Harvest Investments No 4 Pty Ltd t/a Nestle Inn Tourist Village v Lynch
[2011] QCAT 94
•17 March 2011
| CITATION: | Harvest Investments No 4 Pty Ltd t/a Nestle Inn Tourist Village v Lynch [2011] QCAT 94 |
| PARTIES: | Harvest Investments No 4 Pty Ltd t/a Nestle Inn Tourist Village |
| v | |
| Mr Graeme Lynch |
| APPLICATION NUMBER: | OCL075-10 |
| MATTER TYPE: | Other civil dispute matters |
| HEARING DATE: | 10 March 2011 |
| HEARD AT: | Brisbane |
| DECISION OF: | Mr Thomas Bradley, Member |
| DELIVERED ON: | 17 March 2011 |
| DELIVERED AT: | Brisbane |
ORDERS MADE: | [1] The increase in site rent proposed by the applicant in its notice to the respondent dated 8 February 2010, given under section 71 of the Manufactured Homes (Residential Parks) Act 2003, is set aside. |
| CATCHWORDS: | Application to confirm proposed increase in site rent – unwritten site agreement – evidence of site rents in comparable residential parks in the locality – increase in some operational costs – whether fair and reasonable – proposed increase set aside Manufactured Homes (Residential Parks) Act 2003, ss 70(3), 71 |
APPEARANCES and REPRESENTATION:
| APPLICANT: | Harvest Investments No 4 Pty Ltd t/a Nestle Inn Tourist Village represented by Mr Trent Ottawa |
| RESPONDENT: | Mr Graeme Lynch, self-represented |
REASONS FOR DECISION
Introduction
This is a decision on an application for an order about a proposed increase in site rent, being a site agreement dispute between Harvest Investments No 4 Pty Ltd (the “applicant”) and Mr Graeme Lynch (the “respondent”).
The applicant is the owner of the Nestle Inn Tourist Park on Manly Road, Tingalpa (the “Park”). The applicant acquired the Park on 14 December 2009 for a price of $9.225 million.
The respondent is the owner of a home located on a site in the Park. The respondent purchased his home in late 2005. The application concerns a proposed increase in site rental for the site occupied by the respondent’s home.
It is common ground that the Park is a residential park for the purposes of the Manufactured Homes (Residential Parks) Act 2003 (the “MH Act”) and that the respondent’s home is a manufactured home for the purposes of the MH Act.
Since late 2005, the respondent has paid $105 per week in site rent. Since December 2009, he has paid this sum to the applicant. There is no dispute as to the respondent’s right to position his home on the site or as to his right to use common areas and communal facilities in the Park.
On 8 February 2010 the applicant issued a notice (the “Notice”) to the respondent stating that it proposed to increase the site rent for the site occupied by the respondent’s home from $105 per week to $132 per week, payable from 8 April 2010. The respondent objected to the proposed increase, signing a written form to that effect on 8 February 2010. No agreement was reached on the proposed increase within 28 days of the Notice.
Proceeding in the tribunal
On 19 July 2010 the applicant lodged an application seeking an order under section 71 of the MH Act. This was more than five months after the respondent had objected to the proposed increase. The applicant requested that the tribunal “adjudicate” on the Notice and order that the “site rent be effective in accordance with the Section 71 notice issued”.
On 2 August 2010 the tribunal conducted a directions hearing. The respondent, along with other respondents indicated a desire to have all of the applicant’s application against home owners in the Park consolidated. Directions were made for the filing of an application to consolidate and for any response by the applicant.
On 31 August 2010 the tribunal decided to consolidate applications OCL065-10, OCL075-10 and OCL095-10, so that all proceeded as OCL075-10.
[10] Over the ensuing period the applicant withdrew its applications against all of the other respondents, having reached agreement with each other respondent as to the rent payable for the site occupied by other respondent’s home. By the date of the hearing, the respondent was the only remaining respondent in the consolidated proceeding.
[11] At the hearing on 10 March 2011, Mr Ottawa appeared on behalf of the applicant. He relied upon the application and another copy of the same papers filed in OCL075-10, another proceeding in the tribunal that was consolidated with this proceeding. Mr Ottawa identified and explained a number of the matters referred to in the application and the accompanying report.
