Brewster v Woodlands Retirement Village Ltd

[2024] NSWCATCD 13

Civil and Administrative Tribunal

New South Wales

Medium Neutral Citation:

Brewster v Woodlands Retirement Village Ltd [2024] NSWCATCD 13

Hearing dates:

2 November 2023

Date of orders:

12 January 2024

Decision date:

12 January 2024

Jurisdiction:

Consumer and Commercial Division

Before:

G Sarginson, Senior Member

Decision:

(1) The application is dismissed.

Catchwords:

LEASES AND TENANCIES---Legislation protecting tenants---Retirement Villages Act 1999 (NSW)---Calculation of recurrent charges---Whether terms of contract harsh, oppressive, unconscionable or unfair

CONTRACTS---Unjust contracts---Contract Review Act 1980 (NSW)---Disparity monthly recurrent fees between different sized residences in retirement village---Whether terms of contract harsh, oppressive, unconscionable or unfair

Legislation Cited:

Contracts Review Act 1980 (NSW)

Retirement Villages Act 1999 (NSW)

Cases Cited:

Balagiannis v Balagiannis [2022] NSWCA 18

Cong v Shen (No 3) [2021] NSWSC 947

In the matter of Reserve Hotels Pty Limited [2021] NSWSC 376

Kowalczuk v Accom Finance Pty Ltd (2008) 77 NSWLR 205; [2008] NSWCA 343

Provident Capital Ltd v Papa (2013) 84 NSWLR 231; [2013] NSWCA 36

Re Elsmore Resources Ltd (2016) 114 ACSR 297; [2016] NSWSC 856

Riz v Perpetual Trustee Australia Limited [2007] NSWSC 1153

West v AGC (Advances) Ltd (1986) 5 NSWLR 610

Texts Cited:

None cited

Category:

Principal judgment

Parties:

Ronald Arthur Brewster (Applicant)
Woodlands Retirement Village Ltd (Respondent)

Representation:

R Brewster, self-represented (Applicant):
J Coles, solicitor (Respondent)

Solicitors:
Vinden Lawyers Pty Ltd (Respondent)

File Number(s):

2023/00382807 (Previously RV 23/35412)

Publication restriction:

Nil

REASONS FOR DECISION

1. This is an application by a resident of a retirement village to vary the terms of his village contract on the basis that the terms are harsh, unfair and/or unconscionable under s 123 of the Retirement Villages Act 1999 (NSW) (RV Act).

2. The applicant resides in a building of the village identified as “The Lodge.” There are other units/apartments at the village known as “Garden Units.” There is currently a mixture of units/apartments at the village between independent living and assisted living units.

3. The retirement village operates under company title.

4. The dispute involves the amount of recurrent monthly charges that the resident is paying for independent living at ‘The Lodge,’ in comparison to recurrent charges paid by other residents for independent living in the ‘Garden Units.’

5. In essence, the applicant asserts the monthly fees for independent living in ‘The Lodge’ are significantly more expensive than those in the ‘Garden Units’ when calculated on the size of the respective units/apartments. The applicant asserts those persons living in independent living in the Garden Units pay significantly less than he is paying when the square meter size of the respective units/apartments are compared.

6. In this decision, any reference to ‘the resident’ is a reference to the applicant and any reference to ‘the operator’ is a reference to the respondent.

BACKGROUND

7. On 23 September 2023, the applicant entered into a written village contact for the purchase of shares in a company title scheme in respect of an Independent Living Unit (ILU) at the village located in a building known as The Lodge.

8. Prior to signing the contract, the applicant was provided with a Disclosure Statement in accordance with s 18 (3A) of the RV Act.

Village Contact and Disclosure Statement

9. The written contract contains an acknowledgement that the resident had the opportunity to obtain legal advice prior to signing the contract, but chose not to do so.

10. According to the applicant, The Lodge was “originally designed to provide assisted living services for frail aged residents,” but in 2022 the operator determined to sell off a number of Lodge units as independent living units as the assisted living units were failing to sell.

11. The village contract signed by the applicant with the operator states as follows at cl. 27:

A. The Resident and Woodlands agree that this assisted living unit has been transitioned to an independent living unit at the date of entry into Woodlands Retirement Village by the Resident with its recurrent charges to be charged at the rate of recurrent charges applicable to an independent living unity within Woodlands Retirement Village. Woodlands Retirement Village acknowledges receipt of a payment equal to the difference between the recurrent charges for an assisted living unit and an independent living unit calculated for 31 months from the date of entry into Woodlands Retirement Village for this transition. With the consent of Woodlands Retirement Village this unit can be transitioned into an assisted living unit later in time.

B. The Resident hereby acknowledges to Woodlands that the Resident will receive only those services applicable to an independent living unit within Woodlands Village, notwithstanding that the Resident is occupying a lodge suite where other residents located in similar accommodation receive additional services to those provided by Woodlands for an independent living unit. The Resident agrees that Woodlands shall not be obliged to provide any additional services to the Resident other than those services provided to residents not residing in a lodge suite unless the Resident pays for those additional services in addition to the Resident’s normal recurrent charges.

