set-off allowed by the Act; by failing to afford the Act primacy over the residence contract; by incorrectly assuming that the appellant's entitlement to receive the proceeds of sale of the statutory "right to reside" did not depend upon the appellant retaining any proprietary interest in the unit; by misconstruing the contract as a result of failing to interpret it against the interest of the respondent (who had drafted it) and by taking into account the respondent's subjective intentions; by failing to distinguish between the appellant's entitlement to repayment of the monies he had lent to the respondent and the appellant's "exit entitlement" under the contract and under the Act; by failing to conclude that the respondent had breached the Act by failing to sell the appellant's statutory "right to reside" and by instead disposing of it in exchange for a loan from the third party; by holding, contrary to s 104 of the Act, that the appellant's interest was terminated upon termination of the lease; and by taking into account the absence of commerciality in the construction of the arrangements for which the appellant contended.
- The respondent's counsel argued that the trial judge had correctly construed the Act, the public information document, the contract for lease, and the lease. He relied also upon the principle of statutory construction expressed in Maxwell on Statutes[9] which was cited with approval by O'Connor J in Potter v Minahan[10] that:
“It is in the last degree improbable that the legislature would overthrow fundamental principles, infringe rights, or depart from the general system of law, without expressing its intention with irresistible clearness; and to give any such effect to general words, simply because they have that meaning in their widest, or usual, or natural sense, would be to give them a meaning in which they were not really used.”[11]
Discussion
- Section 3 of the Act provided that its main objects were:[12]
"(a)to declare particular rights and obligations of residents and scheme operators;
(b)to promote fair trading practices in operating retirement villages and in supplying services to residents;
(c)to facilitate the disclosure of information to prospective residents of a retirement village to ensure the rights and obligations of the village residents and scheme operator may be easily understood;
(d)to encourage the continued growth and viability of the retirement village industry in the State;
(e)to encourage the adoption of best practice standards by the retirement village industry;
(f)to provide a clear regulatory framework to ensure certainty for the retirement village industry in planning for future expansion;
(g)to facilitate participation by residents, who want to be involved, in the affairs of retirement villages;
(h)to provide for processes for resolving disputes between residents and scheme operators."
- Part 2 of the Act established a system of registration for each retirement village. It enacted that in the event of an inconsistency between the Act and the required public information document the Act prevailed.[13] It provided that in the event of inconsistency between a provision of the public information document and a provision of a residence contract the public information document prevailed if the contract provision disadvantaged the resident.[14]
- The directly relevant provisions are those contained in Part 3. Division 2 of Part 3 of the Act regulated the entry into and the minimum content of residence contracts. Divisions 3 and 4 regulated the rescission of residence contracts and the termination of the right to reside. Division 5 specified consequences that followed upon the termination of a resident’s right to reside under a residence contract.
- The purpose of Part 3 was expressed in s 42(1) as being “to state minimum requirements for residence contracts”. Section 42(2) provided that it was not the intention of Part 3 to prevent a scheme operator agreeing in a residence contract, or otherwise, to conditions that were more beneficial to a resident or former resident than the provisions of Part 3. Subsequent provisions of Part 3 regulated aspects of the right of residence.
- Those provisions must be read with the interpretative provisions found in Division 3 of Part 1 of the Act. The interpretative provisions strongly militated against the appellant’s proposition that the Act conferred a right to reside which was additional to and independent of the residence contract made by the resident. In the following extract I have highlighted the parts which made it clear that residents derived their rights to reside in a retirement village from a contract, rather than from the Act:
"5.What is a "retirement village"
(1)A "retirement village" is premises where older members of the community or retired persons reside, or are to reside, in independent living units or serviced units, under a retirement village scheme.
(2) In this section—
"premises" does not include a site within the meaning of the Mobile Homes Act 1989.
…
- What is a "retirement village scheme"
A "retirement village scheme" is a scheme under which a person—
(a)enters into a residence contract; and
(b) in consideration for paying an ingoing contribution under the residence contract, acquires personally or for someone else, a right to reside in a retirement village, however the right accrues; and
(c) on payment of the relevant charge, acquires personally or for someone else, a right to receive 1 or more services in relation to the retirement village.
…
- Who is a "resident"
A "resident" of a retirement village is a person who has a right to reside in the retirement village and a right to receive 1 or more services in relation to the retirement village under a residence contract.
