Ingpen v Baptcare Ltd
[2025] VCC 937
•8 July 2025
| IN THE COUNTY COURT OF VICTORIA AT MELBOURNE COMMERCIAL DIVISION | Revised Not Restricted Suitable for Publication |
GENERAL LIST
Case No. CI-21-04621
| THOMAS SHARLAND LANE INGPEN (as executor of the estate of Margaret Beatrix Colborne) | First Plaintiff |
| and | |
| HEATHER MARGARET INGPEN (as executor of the estate of Margaret Beatrix Colborne) | Second Plaintiff |
| v | |
| BAPTCARE LTD (ACN 069 130 463) | Defendant |
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JUDGE: | HER HONOUR JUDGE KIRTON | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 25 - 26 October 2023 and 30 October 2023. | |
DATE OF JUDGMENT: | 8 July 2025 | |
CASE MAY BE CITED AS: | Ingpen v Baptcare Ltd | |
MEDIUM NEUTRAL CITATION: | [2025] VCC 937 | |
REASONS FOR JUDGMENT
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Subject:LEASE – CONTRACT – RETIREMENT VILLAGE
Catchwords: Construction of terms of lease in a Retirement Village – existing tenant vacated – entitled to refund of ingoing loan amount less a deferred management fee – deferred management fee to be calculated based on new loan amount paid by incoming tenant – where no new loan amount as no incoming tenant as building to be demolished – new loan amount to be substituted with a proxy amount based on the current market value of the residence rights – calculation of market value – adequacy of valuation evidence
Legislation Cited: Retirement Villages Act1986 (Vic); Retirement Villages (Contractual Arrangements) Regulations 2006 (Vic); Civil Procedure Act 2010 (Vic); Evidence Act 2008 (Vic)
Cases Cited:Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337; Reardon Smith Line Ltd v Yngvar Hansen‑Tangen [1976] 1 WLR 989; Spencer v The Commonwealth (1907) 5 CLR 418; Commonwealthv Arklay (1952) 87 CLR 159; Robinson v Harman (1848) 1 Ex 850; Haines v Bendall (1991) 172 CLR 60; Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64; L Albert & Son v Armstrong Rubber Co (1949) 178 F.2d 182; Mount Bruce Mining Pty Limited v Wright Prospecting Pty Limited (2015) 256 CLR 104; Australian Broadcasting Commission v Australasian Performing Right Association Ltd (1973) 129 CLR 99; Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640; Grundt v The Great Boulder Pty Gold Mines Ltd (1937) 59 CLR 641; Commonwealth v Verwayen (1990) 170 CLR 394; Norman v Federal Commissioner of Taxation (1963) 109 CLR 9; Riches v Hogben [1985] 2 Qd R 292; Australian Financial Services and Leasing Pty Ltd v Hills Industries (2014) 253 CLR 560; Delaforce v Simpson-Cook (2010) 78 NSWLR 483; Talacko v Talacko (2021) 272 CLR 478; Allianz Australia Insurance Ltd v Delor Vue Apartments CTS 39788 (2022) 277 CLR 445; Derring Lane Pty Ltd v Fitzgibbon (2007) 16 VR 563; Bi v Touvanna [2025] VSC 153; Taylor v Johnson (1983) 151 CLR 422; Equuscorp Pty Ltd v Glennallen Investments Pty Ltd (2004) 218 CLR 471; Byrnes v Kendle (2011) 243 CLR 253; Toll (FGCT) Pty Limited v Alphapharm Pty Limited (2004) 219 CLR 165; Zhu v Treasurer of New South Wales (2004) 218 CLR 530; Electricity Generation Corp v Woodside Energy Ltd (2014) 251 CLR 640; Simic v New South Wales Land and Housing Corp (2016) 260 CLR 85; Ecosse Property Holdings Pty Ltd v Gee Dee Nominees Pty Ltd (2017) 261 CLR 544; Innovative Landscaping Supplies Pty Ltd v Spachoice Pty Ltd [2024] VCC 1636; Joseph Finance and Investment Pty Ltd v Eastwood Retirement Pty Ltd [2023] VSC 731; Next Stage Living Moonee Ponds Pty Ltd v Ardmillan Place Nominees Pty Ltd [2022] VSC 89; Rava v Logan Wines [2007] NSWCA 62; Commissioner of Succession Duties (SA) v Executor Trustee & Agency Co of South Australia Ltd (1943) 67 CLR 314
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiffs | Mr D G Robertson KC with Mr B Mason | Novatsis & Alexander |
| For the Defendant | Mr P L Ehrlich KC with Mr J Heard | Barry Nilsson Lawyers |
HER HONOUR:
Introduction
1In this proceeding, the plaintiffs, Heather Margaret Ingpen and Thomas Sharland Lane Ingpen, seek to recover a debt of $370,000.00 from the defendant, Baptcare Ltd (“Baptcare”), pursuant to two lease agreements (“the Leases”) entered into between Margaret Beatrix Colborne and Templestowe Baptist Church Community Centre Ltd (“the TBC Community Centre”). Under the Leases, Mrs Colborne was granted life tenancies in respect of Apartment Numbers 124 and 125 (“the Apartments”) at the Templestowe Orchard Retirement Village (“Templestowe Orchard”), located at 107–109 Andersons Creek Road, Doncaster East. In the alternative, the plaintiffs seek damages for loss. Additionally, the plaintiffs seek declaratory relief and costs on an indemnity basis
2The defendant denies the plaintiffs’ claim, contending that, on its proper construction of the Leases, no monies are owing. Further, the defendant submits that the plaintiffs have not suffered any loss or damage arising from the alleged breach of the Leases and, in the alternative, that the plaintiffs are estopped from asserting that Baptcare breached its obligations under the Leases.
3For the following reasons, I have determined that the proper construction of the Leases is as submitted by the defendant; that is, for the purpose of calculating the deferred management fee (“DMF”) pursuant to clauses 10.2(c) and 10.4(a) of the Leases, in circumstances where no new loan amount (“NLA”) is obtained, the term “new loan amount” is to be substituted with a proxy amount based on the “current market value” of the residence rights of the relevant premises, in accordance with Schedule E of the Leases.
4Unless otherwise specified, all subsequent references to clauses and schedules are to those contained in the Leases.
5On the evidence before me I am unable to determine the “current market value” of the residence rights in the Apartments. I will give the parties the opportunity to address whether I should appoint an independent valuer in accordance with Schedule E and s 65M of the Civil Procedure Act 2010 (Vic) (“the CPA”).
