Griffiths v Sea Change Living NSW Pty Ltd

[2023] NSWCATCD 121

Civil and Administrative Tribunal

New South Wales

Medium Neutral Citation:

Griffiths v Sea Change Living NSW Pty Ltd [2023] NSWCATCD 121

Hearing dates:

12 May 2023

Date of orders:

25 September 2023

Decision date:

25 September 2023

Jurisdiction:

Consumer and Commercial Division

Before:

D Moujalli, Senior Member

Decision:

1. The increase in site fees stated in the notice dated 18 March 2022 is excessive.

2. The increase in site fees from $314.84 per fortnight to $380 per fortnight which took effect on 25 May 2022 is set aside.

3. The site fees must not exceed $338.77 per fortnight for a period of 12 months commencing from 25 May 2022.

4. The respondent is to refund to the applicant and the home owners listed in the schedule to the application lodged on 3 June 2022 any amount paid to the respondent as site fees in excess of the amount specified in order 3.

Catchwords:

LEASES AND TENANCIES – residential communities - legislation protecting tenants – outgoing and operating expenses – repairs and improvements to community - whether site fee increase excessive

Legislation Cited:

Residential (Land Lease) Communities Act 2013 (NSW), ss 4, 67, 69, 71, 73, 74

Cases Cited:

Colin Davidson v Seachange Living NSW Pty Ltd [2023] NSWSC 292

Davis v Seachange Living NSW Pty Ltd [2022] NSWCATAP 142

Dualcorp Pty Ltd v Remo Constructions Pty Ltd [2009] NSWCA 69; (2009) 74 NSWLR 190

Gennacker Pty Ltd t/as Homestead Holiday Park v Bennett [2020] NSWCATAP 12

Marsh v Pines Resort Management Pty Ltd [2021] NSWCATCD 127

Walker & Ors v Hampshire (Pambula) Pty Ltd t/as Acacia Ponds [2022] NSWCATCD 204

Texts Cited:

Nil

Category:

Principal judgment

Parties:

Robert Griffiths (Applicant)

Sea Change Living NSW Pty Ltd (Respondent)

Representation:

Applicant: J Cocks (tenant advocate)

Respondent: C Arapali – director

File Number(s):

RC 22/25974

Publication restriction:

Nil

REASONS FOR DECISION

Introduction

1. On 3 June 2022 the applicant, Robert Griffiths, lodged a residential communities collective application (the Application) with the Tribunal against the respondent as the operator of a residential community as defined by s 4 of the Residential (Land Lease) Communities Act 2013 (NSW) (the Act). The applicant has brough the Application as the representative of 10 home owners each of whom owns a home on a site in the residential community operated by the respondent and is identified in, and has signed, a schedule to the Application.

2. In the reasons which follow, I shall refer to the home owners as the Owners and the respondent as the Operator.

3. The Application has been made under s 71 of the Act and seeks various orders pursuant to s 73 of the Act in relation to an increase in site fees which was notified by the Operator to the Owners in a notice dated 18 March 2022.

4. A hearing of the Application was held on 12 May 2023.

5. At the hearing on 12 May 2023, the Owners were represented by Mr Cocks, a tenant advocate, and the Operator was represented by Ms Arapali, its director.

Jurisdiction

6. I am satisfied that the Tribunal has jurisdiction to hear and determine the Application. Notices of an increase in site fess were given to the Owners by the Operator as required by s 67(3) of the Act. The parties attended mediation as required by s 69 of the Act but were unable to reach an agreement. The requirements of s 71 of the Act for the making of the Application have been satisfied.

Evidence

7. The parties co-operated in the preparation of a consolidated bundle which contained the evidence of both parties. This was marked Exhibit 1 at the hearing. Exhibit 1 comprises 3 volumes with separate numbering for each volume. For this reason, where I have referred to Exhibit 1 below, I have also indicated the relevant volume of the exhibit.

8. The findings made by the Tribunal on the basis of the above evidence is set out below.

Factual Background

9. The Operator operates a residential community known as the Milton Valley Holiday Park which is situated in Milton in NSW.

10. The Owners occupy sites in the community as permanent resident home owners on the basis that any increase in the site fees payable by them is by notice and subject to the provisions on Part 6 of the Act.

11. On 18 March 2022, the Operator sent to the Owners a notice of a site fee increase in which it advised that the increased site fee would be $380 per fortnight effective from 25 May 2022 (the Notice). The notice stated the following reasons for the increase:

Increases in expenses that include but are not limited to accounting fees, advertising, power, repairs and maintenance, wages and remuneration expenses, waste disposal and water.

