Williams v Carlyle Villages Pty Ltd
[2008] QSC 304
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- Unreported Judgment
- Appeal Determined (QCA)
- Williams v Carlyle Villages Pty Ltd[2008] QSC 304
- Add to List
Williams v Carlyle Villages Pty Ltd[2008] QSC 304
Williams v Carlyle Villages Pty Ltd[2008] QSC 304
SUPREME COURT OF QUEENSLAND
CITATION: | Williams v Carlyle Villages Pty Ltd [2008] QSC 304 |
PARTIES: | JOHN JOSEPH WILLIAMS (applicant) v CARLYLE VILLAGES PTY LTD ACN 075 243 800 (respondent) |
FILE NO/S: | SC No 921 of 2007 (Townsville) |
DIVISION: | Trial Division |
PROCEEDING: | Originating Application |
ORIGINATING COURT: | Supreme Court at Townsville |
DELIVERED ON: | 26 November 2008 |
DELIVERED AT: | Brisbane |
HEARING DATE: | 6 November 2008 |
JUDGE: | Dutney J |
ORDER: |
|
CATCHWORDS: | RETIREMENT VILLAGES – Retirement Villages Act 1999 Where applicant entered into a contract with the respondent for the lease of a unit at a retirement village operated by the respondent – Where applicant paid an ‘ingoing contribution’ – Where applicant surrendered lease – Where unit subsequently let to a third party in exchange for an ingoing contribution higher than the ingoing contribution paid by applicant – Whether applicant entitled to ingoing contribution paid by third party STATUTES – Interpretation – Whether Retirement Villages Act can be interpreted to suggest a proprietary right beyond the ‘right to reside’ Retirement Villages Act 1999 (Qld) |
COUNSEL: | M Stewart SC with C Cuthbert for the applicant M Amerena for the respondent |
SOLICITORS: | Guides & Elliott Solicitors for the applicant Munro Thompson Lawyers for the respondent |
- The applicant, Mr Williams is a retired man in his eighties.
- The respondent, Carlyle Villages Pty Ltd owns and operates a retirement village in Condon, near Townsville (“the retirement village”).
- In late 2001, the applicant and his late wife entered into a contract with the respondent to lease an accommodation unit at the respondent’s retirement village (“Unit 196”). In exchange, the applicant paid $150,649.00 as an ingoing contribution to the respondent.
- Six years later the applicant terminated the lease. The respondent subsequently entered into a new lease with a third party in respect of Unit 196 for which the third party paid to the respondent as an ingoing contribution, $345,000.00.
- The applicant seeks declaratory relief to the effect that he is entitled, not only to the $150,649.00 that he paid to the respondent for his lease, but also the $345,000.00 paid to the respondent by the third party.
- The respondent cross-applied to the opposite effect of the applicant’s application. The respondent previously sent a cheque to the applicant for the sum of $150,058.10 (being the amount paid by the applicant as an ingoing contribution minus administration fees).The respondent later discovered that the applicant overpaid monies to the respondent in the sum of $238.19. Consequently, the respondent does not dispute that the applicant is entitled to the sum of $150,296.29. Therefore the only issue for the court to consider is the entitlement to the $345,000.00 paid to the respondent by the third party.
The Lease and the Retirement Villages Act 1999 (Qld)
- It is not disputed that the Retirement Villages Act 1999 (Qld) (“the Act”) applies to the dispute.[1]
- As Unit 196 was not constructed until April 2002, the applicant and his late wife signed an Agreement to Lease Unit 196 dated 13 December 2001. In April 2002 the applicant and his late wife moved into Unit 196, at which stage a Lease was signed and registered.
- Prior to signing the Agreement to Lease, the applicant was also provided with a Public Information Document (“PID”) which contains specific information about the retirement village and essentially reflects many provisions of the Act.[2]
- It is not disputed that the Lease was later substituted in the Department of Natural Resources with an amended version to account for some inaccuracies on the plan attached to the Lease.
- Collectively, these documents form what the Act terms as the residence contract.[3]
- The following terms of the PID are relevant to the determination of this dispute:
PART 1 - GENERIC INFORMATION
CHAPTER 2 - RESIDENTS' RIGHTS AND OBLIGATIONS INFORMATION
General
- A scheme operator can only enter into a residence contract with a prospective resident if the scheme is registered. A prospective resident must be given a copy of the registration certificate.
- Before a residence contract is signed, a prospective resident must be given copy of this PID.
