HEWITT and DALESUN HOLDINGS PTY LTD - [2011] WASAT 5

JURISDICTION : STATE ADMINISTRATIVE TRIBUNAL

STREAM: COMMERCIAL & CIVIL

ACT: RETIREMENT VILLAGES ACT 1992 (WA)

CITATION: HEWITT and DALESUN HOLDINGS PTY LTD [2011] WASAT 5

MEMBER: MR T CAREY (MEMBER)

HEARD: 5 OCTOBER 2010
FINAL WRITTEN SUBMISSIONS FILED 18 OCTOBER 2010

DELIVERED : 13 JANUARY 2011

FILE NO/S: CC 719 of 2010

BETWEEN: FRANK HEWITT
DAVID STREET
Applicants
AND
DALESUN HOLDINGS PTY LTD
(ADMINISTRATORS APPOINTED)
Respondent
COMMISSIONER FOR CONSUMER PROTECTION
Intervener

Catchwords:

Retirement villages - Jurisdiction - Definition of 'service contract' - Whether questions of the existence or enforceability of service contracts within jurisdiction - Whether possible to have 'hybrid' residence and service contracts - Scope of 'recreational services' in definition

Legislation:

Corporations Act 2001 (Cth), s 85AA, s 440D
Fair Trading (Retirement Villages Code) Regulations 2009 (WA), cl 4.4
Retirement Villages Act 1992 (WA), s 3, s 19, s 52(1)(b), s 56, s 56(1), s 56(1)(a), s 56(1)(b)

Result:

Answer to preliminary question provided - the matter raised by the application found to be within jurisdiction

Category: B

Representation:

Counsel:

Applicants:     Selfrepresented
Respondent:     Mr GR Dean
Intervener:     Mr M Crowley (As Agent)

Solicitors:

Applicants:     Self-represented
Respondent:     Cornerstone Legal
Intervener:     Department of Commerce

Case(s) referred to in decision(s):

Jones and Settlers Ridgewood Village Limited [2005] WASAT 62
Timberside Villas Management Pty Ltd v Parker [2005] WADC 246

REASONS FOR DECISION OF THE TRIBUNAL:

Summary of Tribunal's decision

The applicants sought to vindicate their claimed right to a reduction of an 'amenities fee' in their retirement village leases, based upon a representation in a letter from a person holding himself as the Chairman of the administrating body for the village. The reduction reflected the fact that a number of communal facilities, the use of which was provided for in their lease documents, were yet to be constructed or completed.
The administering body objected to the Tribunal having jurisdiction. The Tribunal directed that the question of jurisdiction be dealt with as a preliminary issue.
There were two broad grounds advanced for the Tribunal lacking jurisdiction, both of which were rejected.
The first ground was that the Tribunal did not have power to determine threshold issues of the existence and enforceability of 'service contracts'. Reliance was placed upon a previous Tribunal decision, where the Tribunal found on a similar ground that an application relating to a 'residence contract' was outside its jurisdiction. The Tribunal noted that the provisions of the Retirement Villages Act 1992 (WA) in relation to service contracts under which the application was brought had no equivalent in relation to residence contracts. It found that, depending upon whether or not an agreed variation to a service contract must be approved by the Tribunal, the application was capable of fitting within alternative jurisdictional preconditions appearing in the provision relied upon.
The second ground for denying jurisdiction was that the claimed variation did not relate to any service contract, but rather the residence contract of the applicants. The Tribunal rejected the contentions in support of this ground that contracts can only be of one or other type - that it is not possible for the one contract to be a 'hybrid' of the two - and that the predominance of provisions dealing with the occupation of the applicants' residences in the contracts meant that they must be purely residence contracts. It did so based upon a binding District Court authority, Timberside Villas Management Pty Ltd v Parker [2005] WADC 246. It also supported its conclusions by reference to the policy of the Retirement Villages Act 1992 of ready access to the Tribunal in cases concerning provision of services to residents and the preeminence of the substance of contractual terms as part of a service contract over their form.
When considering the provision for the amenities fee itself, the Tribunal found that it concerned the provision to residents of recreational services, which is a complying category for the purposes of the statutory definition of a 'service contract'. Similarly, the letter containing the representation of variation of the amenities fee to account for the nonprovision of recreational services came within the extended definition relating to collateral agreements or documents.
The Tribunal accordingly determined the subject matter of the application to fall within its jurisdiction.