12. A dispute arose between the Owners and the Operator as to whether the increase in site fees was excessive.

13. On 19 May 2022, the Owners and the Operator participated in a mediation conducted by NSW Fair Trading, however, they were unable to resolve the dispute as certified by the mediator in a letter dated 20 May 2022.

14. As I have already indicated, on 3 June 2022, Mr Griffiths as the Owners’ representative on behalf of himself and the 9 other Owners then commenced this proceeding against the Operator by filing the Application with the Tribunal.

Applicable Law

15. Section 67 of the Act provides:

67   Increase of site fees by notice

(1)  This section applies to a site agreement that provides for the increase of the site fees by notice (otherwise than by a fixed method).

(2)  An increase in the site fees is not payable unless the fees are increased in accordance with this section.

(3)  The site fees must not be increased except by notice in writing given to all the home owners in the same community at the same time under site agreements to which this section applies.

(4)  The notice must—

(a)  specify the amount of the increased site fees, and

(b)  specify the day (the effective day) on and from which the increased site fees are payable, and

(c)  include an explanation for the increase, and

(d)  include such other information as may be prescribed by the regulations, and

(e)  be in the approved form (if any).

(5)  The day specified as the effective day must not be earlier than 60 days after the day on which the notice was given.

(6)  Site fees must not be increased more than once in any 12-month period under this section. This is calculated by reference to the day from which the increased site fees are payable.

(7)  Increases under this section in site fees payable by home owners in the same community under site agreements to which this section applies must take effect on the same day (and not on different days).

(8)  A notice under this section may be cancelled.

(9)  A later notice may provide for a lesser increase than that specified in an earlier notice under this section. A later notice has effect instead of the earlier notice and takes effect from the date on which the earlier notice was to take effect.

(10)  If the site fees payable under a site agreement are increased under this section, the terms of the agreement are varied accordingly.

(11)  If a person becomes a home owner after a notice has been given under this section to other home owners in the community but before the date the increase takes effect—

(a)  the operator must notify the home owner of the notice and its contents and effect, and

(b)  the increase applies as if the notice had been given to the home owner at the same time as it was given to other home owners.

16. Section 69 of the Act provides:

69   Mediation

(1)  This section applies if site fees are increased by notice (otherwise than by a fixed method). However, this section does not apply to an increase in site fees objected to solely on the ground that the increase is substantially excessive when compared with increases for similar residential sites in the community.

(2)  An objection to an increase in site fees on the ground that the increase is excessive may be made by lodging an application for mediation under Division 2 of Part 12 signed by at least 25% (or a lower percentage prescribed by the regulations) of the home owners who received the notice within the first 30 days of the notice period, and not otherwise.

(3)  Home owners may nominate a representative or representatives under section 146 for the purposes of the mediation of the objection. However, the nomination must be made in accordance with the prescribed procedure if the regulations so provide.

(4)  The parties to the mediation must use reasonable endeavours to participate in and finalise mediation before the effective day for the fee increase.

(5)  A home owner may opt out of the mediation, and agree to pay the increase, but only if the home owner follows the process set out in the regulations.

(6)  The fact that one or more home owners opt out of the mediation, after an application for mediation is made, does not prevent the continuation of the mediation in respect of the remaining home owners.

(7)  The regulations may make provision for or with respect to the mediation of objections to increases in site fees.

17. Section 71 of the Act provides:

71   Application following failed mediation

(1) One or more affected home owners may apply to the Tribunal for an order under section 73 if—

(a)  the home owners object to the increase in site fees, and

(b) an application for mediation of the objection was made in accordance with section 69, and

(c)  mediation was unsuccessful.

(2)  The application must be made on behalf of all the affected home owners (other than those who opt out of the application) by one or more of them appointed as the representative or representatives by the participating home owners.

(3)  The application must be made within 14 days after the date on which the mediation failed.

(4)  The application must be accompanied by a notice from the mediator stating mediation failed on the date specified by the mediator.

18. Section 73 of the Act provides:

73   Orders as to excessive increases in site fees

(1) The Tribunal may, on application under section 71 or 72, make any of the following orders—

(a)  an order declaring that an increase in site fees is excessive,

(b)  an order reducing the amount of the increase by a specified amount,

(c)  an order setting aside the increase,

(d)  an order that the site fees must not exceed a specified amount or specified amounts, either—

(i)  from a specified day, not being earlier than the day from which the increased site fees were payable, or

(ii)  during a specified period,

(e)  an order confirming the increase on the conditions (if any) that the Tribunal considers appropriate,

(f)  any ancillary order that the Tribunal, in the circumstances, thinks appropriate.