12. The financial terms of the contract with the operator are set out in clauses A-M. Clause D states that the current recurrent monthly charges are $629.40 per month. Clause E states that the recurrent charges may be varied by a “non-fixed formula” (no more than once every 12 months) and sets out the method of varying the recurrent charges.

13. Clause A of the contract states the resident must pay the operator an “entry payment” of 2.5% for the purchase price of the shares as a non-refundable contribution to the Capital Improvement Fund, which is an additional amount to the amount paid to the outgoing resident as the purchase price for shares as agreed in the separate contract for sale of shares.

14. Clause 2 of the contract contains a “cooling off period” giving the resident the right to rescind the contract by giving a recission notice within 7 business days of signing the contract. That right is waived if the resident moves into the village.

15. Clause 3 contains a “settling in period” giving the resident the right to terminate the contract without notice. The “setting in period” is 90 days from the date that the resident is entitled to occupy the premises; or if the resident occupies before they have a legal right to do so, 90 days from the date of occupation; or any other date that the parties mutually agree in writing. Clause 3 sets out the charges the resident is liable to pay if the resident terminates during the “settling in period”.

16. Clause 18 contains reference to dispute resolution. That clause states that the resident is encouraged to raise disputes with the operator, but is not obliged to do so, and that the resident can take proceedings in NCAT without prior notice to the operator.

17. The Disclosure Statement relevantly sets out the following:

18. The premises in which the applicant expressed an interest is a Lodge Suite “Schedule A-Independent Living” and excludes “all standard services provided to Lodge Suites as this unit has been converted to an Independent Living Unit as outlined in Schedule B with any services accessed by the resident of the Lodge suite…as set out in Schedule B to be used on an optional service basis and paid for in addition to the recurrent charges.”

19. The current rate of recurrent charges is “$629.40 per month (Schedule A-Independent Living)”

20. In Part 6 “Financial Management” sets out that recurrent charges are usually varied in July each year. There is a table attached of comparable recurrent charges over the last 3 financial years for “1 bedroom garden unit”; “2 bedroom garden unit”; “Villa”; “Lodge A Type”; “Lodge AA Type”; “Lodge AAA Type”; and “Lodge Self-Care”.

21. The “Lodge Self-Care table” provides a comparative recurrent charge of $600 pw from 30 June 2022, with earlier periods being “Not Applicable” (presumably on the basis that 2022 was the first year that “Lodge Self-Care” units were available in the village).

22. The “Optional Services” in Schedule A and Schedule B. Schedule A states that the services are for “Independent Living Units Only (including those Lodge suites nominated as Independent Living units).” The rates are effective from 1 July 2022 and involve charges if the resident wishes to purchase meals from the village; bus fares; and maintenance charges for small maintenance jobs if the resident seeks for the maintenance manager to perform the works (residents being required to maintain the interior of their Apartments including fixtures and fittings). Schedule B states that the services are for “Lodge Suites Only but excluding Lodge Suites nominated as Independent Living Units.” The charges refer to laundry charges; bus trips and vacancy allowance. In respect of Schedule B, the document sets out what services are included in the levy payment to the village.

Minutes of Board Meetings

23. The applicant’s documents contained Minutes of the following meetings:

1. Annual Budget Meeting dated 18 May 2023.

2. Extraordinary Meeting “Independent Living units in the Lodge-Levy review” dated 13 June 2023.

3. Extraordinary Meeting “Woodlands Financial Future” dated 13 June 2023.

4. Board of Directors Meeting dated 29 August 2023

24. The Annual Budget Meeting included a number of questions posed to the General Manager by the applicant and other residents of The Lodge-Independent Living Units to the general manager of the operator.

25. Relevant to this application is the following:

We, the undersigned, question the significant difference in the levy between Independent Living “self-care” one bedroom unit, compared to an Independent Living one bedroom garden unit.

The self-care units (independent living) receive No Additional Services, we pay for electricity, do our own cooking, cleaning and laundry, we are Independent Living in identical circumstances to all the garden units and villas.

Comparative cost of all independent living dwellings

Bedroom garden unit=46.6 sq/m plus bathroom and laundry @$426

2 Bedroom garden unit @$523

1 Bedroom “self-care” unit=27.5 sq/m plus bathroom & use of Lodge laundry @$629

Garden Villa @$682

Considering our fully independent living “self-care” units are almost half the size of the one bedroom garden units, yet $200 a month more than one bedroom garden units:

On what basis are the Independent Living units in the lodge priced differently?

26. The General Manager of the operator (Ms Bennett) stated that a “full response would be forthcoming” but that reducing the fees of The Lodge-ICU residents would “come at a cost of $30,000 and recurrent fees of other residents would be affected”. The General Manager stated that fees can be different as a new model can be introduced by the operator, and that the dispute had only arisen because residents had compared their fees. The General Manager stated that the fees were clearly disclosed in the contract and the Disclosure Statement.