Introduction and background to jurisdictional question

Mr Frank Hewitt and Mr David Street (applicants) are residents of Lady Brand Lifestyle Village (Village), a retirement village subject to the provisions of the Retirement Villages Act 1992 (WA) (RV Act) situated in Mandurah. Dalesun Holdings Pty Ltd (Dalesun) is the administering body, as that expression is defined in the RV Act, of the Village.
The Village has operated (in the sense that it has been occupied by residents) since June 2005. Residency entitlements arise from the provisions of documents in common form entitled 'Residency Lease'. Copies of the Residency Leases for the villa units occupied by each of the applicants are in evidence. Unless the context imports a different meaning, 'Residency Lease' will be a reference to both documents.
The Residency Lease permits the person(s) described as the 'resident(s)' the right as lessee to occupy and use the villa and the fixtures and fittings as an incidental to the villa (cl 2.1(a)). Importantly for present purposes, it also allows residents (by cl 2.1(b)):
... the right in common with all other persons authorised by us to use the Common Property including the Community Facilities ...
The reference to 'Common Property' is to the common property of the survey-strata scheme which comprises the Village. The 'Community Facilities' are set out as an item in a schedule to the Residency Lease. They include a multipurpose room (150 to 200 persons dining area capacity), kitchen, medical consulting rooms, library, indoor heated swimming pool and gymnasium, hobbies workshop, bowling green and barbeque area.
According to the applicants, a number of the communal facilities were available for residents' use upon the commencement of the Village's operation. However, some were not, including the pool, workshop and dining hall. The Residents Committee of the Village pursued a timeframe for completion of the outstanding facilities and this was a subject which was discussed at a general meeting of the Residents Committee on 18 November 2005. At the same meeting, a motion was passed requesting Dalesun to agree to a reduction in the provision for amenity fees in all Residency Leases with Dalesun in consequence of the noncompletion of all the proposed community facilities.
In a letter dated 9 February 2006, under Dalesun's letterhead and signed 'Brian Brand, Chairman' (Brand letter), a copy of which is Attachment 3 to the application, the following appears:
The directors have agreed that as of 1 July 2005 the amenities fee be reduced by 40% of the final cost of the total finished community facilities. Incoming residents prior to this date (June 2005) agreed to compensation through a monthly dinner, a significant contribution to the operating budget, other facilities and outings. In other words instead of the full 2.5% charge as stated in the lease agreement, 1.5% will be charged from 1 July 2005 until completion of the facilities.
The letter contains expected completion dates for the workshop, dining hall and swimming pool. The applicants, in Attachment 1 to the application, offer their interpretation of the effect on the operation of the amenities fee of the discount referred to in the Brand letter. They also describe attempts made, at the 2009 and 2010 general meetings of the residents and by correspondence from the applicants, to secure amendments to Residency Leases in order to give effect to the discount. The failure of these attempts resulted in the present application.
By their application filed on 21 May 2010, expressed as being under s 56(1)(b) of the RV Act, the applicants seek an order in the following terms:
That Dalesun Pty Ltd will honour the agreement set out in the letter from Dalesun Director Mr Brian Brand and dated 9 February 2006 (attachment 3) and that an 'Amendment to the Lease' be issued by Dalesun to all leaseholders in residence during the construction of the Community Facilities [in a] period from 1 July 2005 up to the agreed final completion date. The Amendment to the Lease shall clearly state the amount of discount, as a percentage, that each leasehold is entitled to and that any such amount will be deducted from the final amenity fee at the time of resale. The maximum amenity fee being 30% less the discount amount after a period not exceeding 12 years.
In Dalesun's formal response filed on 17 June 2010, it submitted that the application is outside the Tribunal's jurisdiction on the basis that it raises issues relating to the applicants' residence contracts and not service contracts, which are the only legitimate subject of any application under s 56 of the RV Act.
On 22 July 2010, the Tribunal ordered that copies of the application and other documents be served on the Commissioner of Fair Trading (Commissioner), with a view to ascertaining whether the Commissioner intended to become involved, either in order to mediate the dispute or to intervene in the proceedings. At a directions hearing on 12 August 2010, the Commissioner appeared and indicated its desire to intervene in the matter, at least for the purpose of the jurisdictional issue raised by Dalesun. Leave to intervene was granted on that basis.
At the same directions hearing, following discussion between all the parties, I directed that the following issue be determined as a preliminary issue:
... [W]hether the dispute concerning the enforceability of the representation provided in the final paragraph of the letter dated 9 February 2006 signed Brian Brand, Chairman, arises between the parties to a service contract, and therefore falls within the Tribunal's jurisdiction under s 56(1) of the [RV Act].
Directions were made for the filing of submissions by all parties on the preliminary issue. Written submissions were duly filed by Dalesun and the Commissioner. The Commissioner's submissions supported a view that the application does concern the terms of a service contract to the extent required by s 56(1) of the RV Act, and therefore is within the Tribunal's jurisdiction.
The hearing of the preliminary issue occurred on 5 October 2010. Leave was granted to the Commissioner to file and serve written submissions in respect of one particular contention of Dalesun's, which was subsequently extended to a second contention, with Dalesun having leave to respond. The Commissioner filed further submissions pursuant to the grant of leave on 18 October 2010.
On 9 December 2010, Mr IC Francis of Taylor Woodings wrote to the Tribunal informing it that Dalesun had been placed in voluntary administration and that he and Mr MJP Ryan had been appointed as the administrators. The letter went on to suggest that in consequence of the company being under administration, the Tribunal proceeding was stayed and could only continue with their consent. The letter requested copies of documents held by the Tribunal relating to the proceeding to assist the administrator to determine whether consent to continue should be given.
On 12 January 2011, in the course of a directions hearing designed to ascertain the other parties' attitude to the claim, based upon s 440D of the Corporations Act 2001 (Cth), that this proceeding is stayed, a representative for the administrators agreed to the Tribunal delivering its decision on the issue of jurisdiction. Indeed, he was part of a general consensus that it would be beneficial that the decision be delivered and published prior to a meeting of the creditors of Dalesun this Friday, 14 January 2011. In these circumstances, the Tribunal feels unconstrained by the earlier representation on the part of the administrators in delivering its decision constituted by these reasons and issuing its order.