[12] There were a number of exchanges between Mr Ottawa and the respondent, who appeared on his own behalf. These clarified certain contentions advanced by the parties, but are not material to this decision.
Legislation
[13] The tribunal has jurisdiction to deal with the application under section 9 of the Queensland Civil and Administrative Tribunal Act 2009 because the MH Act is an enabling Act that confers original jurisdiction on the tribunal.
[14] In applying the MH Act, it is useful to note the main object, found in subsection 4(1), which is:
“to regulate, and promote fair trading practices in, the operation of residential parks:
(a)to protect home owners from unfair business practices; and
(b)to enable home owners, and prospective home owners, to make informed choices by being fully aware of their rights and responsibilities in their relationship with park owners.”
[15] This object is achieved, relevantly, by “declaring particular rights and obligations of the park owner, and home owners, for a residential park” and “regulating … the variation of site rent”: see paragraphs 4(2)(a) and (c)(iii). In addition to the main object, the MH Act also has as an important object “encouraging the continued growth and vitality of the residential park industry”.
[16] Park owners and home owners may not contact out of the application or operation of the MH Act or enter into any agreement or arrangement with intent to defeat its operation: section 23. A special term of a site agreement is void to the extent that it is inconsistent with the provisions of the MH Act: subsection 24(1).
[17] Part 11 of the MH Act commences with section 68; it provides that the site rent payable under a site agreement may only be varied in the ways stated in Part 11.
[18] The applicant seeks relief under section 71, which is within part 11 of the MH Act. This section was significantly amended by section 20 of the Manufactured Homes (Residential Parks) Amendment Act 2010, which commenced on 19 November 2010. The transitional provision in section 172 of the MH Act provides that where an application has been made to the tribunal before the section was amended and has not been decided, the tribunal must decide the application as if the amending Act had not commenced.
[19] It follows that the tribunal must apply the pre-amendment version of section 71, which provided as follows:
“71 Notice of proposed increase in site rent
(1) This section applies if—
(a) the park owner for a residential park wishes to increase the site rent payable under a site agreement; and
(b) section 69 does not apply to the proposed increase.
(2) The park owner must give the home owner for the site a notice stating the following—
(a) the amount of the proposed increased site rent;
(b) the basis for the proposed increase;
(c) the day the proposed increased site rent is first payable (the increase day);
(d) the home owner must, within 28 days after receiving the notice, give the park owner a written response indicating whether or not the home owner agrees to the proposed increase.
(3) The increase day must not be earlier than 2 months after the notice is given.
(4) The home owner must within 28 days after receiving the notice give the park owner a written response indicating whether or not the home owner agrees to the proposed increase.
(5) If the response indicates the home owner agrees to the proposed increase, the proposed increased site rent is first payable on the increase day.
(6) If the home owner does not give a written response under subsection (4) within the 28 days, the home owner is taken to have not agreed to the proposed increase.
(7) If the park owner and home owner do not agree on the proposed increase within the 28 days, the park owner may apply to the tribunal for an order about the proposed increase.
(8) In deciding the application, the tribunal may have regard to the matters mentioned in section 70(3).
(9) Also, in deciding the application, the tribunal may make any of the following orders—
(a) an order reducing the amount of the proposed increase by a stated amount;
(b) an order setting aside the proposed increase;
(c) an order confirming the proposed increase on the conditions, if any, the tribunal considers appropriate;
(d) another order the tribunal considers appropriate.
(10) If the tribunal makes an order mentioned in subsection (9)(a) or (c), the order must also state the day from which the increased rent is first payable.”
[20] As an applicant under section 71, a park owner bears the onus of persuading the tribunal that the section applies and that the tribunal should confirm a proposed increase: Palmpoint Pty Ltd v The Residents of Bribie Pines Island Village and Others [2007] QDC 130 at [10].