27. There was further debate and questions about the asserted disparity between the recurrent fees for The Lodge-ICU residents and Garden Units. According to the Minutes of the meeting, during the course of debate the question of the applicant was “returned to” and the General Manager stated (words to the effect) as follows:

It is not possible to change the agreed fees as these were presented and agreed to by the undersigned residents before they moved into Woodlands. When a potential resident is shown by the agent who sells the units, there is a decision to be made regarding what type of unit they wish to pursue, depending upon their budget available, as well as the ongoing costs involved. This is documented in both their Disclosure Statements and Service Agreements.

While the Gardens units levies are based on the relative size of the units, this is not the case with the Independent Living units in the Lodge. These fees were worked out as part of a holistic approach as to how to introduce a new model to the village, asking for an affordable rental while also keeping in mind the shortfall in fees from an assisted living unit, and how to keep this shortfall to a manageable level so that the vendor could pay the lump sum needed to enable the unit to be sold as Independent Living. It was also kept in mind, that the price of the unit could be kept to a level to fall beneath the Centrelink cut off for “non-home owners” so that the resident could apply for rental assistance.

The change that you are suggesting would remove over $29,000 from the income for the village. This would have to be added to other resident’s fees.

Perhaps in the future these fees can be gradually brought closer in line with the Gardens units, but for now they will remain the same.

Extraordinary Meeting on 13 June 2023-Independent Living Units in the Lodge-Levy Review

28. This meeting was held on 13 June 2023 (immediately after the meeting regarding the “financial future” of the village).

29. The meeting was to discuss the Motion that was tabled by the applicant (and supported by a number of other The Lodge-ILU residents) at the budget meeting on 13 May 2023 (but not formally voted upon) as follows:

This meeting agrees that this inequity be reviewed by the board of directors and the way the calculation for self-care lodge residences by brought into line with the rest of the village.

30. The Minutes state that it was decided the levy for The Lodge-ILU residents would remain the same for the following reasons:

The levy was discussed by the sales agent during the sales process.

During the preparation of the new operational model Independent Living units in the Lodge, a fair levy was decided upon , based on the fixed costs of the Lodge, the amount a prospective purchaser would be prepared to pay as a levy, and the amount the vendor could afford to pay as a lump sum form the sale of the unit. Both parties were pleased to choose this optional model as 1. The vendor was able to sell their unit which they had not been previously able to sell, and 2. The buyer could secure accommodation at a low capital outlay and an affordable levy charge. It is acknowledged that this way of calculating the levy for self-care lodge residences is different to calculation of the other levies, but that this is fair and legal, as checked with our company Solicitor and other independent industry bodies, both accountants and solicitors.

During the sales process, a Disclosure statement is issued by Woodlands to the prospective buyer, and the levy is disclosed on page 1 and page 6 and page 10 of this document.

During the sales process, a Disclosure statement is issued by Woodlands to the prospective buyer, and their legal representative and on page 2 there is a clear encouragement that during the 14 day cooling off period before you can sign a service agreement, you should use this time to read the contract carefully and seek legal advice if needed.

Contained within the Disclosure statement on p 5 and 6 is a table of every levy payable in the village including 1 bedroom garden unit, 2 bedroom garden unit, Villa, Lodge Type A, Lodge Type AA, Lodge Type AAA, and Lodge self-care. The comparison between different units can clearly be made from this document.

At the time of purchase, an agreement between the Vendor and Woodlands is signed, this acknowledges a lump sum payment has been made to Woodlands by the vendor, to make up the shortfall in the levy, between the previous Assisted Living levy, and the current Independent Living Levy.

At the time of purchase, a Service Agreement is signed. On page 25 of that Service Agreement is an Acknowledgement of Services, confirming that the resident will not receive the same services of Assisted Living residents in the Lodge.

Purchasers all engage a solicitor or conveyancer to assist them through the purchase process.

Any changes to the Independent Living levy in the Lodge has ramifications to the village budget, not only from the 8 Independent Living units currently in the Lodge, but from all Assisted Living units whose contracts were signed after November 2021. In order to attract purchasers to the Lodge, these have a clause whereby, after 24 months of active marketing, the unit has not been sold, then the levy will refer to the same levy of an Independent Living Lodge unit.

Residents of Independent Living units in the Lodge, in most cases also qualify for rental assistance as the capital outlay for their unit falls below the Centrelink deemed threshold for a “homeowner.” If a resident spends less than the threshold on their unit, they are deemed a “non-homeowner” and may receive a greater amount of pension pension, plus rental assistance.

If changes are made to this levy, then any shortfall has to be contributed by other residents across the village, which would not be fair as those residents who bought an Independent Living unit in the Lodge understood what they would be paying.

Board members were comfortable that incoming residents are very aware of the levies which they will pay, when coming into Woodlands, and the comparison with other levies across the village. They voted unanimously to make no changes to any levies presented in the 2023/2024 proposed and approved budget.

A letter will be issued to four undersigned residents. Minutes of this meeting will be issued to all residents and placed on the noticeboard.

Extraordinary Board Meeting Tuesday 13 June 2023-Woodlands Financial Future

31. The Minutes of that meeting set out the reasons why the operator converted Assisted Living Units in The Lodge to Independent Living Units; the transition in the village converting Assisted Living Units to Independent Living Units over the next two years; and the financial impact on residents.