Grounds for Tribunal lacking jurisdiction

Ground 1 - that the Tribunal is unable to determine threshold issues of enforceability

According to the submission made on behalf of Dalesun, the applicants' claim is concerned with a threshold issue of the existence and enforceability of a term of a service contract. Such threshold questions were found in a previous decision of the Tribunal, Jones and Settlers Ridgewood Village Limited [2005] WASAT 62 (Jones) to be outside the Tribunal's jurisdiction. Although Jones concerned a residence contract, it was submitted that the Tribunal is precluded from determining whether or not there exists a contract in particular terms, whether the contract asserted is a residence contract or a service contract. Such threshold matters, it was suggested, would often involve complex matters of fact and law, which were for the courts to determine.
Section 56 of the RV Act states relevantly:
(1)Where -
(a)a party to a service contract proposes a variation or cancellation in relation to any of the terms of a service contract, whether during or on the expiry of its term; or
(b)a dispute arises between the parties to a service contract,
either party to the service contract may make an application in relation to the matter to the State Administrative Tribunal.
...
(3)Where the State Administrative Tribunal is of the opinion that an order, if made under this section, may be relevant to more than one service contract the State Administrative Tribunal may require the administering body to furnish the State Administrative Tribunal with such information in relation to any other service contract or service contracts that may be relevant to the application and effect shall be given to any such order.
As I said in Jones at [34], the Tribunal's jurisdiction is limited by the terms of the State Administrative Tribunal Act 2004 (WA) and the enabling legislation: in this case, the RV Act. The ultimate finding in Joneswas that nothing in either of those Acts vested the Tribunal with jurisdiction to determine the question of enforceability of a residence contract raised in the application in that matter. But there is no equivalent in the provisions of the RV Act pertaining to residence contracts to s 56(1).
The essential nature of the applicants' claim is for recognition that Dalesun is bound by the representation made in the Brand letter concerning reduction of the amenities fee. There might be a question whether or not the parties to a service contract may themselves vary any term of the contract, or whether it is incumbent upon them to obtain an order from the Tribunal under s 56 of the RV Act, even where the variation is agreed. In Timberside Villas Management Pty Ltd v Parker [2005] WADC 246 (Parker), it was held that s 56 of the RV Act imposes no requirement, in terms of the enforceability of such a change, where the parties themselves have agreed to it. Assuming this is a correct statement of law, then in the present case, always on the assumption that the application is concerned with a service contract or a term of a service contract, the application is the manifestation of a dispute arising between the parties to the service contract.
Alternatively, if the effect of s 56(1) of the RV Act, perhaps taken with s 19 of the RV Act, is that any variation or cancellation must have the imprimatur of the Tribunal, then the application fits the template of an application in relation to a proposed variation to the service contract, based upon the representation in the Brand letter, brought by the other party to the contract.
Therefore, depending on the view one takes regarding the need for an application to the Tribunal in the case of asserted agreed variations to service contracts, one or the other of the jurisdictional preconditions appearing in s 56(1)(a) and s 56(1)(b) of the RV Act applies to the matter, assuming the necessary connection with a service contract can be established.
For these reasons, the submission that, to the extent the application concerns a service contract, the matter is outside the Tribunal's jurisdiction because it requires the determination of a threshold question as to the existence or enforceability of such a contract is rejected.