- What is a "residence contract"
(1)A "residence contract" is a written contract, other than an excluded contract, about residence in a retirement village entered into between a person and the scheme operator.
(2)A residence contract includes any other contract (an "ancillary contract") between the person and the scheme operator if the ancillary contract is dependent on, or arises out of, the making of the residence contract or another ancillary contract.
(3) To be a residence contract, a contract must—
(a) either—
(i)purport to give a person, or give rise to a person having, an exclusive right to reside in an accommodation unit in the retirement village; or
(ii) provide for, or give rise to, obligations on a person in relation to the person’s or someone else’s residence in the retirement village; and
(b) purport to give a person, or give rise to a person having, a right in common with other residents in the retirement village, to use and enjoy the retirement village’s communal facilities; and
(c) contain or incorporate—
(i) a service agreement or an agreement to enter into a service agreement that includes a copy of the service agreement; and
(ii) if the contract includes an ancillary agreement that is not signed contemporaneously with the contract, an agreement to enter into the ancillary agreement that includes a copy of the ancillary agreement; and
(d) restrict the way in which, or the persons to whom the right to reside in the village may be disposed of during the resident’s lifetime."
- If there were a statutory “right to reside” which was independent of the provisions of the “residence contract” itself, one might expect to find it in Part 3, and in particular in s 45 which specified the details which must be included in each residence contract. However, s 45 merely provided that a scheme operator must ensure that each residence contract for a retirement village “includes details about” the matters specified in various subparagraphs: it did not purport to confer any statutory right upon residents. In some cases the various paragraphs of s 45(1) required details about matters in respect of which other provisions of the Act did confer statutory rights, but no other provision of the Act conferred any right of residence. The potentially relevant provisions of s 45(1), about which the scheme operator was obliged to ensure that each residence contract included details, were:[15]
"…
(d) the resident's exit entitlement;
…
(i)the resident’s right to resell the right to reside in the accommodation unit;
…
(m) the resident's and scheme operator's rights to terminate the contract.
…"
- That the obligation of the scheme operator under s 45(1) was only to ensure that each residence contract included details about those topics was consistent with the absence of any prescription requiring that each residence contract make identical provision upon each of those topics. Thus, to take the most relevant examples, s 45(1) was consistent with the view that different residence contracts might make different provisions concerning “(i) the resident’s right to resell the right to reside in the accommodation unit” and “(m) the resident’s and scheme operator’s right to terminate the contract”.
- Division 4 of Part 3 regulated the parties' rights to terminate the right to reside. There were significant restrictions upon a scheme operator’s right to terminate a resident’s right to reside in s 53 of the Act, but s 52(1) of the Act simply provided that a resident might terminate the resident’s right to reside in a retirement village by one month’s written notice given to the scheme operator. That provision was reflected in the public information document given to the appellant and his wife before they contracted for the grant of a lease and in the terms of the lease. No provision of the Act was inconsistent with the provision in the lease which entitled the appellant to terminate the lease upon one month’s notice, a provision which, plainly enough, was beneficial to the appellant. There can be no doubt that under the general law the appellant's termination of the lease brought to an end his right to reside in the unit.
- Section 71, in Division 6 of Part 3 of the Act, provided that a residence contract was enforceable against various persons, including the scheme operator, “for the recovery of all or part of the exit entitlement”. Had the Act intended to confer the rights for which the appellant contended, one might expect to see that reflected in the provisions regulating the “exit entitlement”. The appellant's counsel conceded, however, that his claimed entitlement to recover the payment received by the respondent when it entered into the subsequent residence contract with a third party did not form part of the appellant’s “exit entitlement” under the Act. That concession was appropriate. Section 16 of the Act defined “exit entitlement” in these terms:
"16What is an exit entitlement
An 'exit entitlement' is the amount that a scheme operator may be liable to pay to a former resident under a residence contract arising from—
(a) the resident ceasing to reside in the accommodation unit to which the contract relates; or
(b) the settlement of the sale of the right to reside in the accommodation unit."
- That section directed attention to the terms of the residence contract to determine the amount payable to a former resident arising from the resident ceasing to reside in the accommodation unit. That is not readily reconcilable with the appellant’s contention that the Act secured to him the proceeds of any disposition of his claimed statutory right of residence after he had terminated his lease and ceased to reside in the unit.