[21] Subsection 70(3) of the MH Act, to which lists the matters to which the tribunal may have regard, is in the following terms:
“(3) In deciding the application, the tribunal may have regard to the following -
(a) the range of site rents usually charged for comparable sites in comparable residential parks in the locality of the park;
(b) if it is impractical to obtain data for the range of site rents mentioned in paragraph (a), data is not available for that range or it is just and equitable to do so in the particular circumstances—the range of site rents usually charged for comparable sites in comparable residential parks in comparable localities to the locality the park is in;
(c) if it is impractical to obtain data for the range of site rents mentioned in paragraph (a) or (b), data is not available for that range or it is just and equitable to do so in the particular circumstances—general trends in rent for residential accommodation in the locality the park is in;
(d) the increased site rent compared to the previous site rent;
(e) the frequency, and amount, of past increases in the site rent payable under the agreement;
(f) any increase in the CPI number during the previous site rent period;
(g) the amenity or standard of the common areas and communal facilities;
(h) any withdrawal of a communal facility or service previously provided at the park;
(i) any addition of a communal facility or service not previously provided at the park;
(j) any increase in the park owner’s operating costs for the park during the previous site rent period;
(k) whether the increase is fair and equitable in all the circumstances of the case;
(l) anything else the tribunal considers relevant.”
[22] Some of the terms in these provisions are defined in subsection 70(6):
“(6) In this section—
CPI means the all groups consumer price index for Brisbane published by the Australian statistician.
previous site rent means the site rent payable under the agreement before the increase.
previous site rent period means the period commencing on the first day the previous site rent was payable and ending on the day the tribunal decides the application.”
Does section 71 apply?
[23] The first issue to be determined is whether section 71 applies to the proposed increase sought by the applicant. The pre-amendment form of subsection 71(1) included only two requirements, each of which must be satisfied for the section to apply.
[24] It is clear that the applicant, as the Park owner, wishes to increase the site rent payable by the respondent.
[25] There is no written agreement between the applicant and the respondent, contrary to the intention expressed in sections 25 and 151 of the MH Act. The parties explained to the tribunal that the absence of a written agreement results from the respondent’s disagreement with certain special terms included in proposed written site agreements proffered by the applicant.
[26] It appears there is an unwritten agreement between the applicant and the respondent as to the respondent’s right to position his home on the site and as to his right to use common areas and communal facilities in the Park. Can this constitute the “site agreement” between the parties?
[27] This unwritten agreement does not state how and when the site rent may be varied, contrary to paragraph 25(4)(i)(iii). It might be argued that the absence of such a provision, required by the MH Act to be in a site agreement, places the unwritten agreement outside the definition of “site agreement” in section 14 of the MH Act. However, given the beneficial objects and content of the MH Act, the better view is that the parties have an unwritten site agreement, albeit one that does not comply with a number of the obligations imposed by the MH Act. This approach found favour in Palmpoint Pty Ltd v The Residents of Bribie Pines Island Village and Others [2007] QDC 130 at [17]. Neither party took the position that there was no site agreement: cf Monte Carlo Caravan Park Pty Ltd v Curyer (2007) 2 Qd R 57 at 60.
[28] Accepting that the unwritten agreement is a site agreement, the requirement in paragraph 71(1)(a) is satisfied.
[29] The site agreement, such as it is, does not provide for any increase in the site rent payable by the respondent. It follows that section 69 of the MH Act does not apply to the increase proposed by the applicant (see Palmpoint [2007] QDC 130 at [13]) and the second requirement, found in paragraph 71(1)(b), is satisfied.
Relevant matters under s 70(3)
[30] The pre-amendment version of subsection 71(8) permits the tribunal to have regard to the matters mentioned in subsection 70(3). I note, in passing, that since the commencement of the amending Act, the matters in paragraphs (a) to (c) of subsection 70(3) have been excluded from the matters the tribunal may consider. This change does not apply to the present application.
Range of site rents for comparable sites
[31] The first of the matters the tribunal may consider is “the range of site rents usually charged for comparable sites in comparable residential parks in the locality of the park”.
[32] The applicant attached to its application to the tribunal a short bound report, which states:
“In order to support the proposed site rent increase and to resolve the matter without the involvement of QCAT, an independent expert, Jamie Brown of CB Richard Ellis was engaged by the Applicant on 23 February 2010 to prepare an independent Rental Determination Report.”
[33] A copy of Mr Brown’s report, dated 23 February 2010, was also attached to the application. In the report, Mr Brown mentions five other residential parks with the following numbers of sites and weekly rents, excluding electricity:
(a)Thorneside Mobile Home Park, Thorneside (147 sites) $140-$145;
(b)Redlands Mobile Village, Birkdale (133 sites) $120;
(c)Green Acres Caravan Park, Capalaba (103 sites) $130;
(d)Durack Gardens, Durack (133 sites) $136; and
(e)Monte Carlo Caravan Park, Cannon Hill (unknown) $100.