(2)  The Tribunal may make orders applying to individual participating home owners, groups of participating home owners or all participating home owners.

(3)  An order applies to all affected home owners in the community (other than those who opt out), unless the Tribunal is satisfied there is a strong reason for making separate orders for different home owners or groups of home owners.

(4)  The Tribunal cannot make an order that would result in an increase lower than that needed to cover any actual or projected increase (established to the satisfaction of the Tribunal) in the outgoings and operating expenses for the community since the previous increase (if any) in site fees for the community.

19. Section 74 of the Act provides:

74   Matters to be considered about excessive increases

(1) The Tribunal may have regard to any or all of the following factors when deciding whether to make an order under section 73—

(a)  the frequency and amount of past increases in site fees for the community,

(b)  any actual or projected increase in the outgoings and operating expenses for the community as provided by the operator since the previous increase (if any) in site fees for the community,

(c)  any repairs or improvements to the community—

(i)  carried out by the operator since the previous increase (if any), or

(ii)  planned by the operator for the period covered by the increase being reviewed,

(d)  the general condition of the community including its common areas,

(e)  the range and average level of site fees within the community,

(f)  the value of the land comprising the community, as determined by the Valuer-General,

(g)  the value of any improvements to the community (including common areas) paid for or carried out by home owners,

(h)  any explanation for the increase provided by the operator by notice in writing to the affected home owners,

(i)  variations in the Consumer Price Index (All Groups Index) for Sydney,

(j)  whether the increase is fair and equitable in the operation of the community,

(k)  any other matters prescribed by the regulations.

Must there be a minimum amount of increase in site fees by operation of s 73(4) of the Act

20. A preliminary issue which arises for consideration is whether there is a minimum amount of increase in site fees which the Tribunal must permit by operation of s 73(4) of the Act. Section 73(4) of the Act provides that the Tribunal cannot make an order that would result in an increase lower than that needed to cover any actual or projected increase (established to the satisfaction of the Tribunal) in the outgoings and operating expenses for the community since the previous increase (if any) in site fees for the community.

21. It appears to me that s 73(4) can only operate if there has been an increase in the outgoings and operating expenses for the community since the previous increase in site fees. I take the reference to “previous” increase in site fees to be the last increase immediately preceding the increase which is the subject of the application to the Tribunal.

22. The last increase in site fees was pursuant to a notice dated 17 March 2021 which stipulated an increase of $23.32 per fortnight effective from 24 May 2021. This was the subject of an application to the Tribunal, however, the application was dismissed so that the increase was effectively affirmed by the Tribunal. The Tribunal’s decision was given on 30 November 2021. It is unreported, however, it was placed in evidence before the Tribunal on the present application (Ex 1, Vol 1, pp 176-203). I shall refer to it as the 2021 Decision.

23. The 2021 Decision was the subject of an unsuccessful internal appeal to the Appeal Panel. The Appeal Panel’s decision is recorded in Davis v Seachange Living NSW Pty Ltd [2022] NSWCATAP 142. The Appeal Panel’s decision was also the subject of an unsuccessful application for leave to appeal to the Supreme Court which was determined by Harrison AsJ. Her Honour’s reasons for decision are recorded in Colin Davidson v Seachange Living NSW Pty Ltd [2023] NSWSC 292.

24. In the 2021 Decision, the Tribunal accepted that the Operator’s evidence, given through its accountant, Mr Nicholls, that its operating expenses for the period 1 March 2020 to 28 February 2021 were in the amount of $901,382: see 2021 Decision [46], [51]-[53] and [83].

25. The evidence for the present application before the Tribunal includes a letter from Mr Nicholls dated 1 February 2023 (Ex 1, Vol 3, pp 53-54). In that letter Mr Nichols states that operating expenses for the period 1 March 2021 to 28 February 2022 are in the amount of $893,784. This suggests that there has not been an increase in the outgoings and operating expenses for the community since the increase in site fees which took effect from 24 May 2021.

26. The Operator contends that there has been an increase in the outgoings and operating expenses for the community between 2020-2021 and 2021-2022 by seeking to “adjust” the figure which was accepted by the Tribunal of $901,382 for the period 1 March 2020 to 28 February 2021. It contends that the operating expenses for 2020-2021 should be adjusted to $744,736 which results in an increase of $149,036 for the operating expenses of $893,784 for the period 1 March 2021 to 28 February 2022.