- The appellant’s counsel acknowledged that the Act did not prevent the parties to a residence contract from excluding any right in a resident to participate in capital gains but she argued that this residence contract did not do so. The relevant provisions of the residence contract were in clauses 3.13-3.15 of the public information document:
"Exit Entitlement
3.13 When you leave the accommodation unit, you may receive an exit entitlement.
3.14 The exit entitlement for your accommodation unit is calculated as follows:
The Loan Amount lent by you to the scheme operator for your lease of your accommodation unit is repaid to you (refer 3.4).
The scheme operator is entitled to set off and to apply against in reduction and satisfaction of the repayment of the Loan Amount the following amounts on the date the Loan Amount is repaid to you:
• any capital depreciation in the value of a lease of your accommodation unit, being the amount (if any) by which the Loan Amount paid by you for your lease of the accommodation unit exceeds the value of a lease of your accommodation unit at the time your exit entitlement becomes payable to you, being the value agreed between you and the scheme operator or, failing agreement, determined by a valuer;
• your share of the costs of obtaining a valuation or valuations of a new lease of your accommodation unit (if necessary). These costs will be shared between the scheme operator and you in the same proportion as you both share the proceeds of the re-leasing of the accommodation unit;
•the termination administration costs, being the scheme operator’s legal costs and disbursements in respect of the preparation, execution and stamping of a surrender of your Lease or a record of death;
•costs of reinstating your accommodation unit as nearly as practicable to its condition at the commencement of your lease including but not limited to cleaning, repainting, replacing carpets and other floor coverings and repairing damage whether required as a result of fair wear and tear or otherwise, but excluding the replacement of fixtures, fittings, equipment, appliances, furniture, furnishings and other property in and on the accommodation unit that are made available by the scheme operator (unless they have been damaged, destroyed or subjected to accelerated wear by you);
•general services charges outstanding (if any);
•personal services charges outstanding (if any); and
any amounts payable by the resident to the scheme operator under the residence contract or the Act (if any).
(set out calculation process)
(Where applicable, set out details about participation in capital gains/losses.)
When Loan Amount is repaid
The Loan Amount lent by you to the scheme operator for your lease of your accommodation unit (refer 3.4) will be repaid to you within 28 days after the scheme operator grants a new lease of your accommodation unit to a new resident and receives payment of the new loan amount payable for the new lease (subject to the new scheme operator’s right to set off the amounts set out above in 3.14 from the amount repaid).
However, if the scheme operator has not located a suitable person who has agreed to enter into a new lease of your accommodation unit within three years of the date your lease terminates pursuant to either:
•your death (or if there are two of you, or the death of the last of you to die);
• you giving one month's written notice to the scheme operator terminating your lease; or
• the scheme operator give in [sic] you written notice terminating your lease in accordance with the Act,
the scheme operator will repay the Loan Amount to you (subject to the scheme operator's right to set off the amounts set out above in 3.14 from the amount repaid).
- Examples of exit entitlement
The loan amount used in the following example is assumed to be $150,000.00. The actual loan amount to be paid by you for a lease of your accommodation unit is set out in 3.4. It is also assumed that the value of a lease of your accommodation unit has not decreased over time so that there is no capital depreciation. If there is any capital depreciation in the value of a lease of your accommodation unit it will be deducted from the repayment of the loan amount.
Example - Assuming loan amount is $150,000
Year 1 | Year 2 | Year 5 | Year 10 | |
(ie less than 1 year) | (ie 1 year or more but less than 2 years) | (ie 4 year of more but less than 5 years) |
| |
| Exit Entitlement calculation: |
|
|
|
|
| Loan Amount | $150,000 | $150,000 | $150,000 | $150,000 |
| Less Capital Depreciation (if any) | Nil | Nil | Nil | Nil |
| Less other deductions (refer below) | $5,100.00 | $5,100.00 | $5,412.16 | $5,975.46 |
Exit Entitlement | $144,900.00 | $144.900.00 | $144,587.84 | $144,024.54 |
| Other Deductions | Cost Year 1 | Cost Year 2 | Cost Year 5 | Cost Year 10 |
| Valuation Costs | $200.00 | $200.00 | $212.24 | $234.33 |
| Legal Costs | $400.00 | $400.00 | $424.48 | $468.66 |
| Reinstatement | $4,500.00 | $4,500.00 | $4,775.44 | $5,272.47 |
| Total | $5,100.00 | $5,100.00 | $5,412.16 | $5,975.46 |
Note: The 'other deductions' above are examples only based on costs current at the date of this PID indexed after the 2nd year of the lease to an anticipated increase in the CPI of 2%. The actual deductions payable when your loan amount became repayable may be more or less than the deductions used in the above examples. The actual deductions are only able to be determined with certainty at the time your loan amount becomes repayable, at which time they will be set off against the amount repaid to you.