Termination and Refunds
- A resident has the right to terminate a residence contract without penalty within 14 days after both parties have signed the residence contract. If a residence contract is terminated within this time the resident is immediately entitled to a full refund of any money paid to the scheme operator or stakeholder. The scheme operator must advise the resident of the date on which the cooling off period commences. As noted in this PID, a resident includes a person who enters into a residence contract and who acquires the right toreside and also includes a person or entity that enters into a residence contract and who acquires the right to reside on behalf of another person who is to live m the retirement village.
- If a residence contract is terminated after the 14 day cooling off period, the resident is entitled to an exit entitlement as set out in Part 3.
- If a resident terminates a residence contract, notice of the termination must be given to the scheme operator. The address for service of the notice of termination to the scheme operator is in Part 3.
- If:
(a)a residence contract is terminated after the 14 day cooling off period;
(b)the resident stops residing in an accommodation unit; or
(c) the resident sells or assigns a right to reside in an accommodation unit,
the resident is entitled to an exit entitlement calculated as set out in Part 3.
- A resident has a right to terminate a right to reside by giving one (1) month's written notice to the scheme operator. If the right to reside is terminated, the process for sale depends on whether the scheme operator has or does not have a controlling right to sell the right to reside. This is described in Part I Chapter 2.
- If the scheme operator has a controlling right to resell the right to reside, the resident and scheme operator must attempt to agree on the price for resale and the scheme operator must tell the resident of all offers to purchase the accommodation unit or the right to reside. If the scheme operator and resident cannot agree on a resale price, the scheme operator must obtain a valuation of the right to reside from a valuer.
……….
Accommodation Unit Details
- The accommodation unit you have selected is Accommodation Unit No
- 196
- at
- Carlyle Gardens Townsville
- Beck Drive
- CONDON QLD 4815
(print full name and address of retirement village)
of approximately
197.339
square metres marked on the plan attached to this PID (Attachment 6).
3.4 The ingoing contribution/Loan Amount for the accommodation unit is
$150,649.00
……….
3.6 The tenure that you will receive in your accommodation unit is:
[ ]freehold tenure;
[ ]leasehold tenure;
[ ]licence;
[ ]other- specify.
…….
Exit Fee
3.9 When you leave the accommodation unit, an exit fee may be payable to the scheme operator.
3.10The exit fee for your accommodation unit is calculated as follows:
An exit fee is not payable to the scheme operator.
3.11The minimum exit fee is:
Not applicable as an exit fee is not payable to the scheme operator.
The maximum exit fee is
Not applicable as an exit fee is not payable to the scheme operator.
3.12Examples of exit fee:
Not applicable as an exit fee is not payable to the scheme operator.
(Where the amount of the exit fee depends on the sale price obtained when the accommodation unit is sold, the scheme operator does not warrant that the sale prices used in the calculation examples will in fact be achieved at the time of sale.)
Exit Entitlement
3.13When you leave the accommodation unit, you may receive an exit entitlement.
3.14The 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 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 operator’s right to set off the amounts set out 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 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).
3.15 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 deduced from the repayment of the loan
Example - Assuming loan amount is $150,000 | ||||||||||||||||||||||||||
| ||||||||||||||||||||||||||
Exit Entitlement calculation: Loan Amount Less Capital Depreciation (if any) Less other Deductions (if any) Exit Entitlement |
| |||||||||||||||||||||||||
| ||||||||||||||||||||||||||
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 following terms of the Agreement to Lease and Lease are relevant to the determination of this dispute:
FIRST SCHEDULE
ITEM 1:Name and address of Resident:
John Joseph & Josephine May Williams
ITEM 2: Unit No:
196
ITEM 3: Unit completion date:
04/04/2002
ITEM 4:Term of Lease:
Commencing on the Commencement Date (clause 1) and expiring on the first to occur of:
- the date that is ninety (90) years after the Commencement Date; and
- the date of the Resident's death or, if there is more than one Resident named in Item 1 of this schedule, the date of the death of the survivor of them.
ITEM 5: Loan Amount:
$150,649.00
………….
10. NOTICE OF INTENTION TO SURRENDER AND TERMINATION OF LEASE
10.1Notice of Intention to Surrender
10.1.1The Resident may at any time during the term of the Lease give written notice to the Scheme Operator of the resident's intention to surrender the Lease and vacate the Accommodation Unit.
10.1.2Despite the giving of a notice under clause 10.1.1 the Lease shall continue in full force and effect until the Lease terminates under clauses 10.2, 10.3 or 10.4.