27. I am not persuaded that it is appropriate to permit the Operator to re-agitate the issue of the operating expenses for the period 1 March 2020 to 28 February 2021 for the purposes of s 73(4) of the Act. That issue was determined by the Tribunal in the 2021 Decision; the parties to the proceeding in which the 2021 Decision was given are parties to the present application (Mr Davis being one of the Owners on behalf of the whom the present collective application has been made); and an appeal form the 2021 Decision was dismissed. In Dualcorp Pty Ltd v Remo Constructions Pty Ltd [2009] NSWCA 69; (2009) 74 NSWLR 190 at [43]-[50] and [68], Macfarlan J set out the various considerations which have informed the policy of the law for favouring finality in litigation and preventing the re-agitation of issues which have been conclusively determined in an earlier proceeding.

28. For the above reasons, I am not satisfied that there has been an increase in the outgoings and operating expenses for the community since the increase in site fees which took effect from 24 May 2021. I do not therefore consider that there is a minimum amount of increase in site fees which the Tribunal must permit by operation of s 73(4) of the Act.

Burden of proof

29. Both parties made submissions on the burden of proof. The Owners contend the that the Operator “bears the onus of proof in establishing any facts on which it seeks to rely to be taken into consideration in regards to s 74 of the Act”. The Operator contends “the burden of proof rests on the party who lodges an application”.

30. It appears to me that both parties have overstated the position in their favour so far as the burden of proof is concerned. This issue has been substantially clarified by recent case law.

31. In Gennacker Pty Ltd t/as Homestead Holiday Park v Bennett [2020] NSWCATAP 12 at [45], the Appeal Panel said:

The Appellant’s submission that the respondents had the onus of proving that the increase was excessive is misconceived. It is clear from ss 67(4) and 74(h) that the operator must provide an explanation in the notice for the increase and that the Tribunal may have regard to the explanation. In addition the Tribunal may have regard to other factors referred to in s74, some of which constitute information known only to the operator. The Tribunal was entitled to consider the evidence provided by the operator and to determine that the increase in site fees was excessive because there was insufficient evidence explaining the increase in outgoings and expenses.

32. In Colin Davidson v Seachange Living NSW Pty Ltd [2023] NSWSC 292 at [128]-[129], Harrison AsJ said:

[128] While it is not necessary for me to decide, my tentative view is that the decision in Glennacker is correct. The Tribunal’s task in considering whether to make an order under s 73 of the RLLC Act (in this case whether to declare that the increase was excessive) was to consider the factors set out in s 74. From the decision the Tribunal did so, including specifying the factors under s 74(1)(b) (which concerns increases in outgoings and expenses) and under s 74(1)(h) (which concerns any explanation for the increase provided by the operator by notice in writing to affected home owners).

[129] From ss 67(4) and 74(h) that the operator must provide an explanation in the notice for the increase and that the Tribunal may have regard to the explanation. In addition the Tribunal may have regard to other factors referred to in s 74, some of which constitute information known only to the operator. The Tribunal was entitled to consider the evidence provided by the operator in order to determine that the increase in site fees was excessive because there was insufficient evidence explaining the increase in outgoings and expenses. It is my view that the Tribunal’s consideration of the factors in s 74(1)(a) to (h) involves it in exercising an inquisitorial role to some extent.

33. It appears to me that the effect of the above authorities is that where the Operator seeks to rely on matters the proof of which is peculiarly within the knowledge of the Operator, the Tribunal should have regard to the evidence presented by the Operator of these matters in determining whether they have been established by the available evidence.

33. In my view, the Owners have stated the position too broadly in contending that the Operator “bears the onus of proof in establishing any facts on which it seeks to rely to be taken into consideration in regards to s 74 of the Act”. The critical consideration is whether the Operator seeks to establish facts which are uniquely within the knowledge or information which it possesses. The Tribunal should have regard to whether the Operator has presented evidence of such facts (ie, not “any facts” on which the Operator seeks to rely) in determining whether the relevant fact has been established by the evidence.

Matters to be considered under s 74 of the Act

35. The matters listed in s 74(1) of the Act are not expressed to be either mandatory considerations or exhaustive of the matters to be considered by the Tribunal. While discretionary considerations, they do provide statutory guidance of the matters to be considered. The parties structured their submissions by reference to the matters listed in s 74(1) of the Act. It is therefore appropriate to consider, in turn, the relevance and weight to be given to the matters identified in s 74(1) of the Act to the present circumstances.