…………
PART 5 - GENERAL INFORMATION FOR THIS VILLAGE
CHAPTER 3 - RESALE INFORMATION
7 December 2001
Additional Resale Process Information
5.3.1 Details about:
• other resale processes;
• the obligation to continue to pay fees until right to reside is sold;
• whether the scheme operator has a controlling right to sell the right to reside.
Controlling Right to Sell the Right to Reside
The scheme operator has the controlling right to sell the right to reside in your accommodation unit.
Resale Processes
Because the scheme operator has a controlling right to sell the right to reside, the resale process set out in Part 3 Division 5 of the Act applies.
The obligation to continue to pay fees until the right to reside is sold
You or your executors must pay the full general services charges for the period after you permanently vacate your accommodation unit until the scheme operator grants a lease of your accommodation unit to a new resident or ninety (90) days after you permanently vacate your accommodation unit, whichever is earlier.
If the scheme operator has not granted a lease of your accommodation unit to a new resident within ninety (90) days of the day that you permanently vacate your accommodation unit, then after the ninety (90) day period until the date that the scheme operator grants a lease of your accommodation unit to a new resident, you or your executors must pay the proportion of the general services charges equal to the proportion that you or your executors are entitled to share in the sale proceeds of the re-leasing of your accommodation unit with the scheme operator. The scheme operator may elect, in the scheme operator's sole discretion, to accrue as a book debt the amount of the general services charge payable by you in respect of the period after the ninety (90) day period and set off the accrued amount against repayment of your loan amount."
- The appellant's counsel argued that the instruction in italics in the middle of clause 3.14 (“Where applicable, set out details about participation in capital gains/losses”) and the absence of any contractual exclusion of participation in capital gains together indicated that the residence contract did not exclude the appellant's right to capital gains arising upon the sale of his claimed statutory right of residence.
- That is a most unlikely construction of the contract. The text relating to that instruction appears above it. In summary, putting aside costs and charges, the effect of clause 3.14, as reflected in the assumption stated at the commencement of clause 3.15, was that after the appellant’s termination of his lease he was entitled to receive as his “exit entitlement” the amount he had initially lent the scheme operator for the lease of his accommodation unit, less any amount by which that loan exceeded the value of a lease of the unit when the exit entitlement became payable to the appellant. There was no analogous provision in the public information document which provided that the appellant was to receive any amount by which the value of the unit exceeded the loan amount paid by the appellant for his lease. The effect of the residence contract was that, once the appellant terminated the lease which encumbered the respondent’s title to the land, the respondent was entitled to sell, lease or otherwise dispose of an interest in its land without accounting to the appellant for any part of the proceeds of such disposition.
- Thus the risk of any depreciation of the leased unit lay with the appellant but the respondent was to retain the benefit of any appreciation of it. Presumably this allocation of risk was reflected in other aspects of the overall bargain under the residence contract; but whether that was so or not, the appellant has not identified any provision of the Act that precluded the parties from making that bargain.
- The appellant’s reliance upon this aspect of the public information document was misplaced for another reason. The evidence did not establish that the respondent received any capital gain when it subsequently leased the unit. The $345,000 the respondent received from the new resident was matched by the respondent’s obligation to repay that sum to the new resident under their residence contract. No doubt the respondent benefited from the capital appreciation in the unit by obtaining the use of a much larger amount of money for the duration of the new residence contract, but the trial judge was plainly right to conclude that the appellant’s claimed entitlement to recover the $345,000 did not make economic sense.
- That conclusion was a material consideration in the proper construction of the Act. As Gibbs CJ pointed out in Cooper Brookes (Wollongong) Pty Ltd v Federal Commissioner of Taxation[16] where two constructions of a statute are open, “the court will obviously prefer that which will avoid what it considers to be inconvenience or injustice.” The result of the appellant’s argument was so extreme that, at least if the statutory text appeared to require it regardless of the parties’ contract, the case would fit within Gibbs CJ’s further observation[17] that: "There are cases where the result of giving words their ordinary meaning may be so irrational that the court is forced to the conclusion that the draftsman has made a mistake, and the canons of construction are not so rigid as to prevent a realistic solution in such a case …". On the appellant’s argument that a residence contract could exclude the statutory right the uncommercial result flowed directly from the appellant’s construction of the residence contract, rather than from the Act. I do not accept the underlying premise that the Act erected the statutory right the appellant claimed, but if it did the odd consequences flowing from his construction of the contract would militate against its acceptance. The construction of a contract is to be determined by what reasonable persons in the parties’ position would have understood it to mean having regard to the text, the surrounding circumstances known to the parties, and the purpose and object of the transaction the contract embodies.[18] The construction chosen from the competing, available constructions should also accord with commercial efficacy and common sense.[19] The construction contended for by the appellant offends common sense for the reasons given by the trial judge.
