Scouller v Stockland Property Services Pty Ltd
[2017] QCAT 445
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- Unreported Judgment
- Scouller v Stockland Property Services Pty Ltd[2017] QCAT 445
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Scouller v Stockland Property Services Pty Ltd[2017] QCAT 445
Scouller v Stockland Property Services Pty Ltd[2017] QCAT 445
CITATION: | Scouller & Murray v Stockland Property Services Pty Ltd [2017] QCAT 445 |
PARTIES: | John Leslie Scouller Ronald Vivian Murray (Applicants) v Stockland Property Services Pty Ltd (Respondent) |
APPLICATION NUMBER: | OCL020-17 |
MATTER TYPE: | Other civil dispute matters |
HEARING DATE: | 17 November 2017 |
HEARD AT: | Brisbane |
DECISION OF: | Member Olding |
DELIVERED ON: | 20 November 2017 |
DELIVERED AT: | Brisbane |
ORDERS MADE: | The Application received 14 March 2017 is dismissed. |
CATCHWORDS: | REAL PROPERTY – RETIREMENT VILLAGES – whether reasonable to include allowance for employee incentives/bonuses in retirement village operator’s annual budget – whether reasonable to include one-third of incentives/bonuses potentially payable – whether budget should be recast to apportion prior-year surplus across general service charges Retirement Villages Act 1999 (Qld), s 102A, s 106, s 107, s 108 Australian Retirement Homes Ltd v Ash [2013] QCA 355 Scouller and Anor v Stockland Property Services Pty Ltd [2017] QCAT 347 |
This matter was heard and determined on the papers pursuant to s 32 of the Queensland Civil and Administrative Tribunal Act 2009 (Qld) (QCAT Act).
REASONS FOR DECISION
- [1]This dispute relates to the Fig Tree Village retirement village. The Applicants are residents of the village and the Respondent is the retirement village scheme operator.
- [2]The Applicants assert that the Respondent’s calculation of the general services charges and budget presented for the 2016-17 financial year fail to comply with the requirements of the Retirement Villages Act 1999 (Qld) (the Act)[1] in several respects. The Respondent denies that there is any non-compliance.
- [3]On 28 August 2017, the Tribunal published reasons (the earlier reasons) relating to a number of matters raised by the application and made directions for further material and submissions to be filed in respect of two issues.[2]
- [4]The material and submissions having been filed, these reasons relate to the remaining two issues identified in, and should be read with, those earlier reasons.
Statutory framework
- [5]For ease of reference, relevant statutory provisions contained in Division 7 of Part 5 of the Act are repeated below:
102A General services charges budget
- (1)The scheme operator must adopt a budget (the general services charges budget) for each financial year for charges for general services.
- (2)For subsection (1), the general services charges budget must—
- (a)allow for raising a reasonable amount to provide the general services for the financial year; and
(b) fix the amount to be raised by way of contribution to cover the amount.
. . .
- (6)If, at the end of a financial year for which a general services charges budget is adopted, there is a surplus or deficit for the charges, the surplus or deficit must be carried forward and taken into account in adopting the general services charges budget for the next financial year.
(7) Subsection (6) applies despite section 106(1).
106 Increasing charges for general services
- (1)A scheme operator must not increase the total of general services charges for a retirement village for a financial year by more than the CPI percentage increase for the financial year.
Maximum penalty—200 penalty units.
(2) In this section—
CPI means the all groups consumer price index for Brisbane published by the Australian statistician.
CPI percentage increase, for a financial year, means the percentage increase between—
(a) the CPI published for the quarter ending immediately before the start of the financial year; and
(b) the CPI published for the quarter ending immediately before the end of the financial year.
total of general services charges, for a financial year, means the sum of all charges for general services for the financial year, other than the following charges—
- (a)a charge for a general service that has been increased by more than the CPI percentage increase for the financial year and that the retirement village residents, by special resolution at a residents meeting, have approved;
- (b)a charge for a general service that has been increased by more than the CPI percentage increase for the financial year and that is allowed under section 107.
107 Resident’s responsibility for paying increased general services charge
A resident is not required to pay a charge for a general service under a residence contract to the extent that the charge is more than that payable under the contract and increased under section 106, unless the excess is attributable to an increase in—
- (a)rates, taxes or charges levied under an Act in relation to the retirement village land or its use; or
- (b)the salary or wages of a person engaged in the retirement village’s operation and payable under an award, certified agreement or other industrial instrument made, approved, certified, or continued in force under—
(i) the Industrial Relations Act 2016; or
(ii) a Commonwealth Act; or
(c) insurance premiums, or insurance excesses paid, in relation to the retirement village or its use; or
(d) maintenance reserve fund contributions.
108 New services to be approved by majority of residents
- (1)A scheme operator may offer residents a service not already supplied under the scheme, for which a services charge is to be, or may be, made, only if the residents agree to it being supplied by special resolution at a residents meeting.
(2) Subsection (1) does not apply to—
. . .
- [6]As noted in the earlier reasons, the broad effect of these provisions is to cap annual increases in general services charges at the rate of increase in the CPI, but with some exceptions for costs outside the control of the operator or to which the residents consent.