(a) The frequency and amount of past increases in site fees for the community

36. Mr Davis, one of the Owners, has prepared a statement in which he gives evidence of the frequency and amount of past increases in site fees for the community (Ex 1, Vol 1, pp132-133). The precise date on which the increase in site fees took effect is not identified, however, I do not consider that a great deal turns on this. In the following paragraph, I have indicated the precise date on which the site fee increases in 2021 and 2022 took effect as this is identified elsewhere in the evidence.

37. The evidence given by Mr Davis is as follows (with all references to fees being fees payable per fortnight):

1. In about November 2014, the site fees were increased from $212 to $220, being an increase of $8 or 3.8% (compared to CPI of 2.5%);

2. In about July 2015, the site fees were increased from $220 to $224, being an increase of $4 or 1.8% (compared to CPI of 1.5%);

3. In about April 2016, the site fees were increased from $224 to $240, being an increase of $16 or 7.15% (compared to CPI of 1.3%);

4. In about April 2017, the site fees were increased from $240 to $258, being an increase of $18 or 7.5% (compared to CPI of 1.9%);

5. In about May 2018, the site fees were increased from $258 to $262.90, being an increase of $4.90 or 1.9% (compared to CPI of 1.9%);

6. In about May 2019, the site fees were increased from $262.90 to $285.22, being an increase of $22.32 or 8.49% (compared to CPI of 3.1%);

7. In about May 2020, the site fees were increased from $285.22 to $291.52, being an increase of $6.30 or 2.2% (compared to CPI of 2.2%);

8. With effect from 24 May 2021, the site fees were increased from $291.52 to $314.84, being an increase of $23.32 or 8% (compared to CPI of 1.1%);

9. With effect from 25 May 2022, the site fees were increased from $314.84 to $380, being an increase of $65.16 or 20.7% (compared to CPI of 5.1%).

38. I do not understand the above evidence to have been in dispute. I accept it as accurately stating the frequency and amount of past increases in site fees for the community.

39. It can be seen from the above evidence that there have been increases in site fees for the community each year since 2014. The increases have generally exceeded variations in the CPI save for two years (ie, 2018 and 2020) when the increase was in line with the variation in the CPI.

40. The site fee increase which is the subject of this application is unprecedented in terms of its monetary amount and the percentage increase from the pre-existing amount of site fees. However, it is not unprecedented in terms of the percentage increase as a multiple of the CPI. As a multiple of the CPI, it is some fourfold the CPI. Similar or greater increases, in this sense, occurred in 2016, 2017, 2019 and 2021.

(b) Any actual or projected increase in the outgoings and operating expenses for the community as provided by the operator since the previous increase (if any) in site fees for the community

41. As I have already indicated, the “previous increase” in site fees for the community for the purposes of s 74(1)(b) of the Act (ie, last increase immediately preceding the increase which is the subject of the Application) occurred on 24 May 2021. This involved an increase in site fees from $291.52 to $314.84, being an increase of $23.32 or 8%.

42. The evidence before the Tribunal includes financial statements for the Operator indicating expenses for the Operator in the financial years ended 30 June 2021 and 2022 (Ex 1, Vol 3, pp 9-32). The financial statements have been prepared by Mr Nicholls, the accountant for the Operator. Mr Nicholls has signed a compilation report certifying, amongst other things, that he has complied with the relevant ethical requirements of the Code of Ethics for Professional Accountants (Ex 1, Vol 3, p 19). For reasons which were not explained, the director of the Operator has not signed the director’s declaration which accompanies the financial statements (Ex 1, Vol 3, p 20). Notwithstanding the certification provided by Mr Nicholls, I must be mindful that the director has not declared that the financial statements present fairly the financial position and performance of the Operator. The certification by Mr Nicholls does provide some assurance, albeit limited in the absence of the director’s declaration, in relation to the manner in which the financial statements have been prepared.

43. The financial statements for the Operator state that the expenses for the Operator for the financial year ended 30 June 2021 were $985,414 compared to $1,173,489 for the financial year ended 2022. That represents an increase of $188,075 or 19.08% from the 2021 to 2022 financial year. However, I am not prepared to conclude from this that there has been an increase in the outgoings and operating expenses for the community as provided by the operator since 24 May 2021 for the purposes of s 74(1)(b) of the Act. There are a number of reasons why the evidence does not permit me to reach this conclusion.

44. First, it is not possible to determine with any degree of accuracy from the available evidence which expenses relate to community operations as opposed to other operations of the Operator such as touristic operations. The focus of inquiry called for by section 74(1)(b) of the Act is on the “outgoings and operating expenses for the community”.