[34] The following summary comments are drawn from Mr Brown’s report or based on the information it contains.
[35] Like the subject Park, all the parks Mr Brown mentioned are located between 12 and 20 kilometres from the Brisbane CBD, variously in easterly, south-easterly and southerly directions. Monte Carlo is the closest to the subject Park, being approximately four kilometres to its west. Thorneside is about 8 kilometres east of the Park. Redlands is about 9 kilometres to the east. Green Acres is about 16 kilometres south. Durack Gardens is the most distant, being about 30 kilometres to the south-west.
[36] The subject Park is larger, in the number of sites, than any of the other parks mentioned by Mr Brown.
[37] Thorneside and Durack parks have swimming pools and tennis courts, which the subject Park does not have. Durack sites are “generous in proportion compared to comparable parks, allowing for extended gardens or in some cases storage room for extra vehicles or vans.”
[38] Thorneside also has sealed internal roads with concrete kerbing, central drainage and is well maintained with mature landscaping. According to the respondent, the subject Park has graded roads in the vicinity of the respondent’s home site and drainage problems, with frequent flooding affecting the respondent’s home.
[39] In the report, Mr Brown says he was engaged “to undertake a rental determination”. His rental determination is as follows:
“Subject to the overriding stipulations and principal assumptions in this report, I am of the opinion that the market rent of the subject property as at the determination date of 23 February 2010 is:
$136.00 per week (GST inclusive).”
[40] As his “determination” records, Mr Brown was giving his opinion on the “market rent” for a permanent site in the Park. That is not the task the tribunal undertakes in determining whether to confirm a site rent increase under section 71. The tribunal is permitted to consider “the range of site rents usually charged for comparable sites in comparable residential parks in the locality of the park”.
[41] In his oral submissions, Mr Ottawa confirmed this approach. He relied on the report of Mr Brown as to the market rent; pointed to the site rents being paid by other residents in the Park, including those paid by new residents; the site rent ordered by the Small Claims Tribunal in July 2008 for another site in the Park; and the site rents agreed with other residents in the Park since the Notice was circulated. None of these is a matter that the tribunal is permitted to consider under paragraph 70(3)(a).
[42] In making his “determination”, Mr Brown excluded Monte Carlo on the basis that its average rents were “not in line with market”. The comment is not explained. Mr Brown also expressed the view that Monte Carlo was “not comparable” to the Park “due to its unique ownership structure”. This appears to be a reference to the fact that it is owned by the Public Trustee. There is nothing to suggest that persons interested in a permanent site in the locality of the Park could not or would not be able to obtain a site at Monte Carlo. Neither its ownership nor its lower site rent is any proper basis for concluding it is not comparable or for excluding it from consideration under paragraph 70(3)(a).
[43] Mr Brown did not exclude Durack Gardens from his consideration, despite its significant distance from the Park. I do not consider that it is “in the locality” of the Park. It should not be considered within the scope of the matters directed by paragraph 70(3)(a).
[44] I have doubts that the Thorneside and Durack parks are really comparable parks, as they have significantly better communal facilities, particularly swimming pools and Thorneside has far superior internal roads and drainage. Provided that important difference is born in mind, I do not consider that including the Thorneside park in the range will offend the principles reflected in paragraph 70(3)(a).
[45] Mr Brown’s opinion was plainly affected by his exclusion of Monte Carlo and his inclusion of Durack Gardens. It also appears to have taken no account of the superior communal facilities at Thorneside and Durack.
[46] It follows that the evidence collected by Mr Brown is relevant for the tribunal’s present purposes only in that it shows the range of site rents usually charged for comparable sites in comparable residential parks in the locality of the Park is $100 to $145 per week – although the sites over $130 per week are in a park with superior communal facilities, roads and drainage. Both the previous site rent ($105) and the proposed increased site rent ($133) are within this range.