- Returning to Part 3 of the Act, in Division 4 reference might usefully be made to s 55. It provided that a right to reside in an accommodation unit in a retirement village held by a resident terminated on the death of the resident. Whether the statutory right to reside for which the appellant contended should be regarded as a proprietary right or as a free-standing right of a kind which defies categorization, it would be an odd statutory policy indeed which demanded the destruction of the right upon the death of the resident but insisted upon its survival after the resident’s abandonment of occupation and termination of the right to reside in the unit.
- The statutory provisions I have so far discussed are uniformly and strongly opposed to the appellant’s case but the appellant sought support from Division 5 of Part 3 of the Act.
- Division 5 was headed, “Reselling resident’s right to reside”. Section 56 defined “termination date” as meaning, relevantly, the date a resident’s right to reside under a residence contract was terminated under the Act. Section 57 provided that Division 5 applied, despite anything to the contrary in an existing residence contract, if a resident’s right to reside was terminated under the Act. I will broadly summarise the effect of the following provisions:
- Section 58 obliged the scheme operator to give the former resident a statement and an itemised quote for doing what the scheme operator considers to be reinstatement work and for the former resident to give a similar itemised quote in circumstances in which they are unable, after negotiation in good faith, to agree upon what reinstatement work is necessary to be done to the resident’s accommodation unit.
- Section 59 obliged the scheme operator to ensure that necessary reinstatement work was completed within a specified time after the vacation date.
- Section 60 provided for negotiation in good faith between the former resident and the scheme operator about the value of the right to reside in the accommodation unit and that, in default of agreement, a valuation obtained by the scheme operator within a specified time was to be taken to be the agreed resale value of the right to reside.
- Sections 61 and 62 identified who was to pay the cost of reinstatement work in cases in which the former resident’s interest in the accommodation unit was (s 61) a freehold interest or (s 62) a leasehold interest or licence.
- Section 63 provided that a scheme operator was obliged to pay the exit entitlement of a former resident before the sooner of the day when it must be paid under the former residence contract or 28 days after the right to reside was sold, and it obliged the scheme operator to give the former resident a written statement showing how the exit entitlement was worked out together with specified particulars.
- Section 64 provided that if a former resident’s right to reside in a particular accommodation unit was not sold within six months after the termination date and the former resident had not been paid an exit entitlement under s 63, then the former resident might engage a real estate agent to effect the sale of the right to reside in the accommodation unit.
- Where a former resident had not been paid an exit entitlement, s 65 obliged the scheme operator promptly to give to the former resident details of each offer to purchase the former resident’s right to reside and, if the former resident asked, specified information about sales inquiries, the steps the operator was to take to promote the sale of the right to reside, and particulars of other rights to reside in accommodation units for sale in the retirement village.
- Section 66(1) provided that if the scheme operator accepted an offer for a right to reside at less than the agreed value for the right, the former resident’s exit entitlement was to be worked out as if the right to reside was sold at the agreed value. Conversely s 66(2) provided that if a former resident accepted an offer for a right to reside less than the agreed value, the former resident’s exit entitlement was to be worked out on the amount of the offer.
- Section 67 provided for the updating of the agreed resale value where a former resident’s right to reside was not sold within six months after the termination date and the former resident had not been paid an exit entitlement, and for subsequent reconsideration of the resale value of the right to reside at least every six months.
- Section 68 regulated how the costs of selling a right to reside in a particular accommodation unit were to be apportioned.
- Section 69 limited the grounds upon which the scheme operator might refuse to accept an offer to purchase a right to reside in an accommodation unit.