- [7]The earlier reasons also noted that in Australian Retirement Homes Ltd v Ash [2013] QCA 355 the Court of Appeal held that s 106 requires a comparison of the amounts charged by the operator to the residents for general services, and not a comparison of the budgeted cost of providing the various services, between the previous and current years. The current year charges are struck through the budget process provided for under s 102A.
The short-term incentives (bonuses) issue
- [8]The Respondent included provision for short-term incentives or bonuses to be paid to staff in the 2016-17 budget. The Applicants contended that this offends s 108(8).
- [9]In relation to this issue, the earlier reasons stated:
[25] Section 108 provides that an operator may only make a charge for a new service if the residents agree by special resolution. Consistent with that principle, s 108(8) provides that “[t]he operator may not charge the residents for the new service before the service is supplied to the residents”.
[26] Section 108 is concerned with charges for new services. It is not concerned with charges for existing services. There is no suggestion that there is a new service associated with the short-term incentives. Accordingly, s 108(8) is not relevant to this dispute.
[27] The Applicants also ask: “[a]s a bonus may not be paid in any one year, how can it be a ‘service’ if in fact no bonus is paid?” A bonus is clearly not a service. One might more helpfully ask whether it is appropriate to include in the budget an amount that the operator acknowledges may not be paid.
[28] The answer is to be found in s 102A(2)(a). The general services charges budget must “allow for raising a reasonable amount to provide the general services for the financial year”. It is in the nature of budgets that an attempt is made to estimate revenue and expenses in advance and that actual revenue and expenses may differ from budgeted revenue and expenses. This is implicitly acknowledged in the provision for surpluses or deficits to be carried forward.
[29] Accordingly, I do not accept that uncertainty about whether a bonus will be paid in itself means that the potential cost of paying bonuses should not be included in making a reasonable allowance for the cost of providing general services. Is it otherwise unreasonable to include the cost of bonuses?
[30] Ordinarily, it will be reasonable to include an operator’s legitimate employment costs. There is, for example, nothing inherently unreasonable in an operator’s remuneration arrangements exceeding award rates. It would not be unreasonable to include in the budget the employment costs of an operator that makes a judgement in good faith that paying wages exceeding award rates is appropriate to attract and retain suitable staff.
[31] These are judgements that the operator is best placed to make. In determining a reasonable allowance for costs, including employment costs, the Tribunal could not replace the operator’s judgement with its own judgement on such matters in the absence of evidence suggesting that the amount included in the budget for employment costs is not reasonable. Further, residents are afforded a degree of protection against the impact of such decisions by the s 106 CPI cap on increases in the total of general service charges.
[32] Is the position any different if the operator makes a judgement in good faith that conditions allowing staff to enjoy performance bonuses are appropriate to attract and retain staff? It seems to me that there is nothing in the nature of a bonus per se that means including the potential cost of the bonus would not be reasonable.
[33] Indeed, it would ordinarily be reasonable to include at least an estimate of the amount of bonuses likely to become payable. A budget that did not include an estimate of the employment costs likely to be paid would not meet the s 102A(2)(a) requirement to allow for raising a reasonable amount to provide the general services.
[34] The Respondent included one-third of the short-term incentives potentially payable. There is no evidence that suggests this is not a reasonable estimate.
[35] However, it is necessary to consider the criteria against which eligibility for a bonus is to be judged. It is likely to be reasonable to include in the budget the estimated cost of a bonus that would be earned if, for example, resident surveys reveal a high level of satisfaction with related services. It may not be reasonable to include the estimated cost of bonuses that are earned or partly earned by reference to, for example, achievements unrelated to the provision of services to residents.
[36] This is not to say that any such conditions attach to the Respondent’s arrangements for payment of short-term incentives. The difficulty is that neither the residents nor the Tribunal knows the criteria for payment of the incentives.
- [10]Accordingly, I made directions for the Respondent to provide copies of the criteria for the payment of the incentives. I also allowed the parties to make further submissions on whether, having regard to those criteria, it would have been reasonable to include an estimate of the costs of the bonuses in the budget and, if so, what that estimate should have been.
- [11]The Respondent filed copies of the relevant position description documents for the Village Manager and Assistant Village Manager positions and advised that eligibility for short-term incentive payments is assessed against the requirements of the occupants of the positions set out in those documents.
- [12]For various reasons, the Applicants maintained their position that no amount should be included as an estimate of the costs of these incentives.
- [13]The Applicants submitted that the position documents are deficient, relative to others they have seen in different contexts, in that they fail to show measurable goals. The performance requirements set out in the documents are of the type that one would expect to find in position statements of this kind, listing performance requirements across a range of areas, including asset, stakeholder, people, financial and risk management. There is nothing in the position statements that suggests they are significantly directed to ends unrelated to the efficient and effective operation of the village.
- [14]The Applicants also submitted that the Respondent should not be “profiting” from the residents by recovering the costs of paying incentives that the Respondent is contractually committed to paying. To the extent that any cost is recovered through the budget process an operator’s profit will necessarily be higher than it otherwise would be (or a loss less than it otherwise would be). This is not a basis for excluding an operating cost from the budget.