Background facts
6On 15 September and 5 October 2006, Mrs Colborne entered into two leases with the TBC Community Centre, granting her life tenancies in respect of Apartment Numbers 124 and 125 at Templestowe Orchard, located at 107–109 Andersons Creek Road, Doncaster East. Aside from the differences in the apartment numbers, the respective dates of execution, and the particulars set out in Schedule A, the terms of the Leases are otherwise identical for the purposes of this proceeding.
7Pursuant to clause 5, Mrs Colborne was required to advance an ingoing loan amount (“ILA”) of $185,000.00 to the TBC Community Centre prior to occupying the Apartments. By 17 November 2006, Mrs Colborne paid the loan monies, totalling $370,000.00, to the TBC Community Centre.
8Mrs Colborne subsequently moved in to the Apartments, which were interconnected and located in a building called “The Lodge”. Mrs Colborne used one of the apartments as a bedroom and the other as a dining, sitting, and living room.
9On 20 March 2008, Mrs Colborne executed a financial power of attorney naming Mr Ingpen and Mrs Ingpen, the plaintiffs, as her attorneys. Mrs Ingpen is Mrs Colborne’s daughter.
10Under clause 10, if the Leases are cancelled in prescribed circumstances set out in clause 7.3, Mrs Colborne or her legal personal representatives are entitled to the ILA less a DMF, a capital replacement fee (“CRF”), the costs of re-letting, and any amount expended to rectify for any breaches of the Leases – an amount herein referred to as the “Settlement Payout”.
11The Settlement Payout owed to the plaintiffs, as executors of Mrs Colborne’s estate, is the main issue for determination in the current proceeding.
12In March 2012, Baptcare purchased Templestowe Orchard from the TBC Community Centre. Baptcare continued to operate Templestowe Orchard and assumed the rights and liabilities of the TBC Community Centre, including Mrs Colborne’s leases.
13In April 2013, Baptcare circulated a notice informing residents of proposed redevelopments to Templestowe Orchard, noting that The Lodge would remain unaffected during the “first stage” of the building process – but that, subsequently, in approximately 2016, residents of The Lodge would be relocated to a newly constructed aged care facility (“the New Facility”).
14On 24 July 2015, Mrs Ingpen requested a Settlement Payout estimate on the Apartments and was informed that it would be “nil”, given the DMF and CRF together would exceed the ILA paid by Mrs Colborne. This was reiterated by Baptcare in March 2016, following a further request from Mrs Ingpen to calculate the Settlement Payout on the Apartments.
15In the July 2015 estimates provided by Baptcare, it was stated that the Settlement Payout was dependent on the new ingoing loan amount (“NIL”), defined as the sum loaned by a future tenant or tenants of the Apartments.
16In August 2016, Baptcare informed Mrs Colborne that The Lodge would not continue to operate once the New Facility was completed (estimated to be between May and July 2017), and that as an existing resident of The Lodge, Mrs Colborne would have the opportunity to move into the New Facility.
17On 29 August 2016, Baptcare provided Mrs Colborne with letters (“the 29 August 2016 letters”) informing her that the Settlement Payout on the Apartments would be $nil as at 30 June 2017, on the basis that the DMF ($188,500.00) would exceed the ILA ($185,000.00) she had provided for each apartment. Baptcare’s calculation of the DMF was based on an estimated NIL of $290,000.00, based on the most recent five commercial sales, all of which were between $290,000.00 and $320,000.00. The DMF was then calculated at 20% of the estimated NIL for two years following Mrs Colborne’s entry into the Leases (15 September 2006), and at 6.5% per annum thereafter, up to a maximum of 65%, equating to $185,000.00.
18The 29 August 2016 letters were emailed to Mrs Ingpen. In the same email correspondence, Baptcare also informed Mrs Ingpen that it had arranged a session for Mrs Colborne and Mrs Ingpen to meet with a financial advisor to discuss the move into the New Facility.
19Mrs Colborne was reluctant to relocate but realised that “the move [was] inevitable”. She had selected room preferences in the New Facility, communicated to Baptcare via Mrs Ingpen on 17 November 2016.
20Around 13 February 2017, Mrs Colborne said she had changed her mind about the move, but nevertheless, on 16 February 2017, Mrs Colborne (via her attorney, Mrs Ingpen) executed an “Acknowledgment of Relocation” with Baptcare.
21Mrs Colborne’s health then declined and she was admitted to hospital. On 27 March 2017, Mrs Ingpen informed Baptcare that Mitcham Hospital had recommended Mrs Colborne be admitted into high-care accommodation and Baptcare subsequently made enquiries for Mrs Colborne to be placed at Hedley Sutton, Camberwell, as a high-care resident.
22Before moving anywhere, on 30 March 2017 Mrs Colborne passed away. As a consequence, the Leases for the Apartments were cancelled pursuant to clause 7.3(a). On 6 April 2017, the plaintiffs delivered vacant possession of the Apartments to Baptcare.
23On 20 December 2017, the plaintiffs’ solicitors sent a letter of demand to Baptcare, claiming a Settlement Payout of $366,575.00 (the ILA less the CRF plus interest), pursuant to clause 10.2(c). The defendant’s solicitors denied that a Settlement Payout was owed to the plaintiffs, referring to the calculations in the 29 August 2016 letters.
24On 23 July 2018, Baptcare obtained a valuation of the Apartments, completed by Laila Burnet, describing the “market value” of each apartment as $260,000.00 when un-refurbished and $290,000.00 when refurbished.
25The parties subsequently applied to the Australian Property Institute (“API”) to “seek an opinion as to the market value of the ‘residence right’ for each apartment” and agreed that the determination of the nominated valuer would not be binding.
26On 19 June 2019, Julian Valmoirbida was appointed to conduct the valuation. The parties were to make submissions to Mr Valmoirbida concerning the value of residence rights in the Apartments, but prior to this, by November 2019, Baptcare had already demolished the Apartments. Between 6 April 2017 and November 2019, Baptcare did not endeavour to re-let the Apartments.
27On 21 April 2020, the plaintiffs’ solicitors referred to the demolition and stated that they “[did] not see how a valuation in these circumstances can serve any purpose” given residence rights have ceased to exist.
28The primary issue for determination in this proceeding is the amount of the Settlement Payout, if any, that the defendant is required to pay to the plaintiffs as executors of Mrs Colborne’s estate.