Board of Directors Meeting 29 August 2023

32. The Minutes of that meeting refer issues including the operator engaging legal advice and representation regarding the NCAT proceedings by the applicant; further issues regarding the process of converting Assisted Living Units to Independent Living Units; the invitation of the applicant to a board member Mr Richardson to attend “a meeting of some Lodge residents that evening” (which Mr Richardson declined); there to be the Annual General Meeting on 5 October 2023 (“if financials are available”) and a Forum for Lodge Residents on 1 September 2023 to “clarify the proposed changes to Assisted Living to take effect from 1 July 2024 and which are to (sic) presented for approval by residents at a meeting on Thursday 5 October 2023”.

Statement of the Applicant Dated 18 September 2023

33. The statement of the applicant sets out his evidence of relevant factual events, and, in essence, his submission as to why the village contract is harsh, oppressive, unconscionable or unfair.

34. The applicant states as follows:

1. He has been a resident of the village since 1 November 2022.

2. He “investigated” the village after seeing a unit advertised for $160,000.

3. He did not “at this point” understand the distinction between Assisted Living and Independent Living and it was “explained” that the village was “trialling a new model.” To “compensate” the operator for the difference between Assisted Living and Independent Living a lump sum of $40,000 was paid to the operator, which raised the purchase price from $160,000 to $200,000.

4. The applicant was aware of the lump sum payment to the operator and that the “additional” $40,000 was to compensate the operator for the difference between Assisted Living and Independent Living monthly fees.

5. It was “not clear” in the contracts or the “discussion” with the operator that monthly levies for an Independent Living Unit at The Lodge were “at roughly double the rate per square metre as the rest of the village.”

1. It was “never revealed” that the monthly levy of The Lodge ILU’s “was calculated to co-contribute with the “Vendor’s Lump Sum” in perpetuity.”

2. It was only when the 2023/2024 budget was circulated to residents that the applicant was able to see that his fee increase was “significantly above all but the largest unit types within the Village”.

3. The operator had never provided “any reasonable explanation” as to why The Lodge-ILU’s paid proportionally higher monthly fees/levies despite being the smallest in the village.

35. The applicant’s documents also contain statements from Mr Martin and Ms Foster (who are also residents of The Lodge-Independent Living Units) that make similar assertions to those contained in the statement of the applicant.

Notice of Recurrent Charges/Levies Increase for 2023/2024

36. The applicant’s documents contain the notice sent by the operator to residents dated 8 June 2023 of recurrent charges increases for the 2023/2024 financial year. The notice states that the Budget meeting on 18 May 2023 had approved an increase of 8.5% in recurrent charges (taking effect from 1 July 2023) and the relevant increases (Garden Units and Lodge-Independent Living) were as follows:

1. 1 bedroom garden unit-$425.47 to $461.63

2. 2 bedroom garden unit-$523.66 to $568.17

3. Villa-$682.94 to $740.99

4. Lodge-Independent Living-$629.40 to $682.90

37. The applicant’s documents also contained a comparison of floor plans for 1 bedroom Garden Unit; 2 Bedroom Garden Unit; Villa; and The Lodge-Independent Living Unit which the applicant relied upon to assert that the size of a Lodge-ILU was significantly smaller than the equivalent 1 and 2 bedroom Garden units and Villa units.

Proceedings in the Tribunal

38. The applicant commenced proceedings in the Tribunal on 2 August 2023.

39. The order sought by the applicant was that “recurrent charges be amended to align equitably with the level of recurrent fees levied across other independent units across the Village as agreed in a motion placed before the shareholders. That is, the amount of recurrent fee levied for our (sic) units is calculated on the number of square feet of the unit at the standard rate applied across the village at the standard rate applied across the village. This change to come into effect on 1 July 2024”.

40. The matter was listed for a directions hearing on 29 August 2023 before Wilson SM. The matter was set down for hearing with procedural directions regarding the filing and serving of documentary evidence. At that directions hearing, the applicant appeared and Ms Vinson, Solicitor, appeared for the respondent.

41. The Tribunal made a consent order that both parties could be legally represented if they chose to do so, on the condition that the respondent would not make a costs application against the applicant.

42. The application filed with the Tribunal referred to a number of persons being “applicants.” However, this type of proceedings under the RV Act is not a type of proceedings where one applicant can engage in representing a number of applicants. Accordingly, Wilson SM made an order that any other residents seeking to be joined as applicant to the proceedings had to write to the Tribunal and the respondent by 5 September 2023 seeking leave to be joined as applicants and setting out the basis they sought to be joined as parties to the proceedings.

43. No other residents complied with that procedural direction. Accordingly, the applicant is the only applicant in the proceedings.

44. The applicant filed documents with the Tribunal on 25 September 2023. Those documents relevantly included the documents that have been referred to previously in this decision. Those documents were admitted into evidence at the hearing, subject to weight and relevance.

45. No documents were filed and served by the respondent.

46. The hearing occurred at the Tribunal on 2 November 2023. The applicant appeared. Mr Coles, Solicitor, appeared for the respondent.