- [15]Related to this, the Applicants submitted that the Respondent is capable of paying the bonuses from its own resources and it would be “unconscionable” to pass the cost onto residents. Again, this is not a basis for excluding an allowance for the incentives. The incentives are part of the their remuneration arrangements for staff engaged in the operation of the village. Unless there is an identified reason why this particular form of remuneration should be excluded, the Respondent is entitled to include an allowance for them in the budget.
- [16]Additionally, the Applicants referred to the comment at paragraph [27] of the earlier reasons (extracted above) that “[a] bonus is clearly not a service” and asserted that for that reason an estimate of the costs of paying incentives cannot be included. That comment appears in the context of rejecting a submission that incentives should not be included because, depending on performance, they may not in fact be paid. The comment in the reasons is correct, but it was directed to identifying the correct statutory question. It does not say that a payment of a bonus is not a cost of providing a service. The comment does not assist the Applicants.
- [17]In the circumstances, I conclude that it is reasonable to include an estimate of the amount of these incentives that may be payable to employees.
- [18]The remaining question is whether including one-third of the incentives potentially payable is reasonable. The Applicants maintained that no amount should be included. They made no submissions regarding whether, if an allowance should be made, the estimate of one-third is reasonable.
- [19]On its face, one-third of the potential incentives payable is towards the conservative end of the range. The estimate is relatively small, both in percentage and absolute terms, relative to the cost of operating the village. Without information regarding the history of incentives achieved by relevant employees, and any other information relevant to the likelihood of employees qualifying for incentives in the year under consideration, it is not possible to make a sophisticated assessment of whether one-third is a reasonable estimate.
- [20]In the absence of any other relevant evidence or submission, I have no basis on which to conclude that the Respondent’s estimate of one-third of the total amount of incentives potentially payable is not reasonable. In those circumstances, I would not order that the budget be re-cast to include any different amount.
Format of the budget
- [21]
[46] The defined term “total of general services charges” in s 106 comprehends that there is a charge for each general service from which a summation of charges can be derived. The repeated references in the section to “a charge for a general service” makes that clear. On the construction of the defined term which I prefer, and having regard also to s 107 to which the definition expressly refers, the charge for each general service comprehended by the definition is the charge for that service which the scheme operator requires the resident to pay. Thus the definition also comprehends that the scheme operator will charge the resident an identified amount for each general service under the residence contract.
[47] Notwithstanding, it remains open to the scheme operator to levy a composite general services charge on residents. However, what is significant is that the operation of s 106 requires that the charge levied on residents individually for each general service be specifically identified.
[48] This definition was enacted in 2006 when s 102A was enacted. In my view, it influences the content of the general services charges budget. Importantly for present purposes, the budget must state the dollar amount of the charge for each general service to be paid by residents individually. In accordance with conventional practice for budget presentation, both the dollar amount for the financial year in question and the corresponding dollar amount for the immediately preceding financial year would be stated, thereby facilitating ready identification of those increases to individual general services charges which require special resolution under s 106(2) (if any) or are covered by s 107.
- [22]In short, “s 106 requires that the charge levied on residents individually for each general service be specifically identified”.[4] I allowed the parties an opportunity to make submissions about whether, and, if so, by reference to what categories of general services, the budget should be recast to separately identify charges for each general service.
- [23]In written submissions, the Applicants advised that they were not concerned with the categories of charges, other than to separately identify the so-called s 106 and s 107 items.[5] In response, the Respondent submitted that, since the Applicants were not seeking additional categories of general service charges, that should be the end of the matter.
- [24]However, the Applicants went on to submit that the prior-year surplus of $40,000, which the Tribunal previously ruled must be taken account in the budget, should be apportioned across the general service charges. What is required by the dicta in Ash extracted above is the identification in the budget or by way of a separate schedule of each general service charge. The budget identifies a charge for “maintenance fees” and the revenue from charges for electricity, water, telephone and internet. There is also a small sundry item that the Applicants do not take issue with.
- [25]There is no requirement that a carried-forward surplus be applied in calculating any particular charge; merely that the surplus be “taken into account in adopting the general services charges for the budget”. The Respondent has done that.
- [26]In any case, it is difficult to see what purpose would be served by apportioning the surplus against each general service charge or the cost of each general service. Such an exercise would involve artificially breaking up what is in reality a single surplus amount and would tend to obscure rather than advance transparency.
- [27]For these reasons, I decline to make any order requiring the recasting of the budget.
- [28]This completes consideration of the application. As each of the Applicants’ submissions has been rejected, the application will be dismissed.
Footnotes
[1] All legislative references are to the Act unless otherwise indicated.
[2] Scouller and Anor v Stockland Property Services Pty Ltd [2017] QCAT 347.
[3] Australian Retirement Homes Ltd v Ash [2013] QCA 355.
[4] Ibid, [47].
[5] A submission to this effect was rejected in the earlier reasons: Scouller and Anor v Stockland Property Services Pty Ltd [2017] QCAT 347, [50]–[55].