Relevant terms
29The relevant clauses of the Leases are as follows:
“7. Cancellation of Lease by Resident
…
7.3After the Commencement Date this lease can be cancelled and the Owner can re-let the apartment if:
(a)the Resident (or both of them) dies; …”
“10. Effect of Cancellation after Commencement Date
10.1If this lease is cancelled for any of the reasons set out in clause 7.3 the Owner will:
(a)use its best endeavours to re-let the apartment as expeditiously as possible by private treaty;
…
(c)when re-letting the apartment, first ascertain the current loan amount for an equivalent apartment in the Premises and attempt to re-let the apartment for at least the current loan amount;
(d)if it becomes reasonably apparent to the Owner after a reasonable period of time (being not less than one month) that the current loan amount is not readily attainable, re-let the apartment for such loan amount as is attainable;
(e)at all times act in good faith and not be in any way liable for any loss to the Resident occasioned by the re-letting.
10.2The Owner will repay the loan amount to the Resident from the proceeds of re-letting the apartment (“the new loan amount”):
(a)within fourteen (14) days of the date of receipt of those proceeds; or
(b)within fourteen (14) days after the day on which another person takes up residence in the premises; or
(c)on a day which is not more than six (6) months after the non-owner has delivered up vacant possession;
whichever is the earlier.
10.3The Owner will repay the loan amount to
(a)the Resident or, if more than one, both of them equally, if living; or
(b)the Resident’s legal personal representative.
10.4The amount to be repaid to the Resident shall be the loan amount:
(a)less the deferred management fee calculated in accordance with Schedule A, Item 11;
(b)less the capital replacement fee calculated in accordance with Schedule A, Item 12;
(c)less the costs of re-letting;
(d)less any amount expended by the Owner for rectification of a breach, or monies owing to the Owner.
10.5Any amount which is required to be repaid to the Resident under the [Retirement Villages] Act [1986] or the Retirement Villages (Contractual Arrangements) Regulations 2006 (“the Contractual Arrangements Regulations”) prior to the receipt of the new loan amount, shall be calculated in accordance with Schedule 3 of the Contractual Arrangements Regulations.
(A copy of Schedule 3 is attached to this lease in Schedule E).”
“13. Destruction of premises
If the apartment, premises or any part of them are destroyed or damaged by any cause, other than by the Resident or the Resident’s guest(s), so as to render them substantially unfit for the use and occupation of the Resident, the Owner will repair the damage and reinstate the premises within a reasonable time and the Owner will in the meantime use all reasonable endeavours to provide the Resident with suitable alternative accommodation.”
30Schedule E of the Leases incorporates Schedule 3 of the Regulations into the Leases, and reads as follows:
“CALCULATION OF REFUNDABLE IN-GOING CONTRIBUTION BASED ON MARKET VALUE:
…
2. The parties agree that the refundable in-going contribution will be calculated as if another person had paid the proxy amount determined in accordance with clause 3 as an in-going contribution under a residence contract in relation to the premises.
3. For the purposes of clause 2, the proxy amount is the current market value of the residence right as determined by an independent valuation obtained from –
(a) an independent valuer agreed by the parties; or
(b) if the parties cannot agree, a valuer appointed by the President of the Victorian Division of the Australian Property Institute.
…”
31Further, Schedule A, Item 11 of the Leases contains an incomplete definition of the “deferred management fee” as follows:
“Deferred Management Fee:
…
(c)If the term exceeds two (2) years, the deferred management fee is twenty percent (20%) of the new loan amount (exclusive of the carport or garage component) plus six and one half percent pro rata per annum (6½% p.a.) of the new loan amount (exclusive of the carport or garage component) for each year of occupancy after the first (2) years, calculated from the Commencement Date to the Commencement Date [sic]”
32There appears to be a typographical or formatting error in the Leases, as the remainder of this paragraph is missing. Baptcare submitted that the balance of that clause should have read “…of the next successive lodge apartment lease subject to a cumulative maximum of sixty-five percent (65%)”, as this is the wording of the standard pro-forma lease in use at that time by the TBC Community Centre. That was also the calculation used by Baptcare in the 29 August 2016 letters. In order to make commercial sense of the paragraph, I accept the defendant’s submission, taking into consideration “the background, the context [and] the market in which the parties are operating.”[1]
[1] Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337 at [19] (“Codelfa”), citing Reardon Smith Line Ltd v Yngvar Hansen‑Tangen [1976] 1 WLR 989 at 995-996.
33As a result, the complete definition of the “deferred management fee” in Schedule A, Item 11 of the Leases is as follows:
“Deferred Management Fee:
…
(c)If the term exceeds two (2) years, the deferred management fee is twenty percent (20%) of the new loan amount (exclusive of the carport or garage component) plus six and one half percent pro rata per annum (6½% p.a.) of the new loan amount (exclusive of the carport or garage component) for each year of occupancy after the first (2) years, calculated from the Commencement Date to the Commencement Date of the next successive lodge apartment lease subject to a cumulative maximum of sixty-five percent (65%).
34Schedule A, Item 12 defines the “capital replacement fee” as follows:
“Capital Replacement Fee:
The capital replacement fee is one thousand dollars ($1,000) per each year of occupancy (or part thereof), calculated from the Commencement Date to the Commencement Date of the next successive lodge apartment lease, subject to a cumulative maximum of seven thousand, five hundred dollars ($7,500).”
Issues
35Pursuant to the Summary of Issues in the Case submitted by the parties, there are ten issues as follows:
(a) On the proper construction of the Leases, was there no NLA for the purposes of calculating the DMF under the Leases, such that the DMF under the Leases was $nil?;
(b) In particular:
(i)By reason of Baptcare demolishing the Apartments without replacing any of the capital relating to either Apartment, and/or without notifying the plaintiffs of such demolition, either before or after carrying it out, is there no NLA for the purpose of calculating the DMF under each of the Leases, so that the DMF under the Leases was $nil?; or
(ii)Is the NLA to be determined by substituting a “current market value proxy amount” for the “new loan amount”, the latter to be determined in accordance with Schedule E of the Leases and Schedule 3 of the Regulations?;
(c) On the proper construction of the Leases, what amount, if any, is Baptcare indebted to pay the plaintiffs pursuant to clauses 10.3 and 10.4 of each Lease?;
(d) Alternatively, did Baptcare breach the terms of each Lease by:
(i)not making any endeavour to re-let either Apartments 124 and 125?;
(ii)not attempting to re-let either of Apartments 124 and 125 for at least the current loan amount for an equivalent apartment in the Templestowe orchards Retirement Village or for any loan amount at all; and/or
(iii)demolishing Apartments 124 and 125 sometime after 6 September 2017 without replacing any of the capital relating to either Apartment and/or without notifying the plaintiffs of such demolition, either before or after carrying it out?
(e) If Baptcare did breach the terms of each Lease, what loss and damage, if any, have the plaintiffs suffered?;
(f) Did Mrs Colborne agree to her relocation to alternative accommodation at the Templestowe Orchards Retirement Village when the new facility was built, commissioned, and ready for occupation?