10.2 Termination by Resident
10.2.1The Resident may at any time during the term of the Lease give written notice to the Scheme Operator terminating the Lease, whether or not the Resident has given the Scheme Operator a notice under clause 10.1.1.
10.2.2If the Resident gives a notice under clause 10.2.1 the Lease terminates:
- 1 month after the date the notice is given; or
- if the Resident and the Scheme Operator agree on an earlier time, the time agreed.
- It can be seen from these provisions that it is clear that the applicant was to pay to the respondent the sum of $150,649.00 by way of an ingoing contribution/loan amount.
- The applicant’s wife passed away in December 2002 however the applicant continued to reside in Unit 196 until late 2007.
- On 14 August 2007, the applicant wrote to the respondent lawfully terminating his residence contract in respect of Unit 196 effective as of 14 September 2007.
- Pursuant to the residence contract, and the Act, the effect of termination is that the applicant was then entitled to be paid an exit entitlement. In the applicant’s case, this exit entitlement was the full amount of the incoming contribution minus any administration expenses, which on the respondent’s initial calculation totalled $150,058.10.
- The applicant having terminated the contract, the respondent acquired the right to grant a new lease over the unit as it acquired the controlling right to resell the right to reside.
- Subsequently, the respondent entered into a new residence contract with a third party for a lease of Unit 196. The third party paid to the respondent a sum of $345,000.00 for the right to reside in Unit 196.
- The applicant contends that the language of the Act and a proper interpretation of the residence contract suggest that he acquired a proprietary interest in Unit 196 entitling him to the relief he seeks.
- There is no provision in the residence contract which specifically states that the applicant has a right to the incoming contribution paid by the third party. There are a number of clauses in the residence contract which refer in passing to ‘capital gain’. For example in clause 3.14 of the PID, the calculation process for the exit entitlement is explained and the clause invites the draftsperson to ‘Where applicable, set out details about participation in capital gains/losses’. However, references such as this do not, in themselves, entitle the applicant to a ‘capital gain’.
- In my opinion, clause 3.14 of the PID makes it abundantly clear that there is no contractual entitlement to capital gain in this case. The exit entitlement is expressly limited to the loan amount less the specified deductions set out by reference to the bullet points. There is no provision for the exit entitlement to exceed the loan amount.
- Since the interest held by the applicant before termination was only a leasehold interest, his rights following termination were then limited to those contained in the residence contract or the Act.
- It was suggested by Counsel for the applicant, possibly as a direct result of references in the residence contract to the word ‘capital gain’, that because the value of the incoming contribution increased from $150,649.00 as paid by the applicant to $345,000.00 paid by the third party, a capital gain was made upon the right to reside in Unit 196 being resold to the third party. This interpretation is incorrect. The nature of the incoming contribution is defined in s 14 of the Act and relevantly provides;
14 What is an ingoing contribution
(1) An ingoing contribution is the amount payable by a person under a residence contract to secure the person's, or someone else's, right to reside in a retirement village, but does not include a recurrent payment for rent, fees or charges.
(2) It is immaterial whether--
(a) the right to reside in the village is enforceable or not; or
(b) the payment alone secures the right, or something else is also required to secure it.
- Despite the obvious inaccuracy, the PID uses the term capital gain or capital loss to refer to the difference between the ingoing contribution of the tenant as compared with the succeeding tenant. That terminology would not of itself suggest any entitlement on the part of the applicant both to the return of his own ingoing contribution and the whole of the ingoing contribution of the next tenant, not as a loan but absolutely.
- The incoming contribution itself is held by the respondent for the duration of the incoming parties’ period of occupation of Unit 196.[4] Presumably the interest generated by the incoming contribution during this period of occupation is the primary source of revenue for the respondent’s business. The increase in value as between the applicant’s and the third party’s incoming contributions is simply a result of the market value of the right to reside having increased.
- We can see from the provisions of the residence contract, and the Act, that subject to relevant fees being paid, the applicant, and the third party upon ending their occupation of Unit 196, are both entitled to the return of their respective incoming contributions. Viewed in this way, the incoming contribution begins to take the form of a security deposit paid to the respondent to secure a right to reside until such time as the resident no longer resides in the accommodation or until death. Since ultimately the parties are entitled to the return of their incoming contributions at the end of their occupation, it seems unlikely that the applicant could then also be entitled to a third party’s ingoing contribution when that third party’s contribution needs to be repaid at a later date.