- One evident purpose of these provisions was to ensure that the scheme operator was obliged to pay a former resident’s exit entitlement without undue delay after the operator had a reasonable time to dispose of a right to reside in the unit formerly occupied by the resident. In that respect the last part of clause 3.14 of the public information document provided that the amount lent by the appellant to the respondent for the lease of the appellant’s accommodation unit was to be repaid to the appellant within 28 days after the scheme operator granted a new lease of the accommodation unit to a new resident and received payment of a new loan amount for the new lease. That reflected s 63 of the Act.[20]
- Although these sections were partly explicable by the policy objective of securing timely payment to the former resident, some of them were expressed in terms which assumed both the continued existence in a former resident of some aspect of a "right to reside" after the apparently lawful termination of that right and that residence contracts would provide for the sharing between the scheme operator and the former resident of the proceeds of the scheme operator’s “sale” of the former resident’s right to reside. The following extracts sufficiently make the point in the parts I have emphasised:
"62 Who pays for work in leasehold or licence scheme
(1) If the former resident's interest is a leasehold interest or licence, the cost of reinstatement work must be paid by—
(a) to the extent the former resident caused accelerated wear to the accommodation unit’s interior or deliberate damage to the unit - the former resident; or
(b) if the residence contract states who is to make the payment - the person stated; or
(c) otherwise—
…
(ii) for an existing residence contract - the former resident and the scheme operator in the same proportion as they are to share the sale proceeds of the right to reside in the unit on its sale.
…
63When former resident’s exit entitlement payable
(1)…
(2) However, this division does not prevent the operator paying the exit entitlement before the right to reside is sold if—
(a)a scheme operator wants to pay an exit entitlement to a former resident after termination but before the right to reside is sold; and
(b) the former resident and the operator agree on the value of the right to reside.
…
66 Accepting offers at less than agreed resale value
(1)If a scheme operator accepts an offer for a right to reside less than the agreed value for the right, the former resident’s exit entitlement is to be worked out as if the right to reside was sold at the agreed value.
(2) If a former resident accepts an offer for a right to reside less than the agreed value, the former resident’s exit entitlement is to be worked out on the amount of the offer.
…
68 Costs of selling
(1) The costs of the sale of a right to reside in a particular accommodation unit, including the costs mentioned in sections 60(2) and 67(3), are to be shared by the former resident and the scheme operator in the same proportion as they are to share the sale proceeds of the right to reside in the unit on its sale."
- A different part of the Act, Division 7 of Part 5, concerned charges for services for which a resident was liable under a residence contract. The appellant relied upon s 104, which provided:
"104 Working out and paying general services charges for former residents
(1) A former resident of a retirement village is responsible for the resident’s proportion of the general services charges after the resident vacates the unit until the first of the following happens—
(a)the right to reside in the unit is sold;
(b) subject to subsection (2), a period of 90 days elapses (the '90 day period');
(c) the tribunal orders the scheme operator to pay the former resident’s exit entitlement under section 171.
(2) If a former resident’s right to reside in an accommodation unit has not been sold within the 90 day period the resident and the scheme operator are each liable, after the period ends, to pay the general services charges in the same proportion as they are to share the sale proceeds of the right to reside in the unit on its sale.
(3)However, subsections (1)(a) and (b) and (2) do not apply to a former resident under an existing residence contract.
(4)If a former resident's right to reside in an accommodation unit has not been sold within the 90 day period, the scheme operator may –
(a)accrue, as a book debt, the resident's proportion of the general services charges for the period starting after the end of the period and ending on the day the right to reside is sold; and
(b)set off the accrued amount against the resident's exit entitlement."
[I have added the emphasis.]
- I interpolate here that because the Act contemplated that the right to reside might be provided by way of a licence, a lease, or a freehold title, the word "sold" in s 104 must be a broad term which comprehended a variety of modes of disposition. The appellant was not entitled to the declaration he sought "that the disposal of the right to reside be by sale".
- Returning to the appellant’s main point, the provisions of Division 5 applied only after the former resident’s right to reside had been duly terminated, as sections 56 and 57 made clear. It seems distinctly odd that they and s 104 were so expressed as to assume that the former resident’s right to reside subsisted. Further, although those sections assumed that the former resident would share the proceeds of the disposition of the former resident’s right to reside, the Act did not prescribe that or require that residence contracts contain any provision to that effect. Those sections also assumed that residence contracts would define how the proceeds of sale would be shared, but no method or formula for sharing proceeds was prescribed. In this context, and in light of the contrary indications I earlier discussed, it is going too far to derive from the use of the expressions I have emphasised the proposition that, after termination of the right to reside, the former resident retained such an interest which, in the absence of any contrary provision in the residence contract, entitled the former resident to recover the proceeds of a subsequent disposition of a right to reside in the unit. Nothing in the Act precluded the parties to a residence contract from agreeing upon an allocation of the capital risk under which a former resident was not to receive any of those proceeds. Where, as here, the residence contract did not provide for a sharing between the resident and the scheme operator of any of the proceeds of the subsequent disposition of a right to reside, the statutory provisions premised upon the contrary assumption simply had no scope for operation to that extent.
