Armstrong v Kawana Island Retirement Village Pty Ltd
[2013] QCAT 60
| CITATION: | Armstrong v Kawana Island Retirement Village Pty Ltd [2013] QCAT 60 |
| PARTIES: | Leslie James Armstrong (Applicant) |
| v | |
| Kawana Island Retirement Village Pty Ltd (Respondent) |
| APPLICATION NUMBER: | OCL132-11 |
| MATTER TYPE: | Other civil dispute matters |
| HEARING DATE: | 6 August 2012 5 February 2013 |
| HEARD AT: | Brisbane |
| DECISION OF: | Susan Gardiner, Member |
| DELIVERED ON: | 11 February 2013 |
| DELIVERED AT: | Brisbane |
| ORDERS MADE: | 1. The application is dismissed. |
| CATCHWORDS : | RETIREMENT VILLAGES – where a photocopier leased by the village operator – where previously considered as a general service accounting item and allocated under that budget – where used by staff and residents – whether rental and service and repairs of copier a capital charge to be paid by the village operator – definitions of general service charges and capital Items considered - where the copier not found to be a capital item Retirement Villages Act 1999 ss, 17, 19, 90, 97, 113A, 191, Dictionary Schedule Jomal Pty Ltd v Commercial and Consumer Tribunal [2009] QCA 326 followed |
APPEARANCES and REPRESENTATION (if any):
| APPLICANT: | Mr Les Armstrong in person |
| RESPONDENT: | Mr Michael Amerena, Barrister |
REASONS FOR DECISION
Kawana Island Retirement Village is owned and operated by Living Choice Australia Ltd. The Village has a photocopier in its general administration area. It sits in a locked room accessed only by the staff of the village. It is used by administration staff in the normal course of village business.
Residents are also able this copier, although Mr Armstrong alleges, only having first gained the consent of staff members who act as gate keepers to the copier and that usually, the copying is done by staff members. If the copying is used for village purposes, e.g. the resident’s newsletter, there is no charge (other than those discussed below) but if the copying is for personal use, the fee to residents is 10 cents per page.
Photocopiers of one sort or another have been in place in the administration area since January 2005. The current machine (along with machines in other villages) is leased under a rental agreement between Living Choice and Toshiba Australia Finance Pty Ltd, dated 1 January 2010. The rental agreement covers the machine only. There is a separate service agreement for the operating costs (maintenance, repairs and ongoing consumables).
The first photocopier rental in 2005 was of a Sharp copier from S.E. Rentals Pty Ltd. In 2008 a change was made to rent from Toshiba. The Sharp charges were allocated to the general services expenditure in the 2006/07 year. There was some negotiation in the 2007/08 and 2008/09 years between the parties about the charges, but from 2009/10 until now, Living Choice says the Toshiba copier charges (both the rental and service) have been included in the general services budget and charged to residents as part of their general services charge.
Mr Armstrong disputes both these charges being charged as a general services charge. He says that under the Retirement Villages Act 1999, the first time provision of the copier in 2005 was a capital improvement[1] and that, as the machine is a capital item, Living Choice must bear the costs of providing the copier as a capital amount, not the residents. Mr Armstrong accepts that the residents should bear part of the costs of the service agreement (the consumables) for the machine but says Living Choice should pay the rental agreement and the servicing and repairs of the machine as a capital item. As a resident, Mr Armstrong says he has a genuine interest in ensuring that no inappropriate amounts are included in the general service charges.
[1]Retirement Villages Act 1999; Schedule Dictionary definition of ‘capital improvement’ includes the first time provision of a capital item.
Living Choice denies that the provision of the copier is a capital item saying it is a general service provided to residents. If Mr Armstrong is right, he says the charges applied for the rental of this machine and its predecessors, where they have been applied as a general services charge should potentially be refunded to the residents and there should be a different accounting process necessary for parts of the servicing of the copier.
So, how should be provision of a photocopier be classified? Is it a capital item (as alleged by Mr Armstrong) or a general service (as argued by Living Choice)? The parties agree that the copier is a piece of ‘equipment’ and that subsection ‘b’ of the definition of ‘capital items’ is the relevant subsection in this matter.
The relevant section of the Retirement Villages Act 1999[2] defines ‘capital items’ as including the following:
(a) …
(b)all plant, machinery and equipment used in the operation of the village, other than items that are body corporate property;
Examples for paragraph (b)—
communal hot water and air conditioning services, kitchen and dining room equipment, community facility furnishings, gardening equipment, village bus or transportation services
(c) ...
[2] Retirement Villages Act 1999; Schedule Dictionary.
Mr Armstrong says the copiers are capital items because:
a) The definition of the range of ‘capital items’ above is not limited as evidenced by the use of the word ‘including’.
b) Subparagraph ‘b’ in the definition is concerned with chattels or moveable items of equipment referring to plant, machinery and equipment used in the operation of the village other than items that are body corporate property. This is also not confined to items owned by the operator as this subparagraph specifically omits the words ‘owned by the scheme operator’ that appear in the other two subparagraphs.
c) This drafting of subparagraph ‘b’ omitting the words ‘owned by the scheme operator’, includes arrangements that do not give the operator legal ownership such as leases, rental agreements and hire purchase agreements.
d) Because the copier is an item ‘used in the operation of the village’ it must be a capital item even though it is only subject to a rental agreement – because subparagraph ‘b’ allows for this rental arrangement to come within the definition.