47. At the outset of the hearing, Mr Coles foreshadowed applications to summarily dismiss the proceedings or seek an adjournment because the applicant had not served his documents on the respondent. The applicant asserted that documents had been served on the manager of the operator.

48. Ultimately, the applications for summary dismissal or the adjournment of the hearing were not pressed. The respondent was given the opportunity to view and consider the documents of the applicant before the hearing concluded.

49. In any event, the Minutes of the Extraordinary Meeting on 13 June 2023 “Independent Units in the Lodge-Levy review” clearly set out what the respondent’s position is in respect of the application.

50. Mr Coles did not seek to cross examine the applicant. Both parties made oral submissions as to why the Tribunal should, or should not, make the orders sought.

CONSIDERATION

51. Section 123 of the RV Act states as follows:

123   Jurisdiction of Tribunal

(1) A resident of a retirement village may apply directly to the Tribunal for an order in relation to any village contract (being a contract to which the resident is a party) that the resident considers to be harsh, oppressive, unconscionable or unjust.

(2) The Tribunal has, and may exercise—

(a) jurisdiction to determine any application made to it under this section, and

(b) (Repealed)

(c) the same jurisdiction as the Supreme Court, and all the powers and authority of the Supreme Court, in proceedings in which relief under the Contracts Review Act 1980 is sought in relation to a contract between an operator of a retirement village and a resident of the village.

Note—

Under the Contracts Review Act 1980, the Supreme Court may (among other things) refuse to enforce any or all of the provisions of the contract concerned or make an order declaring the contract void (in whole or in part) or varying (in whole or in part) any provision of the contract. It may also make orders with respect to any consequential or related matter, such as orders for the payment of money (whether or not by way of compensation) to a party to the contract and orders for the supply of services.

(3) This section does not authorise the Tribunal to exercise the powers conferred by section 10 of the Contracts Review Act 1980.

Note—

Section 10 of the Contracts Review Act 1980 allows the Supreme Court, in certain circumstances, to prescribe or otherwise restrict the terms on which certain persons may enter into contracts of a specified class.

Applicable Legal Principles

52. Section 123(2) of the RV Act empowers the Tribunal to consider whether a village contract between a resident and an operator is “unjust” or “unconscionable” within the meaning of the Contracts Review Act 1980 (NSW) (CR Act).

53. Under s 4(1) of the CR Act, the definition of “unjust” includes unconscionable, harsh, or oppressive.

54. Section 7 (1) of the CR Act allows a Court (the definition of which in s 4(1) of the CR Act includes the Tribunal in respect of any application under s 123 of the RV Act) which finds that a contract, or a provision of a contract, which is “unjust in the circumstances relating to the contract at the time it was made” to, if the Court “considers it is just to do so and for the purpose of avoiding as far as practicable an unjust consequence or result”, do one or more of the following:

(a) it may decide to refuse to enforce any or all of the provisions of the contract,

(b) it may make an order declaring the contract void, in whole or in part,

(c) it may make an order varying, in whole or in part, any provision of the contract,

(d) it may, in relation to a land instrument, make an order for or with respect to requiring the execution of an instrument that—

(i) varies, or has the effect of varying, the provisions of the land instrument, or

(ii) terminates or otherwise affects, or has the effect of terminating or otherwise affecting, the operation or effect of the land instrument.

55. Section 7(2) of the CR Act provides that, if an order is made declaring the contract void in whole or part; or varying the terms of the contract, that shall have effect from the date when the contract is made or any other time specified in the order.

56. Section 9 of the CR Act states:

9   Matters to be considered by Court

(1) In determining whether a contract or a provision of a contract is unjust in the circumstances relating to the contract at the time it was made, the Court shall have regard to the public interest and to all the circumstances of the case, including such consequences or results as those arising in the event of—

(a) compliance with any or all of the provisions of the contract, or

(b) non-compliance with, or contravention of, any or all of the provisions of the contract.

(2) Without in any way affecting the generality of subsection (1), the matters to which the Court shall have regard shall, to the extent that they are relevant to the circumstances, include the following—

(a) whether or not there was any material inequality in bargaining power between the parties to the contract,

(b) whether or not prior to or at the time the contract was made its provisions were the subject of negotiation,

(c) whether or not it was reasonably practicable for the party seeking relief under this Act to negotiate for the alteration of or to reject any of the provisions of the contract,

(d) whether or not any provisions of the contract impose conditions which are unreasonably difficult to comply with or not reasonably necessary for the protection of the legitimate interests of any party to the contract,

(e) whether or not—

(i) any party to the contract (other than a corporation) was not reasonably able to protect his or her interests, or

(ii) any person who represented any of the parties to the contract was not reasonably able to protect the interests of any party whom he or she represented,

because of his or her age or the state of his or her physical or mental capacity,

(f) the relative economic circumstances, educational background and literacy of—

(i) the parties to the contract (other than a corporation), and

(ii) any person who represented any of the parties to the contract,

(g) where the contract is wholly or partly in writing, the physical form of the contract, and the intelligibility of the language in which it is expressed,

(h) whether or not and when independent legal or other expert advice was obtained by the party seeking relief under this Act,

(i) the extent (if any) to which the provisions of the contract and their legal and practical effect were accurately explained by any person to the party seeking relief under this Act, and whether or not that party understood the provisions and their effect,

(j) whether any undue influence, unfair pressure or unfair tactics were exerted on or used against the party seeking relief under this Act—

(i) by any other party to the contract,

(ii) by any person acting or appearing or purporting to act for or on behalf of any other party to the contract, or

(iii) by any person to the knowledge (at the time the contract was made) of any other party to the contract or of any person acting or appearing or purporting to act for or on behalf of any other party to the contract,

(k) the conduct of the parties to the proceedings in relation to similar contracts or courses of dealing to which any of them has been a party, and

(l) the commercial or other setting, purpose and effect of the contract.