Range of site rents in comparable localities, general rent trends
[47] As Mr Brown was able to find information on the range of site rents usually charged for comparable sites in comparable residential parks in the locality, the circumstances that might have permitted the tribunal to consider rents in parks in comparable localities, under paragraph 70(3)(b), or general trends in rent for residential accommodation in the locality, under paragraph 70(3)(c), do not arise.
Increased site rent and the previous site rent
[48] The next matter to be considered is the increased site rent compared to the previous site rent, under paragraph 70(3)(d). The evidence is that the proposed rent was an increase of $27 per week (or 25.7%) from the previous site rent.
Frequency and amount of past site rent increases
[49] As the respondent has only been in the Park since late 2005, there has only been one previous increase in site rental payable by him, which may be considered under paragraph 70(3)(e). It was an increase from $97 to $105 per week (or 8.25%) in 2005 or 2006. From this it is clear that the respondent’s site rent has not changed for some time and that the last change was about a third of the change now proposed.
Increase in the consumer price index
[50] In the Notice, the applicant had relied on the following comment as a basis for the proposed site rent increase:
“The fact that you have not had a Site Rent increase since you came to the Park in 2006 and the Consumer Price Index for All Groups (Brisbane) has increased 16.8% over the period December 2006 to September 2009 (see summary below of ABS data) or an average annual increase of 5.6%.”
[51] Mr Ottawa accepted that the applicant had incorrectly stated the figures for movements in the CPI (All Groups) Brisbane in the Notice and its written submissions. No official figures were put into evidence. The respondent was prepared to accept that the relevant CPI had increased since the last site rent increase, but thought the annual increase had been in the range of 2% to 3%. He speculated that the applicant may have produced the incorrect figures by adding up quarterly increases that had already been annualised. Whatever the explanation, the result was that there was no reliable information for the tribunal to consider under paragraph 70(3)(f).
Amenity and standard of common areas and communal facilities
[52] As to paragraph 70(3)(g), the respondent complained about the amenity and standard of common areas and facilities in the Park, referring to recent flooding, wearing away of the Park’s gravel roads and the limited access to fire-fighting resources. Although the applicant did not accept these criticisms, Mr Ottawa did not seek to justify the proposed site rent increase on the basis of improved amenity or standards.
Withdrawal of a communal facility or service
[53] Paragraph 70(3)(h) allows the tribunal to consider any withdrawal of a communal facility or service previously provided at the Park.
[54] The respondent identified a reduction in the mail delivery service previously offered in the Park and the loss of a service that collected garbage from each home site. Home owners now have to transport their garbage to a central waste area. Mr Ottawa said that this change was the result of appointing a Council approved contractor and accounted for the increase in waste removal costs from $5,000 to $35,000 per annum.
Addition of a communal facility or service
[55] As to paragraph 70(3)(i), Mr Ottawa did not seek to justify the proposed increase in site rent by reference to any additional communal facility or service not previously provided at the Park.
Increase in operating costs
[56] The applicant provided some evidence on increases in operating costs, which may be considered under paragraph 70(3)(j).
[57] The written report by the applicant, which was filed with the application, dealt with nine items, including increases in fixed operating costs. It set out a table showing changes in four categories, described as “some of the fixed operating cost increases of the Park over the period 2006-2010”. The four were “rates and taxes” (which rose from $74,500 in 2006 to $132,528 in 2010), “waste removal” (which rose from $5,000 to $35,000), “insurance” (which rose from $13,250 to $28,500) and “wages” (which rose from $154,339 to $231,673). The accompanying text provides no further detail of these costs. I calculate that these selected costs have increased by $118,112 over the period from 2006 to 2010.
[58] The section of the applicant’s report on operating costs concludes as follows:
“Rent reviews to market take regard of many elements, one of which is any increase in any fixed operating costs of the Park.”
[59] No other “significant fixed cost increases” were noted. The applicant’s total operating costs were not disclosed; it is not known whether the total operating costs have increased significantly, increased marginally, decreased or remained constant.
[60] It does not appear from the Notice, the application or the applicant’s supporting documents that the applicant has ever contended that the proposed site rent increase was necessary to cover significant increased operational costs in relation to the Park. Rather, it appears the applicant sought an increased based on a market review of site rents, including a consideration of the increases in certain operating costs. The fixed cost increases were considered only on the basis that they were relevant to a determination of the “market rent” for the site occupied by the respondent’s home.