45. The Operator appears to accept that the financial statements are not confined to the “outgoings and operating expenses for the community”. I say this because it seeks to rely on a letter from its accountant dated 1 February 2023 (Ex 1, Vol 3 pp 53-54). In that letter Mr Nicholls states that he has “adjusted [his] calculations to exclude ‘non-community’ expenses”. While not entirely clear to me, it appears that Mr Nicholls has arrived at an “adjusted” increase for what he calls the “2022 period” of “$134,036 representing an overall increase of 18% in the outgoings and operating expenses of the community in the time period”.

46. I am not prepared to accept Mr Nicholls’ letter as stating accurately the outgoings and operating expenses for the community as provided by the Operator for the 2020-21 and 2021-22 periods. The process by which Mr Nicholls has “adjusted” the outgoings and expenses for the purposes of his letter is not made sufficiently clear for me to be satisfied that it presents fairly and accurately the outgoings and operating expenses for the community. Unlike the financial statements, Mr Nicholls has not certified that the figures contained in the letter have been prepared in accordance with relevant accountancy standards and ethical requirements.

47. The Operator has also prepared a table of what are said to be “community expenses” for the period 1 March 2020 to 28 February 2021 and the corresponding period in 2021-22 (Ex 1, Vol 3 p 96). I am not prepared to accept this table as representing “the outgoings and operating expenses for the community as provided by the operator” for the purposes of s 74(1)(b) of the Act for the following reasons:

1. No explanation is provided as to how the expenses in the table have been determined to be community expenses as opposed to expenses of other operations of the Operator.

2. Unlike the financial statements there is no certification that the figures contained in the table have been prepared in accordance with relevant accountancy standards and ethical requirements.

3. There are discrepancies between the figures in the table and those in the financial statements which are difficult to reconcile. For example, the income statements for the 2021 and 2022 financial years record that electricity decreased from $47,228 in 2021 to $44,774 in 2022 (Ex 1, Vol 3 p 9). The table prepared by the Operator indicates that electricity increased from $45,548 to $54,503. I note that the table indicates that these figures also include expenses for gas, however, the corresponding profit and loss statement for the relevant period (Ex 1, Vol 3 pp 94-95) does not include this notation. There are also significant variances between the amounts for salaries and wages shown in the table and in the financial statements. Even allowing for the fact that the financial statements cover the period 1 July to 30 June and the table covers the period 1 March to 28 February, there is still no apparent satisfactory explanation for the discrepancy in the figures between the financial statements prepared by Mr Nicholls and the table prepared by the Operator.

4. I have attempted, but have been unable, to reconcile the discrepancies identified above by reference to primary records, such as invoices, which are in evidence. For example, the Operator has provided what are said to be “examples of increases in electricity bills” (Ex 1, Vol 1 p 35). These appear to be invoices for only two months, ie, March 2021 and March 2022 (Ex 1, Vol 2 p 143). I do not consider this to be a sufficient basis to determine whether there has been an increase in the expense for electricity over the relevant periods.

48. Second, the expenses in the financial statements (and Mr Nicholls’ letter of 1 February 2023 so far as I can determine) include an amount for “repairs and maintenance”. I respectfully adopt the reasoning of the Tribunal in Marsh v Pines Resort Management Pty Ltd [2021] NSWCATCD 127 that “outgoings and operating expenses” for the purposes of s 74(1)(b) are expenses of a recurring nature which an operator would be justified in recouping increases in such expenses in the period directly after they have been incurred. Expenses in the nature of repairs, maintenance and improvements represent a longer-term investment by the Operator in its facilities which would not justify recoupment, at least in their entirety, in the period immediately after they have been incurred. Having regard to the observations of the Tribunal in Marsh v Pines Resort Management Pty Ltd at [16], I consider that expenses in the nature of repairs, maintenance and improvements fall more appropriately for consideration under s 74(1)(c) of the Act.

49. Third, to a large degree, the increase in expenses between the 2021 and 2022 financial years is attributable to significant amounts which have been allowed for amortisation and depreciation. The amount for amortisation in the 2022 income statement is $29,298, the amount for depreciation is $217,614 and the amount for depreciation-motor vehicles is $9,063. In comparison, the 2021 income statement made no allowance for amortisation and allowed an amount of $51,826 for depreciation-pooled assets.

50. I do not consider that amortisation and depreciation are expenses of a recurring nature that properly fall for consideration under s 74(1)(b). In any event, even if I am wrong in this conclusion, there does not appear to be any explanation as to why significant amounts have been allowed for amortisation and depreciation in the 2022 income statement as opposed to the 2021 income statement.