(3) For the purposes of subsection (2), a person shall be deemed to have represented a party to a contract if the person represented the party, or assisted the party to a significant degree, in negotiations prior to or at the time the contract was made.

(4) In determining whether a contract or a provision of a contract is unjust, the Court shall not have regard to any injustice arising from circumstances that were not reasonably foreseeable at the time the contract was made.

(5) In determining whether it is just to grant relief in respect of a contract or a provision of a contract that is found to be unjust, the Court may have regard to the conduct of the parties to the proceedings in relation to the performance of the contract since it was made.

57. In Provident Capital Ltd v Papa (2013) 84 NSWLR 231; [2013] NSWCA 36 at [7], Allsop P summarised the evaluation involved in determining whether relief should be allowed under the CR Act as follows:

“The broad evaluation of unjustness under the Contracts Review Act1980, s 4, s 7 and s 9 involves the normative evaluation of the totality of relevant circumstances. Inevitably minds may differ as to conclusions about such questions. Also, it is often not fruitful to compare other cases with the particular circumstances at hand, lest one be deflected from an appropriate overall assessment by focus on particular aspects relevant to any such comparison. Central to the normative evaluation is the recognition that there is a need for the protection of some people in some circumstances, who are not able fully to protect their own interests against factors that may cause injustice. That vulnerability may come from one or more of many circumstances, such as lack of education or of intelligence, from gullibility, from the predation of fraud and greed, and also sometimes from loyalty and love. The characterisation of a contract as unjust and the sheeting home to the other contracting party of the consequences of its unjustness may be a difficult evaluative exercise. At its heart, however, is the recognition of the inadequacy of one party to protect her or his interests in the circumstances.”

58. The matters to be considered as to whether a contract, or a provision of a contract, was unjust at the time it was made under s 9 (2) of the CR Act are not exhaustive, and the Tribunal may take into account any relevant matter other than s 9 (4) (West v AGC (Advances) Ltd (1986) 5 NSWLR 610 at 621).

59. The effect of ss 7 and 9 of the CR Act is that a contract may be unjust in the circumstances existing when it was made “because of the way it operates in relation to the claimant or because of the way it was made, or both” (West v AGC (Advances) Pty Ltd (1986) 5 NSWLR 610 at 621; Balagiannis v Balagiannis [2022] NSWCA 18 at [67]).

60. In West v AGC (Advances) Pty Ltd, McHugh JA described the circumstances of unfairness as follows (at 621):

Under s 7(1) a contract may be unjust in the circumstances existing when it was made because of the way it operates in relation to the claimant or because of the way in which it was made or both. Thus a contractual provision may be unjust simply because it imposes an unreasonable burden on the claimant when it was not reasonably necessary for the protection of the legitimate interests of the party seeking to enforce the provision: cf s 9(2)(d). In other cases the contract may not be unjust per se but may be unjust because in the circumstances the claimant did not have the capacity or opportunity to make an informed or real choice as to whether he should enter into the contract: cf s 9(2)(a), 9(2)(e), 9(2)(f), 9(2)(g), 9(2)(i), 9(2)(j). More often, it will be a combination of the operation of the contract and the manner in which it was made that renders the contract or one of its provisions unjust in the circumstances. Thus a contract may be unjust under the Act because its terms, consequences or effects are unjust. This is substantive injustice. Or a contract may be unjust because of the unfairness of the methods used to make it. This is procedural injustice. Most unjust contracts will be the product of both procedural and substantive injustice.

61. The reference to “the circumstances relating to the contract at the time it was made” in s 7(1) of the CR Act is not limited, in its terms, to those circumstances which were known to the party that seeks to rely on the contract at the relevant time, although a lack of knowledge of relevant matters may well be relevant to the exercise of the Tribunal’s discretion (In the matter of Reserve Hotels Pty Limited [2021] NSWSC 376 at [98] per Black J (citing Re Elsmore Resources Ltd (2016) 114 ACSR 297; [2016] NSWSC 856 at [65])).

62. In applying the CR Act, two distinct steps are involved. As stated by Brereton J in Riz v Perpetual Trustee Australia Limited [2007] NSWSC 1153 at [51], and cited with approval in Kowalczuk v Accom Finance Pty Ltd (2008) 77 NSWLR 205; [2008] NSWCA 343 at [87] per Campbell JA (Hodgson and McColl JJA agreeing) (citations omitted):

The first is whether the contract was unjust in the circumstances in which it was made, having regard to the factors referred to in s 9. This is a conclusion of fact, albeit one of ultimate fact involving a broadly based value judgment. The second, which arises only if the first is resolved in the affirmative, is whether any and if so what relief should be granted; this involves the exercise of a judicial discretion.