If it is a capital item, Mr Armstrong says that the acquisition of the first copier in 2005 was a ‘capital improvement’, defined under the Schedule to the Act as meaning ‘the first time provision of a capital item’ and is also the responsibility of Living Choice[3].
[3] Retirement Villages Act 1999; s 90(1).
Further, if it is a capital item, maintaining and repairing it should be paid by Living Choice from the sinking fund known as the ‘maintenance reserve fund’ (MRF)[4] not from the general services fund, although both of these funds are funded by residents. Consumables, Mr Armstrong agrees should be paid from the fund for general services.
[4] Retirement Villages Act 1999; s 97.
As a capital item, Mr Armstrong says Living Choice have contravened s 90 of the Retirement Villages Act 1999 as it is solely responsible for the cost of the village’s capital improvement.
This argument is attractive in its pleasing simplicity. When the definition is considered in isolation, a plain reading of the words does support Mr Armstrong’s argument. The problem however for Mr Armstrong’s contention is the very isolation of his suggested interpretation.
The recent decision of Jomal Pty Ltd v Commercial and Consumer Tribunal[5] is authority for the need to interpret legislation in the light of the objects or purposes of the Act in which it sits. This seems to me to be particularly important when dealing with definitions in a statutory dictionary.
[5] [2009] QCA 326 per Keane JA (as he then was) at 425-6.
Counsel for Living Choice took a more complicated but ultimately compelling journey through the legislation to conclude that the copier is not a piece of equipment caught by paragraph (b) of the definition of ‘capital items’.
The route is as follows. Living Choice first submits that copying for individual residents is a personal service and not part of the general services charge and therefore an irrelevance to the interpretation point. I accept this.
Then, standing outside the legislation, Counsel first addressed the classification of the copier under the general accounting principles. The copier is rented. Living Choice has no ownership at any level and no entitlement in the future to obtain ownership. The rentals are short term with monthly repayments. There is no capital value accrued by Living Choice associated with the rental agreement now or in the future.
Under general accounting principles[6], the copiers would be classified as revenue expenditure. The copies are not asset expenditure forming part of the assets of the village because Living Choice has no title to the asset now and no title anticipated in the future. So under general accounting principles the copier would be part of the general services budget and charged to residents as part of their general services charge – as it is currently in the village budget.
[6]Counsel referred the Tribunal to: Yorkson, K and E Smyth Elementary Accounting 5th ed 1975 Law Book Company Sydney and although an older edition, Counsel assured the Tribunal that these principles remained the same to the current date.
Section 90 states that Living Choice as scheme operator is solely responsible for the cost of the retirement village’s capital improvement (my emphasis). ‘Capital improvement’ is defined in the schedule to the Act as meaning the first time provision of a capital item. Contravention of this section will only be relevant if the copier is a capital item.
Does the Retirement Villages Act 1999 change the generally accepted accounting position for the classification of the copier?
In order to answer this, the starting point is to try to isolate what the Retirement Villages Act 1999 allows as classification of expenditure. An amendment to the Act in 2006 (s 113A) lists potential expenditure groups as being the capital replacement fund; the maintenance reserve fund; or a levy as a general charge.
Classification as falling into the ‘capital replacement fund’[7] or the MRF[8] presupposes the item is capital – clearly only of use if that determination is made and also not applicable to the initial acquisition of the copier.
[7] Retirement Villages Act 1999; s 17.
[8] Retirement Villages Act 1999; s 19.
The final possible category is a levy as a general charge and this is the classification Living Choice submits as appropriate.
‘General services’ are defined under the Schedule to the Act as being services supplied or made available to all residents of the village. The relevant example given is ‘management and administration’ – both of which Living Choice says, are to be distinguished from operational matters.
Living Choice submits this ability to distinguish between management, administration and operational matters is highlighted by the very Part of the Act (Part 5) that includes s 90 (the section Mr Armstrong alleges Living Choice has contravened). The Part is headed ‘Operations of schemes for, and management of, retirement villages’.
Following further down this line and returning to the definition of ‘capital items’ under the schedule, subsection ‘b’ (agreed by the parties as the relevant part of the definition) states that ‘capital items’ includes ‘all plant, machinery and equipment used in the operation of the village’ (my emphasis again added).
If it is reasonable to maintain the distinctions between management, administration and operational matters, this distinction limits the boundaries of capital items. This distinction is re-enforced by the examples given in the Act in this subsection. The examples given – communal hot water and air conditioning services, kitchen and dining room equipment, community facility furnishings, garden equipment, village bus and transportation services do not have the characteristics of direction or control that would be inherent in management or administration but do appear to relate to the operations of the village directly, in other words the ‘nuts and bolts’ of village life.
I am satisfied that the distinction highlighted by Living Choice in subparagraph ‘b’ of the definition of ‘capital items’ is valid when the legislation is considered as a whole and not in isolation. This also accords with the objects of this Act as set out in s 3 by clarifying the rights and obligations of both the scheme operator and the residents and to ‘strike a balance in so far as the pursuit of the legislature’s objectives are concerned’[9].
[9]Jomal Pty Ltd v Commercial and Consumer Tribunal [2009] QCA 326 per Keane JA (as he then was) at 425.
Based on the above, the copier is not caught by the definition of ‘capital items’ in the Schedule to the Act and the copiers would remain classified as they do under the general accounting principles as revenue expenditure, not asset expenditure forming part of the assets of the village.
Living Choice has therefore not contravened s 90 of the Act and Mr Armstrong’s application (which includes an application for costs) is dismissed.
I record my thanks to counsel and to Mr Armstrong for their able assistance in the interpretation of this complex legislation.
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