(g) If Mrs Colborne agreed to her relocation:
(i)Did any such agreement by Mrs Colborne have the effect that Baptcare was not required to comply with clause 10.1 of the Leases in the event of a cancellation of the Leases, for any of the reasons set out in clause 7.3 of the Leases, including Mrs Colborne’s death?; and
(ii)Did any such agreement by Mrs Colborne amount to Baptcare’s compliance with clause 10.1 of the Leases being waived in the event of a cancellation of the Leases for any of the reasons set out in clause 7.3 of the Leases, including Mrs Colborne’s death?
(h) By signing and delivering the Acknowledgement, did Mrs Colborne expressly or impliedly represent to Baptcare that she consented:
(i)to her permanent relocation at the Templestowe Orchards Retirement Village, commencing from when the new facility was commissioned and ready for occupation?; and
(ii)in consequence thereof, the redevelopment of the land on which the Templestowe Orchards Retirement Village was relocated, and the demolition of Apartments 124 and 125?
(i) Did Baptcare rely upon Mrs Colborne’s alleged representations in:
(i)planning for and proceeding with the redevelopment of the land upon which the Templestowe Orchards Retirement Village was located, including demolishing Apartments 124 and 125; and/or
(ii)after Mrs Colborne died, not attempting to re-let either of Apartments 124 or 125 during the period prescribed by clause 10.2(c) of the Leases?
(j) Are the plaintiffs estopped from alleging that Baptcare breached its obligations under clause 10.1 of the Leases by failing to use its best endeavours to re-let Apartments 124 and 125 during the time prescribed by clause 10.2(c) of the Leases?
36I will address Issues (a) and (b) together, in determining the proper construction of the Leases. I will then determine, according to that construction, the amount, if any, owed as a debt to the plaintiffs.
37I will next address Issues (d) and (e) together, concerning whether there has been a breach of the Leases and, if so, whether the plaintiffs are entitled to damages. Finally, I will then address Issues (f), (g), (h), and (i) together, in considering whether the plaintiffs are estopped from alleging that Baptcare breached the Leases.
38I note that, pursuant to the plaintiffs’ Statement of Claim dated 28 October 2021, the plaintiffs also seek declaratory relief and costs on an indemnity basis..
Submissions
The plaintiffs’ submissions
39The plaintiffs submit that, pursuant to the respective lease agreements, Mrs Colborne advanced an ILA of $185,000.00 to the TBC Community Centre for a life tenancy in respect of each of Apartment Numbers 124 and 125 at Templestowe Orchard (totalling $370,000.00). The landlord, being the TBC Community Centre at the relevant time, was obliged to provide services for Mrs Colborne’s care and comfort throughout the life tenancy.
40The plaintiffs state that the Leases provided that, upon Mrs Colborne’s death, her estate would be entitled to receive a Settlement Payout equal to the ILA less a DMF. The DMF was to be calculated by reference to a NLA, and, accordingly, the plaintiffs contend that the Leases were entered into on the expectation that there would be an incoming resident for the Apartments.
41The plaintiffs submit that the Settlement Payout provision required the landlord to continuing operating Templestowe Orchard, and that the Leases did not contemplate the landlord unilaterally deciding not to comply with its obligations regarding Mrs Colborne’s right of quiet enjoyment.
42The plaintiffs state that Baptcare assumed the rights and liabilities of the TBC Community Centre when it purchased Templestowe Orchard, including pursuant to the Leases. In 2012, Baptcare began its plan to redevelop Templestowe Orchard.
43The plaintiffs suggest that the defendant did not seek Mrs Colborne’s consent to the redevelopment of the Apartments she resided in. Instead, the development was presented as a “fait accompli” – a decision already made – as indicated by the language of correspondence provided by Baptcare to residents in 2016. Residents were therefore left with no option but to relocate to the New Facility upon its completion or to find alternative accommodation.
44The plaintiffs note that Baptcare sought a further advance of $350,000.00 from Mrs Colborne as a condition for her to reside in a new, single, smaller room in the New Facility – a room that did not necessarily have a north-facing aspect or an immediately adjacent garden.
45The plaintiffs state that Mrs Colborne passed away on 30 March 2017, and that vacant possession of the Apartments was delivered up to Baptcare on 6 April 2017, which they did not attempt to re-let. The plaintiffs claim that, on the proper construction of the Leases, Baptcare must return Mrs Colborne’s ILA to her estate, in full, which they have refused to do.
46The plaintiffs suggest that the task of the Court in the current proceeding is to interpret the Leases in view of their text, context, and purpose. The plaintiffs note the inconsistencies in Baptcare’s submissions, particularly in their framing of the Leases as “badly drawn” agreements – yet present their interpretation of the Leases as a “simple construction choice” for the Court to make.
47The plaintiffs submit, however, that their construction should be preferred when viewing the Lease as a whole, having regard to their context and purpose, as well as the Retirement Villages Act1986 (Vic) (“the Act”) and the Retirement Villages (Contractual Arrangements) Regulations 2006 (Vic) (“the Regulations”). The plaintiffs further cite the contra proferentem rule – that, where an agreement is ambiguous, the preferred meaning should be against the party responsible for the drafting – and note that Baptcare does not refer to an authority suggesting the rule does not apply merely because it “inherited” the Leases from the TBC Community Centre.
48The plaintiffs claim that, upon Mrs Colborne’s death, they are entitled to recover her ILA as a debt, pursuant to clause 10.2. The clause requires that Mrs Colborne or her estate be repaid “from the proceedings of re-letting the apartment” – otherwise known as the NLA. The plaintiffs suggest that this condition only applies with respect to clause 10.2(a), where a new tenant moves into the Apartments, and not clause 10.2(c), where no tenant moves into the Apartments, but where there has been six months of vacant possession.
49The plaintiffs submit that, if clause 10.2 is engaged, the central issue in the proceeding is determining the amount repayable to Mrs Colborne’s estate from the ILA. In doing so, the plaintiffs note that the Court must determine what the DMF is, pursuant to clause 10.4(a).
50The plaintiffs suggest that the DMF should be calculated as a percentage of the NLA pursuant to Schedule A, Item 11(c). However, as a result of Baptcare’s decision to redevelop Templestowe Orchard, cease operating The Lodge, and demolish the Apartments, no NLA was obtained. It follows, the plaintiffs contend, that no DMF is payable, and that they, as executors of Mrs Colborne’s estate, are entitled to repayment of the ILA in full.
51The plaintiffs submit that the ordinary operation of the Schedule A, Item 11(c) formula should be preferred, given Baptcare breached its obligation under clause 10.1 to exercise its best endeavours to re-let the Apartments by unilaterally deciding to cease operating Templestowe Orchards.