[61] There was no evidence concerning the ability of the applicant to meet its operating costs from revenues generated by the Park; or its ability to meet those costs from income other than site rents payable by owners of the manufactured homes in the Park. According to Mr Ottawa there are currently 197 sites in the Park, of which 164 are occupied by permanent residents; of this number about 41 are owners of manufactured homes.
[62] The respondent tendered evidence that, when the Park was offered for sale in September 2009, it was advertised as having a “strong cash flow - $1M adjusted net profit for the 08-09 FY”. (According to the advertisement, at that time the Park had 172 permanent sites and 31 holiday cabins.) An annual net profit of $1 million is a profit of about $95 per site per week across 203 sites. The advertised net profit was for a period before the round of site rent increases were agreed by the applicant and other permanent residents, according to the applicant raising site rents to an average of $134 per week. However, the net profit made in a period when most of the increases in operating costs had occurred.
[63] These matters indicate that costs (including operating costs) may account for a relatively modest proportion of the site rents payable to the applicant, with the most significant share flowing through to the net profit of the owner. This may explain why the increase in operating costs, of itself, did not figure significantly in the applicant’s approach to proposing an increased site rent in the Notice and in the application.
Fairness and equity, other relevant matters
[64] Section 71(9) permits the tribunal to consider, under paragraph 70(3)(k), “whether the increase is fair and equitable in all the circumstances of the case” and, under 70(3)(l), “anything else the tribunal considers relevant”.
[65] In other contexts such language has been found to confer a very wide discretion to put right and cure any unfair prejudice: Re Bird Precision Ltd (1986) 1 Ch 658 at 699D; Frauenstein v Farinha [2009] FCA 55 at [14]. Considerations of fairness and equity necessarily involve the subjective positions of each of the parties; in other words considering whether the proposed increase is fair from the perspective of the applicant and from the perspective of the respondent: cf Holt v Cox 15 (1994) ACSR 313 at 338. Where the issue is whether a value is “fair”, the “market” value is often not decisive: MMAL Rentals Pty Ltd v Bruning (2004) 63 NSWLR 167 at 176, citing Gambotto v WCP Ltd (1995) 182 CLR 432 at 457-458.
[66] The proposed increase is very significant – of the order of 25.7%. It would place the respondent’s weekly site rent at a level above that found in all the comparable parks in the locality, save for Thorneside, which has superior communal facilities, roads and drainage. The respondent would be paying a premium without the benefit of any additional or superior facilities or services. Indeed, from the respondent’s perspective, the important postal and waste removal services have reduced since the last site rent increase.
[67] From the applicant’s perspective, it would be obtaining a premium above comparable parks without having to provide any premium services or facilities. Although it may be paying more in some operating costs, it is providing fewer or a reduced level of service to the respondent. In all the circumstances, it is difficult to characterise the proposed increase as “fair and equitable”, from the position of the applicant or the respondent.
Conclusion
[68] For the reasons set out above, I do not consider that the proposed increase should be confirmed by the tribunal. Although it is within the range of site rents usually charged for comparable sites in broadly comparable residential parks in the locality of the Park, it above that charged at the clearly comparable parks and exceeded only by that at a park with superior facilities. On the evidence presented, I am unable to find that the proposed increase is justified by movements in the relevant CPI or by increases in operating costs at the Park.
[69] I accept that, since the last increase in the site rent payable by the respondent, some of the applicant’s operating costs have increased and the CPI has also increased. However, I am not satisfied that the proposed increase would be fair and equitable in all the circumstances.
[70] I have considered whether the tribunal ought to make an order under paragraph 71(9)(a), reducing the amount of the proposed increase by a stated amount. On the evidence presented to the tribunal, I do not considered it safe to do so, because that evidence is neither adequate nor in a form that would facilitate the calculation or estimation of an appropriate adjustment amount. Fixing an arbitrary amount would not be fair or equitable.
[71] Taking all the subsection 70(3) matters into consideration, I have concluded that the tribunal should make an order setting aside the proposed increase under paragraph 71(10)(b) of the MH Act.
Order
[72] The order of the tribunal will be that the increase in site rent proposed by the applicant in its notice to the respondent dated 8 February 2010, given under section 71 of the MH Act, is set aside.
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