51. Fourth, the income statement for the 2022 financial year includes an amount of $41,025 for director’s salaries, however, no such expense is included in the income statement for the 2021 financial year or the profit and loss statement for the 2020 financial year (Ex 1, Vol 3 p 34). There does not appear to be any explanation as to why this expense was included in the 2022 income statement but not in the 2021 income statement or the 2020 profit and loss statement.

52. Fifth, I note that a comparison of the 2021 and 2022 financial statements indicates an increase in certain expenses. For example, salaries and wages increased from $258,085 to $294,969 and waste disposal increased from $22,157 to $26,148. However, there was also a decrease in certain expenses, for example, electricity which I have already referred to above. The amount for repairs and maintenance also decreased from $117,225 to $105,539. The amount for rates and taxes also decreased from $28,827 to $6,990.

53. The financial position and performance of the Operator is something uniquely within its information and knowledge. Having regard to the various anomalies and discrepancies in the evidence relating to the financial position and performance of the Operator, which have not been satisfactorily explained, I am not prepared to conclude that that there has been an increase in the outgoings and operating expenses for the community as provided by the Operator since 24 May 2021 for the purposes of s 74(1)(b) of the Act.

(c) Any repairs or improvements to the community:(i) carried out by the operator since the previous increase (if any), or (ii) planned by the operator for the period covered by the increase being reviewed

54. As I have already indicated, the previous increase in site fees took effect on 24 May 2021.

55. The financial statements for the Operator indicate that the Operator expended an amount of $105,539 on repairs and maintenance in the financial year from 1 July 2021 to 30 June 2022.

56. It is likely that the amount of $105,539 was not solely for the benefit of the community as opposed to other operations of the Operator. However, I did not understand it to be seriously in dispute that the expenditure on repairs and maintenance by the Operator was to the benefit of the community.

57. The Operator gave evidence, by way of invoices and photographs, of expenditure on repairs and improvements since the previous increase in site fees. This expenditure covered the 2021-2022 financial year and also the period up to December 2022. The repairs and improvements included: the installation of a second oven in the community kitchen; upgrading of the fire safety system; replacement of pool equipment; installation of hand rails for the convenience of residents with mobility restrictions; repairs to lawn mowing and other equipment necessary for the maintenance of 17 acres of land; and tree maintenance to facilitate safe entry to the park.

58. I accept the Operator’s submission that the land on which the community is situated requires constant upkeep as it extends over 17 acres of grounds and contains about 800 palm trees which require trimming throughout the course of the year.

59. I also accept the Operator’s submissions that work in the nature of repairs and improvements has been carried out since the previous increase in site fees generally in accordance with its submissions.

(d) The general condition of the community including its common areas

60. My impression from the condition report prepared by the Operator’s manager (Ex 1, Vol 2, pp 233-241), the photographs placed in evidence by the Operator (Ex 1, Vol 2, pp 95-106 and 242-255) and testimonials from other residents of the facility conducted by the Operator (Ex 1, Vol 2, pp 128-133 and 256) is that the community and its common areas are well managed and maintained so as to create a pleasant living environment for the community residents. I did not understand this to be seriously in dispute by the Owners.

61. In addition, the Operator has supported a social club in which community residents can participate. The social club organises a weekly morning tea and additional events for the Melbourne Cup and Christmas.

(e) The range and average level of site fees within the community

62. The Tribunal was not assisted with clear submissions on this issue. The matters raised by the Operator in relation to s 74(1)(e) appear to have been more directed towards an ultimate submission that “the ‘by notice’ system creates uncertainty, extra work & tribunal issues”, however, that is not a relevant consideration for the Tribunal on this Application.

63. It appears from the submissions of the Operator that the site fees paid by residents of the community range from $157.66 to $197 per week. This compares to the site fee increase which is the subject of this Application having the effect that the Owners are paying $190 per week.

64. Limited information has been provided as to why certain residents of the community are paying lower site fees than others. It is said that certain residents currently paying lower fees paid higher fees than others in previous years to “benefit long term and have certainty”.

(f) The value of the land comprising the community, as determined by the Valuer-General

65. The Operator submits that the value of the land on which the community operations are conducted has increased from $1,096,000 in 2020 to $1,530,000 in 2021. However, it is not clear from its submissions how this should be factored into the Tribunal’s consideration of the Application.

66. The Owners draw attention the fact that the Operator does not own the land and has use of the land pursuant to a lease with Sea Change Parks Australia Pty Ltd. In response to this, the Operator says that the owner of both the Operator and Sea Change Parks Australia Pty Ltd is the same person. However, I cannot see the relevance of this in circumstances where the Operator and Sea Change Parks Australia Pty Ltd are separate corporate and legal entities.