52The plaintiffs further submit that the objective intention and purpose of the Leases were to incentivise Baptcare to operate and maintain Templestowe Orchards for the duration of Mrs Colborne’s life tenancy. The plaintiffs support this submission by reference to clause 13, which requires Baptcare to repair any relevant damage to the Apartments. The plaintiffs also highlight the “confined circumstances” under which Mrs Colborne’s life tenancy could be cancelled, none of which are relevant to the present proceeding. Finally, the plaintiffs note the consideration Baptcare would expect to receive under the Leases, in the form of “two sizeable loans, on interest free terms” and a “substantial deferred management fee,” contingent on Templestowe Orchard continuing to operate as a desirable residential aged care facility.
53This consideration, the plaintiffs submit confers a “double benefit” on Baptcare – first, Baptcare would expect to secure a greater NLA from the subsequent resident(s) of the Apartments; and second, Baptcare would be entitled to receive a greater DMF from the ILA paid by Mrs Colborne. This arrangement, they argue, would provide Baptcare with additional working capital to sustain the operation of Templestowe Orchard.
54Alternatively, the plaintiffs contend that if Baptcare operated Templestowe Orchard poorly such that it became an undesirable aged care facility, it would be likely to receive a reduced NLA and, consequently, a lower DMF. In that event, Mrs Colborne would stand to receive a greater Settlement Payout should she have chosen to cancel the Leases under clause 7, thereby enabling her to secure alternative accommodation.
55Contrary to Baptcare’s submissions, the plaintiffs state that Mrs Colborne has not received “10 years of free accommodation”, given Baptcare has enjoyed substantial, interest-free loans which would have continued to depreciate throughout Mrs Colborne’s life tenancy. Baptcare, the plaintiffs state, was able to use the loan funds as it saw fit, providing a “significant commercial benefit” for the duration of the life tenancy – possibly a considerable period of time.
56The plaintiffs note that Baptcare has not adduced any evidence to suggest that the commercial benefit derived from its use of Mrs Colborne’s ILA, together with the monthly maintenance charges she paid, was insufficient to cover the actual cost of providing care to Mrs Colborne, or that the arrangement was otherwise commercially unviable. The monthly maintenance charge covered rates and utilities, as well as Mrs Colborne’s meals, personal care, laundry, and cleaning costs. The plaintiffs submit that the monthly maintenance charge was an “integral component” of the Leases, and reject the defendant’s submission that this charge was irrelevant to Mrs Colborne’s right of residence, noting that Baptcare retained the contractual right to require Mrs Colborne to vacate the Apartments upon non-payment, pursuant to clause 9.2.
57The plaintiffs submit that clause 10.5, referring to Schedule E of the Leases (containing Schedule 3 of the Regulations), does not apply in the current proceeding, as it requires repayments to be made to Mrs Colborne or her estate “prior to the receipt of the new loan amount”. Instead, the plaintiffs suggest that the current proceeding concerns clause 10.2(c).
58Even if the Court finds that clause 10.5 is engaged, the plaintiffs submit that they are nonetheless entitled to recover, as a debt, the full ILA paid by Mrs Colborne. Schedule E provides that the Settlement Payout is to be calculated by reference to a “proxy amount” rather than the NLA, representing the “current market value of the residence right” in the Apartments.
59The plaintiffs contend that the value of the residence right in respect of Apartments 124 and 125 does not call into question the value of the residence right associated with another apartment that did not exist prior to 2006, nor with any apartment in which Mrs Colborne never held a legal or equitable interest. That is, if Mrs Colborne were relocated to an apartment of substantially greater market value than her original residence, the DMF referable to her original residence should not be increased merely because the new apartment commands a higher market value.
60Such a construction, the plaintiffs submit, would be inconsistent with s 3 of the Act, which refers to residence rights “created or aris[ing] … under a contract”. It would also lead to absurdity, be susceptible to abuse, and fall outside the objective contemplation of the parties as well as the intention of Parliament.
61Rather, the plaintiffs propose that the value of Mrs Colborne’s residence right should be determined by reference to her right to reside in the Apartments at Templestowe Orchard and to receive the services that Baptcare was contractually obliged to provide pursuant to the Leases.
62The plaintiffs state that, by reference to the valuation report of Gino Mitrione dated 9 May 2023 (“the 9 May 2023 report”), the Court should recognise the residence rights in the Apartments as having a value of $nil, given:
(a) only a person willing to enter into a lease with the landlord in respect of the Apartments would be entitled to reside there permanently;
(b) any subsequent resident would have no right to re-let the Apartments; and
(c) the Apartments are restricted to use as residences for either a single person aged at least 70 years, or for a couple where at least one person is aged 70 or over.
63These, the plaintiffs submit, reflect the terms upon which Mrs Colborne had contracted with Baptcare.
64The plaintiffs also note that Baptcare has accepted that an apartment in a retirement village due for demolition in two years would have a negligible value, taking into account “all circumstances which may affect [the property’s] value, either advantageously or prejudicially, including its situation, character, quality, proximity to conveniences or inconveniences”.[2] The plaintiffs take issue with defendant’s contention that a willing purchaser would disregard “ordinary business considerations”, such as Baptcare’s intention to demolish the Apartments.[3]
[2] Spencer v The Commonwealth (1907) 5 CLR 418 (“Spencer”).
[3] Spencer.
65The plaintiffs continue to object to the valuation of the residence rights contained in the valuation report of Laila Ann Burnet dated 28 September 2022, being not less than $290,000.00 if the Apartments were refurbished. The plaintiffs submit that Ms Burnet’s valuation report is inadmissible given the assumptions underlying her analysis have not been proven and the report is irrelevant, pursuant to s 56(2) of the Evidence Act 2008 (Vic), given Ms Burnet calculated a “vastly different ‘residence right’” to that which Mrs Colborne actually enjoyed under the Leases
66In the alternative, the plaintiffs contend that they are entitled to recover loss and damage equivalent to the full amount of the ILA, arising from Baptcare’s breach of the Leases. Pursuant to clause 10.1, Baptcare was required to take steps to re-let the Apartments for “such a loan amount as is attainable”, and to act in “good faith” in doing so.
67The plaintiffs submit that, had Baptcare complied with its obligations under the Leases, the ILA have been fully repayable. Accordingly, the plaintiffs claim damages suffered to place them in the position they would have been in, had the Leases been properly performed.