Summary
- Although the appellant's argument found a foothold in some provisions of the Act, numerous features of the regulatory scheme were inimical to the existence of the statutory “right to reside” he claimed. One would expect that if the Act did create such a right it would be expressed in one of the declarations foreshadowed in paragraph (a) of the objects expressed in s 3, but no such declaration was expressed in the Act. The references in the Act to a right to reside suggested that any such right was derived from a contract made by the resident. The Act provided that the parties were free to agree that the resident might terminate a lease conferring a right to reside on one month’s notice. A resident’s right to reside in an accommodation unit was secured by a provision which limited the grounds upon which the lessor could terminate the right and by provisions requiring payment of an "exit entitlement" in an amount agreed between the parties in their residence contract. Those provisions did not require that the amount include the value of the (terminated) right to reside. In that context, the absence of any provision expressly conferring an extra-contractual right of residence or a right to share in the proceeds of any disposition after termination of a right of residence told strongly against the existence of any such rights.
- In my respectful opinion the trial judge’s conclusions were correct. The Act did not confer any independent statutory right of residence which carried with it an entitlement to the proceeds of any disposition of the unit by the scheme operator where that right was not given in the residence contract.
Disposition
- I would dismiss the appeal with costs.
- MARGARET WILSON J: I agree with the order proposed by Fraser JA and with His Honour’s reasons for judgment.
Footnotes
[1] (2004) 219 CLR 165, Gleeson CJ, Gummow, Hayne, Callinan and Heydon JJ, at 177-185.
[2] [2009] NSWCA 199 at [47]-[48].
[3] [2009] QSC 3 at [12].
[4] [2009] QSC 3 at [12].
[5] Carlyle Gardens Townsville Public Information Document, cl 5.3.1.
[6] Cf Acts Interpretation Act 1954 (Qld), s 20(2)(c).
[7] Williams v Carlyle Villages Pty Ltd [2008] QSC 304.
[8] [2008] QSC 304 at [37] – [38].
[9] Sir Peter Benson Maxwell, Maxwell on Statutes, (4th ed, 1905), 121-122.
[10] (1908) 7 CLR 277 at 304.
[11] See also American Dairy Queen (Qld) Pty Ltd v Blue Rio Pty Ltd (1981) 147 CLR 677 at 682-683; Coco v R (1994) 179 CLR 427 at 437-438; Federal Commissioner of Taxation v Citibank Ltd (1989) 20 FCR 403 at 432-433.
[12] A subsequent amendment revised these provisions and inserted reference also to "consumer protection". The changes were not significant for present purposes.
[13] s 37(4).
[14] s 37(3). A subsequent amendment re-phrased this: the provision which was more beneficial to the resident prevailed. Again, the change was not significant for present purposes.
[15] A subsequent amendment added various topics, none of which was material here, and re-lettered these paragraphs.
[16] Cooper Brookes (Wollongong) Pty Ltd v Federal Commissioner of Taxation (1981) 147 CLR 297 at 305; see also per Mason and Wilson JJ at 320-321; [1981] HCA 26.
[17] (1981) 147 CLR 297 at 304. See also Newcastle City Council v GIO General Limited (1997) 191 CLR 85 at 113 per McHugh J; [1997] HCA 53 and Ravenscroft v Nominal Defendant [2008] 2 Qd R 32 at 46-51; [2007] QCA 435 at [33]-[48] per Muir JA.
[18] Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451 at [22]; Toll (FGCT) Pty Ltd v Alphapharm Pth Ltd (2004) 219 CLR 165 at [40].
[19] See, for example, Gollin & Co Ltd v Karenlee Nominees Pty Ltd (1983) 153 CLR 455 at 463; McCann v Switzerland Insurance Australia Ltd (2000) 203 CLR 579 at [22].
[20] A subsequent amendment changed that time limit to 14 days after the "settlement day", but this is not material to the issues in this appeal.