63. “Unconscionability” and “Undue influence” bear the same meaning under s 9 of the CR Act as in equity and at common law. Ward CL in Eq (as she then was) summarised those principles in the context of considering s 9 of the CR Act in Cong v Shen (No 3) [2021] NSWSC 947 at [1369]-[1370] and [1373]-[1378] as follows:

As to the unconscionable conduct claim, the principles relating to unconscionable conduct in equity, as set out in Commercial Bank of Australia Limited v Amadio (1983) 151 CLR 447; [1983] HCA 14 (Amadio), and developed in Kakavas v Crown Melbourne Ltd (2013) 250 CLR 392; [2013] HCA 25and other cases, are well known. A conclusion of unconscionable conduct requires the innocent party to be subject to a special disadvantage which seriously affects the ability of the innocent party to make a judgment as to their own best interests. The other party must also unconscientiously take advantage of that special disadvantage. As the High Court explained in Thorne v Kennedy at [38], before there can be a finding that there has been an unconscientious taking of advantage (which has also been described as ‘victimisation’ or ‘exploitation’), it is generally necessary that the stronger party knew or ought to have known of the existence and effect of the special disadvantage.

Where a plaintiff has established the existence of special disadvantage and that the special disadvantage was sufficiently evident to the defendant, in that the defendant knew or ought to have known of that disadvantage, the defendant then bears the onus bears the onus of establishing that the transaction was “fair, just and reasonable” (Amadio at 474 per Deane J (with whom Mason and Wilson JJ agreed); Tillett v Varnell Holdings Pty Ltd [2009] NSWSC 1040 at [51]-[52] per Brereton J (as his Honour then was)).

…

I turn now to the undue influence claim and the Yerkey v Jones claim. Undue influence arises if the free and independent will of the weaker party is overborne by the stronger party when entering a transaction: Johnson v Buttress at 134 per Dixon J.

As the plurality of the High Court explained in Thorne v Kennedy at [32]:

The question whether a person’s act is “free” requires consideration of the extent to which the person was constrained in assessing alternatives and deciding between them. Pressure can deprive a person of free choice in this sense where it causes the person substantially to subordinate his or her will to that of the other party. It is not necessary for a conclusion that a person’s free will has been substantially subordinated to find that the party seeking relief was reduced entirely to an automaton or that the person became a “mere channel through which the will of the defendant operated.” Questions of degree are involved. But, at the very least, the judgmental capacity of the party seeking relief must be “markedly substandard” as a result of the effect upon the person’s mind of the will of another. [citations omitted]

Undue influence may be proved by presumption (presumed undue influence) or direct evidence (actual undue influence). The presumption of undue influence arises in established categories of relationships, including those of parent and child, guardian and ward, solicitor and client, physician and patient and cases of religious influence, as well as in circumstances where the particular factual relationship between the parties can be characterised as one where the stronger party is in a position to exercise dominion over the weaker party by reason of trust and confidence reposed in the former (Johnson v Buttress at 119 per Latham CJ). Where a presumption of undue influence arises, it can be rebutted by the stronger party satisfying the court that the transaction was a result of the free and independent will of the weaker party.

Actual undue influence requires direct evidence of the circumstances of the particular transaction to show that the transaction was not entered into as a result of the free and independent exercise of judgment by the weaker party (see Thorne v Kennedy at [34]). More than mere influence is required; it must be established that the stronger party has used their influence to obtain an unfair advantage for themselves and so as to cause injury to the person relying upon the stronger party’s authority or aid (Watkins v Combes at 193-4 per Isaacs J).

As to Yerkey v Jones, the principle which derives from Yerkey v Jones operates in the context of a transaction in which the wife seeking relief is a surety for her husband’s liabilities, and one who obtained no financial benefit from the transaction (see Garcia v National Australia Bank Ltd (1998) 194 CLR 395; [1998] HCA 48 (Garcia v National Australia Bank)).

The four elements which make it unconscionable to enforce a transaction of this kind were set out by the High Court in Garcia v National Australia Bank at [31]: first, that the surety did not understand the purport and effect of the transaction; second, that the transaction was voluntary (in the sense that the surety obtained no gain from the contract, the performance of which was guaranteed); third, that the lender is to be taken to have understood that, as a wife, the surety may repose trust and confidence in her husband in matters of business and therefore to have understood that the husband may not fully and accurately explain the purport and effect of the transaction to his wife; and fourth, that the lender did not itself take steps to explain the transaction to the wife or find out that a stranger had explained it to her.

Was the Village Contract Harsh, Oppressive, Unconscionable or Unjust?

64. The applicant bears the onus of establishing on the balance of probabilities that one or more terms of the village contract were harsh, oppressive, unconscionable, or unjust; and, if so, the Tribunal should exercise its discretion to vary the terms of the contract (variation being the remedy sought by the applicant in respect of payment of recurrent charges).