67. Any increase in the value of the land has only had a marginal impact on the expenses described as “leasing charges” in the financial statements for the Operator. This expense increased from $108,990 in the 2021 financial year to $115,638 in the 2022 financial year.

68. I also note that other operations than the community operations are conducted by the Operator on the land.

69. Taking all of the above considerations into account, I do not consider it appropriate to attach any weight to the value of the land, or any increase in its value, to determining the Application.

(g) The value of any improvements to the community (including common areas) paid for or carried out by home owners

70. There are no improvements which have been paid for or carried out by home owners.

(h) Any explanation for the increase provided by the operator by notice in writing to the affected home owners

71. I have set out above the explanation for the increase provided by the Operator in the Notice in paragraph 11 above. For the reasons set out in paragraphs 41 to 53 above, I do not accept that there has been an overall increase in the expenses of the Operator. In respect of two of the expenses nominated by the Operator in the Notice as having been subject to increase, ie, power (ie, electricity) and repairs and maintenance, the financial statements certified by the accountant indicate to the contrary, ie, that these expenses have decreased from the 2021 financial year to the 2022 financial year.

(i) Variations in the Consumer Price Index (All Groups Index) for Sydney

72. There is a dispute between the parties as to the applicable CPI. The Owners contend that it should be based on the increase for December 2021 which was 3.1% or, alternatively, the increase for March 2022 which was 4.4%. The Operator contends that it should be based on the increase for December 2022 which was 7.6%.

72. In Walker & Ors v Hampshire (Pambula) Pty Ltd t/as Acacia Ponds [2022] NSWCATCD 204 at [48], the Tribunal adopted the most recent CPI prior to the site fee increase taking effect. In the present circumstances, that is the rate of 4.4% for March 2022.

73. However, the Act is not prescriptive as to the specific period in which an increase in the CPI should be considered. I consider that in the present circumstances, regard should be had to the CPI increase for December 2022. That represents an increase in CPI during the period in which the site fee increase which is the subject of the Application has been in effect. As I have found above, the evidence indicates that there has been substantial expenditure by the Operator on repairs, improvements and maintenance of the community during this period. Adopting this approach in the present circumstances, I consider that the CPI increase for December 2022 of 7.6% is a relevant consideration.

(j) Whether the increase is fair and equitable in the operation of the community

75. The Owners contend that they are generally on fixed statutory incomes which are indexed in accordance with the CPI every 6 months. The Operator contends that the Owners could have secured greater certainty for themselves by accepting proposals from the Operator to enter into agreements providing for fixed increases in site fees. I do not consider either of these contentions to be relevant considerations. As to the Owners’ contention, there is nothing in the Act or regulations to limit any increase in site fees to increases in the CPI. As to the Operator’s contention, it is a matter for the Owners whether they wish to remain with their existing agreements or to enter into alternative agreements providing for fixed increases in site fees.

(k) Any other matters prescribed by the regulations

76. There are no other matters prescribed by the regulations.

Decision and orders

77. Taking all of the above matters into consideration, I consider that an increase in site fees in accordance with the increase in CPI is appropriate.

78. Having regard to the fact that there have been annual increases in site fees since 2014 and that I am not persuaded that that there has been an increase in the outgoings and operating expenses for the community as provided by the Operator since the previous increase in site fees, I consider the increase stipulated in the Notice to be excessive.

79. However, I consider that an increase in site fees is justified having regard to the significant expenditure by the Operator on repairs, maintenance and improvements, the ongoing upkeep required for the land on which the community is situated and the fact that the community, its common facilities and the land on which it is situated are generally well maintained and managed.

80. I consider that it is appropriate to apply the CPI increase for December 2022 of 7.6%. That increase is for a period covered by the increase in site fees and during which there has been expenditure by the Operator on repairs, maintenance and improvements. Applying 7.6% to the previous amount of site fees of $314.84 per fortnight results in a fortnightly increase of $23.93.

81. For the above reasons, the Tribunal makes the following orders:

1. The increase in site fees stated in the notice dated 18 March 2022 is excessive.

2. The increase in site fees from $314.84 per fortnight to $380 per fortnight which took effect on 25 May 2022 is set aside.

3. The site fees must not exceed $338.77 per fortnight for a period of 12 months commencing from 25 May 2022.

4. The respondent is to refund to the applicant and the owners listed in the schedule to the application lodged on 3 June 2022 any amount paid to the respondent as site fees in excess of the amount specified in order 3.

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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: 06 October 2023