- The Act sets out the minimum requirements for the content of a residence contract.[5] Notwithstanding that the forms constituting the contract may be statutory forms,[6] there are opportunities in the residence contract for the parties to stipulate terms that are more beneficial for the resident. For example, clause 3.6 of the PID allows the parties to tick one of four boxes indicating the type of interest acquired under the residence contract. In the applicant’s case, the leasehold interest was chosen for a term of 90 years.
- It is a pre-requisite in order to reside in the retirement village that a resident be at least fifty years of age before entering into the residence contract.[7] As a result, obviously it was never intended that a resident was to ever actually reside in the unit for the entire 90 year term.
- The applicant terminated the residence contract on 14 August 2007. As a result, his leasehold interest in Unit 196 which had legally preserved his right to reside in that unit was extinguished as of 14 September 2007. If the parties intended for the applicant to acquire a more substantial proprietary interest in Unit 196 beyond merely the leasehold interest the applicant had during his occupation, it would have specifically been stated in the residence contract. Clause 3.6 clearly makes a freehold interest option available but the parties did not select this option.
- Clauses 3.14 and 3.15 of the PID further illustrate this point. Following the words in clause 3.14 which state ‘Where applicable, set out details about participation in capital gains/losses’, the residence contract goes on in clause 3.15 to discuss the applicant’s exit entitlement in the situation where the value of the unit incurs a capital loss. It is at this point of the residence contract that one might expect there to be an example of the applicant’s exit entitlement in the event that a capital gain occurs. This having not been written into the contract, it can only be assumed that the parties intended that the applicant have no entitlement to any ‘capital gain’ in relation to Unit 196.
- To support his submission, the applicant relied heavily upon the provisions of Part 3 Division 5 of the Act which relate to the procedures for reselling the right to reside. For example, s 60 of the Act suggests that the resident and the scheme operator should agree on a value for which the accommodation unit should be resold.[8] Again, the terminology obscures the reality. The applicant having terminated his own lease, the respondent is entitled to relet the unit on the terms of a new lease.
- The applicant is correct in that the sections encompassed in Part 3 Division 5 of the Act tend to encourage the outgoing resident’s participation in the resale process. However I do not accept that this participation is because the resident acquires a proprietary right in the property upon the resale.
- In practical terms, the scheme operator will not always be in a position to immediately return the incoming contribution or the exit entitlement to an outgoing resident. Rather, repayment of the exit entitlement will often depend upon the resale of the right to reside. It follows that the outgoing resident will always have a vested interest in the resale of the right to reside in the accommodation unit and this is accounted for in Part 3 Division 5 of the Act by encouraging the outgoing resident’s participation. The applicant’s submissions in respect of Part 3 Division 5 must be rejected.
- The applicant also pointed to ss 90 & 90A of the Act which provide;
‘90 Responsibility for capital improvement of retirement village
(1)A scheme operator is solely responsible for the cost of the retirement village's capital improvement, including the capital improvement of the retirement village's communal facilities owned by the scheme operator.
(2)This section applies subject to sections 90A and 90B.
90A Responsibility for capital improvement of resident's accommodation unit
(1)This section applies if--
(a)a resident gives the scheme operator a written request for a particular capital improvement to the resident's accommodation unit; and
(b)the scheme operator makes or agrees to make the capital improvement.
(2)The resident is solely responsible for the cost of the capital improvement’.
- These sections suggest a relationship between the parties that is more akin to a landlord/tenant relationship rather than providing support for the applicant’s contentions.
- 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.
- 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.
- For the reasons I have stated I make the following orders;
- I dismiss the applicant’s application
- I declare that the amount of the Applicant’s entitlement under the Retirement Villages Act 1999 is $150,296.29
- I declare that other than for the exit entitlement referred to in order 2, the Applicant is not entitled to the payment of any further monies from the Respondent
- I order the applicant to pay the respondent’s costs of the application to be assessed on the standard basis.
Footnotes
[1] s 23 Retirement Villages Act 1999 (Qld).
[2] See s 13 of the Retirement Villages Act 1999 (Qld).
[3] See ss 10 & 37 of the Retirement Villages Act 1999 (Qld).
[4] See s 46 of the Retirement Villages Act 1999 (Qld).
[5] See s 42 of the Retirement Villages Act 1999 (Qld).
[6] See s 74 & 227 of the Retirement Villages Act 1999 (Qld).
[7] See clause 3.10 of the PID.
[8] See also ss 64 – 70A of the Retirement Villages Act 1999 (Qld).