Ground 2 - that no 'service contract' is involved

Put shortly, Dalesun contends that the contractual variation asserted or sought by the applicants is a variation to the 'residence contract' and not a variation to a 'service contract', as both those expressions are to be construed for the purposes of the RV Act.
The argument advanced by Dalesun relies upon a number of propositions, which I shall attempt to summarise:
1)In general terms, a contract which creates a right of occupation must be a residence contract. Further, it is not possible for the same contract to comprise a 'hybrid' of a residence contract and a service contract.
2)In any event, the Residency Lease predominantly comprises provisions for the residents' occupation of their villas. It is therefore a residence contract.
3)The Brand letter allows a discount on amenities fees. As these fees are part of the grant to the applicants under the Residency Lease, the letter is concerned in each case with a residence contract, and not concerned with, or a term of, any service contract.
The statutory definitions of both 'residence contract' and 'service contract' appear in s 3 of the RV Act, in the following terms:
...
residence contract means a contract, agreement, scheme or arrangement which creates or gives rise to a right to occupy residential premises in a retirement village, and may take the form of a lease or licence;
...
service contract means a contract between an administering body or former administering body of a retirement village and a resident for the provision to the resident of -
(a)hostel care;
(b)infirmary care;
(c)medical or nursing services;
(d)meals;
(e)administrative and management services;
(f)maintenance and repair services;
(g)recreation services; or
(h)any other services,
and any collateral agreement or document relating to the provision of any such service;
...
I will now deal with each of the above propositions of Dalesun.

Is a contract which allows a right of occupation a residence contract exclusively?

Dalesun contends for the residence contract, as the Residency Lease plainly is, as an homogenous whole - that is, that it is only a residence contract, and not a service contract as well. Its first ground for so contending is that the RV Act does not permit the categorisation of contracts which are residence contracts as a service contract for any purposes under that Act. It calls in aid the restriction in s 52(1)(b) of the RV Act on the Tribunal making orders that are inconsistent with a residence contract.
Dalesun also relies upon that part of the definition of 'service contract' referring to 'any collateral agreement or document relating to the provision of any such service'. It referred to the fact that there is a single document (the Residency Lease) in existence. The lack of a collateral agreement or document containing clear service contract terms, in Dalesun's submission, militates against the possibility that the Residency Lease could constitute a service contract.
An immediate obstacle to acceptance of these submissions is that they appear to contradict the decision of the District Court in Parker, a decision which represents the law in Western Australia on this point and is therefore binding on the Tribunal. In that case, a question arose as to whether certain provisions contained in a document named 'Residency Deed' constituted a service contract. In upholding a decision of the then Referee of the Retirement Villages Disputes Tribunal to exercise jurisdiction by reference to the residency deed as a service contract or containing the terms of a service contract, Crisford DCJ said (at [68]):
The fact that the residency deed may also touch upon matters relating to a right to occupy residential premises in a village does not preclude the deed being categorised as a service contract.