68The plaintiffs reject the defendant’s construction of the Leases and, in particular, Baptcare’s submissions that the Leases and the Act are “synonymous”, given such an interpretation would render the Leases ineffective and redundant. Instead, the plaintiffs submit that the legislation is merely contextual and the only provision which may be applicable in the current proceeding is s 26(2)(b)(iii) of the Act, entitling a “non-resident owner” to recover their ILA within six months of delivering vacant possession of their residence.
69First, the plaintiffs reject the defendant’s submissions, that s 26(1) of the Act and r 7 of the Regulations are connected. They contend that s 26(2) of the Act only refers to r 5 of the Regulations, which refers to conditions for refunding an ILA but not prescribing how the Settlement Payout should be calculated.
70Second, the plaintiffs suggest that the statutory language of s 26(1) of the Act is incompatible with Baptcare’s submissions that the Leases and the Act are synonymous. Regulation 7 of the Regulations incorporates, and s 21B(2) of the Act deems, the terms prescribed in Schedule 3 of the Regulations into Schedule E of the Leases. However, the plaintiffs note that the statutory language of s 26(1) of the Act does not prescribe that the Settlement Payout must be calculated by reference to the terms of the parties’ contract or to the terms set out in Schedule 3 of the Regulations. Rather, the plaintiffs contend that s 26(1) of the Act contemplates a broader assessment, including consideration of statements made during negotiations, irrespective of whether those statements were incorporated into the residence contract.
71Third, the plaintiffs submit that, even if Schedule 3 of the Regulations applies in this proceeding, Baptcare made no attempt to undertake the valuation process prescribed to determine a proxy amount within six months of the plaintiffs delivering up vacant possession of Apartments 124 and 125. This failure, coupled with the non-payment of a Settlement Payout as required by s 26(2)(b)(iii) of the Act, is said by the plaintiffs to constitute an offence under s 381(1) of the Act.
72Fourth, the plaintiffs contend that Baptcare’s submissions erroneously proceed on the assumption that the Leases merely reflect the “minimum protections” afforded to the residents of retirement villages pursuant to the Act. The plaintiffs emphasise that Baptcare has accepted that the Leases may contain contractual terms more favourable to residents, even if they go beyond the Act’s requirements.
73Fifth, the plaintiffs respond to Baptcare’s hypothetical scenarios by contending that the parties did not objectively intend for clauses 10.2(c) and 10.5 to apply in all circumstances where no NLA arises – such as where the Apartments are destroyed without fault on Mrs Colborne’s part, where Baptcare becomes insolvent, or where Baptcare elects to cease business operations.
74The plaintiffs contend that the reason the NLA is $nil arises solely from Baptcare’s decision to redevelop Templestowe Orchards. Accordingly, they claim that the amount owing is $370,000.00, being the full ILA, together with any penalty interest payable pursuant to s 58(1) of the Supreme Court Act 1986 (Vic).
75Further, the plaintiffs reject the defendant’s “unpleaded call” for an independent valuation, submitting that clause 3 of Schedule E of the Leases is not relevant to this proceeding. In any event, they contend that such a valuation would serve no utility, as Baptcare has admitted that the value of the Apartments as at May 2017 was $nil, and had previously been afforded the opportunity to obtain a valuation but failed to do so.
76Pursuant to the plaintiffs’ Statement of Claim, the plaintiffs seek costs on an indemnity basis and suggest that the defendant has breached its overarching obligations under ss 22 and 23 of the CPA to “use reasonable endeavours to resolve a dispute by agreement between the persons in dispute” and to “narrow the scope of the remaining issues in dispute”.
77In support of this contention, the plaintiffs rely on correspondence exchanged between the parties and the defendant’s conduct during the period in which the parties were seeking to have the Apartments valued – specifically, the demolition of the Apartments prior to any such valuation being undertaken.
The defendant’s submissions
78The defendant submits that the plaintiffs’ debt claim of $370,000.00 is made “as if there was no fee payable” for Mrs Colborne’s life tenancy, and is based on alleged breaches of the Leases – namely:
(a) the defendant’s failure to re-let the Apartments upon the death of Mrs Colborne, the termination of the Leases, and the giving up of vacant possession of the Apartments by the plaintiffs; and/or
(b) the demolition of the Apartments without first notifying the plaintiffs.
79The defendant admits that they did not attempt to re-let the Apartments, but argue that the plaintiffs’ debt claim fails on the true and proper construction of the Leases, and by application of, collectively:
(a) clauses 10.2 and 10.5 of the Leases;
(b) subsections 26(1), 26(2)(b), and 26(2)(c) of the Act;
(c) regulation 7 of the Regulations; and
(d) Schedule 3 of the Regulations, incorporated into the Leases as Schedule E (by operation of r 7).
80The defendant submits that:
(a) clauses 10.2 is in complete accordance with s 26(2)(b) of the Act;
(b) clauses 10.5 is in complete accordance with s 26(2)(c) of the Act and r 7 of the Regulations;
(c) even if clause 10.5 was not expressly included in the Leases, it would nonetheless be incorporated pursuant to r 7 of the Regulations; and
(d) Schedule E of the Leases, titled “CALCULATION OF REFUNDABLE IN-GOING CONTRIBUTION BASED ON MARKET VALUE”, is in “complete conformity” with Schedule 3 of the Regulations and is incorporated pursuant to r 7 of the Regulations.
81The defendant submits that, in the current proceeding, given there was no NLA within six months of the plaintiffs delivering up vacant possession of the Apartments, then clause 10.2(c), alternatively s 26(2)(c)(iii) of the Act, and the process set out in clause 10.5 and Schedule E, were engaged.
82The defendant further submits that, in such circumstances, the Act and the Regulations exclusively determine what should occur if “the resident becomes entitled to payment of the refundable in-going contribution before another person has paid an in-going contribution”, as per Schedule E. This is the case regardless of why there was no NLA, the defendant states, including whether the Apartments was demolished, whether Baptcare became insolvent and was placed in liquidation, whether Baptcare had chosen to cease business, or if the Apartments had burned down.
83The defendant notes that pursuant to Schedule E of the Leases and Schedule 3 of the Regulations, an “independent valuation” is required when calculating the Settlement Payout, intended to protect residents and their estates. This is emphasised by proposed reforms to consolidate the Act and Regulations, pursuant to the Retirement Villages Amendment Bill Exposure Draft 2023.
84The defendant says that it has always wanted to have a valuation of the Apartments in accordance with the leases and the Regulations. That is the only remedy available to the plaintiffs but no valuation was obtained because, while parties had initially agreed to the appointment of an expert valuer pursuant to Schedule E of the Leases and Schedule 3 of the Regulations (Mr Valmoirbida was appointed on 19 June 2019), the plaintiffs subsequently withdrew from the valuation process and commenced the current proceeding.