65. The Tribunal is not satisfied that the applicant has proved on the balance of probabilities that the terms of the contract relating to the purchase price and calculation of recurrent fees are harsh, oppressive, unconscionable or unjust for the following reasons:

1. The respondent provided a disclosure statement compliant with s 18(3A) of the RV Act prior to the applicant entering into the written contract.

2. The terms of the written contract contain a cooling off period and settling in period that is not inconsistent with the provisions of the RV Act that deal with cooling off periods and settling in periods (ss 32 and 44A of the RV Act).

3. The Disclosure Statement clearly sets out the current rate of recurrent charges; and provides a summary of the recurrent charges (and changes) over the 3 previous financial years prior to the date of Disclosure Statement. That information includes the different rates between The Lodge-Self Care Units (i.e. Independent Living Units) and Garden Units.

4. On the basis of the information contained in the Disclosure Statement, the applicant was able to make his own enquiries regarding the different sizes of The Lodge-Independent Living Units and Independent Living Garden Units and compare the recurrent monthly charges of the respective units before deciding to purchase; or within the cooling off period under the terms of the contract and s 32 of the RV Act.

5. The village contract clearly sets out the recurrent monthly charges for The Lodge-Independent Living Units and the method of how the charges are varied each year.

6. There is nothing to indicate any inequality of bargaining power, disability, or special disadvantage that affected the applicant’s ability to obtain advice and make a considered decision prior to entering into the contract.

7. There is no evidence to indicate any unfair pressure or unfair sales tactics were employed by the respondent prior to the applicant entering into the contract.

8. There is nothing to indicate any conduct of the respondent prior to entering into the contract that misled or deceived the applicant or was likely to mislead or deceive the applicant as to the size of the respective units in the village or the amount of monthly recurrent charges. The respondent was not under a legal obligation to explain to the applicant the difference in sizes between The Lodge units and The Garden units or provide a detailed explanation as to why recurrent monthly charges differed between the respective units.

9. The Disclosure Statement at Clause 12 (More Information) makes clear that the applicant had the right to ask for a copy of, or to inspect, documents free of charge including a site plan for the village; and plans showing the location, floor plan and significant dimensions of residential premises available in the village prior to signing the contract. There is no evidence the applicant requested such documents. Had he done so, it is likely he would have clearly understood the different dimensions of The Lodge units and the Garden units.

10. The Disclosure Statement at Clause 12 also identifies that the applicant could request the budgets for the last 3 financial years; the current financial year and the next financial year as well as the annual accounts for the village for the last 3 years. This undermines the assertion of the applicant that he did not become aware of the different monthly recurrent charges for The Lodge and Garden units until the 2023/2024 budget was circulated. In any event, the Disclosure Statement makes clear the different rates for the respective units.

11. The applicant clearly had the opportunity to obtain independent legal advice before entering into the contract, and had an additional right to terminate during the “cooling off period” and the “settling in period.”

12. The fact that the respondent charges different monthly recurrent charges for The Lodge-Independent Living Units and Garden Independent Living Units is not, of itself, a sufficient basis for finding that the terms of the applicant’s contract are harsh, oppressive, unconscionable or unjust.

13. The payment of an additional $40,000 to the vendor by way of the transition from Assisted Living to Independent Living in The Lodge was not a representation that the monthly recurrent fees would be calculated other than as set out in the Disclosure Statement and the terms of the written contract.

66. As the Tribunal is not satisfied that the terms of the village contract are harsh, oppressive, unconscionable or unjust, it is unnecessary to make a finding as to whether, if the Tribunal was so satisfied, it would exercise its discretion to make the order sought.

67. However, as was pointed out at the Extraordinary Board Meeting on 13 June 2023, making the order sought would likely significantly affect the income of the operator (even if the order was made prospectively from 1 July 2024) and that would likely result in either (a) a reduction in services and maintenance and/or (b) other measures needing to be taken by the operator to increase income. Although the order would only be in respect of the applicant, any such order would likely either result in the village providing an equivalent reduction in monthly recurrent charges to other The Lodge-ICU residents; or those residents making their own application to NCAT using the orders made in favour of the applicant as a precedent.

68. Reduction in income of the village would affect all residents at the village, and it is not simply a situation where a reduction in monthly recurrent charges of one applicant (or set of applicants) can be considered in isolation.

69. Further, the provisions of Part 7 Divisions 4 and 5 of the RV Act deal with the process of variation of recurrent charges; and the approval of annual budgets of the village. Considering those provisions, the circumstances of this matter are not an appropriate vehicle to fix or vary the future recurrent charges in respect of The Lodge-ILU’s.

70. Accordingly, even if the Tribunal was satisfied the terms of the applicant’s village contract were harsh, oppressive, unconscionable or unfair, there are compelling discretionary reasons for not making the order sought.

ORDERS

1. The application is dismissed.

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I hereby certify that this is a true and accurate record of the reasons for decision of the Civil and Administrative Tribunal of New South Wales.

Registrar

Decision last updated: 13 August 2024