Whether or not I agree with the reasoning of her Honour, I am bound by it. However, I would, with respect, agree with it for a number of reasons.
To say that a residence contract is also a service contract, or contains terms of a service contract, accords with the intention of the RV Act that a wide range of disputation in relation to the provision of services to residents of retirement villages be dealt with by the Tribunal.
Further, I do not share Dalesun's aversion to the concept of the one document (generally styled as a residency deed, residency lease or some such description) comprising both types of contract. It is the substance of particular provisions, rather than the form of the document in which they repose, which must be considered. To my mind, it makes no difference whether the terms of a service contract appear in the residency contract document, a separate service contract, or another document collateral to a document of the former or latter type. The question is whether, on normal contractual principles, a contract which fits the definition of 'service contract' in the RV Act has been formed.
Dalesun's reliance upon s 52(1)(b) of the RV Act sheds light on the misconception which underlines its position. Section 52(1)(b) is to the following effect:
(1)The State Administrative Tribunal shall not make orders under this Act that are -
...
(b)inconsistent with a residence contract.
It is not the case, on the principle laid out in Parker, that particular terms of the contract are terms of both a residence contract and a service contract. They will be either one or the other. This is borne out by the conclusion of Crisford DCJ at [71] that the provisions relevant to the matters before her comprised a service contract and not a residence contract. The relief sought in Parker being held to relate to the terms of a service contract, the restriction under s 52(1)(b) of the RV Act did not apply.

Is the Residency Lease predominantly a residence contract? If so, does this preclude the possibility of a service contract arising?

Dalesun submits that the predominance of the provisions of the Residency Lease as relating to the applicants' rights to occupy their respective premises has the effect that any provisions for service in the residency lease are to be read in the context of the lease, not as distinct services. In oral submissions, it was suggested that, in construing the residency lease as a whole, it contains only terms of 'the grant' and other provisions, described as 'ancillary to the grant'.
Although Dalesun appears to include, within the expression 'the grant', the giving of both the lease and the licence permitted by cl 2.1(b) of the Residency Lease, this begs the question of whether the licensing of the communal facilities is part of the residence contract or the service contract.
Dalesun goes further, by contending that none of the terms of the Residency Lease which the applicants assert to be, or form part of, a service contract qualify as such under the definition of service contract. Again, the relevant enquiry is whether or not any term being asserted, or any variation being sought, concerns a service contract.
It is instructive to consider the opposing positions of the parties in respect of some of the terms proposed by the applicant as terms of a service contract. I do so by reference to the particular category found in the definition upon which the applicants relied:
• Administrative and management services
According to the Commissioner, cl 7.1(c) and cl 7.1(e) (obliging Dalesun to arrange insurance and make available accounting records to residents), cl 7.2 (under which Dalesun must keep and maintain a register of resident details) and cl 7.6 (requiring Dalesun to prepare and supply annual accounts) of the Residency Lease all fall within the above category of service contract.
Dalesun submits that the obligations mentioned are requirements for the compliance by Dalesun with its statutory obligations, rather than the provision of administrative and management services to individual residents. In order for such services to come within the definition, it is suggested, they must be personal to the residents concerned.
It is not necessary, for present purposes, to rule on this particular dispute.
• Maintenance and repair services
The Commissioner points to cl 6.1(5) (containing Dalesun's right to view, repair and maintain the individual resident's premises) and cl 7.1(g) and cl 7.1(h) (under which Dalesun agrees to maintain the gardens and grounds, and all common property, including the community facilities) of the Residency Lease as satisfying the definition under the above category.
Dalesun did not offer an explanation as to why these terms do not fit within the definition. Presumably, it would rely upon the same nonexclusivity argument raised in relation to the previous category in respect of the maintenance of the Village garden and grounds. It certainly does so in relation to the upkeep of community facilities. However, it seems to me that the provision for Dalesun to 'view, repair and maintain the resident's premises', which is an obligation owed in respect of the particular resident in each case, is clearly caught.
• Any other services - provision of security
The Commissioner refers to cl 7.8 of the Residency Lease (providing for an 'Emergency Call System' for the resident to utilise in cases of emergency).
Again, Dalesun does not explain why the provision of such a call system is not the provision of a service under the definition. I regard it to be so.
The critical category under the definition - recreational services - will be considered under the next of the Dalesun propositions. However, what the above discussion serves to demonstrate is that, typical of documents bestowing residential rights on residents of retirement villages, the Residency Lease includes a number of provisions which, at least arguably, fall within the 'service contract' definition. As such, any issue or dispute relating to those provisions may be amenable to applications to the Tribunal under s 56(1) of the RV Act.