85The defendant refers to correspondence from the plaintiffs’ solicitors dated 2 April 2019, seeking to withdraw from the “mandatory statutory process” on the basis of the Apartments’ demolition. The defendant describes this as “opportunistic” because:
(a) Mrs Colborne had implicitly agreed to the demolition, and the plaintiffs had no ongoing interest in the issue of demolition after Mrs Colborne’s death; and
(b) Schedule E of the Leases and Schedule 3 of the Regulations requires the “current market value of the residence right” to be used as a “proxy amount” to determine the NLA.
86Regarding the interpretation of Schedule E, the defendant cites the following definitions from s 3(1) of the Act:
"residence right means a right of a resident to use residential, hostel or hospital accommodation or other services provided for a retirement village (not being a service provided in a residential care facility) which is created or arises by or under a contract whether the right is expressed as an interest in land or a licence or arises because the resident becomes the holder of shares in a company which provides accommodation or services for a retirement village.”
“in-going contribution means the payment made –
…
(c) in consideration of the right to become a resident –
whether paid by or on behalf of the person who wishes to become a resident and whether in a lump sum or by instalments but does not include rent.”
"residence contract means a contract between an owner and a resident which creates or gives rise to a residence right.”
"resident means a retired person who lives or proposes to live in a retirement village …”
"contract includes a lease or other agreement relating to an interest in land.”
87The defendant submits that calculating the current market value of the residence right in the Apartments is a “hypothetical” exercise that should not take into consideration whether Baptcare subjectively intended to re-let the Apartments. It should also be assumed that:
(a) the Apartments are available for re-letting, as follows from clauses 2 and 3 of Schedule E; and
(b) Baptcare is a “willing vendor”, despite its actual intention to demolish and redevelop the Apartments.
88Regarding the “willing vendor” submissions, the defendant cites Issacs J in Spencer and suggests that the current market value should be calculated assuming that it has arisen as a result of “voluntary bargaining between the plaintiff and a purchaser, willing to trade”.[4]
[4] Spencer at 441.
89The defendant further cites the High Court of Australia in Commonwealth v Arklay:[5]
“Where the amount for which a vendor may sell and a purchaser buy is not controlled the Court poses a hypothetical problem the answer to which supplies this value. It is a familiar rule which in Australia was authoritatively formulated in Spencer's Case. Shortly stated what is required is 'an estimate of the price which would have been agreed upon in a voluntary bargain between a vendor and purchaser each willing to trade but neither of whom was so anxious to do so that he would overlook any ordinary business considerations' ... It is simply an analysis of what in all the relevant circumstances would be the price that a willing purchaser would have to pay a vendor willing but not anxious to sell in order to obtain the land. Where land has no special suitability for some business or activity carried on by the owner and has no added potential value if put to some better use of the value on a free market is usually its market value. The best evidence of this value is that of comparable sales of other land either before or after the date of acquisition but this evidence is often not available.” (underlining and emphasis added)
[5] (1952) 87 CLR 159 at 169-170 (“Arklay”).
90The defendant notes that the plaintiffs in the current proceeding have not sought an independent valuation to be conducted pursuant to Schedule E of the Leases and Schedule 3 of the Regulations. They concede that the Court may have the power to order a valuation under Schedule 3, but point out that the plaintiffs have not asked for that. Their case fails or succeeds on the application of item 11(c) of Schedule A, namely the method of calculating the DMF.
91Regarding the plaintiffs’ claim for damages, equivalent to the ILA of $370,000.00 paid by Mrs Colborne, the defendant refers to “settled law” that compensatory damages in actions for contract are intended to put the suffering party in the same position as they would have been had the contract been performed.[6]
[6] Robinson v Harman (1848) 1 Ex 850 (“Robinson”); Haines v Bendall (1991) 172 CLR 60 (“Haines”); Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64 (“Amann”).
92In particular, the defendant cites Amann, referring to the judgment of Mason CJ and Dawson J:
“The general rule at common law, as stated by Parke B. in Robinson v. Harman (1848) 1 Ex 850, at p 855 (154 ER 363, at p 365), is:
‘that where a party sustains a loss by reason of a breach of contract, he is, so far as money can do it, to be placed in the same situation, with respect to damages, as if the contract had been performed’.”[7]
[7] Amann at 80 per Mason CJ and Dawson J, citing Parke B in Robinson at 855.
…
“The corollary of the principle in Robinson v. Harman is that a plaintiff is not entitled, by the award of damages upon breach, to be placed in a superior position to that which he or she would have been in had the contract been performed.”[8] (underlining added)
[8] Amann at 82 per Mason CJ and Dawson J, citing Learned Hand CJ in L Albert & Son v Armstrong Rubber Co (1949) 178 F.2d 182 at 189.
93The defendant contends that the plaintiffs have failed to assess whether any repayments would have been made if Baptcare had not demolished the Apartments and had otherwise complied with clause 10.1. Instead, the plaintiffs’ expert evidence proceeds on the assumption that the Apartments were indeed demolished, without considering the counterfactual scenario in which the contractual obligations were performed.
94Regarding the plaintiffs’ claim for debt proceeds, the defendant submits that it is predicated on a construction of the Leases that is not true and proper, not in accordance with the Act and the Regulations, not open as a matter of authority, and could not have been in the contemplation of the original parties to the Leases.
95The defendant further submits that, objectively, even if Baptcare had not made good faith attempts to re-let the Apartments, clause 10.1 could not be interpreted as delivering a “windfall” return of the full ILA paid by Mrs Colborne, as if she had not benefited from life tenancy of the Apartments.
96The defendant contends that the ILA was “at all times” subject to the DMF, which represented the “price” of Mrs Colborne’s life tenancy. On this basis, the defendant submits that the ILA would “never be repayable in full”. The defendant further argues that the plaintiffs have not established that any loss and damage claimed to arise from a breach of clause 10.1 would not have been suffered even if the Leases had been properly performed.
97The defendant accepts that Mrs Colborne paid an additional 'Maintenance Charge' pursuant to clause 4.7 – a charge considered to be “other than for [her] right of residence”. The defendant further contends that if the DMF were $nil, the effect would be that Mrs Colborne enjoyed “free occupation” of the Apartments for over a decade. The defendant characterises this as an opportunistic attempt to recover the ILA in full, as if Mrs Colborne had not resided in the Apartments at all.
98The defendant submits that the plaintiffs’ reliance on clause 10.4(a) is “quarantined” and fails to have proper regard to the text, context, and purpose of the Leases as a whole[9] – as affirmed by Gibbs J in Australian Broadcasting Commission v Australasian Performing Right Association Ltd.[10] In particular, the defendant contends that clauses 10.2(c) and 10.5 apply in all circumstances where there is no NLA, so as to ensure Mrs Colborne remained entitled to a Settlement Payout in accordance with the Act.