Does the applicants' claim based upon the Brand letter concern a service contract?

The amenities fee the subject of the representation in the Brand letter is defined by the Residency Lease (cl 3.4) as ' … the consideration you pay to us for your right to use the Common Property including the Community Facilities' - being the right provided by cl 2.1(b) of the Residency Lease. I have already referred to what is covered by the expression 'Community Facilities'. In order for the applicants' claim to fit within s 56 of the RV Act, the amenities fee provision must be a term of a service contract.
Dalesun submits that the licence under cl 2.1 and cl 3.4 of the Residency Lease is a right to use the communal facilities. As such, on the proper construction of the Residency Lease, the amenities fee is part of the grant and therefore any term relating to it forms part of the residence contract. Support for its position is drawn from the Fair Trading (Retirement Villages Code) Regulations 2009 (WA) (Code Regulations), which differentiate between the requirements for residence contracts and service contracts. Clause 4.4 of the Code Regulations requires that residence contracts state the amenities that are or are to be provided to residents and any changes or conditions applying to the use of those amenities.
Although I was initially attracted to the apparent dichotomy between 'amenities', which would seem to include the communal facilities, and 'services' under the Code Regulations, and the prospect that the same dichotomy may be applied to the RV Act, as the principal statute under which the Code Regulations were promulgated, I have in the end rejected it, for the reasons set out in the Commissioner's further submissions dated 18 October 2010 at para 34 to para 56, which I respectfully adopt.
The critical findings flowing from the Commissioner's submissions I have adopted are:
1)The provision of facilities for which the amenities fee is paid, including workshop, swimming pool, gymnasium, bowling green and children's play equipment area, amounts to the provision of 'recreational services' for the purposes of the service contract definition.
2)Dalesun provides other services in connection with the provision of the facilities to which I have just referred, such as their management, operation, cleaning and maintenance, the cost of which is covered by the amenities fee. These services also come within the definition.
3)The Brand letter is, arguably, a collateral agreement or document relating to the provision (or, more accurately, the nonprovision) of the recreational services so identified to residents.
I am fortified in these findings by the following observation in Parker at [70]:
At the very least the residency deed does, in a collateral fashion, deal with the services available both to individual residents and to all residents alike. It deals with service deeds and it also deals with the ability of any resident to approach the council in relation to actual proposed changes to services or facilities which may involve increased cost to or a loss of amenities by a resident (cl 2.1, cl 3 and cl 5). (My emphasis.)

Conclusion

By reason of the critical findings expressed above, the answer to the preliminary question is that the dispute concerning the enforceability of the representation in the Brand letter does arise between the parties to a service contract, or, alternatively, the representation arguably constitutes a proposed variation to the terms of a service contract, and therefore the matter does fall within the Tribunal's jurisdiction under s 56(1) of the RV Act.

Orders

The Tribunal shall issue an order in the following terms:
1.The preliminary issue is determined as follows:
The dispute concerning the enforceability of the representation in the final paragraph of the letter dated 9 February 2006 signed by Mr Brian Brand, Chairman, does arise between the parties to a service contract; or, alternatively, the same representation arguably constitutes a proposed variation to the terms of a service contract; and therefore, the matter does fall within the Tribunal's jurisdiction under s 56(1) of the Retirement Villages Act 1992 (WA).
2.The proceeding will be listed for a directions hearing on a date to be fixed after consultation with the parties.

I certify that this and the preceding [60] paragraphs comprise the reasons for decision of the State Administrative Tribunal.
___________________________________
MR T CAREY, MEMBER