[9] Mount Bruce Mining Pty Limited v Wright Prospecting Pty Limited (2015) 256 CLR 104 at [46] (“Mount Bruce Mining”).
[10] (1973) 129 CLR 99 at 109 (“ABC v APRA”).
99The defendant accordingly submits that the Settlement Payout in this proceeding should be calculated by substituting the NLA with the current market value of the Apartments, pursuant to Schedule E of the Leases and Schedule 3 of the Regulations. In support of this construction, the defendant refers to clause 10.5 and Schedule E, both of which are incorporated into the Leases by operation of r 7 of the Regulations.
100As to the principles of contractual interpretation guiding the Court’s construction of the Leases, and, in particular, the objective approach the Court must adopt, taking into consideration:
(a) the language employed by the parties;
(b) the circumstances addressed by the contract; and
(c) the commercial purpose or objects of the contract;
the defendant relies upon the following extract from the High Court’s decision in Mount Bruce Mining:[11]
“The rights and liabilities of parties under a provision of a contract are determined objectively, by reference to its text, context (the entire text of the contract as well as any contract, document or statutory provision referred to in the text of the contract) and purpose.
In determining the meaning of the terms of a commercial contract, it is necessary to ask what a reasonable businessperson would have understood those terms to mean. That enquiry will require consideration of the language used by the parties in the contract, the circumstances addressed by the contract and the commercial purpose or objects to be secured by the contract.
Ordinarily, this process of construction is possible by reference to the contract alone. Indeed, if an expression in a contract is unambiguous or susceptible of only one meaning, evidence of surrounding circumstances (events, circumstances and things external to the contract) cannot be adduced to contradict its plain meaning.
However, sometimes, recourse to events, circumstances and things external to the contract is necessary. It may be necessary in identifying the commercial purpose or objects of the contract where that task is facilitated by an understanding ‘of the genesis of the transaction, the background, the context [and] the market in which the parties are operating’. It may be necessary in determining the proper construction where there is a constructional choice. The question whether events, circumstances and things external to the contract may be resorted to, in order to identify the existence of a constructional choice, does not arise in these appeals.
Each of the events, circumstances and things external to the contract to which recourse may be had is objective. What may be referred to are events, circumstances and things external to the contract which are known to the parties or which assist in identifying the purpose or object of the transaction, which may include its history, background and context and the market in which the parties were operating. What is inadmissible is evidence of the parties’ statements and actions reflecting their actual intentions and expectations.
Other principles are relevant in the construction of commercial contracts. Unless a contrary intention is indicated in the contract, a court is entitled to approach the task of giving a commercial contract an interpretation on the assumption ‘that the parties … intended to produce a commercial result’. Put another way, a commercial contract should be construed so as to avoid it ‘making commercial nonsense or working commercial inconvenience’.” (underlining added)
[11] Mount Bruce Mining at [46]-[51].
101The defendant further cites the High Court’s decision in Electricity Generation Corporation v Woodside Energy Ltd regarding the principles applicable to the construction of a “commercial contract”:[12]
“The meaning of the terms of a commercial contract is to be determined by what a reasonable businessperson would have understood those terms to mean. That approach is not unfamiliar. As reaffirmed, it will require consideration of the language used by the parties, the surrounding circumstances known to them and the commercial purpose or objects to be secured by the contract. Appreciation of the commercial purpose or objects is facilitated by an understanding ‘of the genesis of the transaction, the background, the context [and] the market in which the parties are operating’. As Arden LJ observed in Re Golden Key Ltd, unless a contrary intention is indicated, a court is entitled to approach the task of giving a commercial contract a businesslike interpretation on the assumption ‘that the parties … intended to produce a commercial result’. A commercial contract is to be construed so as to avoid it "making commercial nonsense or working commercial inconvenience.”
[12] (2014) 251 CLR 640 at [35].
102The defendant proposes that the plaintiffs’ interpretation of the Leases fails to consider the contractual interpretation principles as set out above. In particular, it would be contrary to the commercial purpose or objects of the Leases if Mrs Colborne were to “obtain the windfall of free accommodation for over 10 years” even though there was no NLA.
103The defendant submits that the plaintiffs’ interpretation of the Leases disregards the contractual interpretation principles outlined above. In particular, even if there was no NLA, it would still be inconsistent with the commercial purpose and objects of the Leases to permit Mrs Colborne to receive the “windfall of free accommodation for over 10 years.”
104Further, the defendant submits that clause 10.2 expressly provides that the Settlement Payout is to be made “from the proceeds of re-letting the apartment”, such that if no such proceeds exist, no repayment obligation arises. In those circumstances, the defendant contends that clauses 10.2(c) and 10.5 operate as the applicable provisions.
105The defendant summarises its construction of the Leases as follows:
(a) the ILA provided by Mrs Colborne constituted consideration for her life tenancy in the Apartments, as provided for in clause 1;
(b) each of the Leases was a “residence contract” and the ILA constituted both an “in-going contribution” and a “refundable in-going contribution” pursuant to s 3(1) of the Act;
(c) the ILA was subject to a DMF at all times, which would be deducted from the ILA, with the quantum of the DMF dependent on the length of residence, as set out in clause 10.4(a) and Schedule A, Item 11;
(d) pursuant to r 7 of the Regulations, Schedule 3 of the Regulations was incorporated into Schedule E of the Leases by operation of law;
(e) where Baptcare failed to re-let the Apartments as required under clause 10.2(c), the Settlement Payout was to be calculated by substituting the NLA with a “current market value proxy amount”, determined in accordance with Schedule E of the Leases and Schedule 3 of the Regulations;
(f) clause 10.5 applied irrespective of the reason for the failure to re-let, ensuring that Mrs Colborne was protected and assured of repayment, secured by a charge created by s 29(1) of the Act;
(g) clauses 10.2(c) and 10.5 operated as an agreed mechanism to apply in all circumstances where there was no new re-letting pursuant to clause 10.2, including where clause 10.1 had been breached; and
(h) the operation and effect of clauses 10.2(c), 10.5, and clauses 1, 2 and 3 of Schedule E are otherwise confirmed.
106In relation to the plaintiffs’ claim for loss and damage, the defendant denies that any loss arose from the breach of clause 10.1. The defendant contends that the plaintiffs remained entitled to a Settlement Payout, albeit calculated in accordance with clause 10.5, which provides for the substitution of the NLA with a “current market value proxy amount”.
107However, even if 10.5 does not apply, the defendant alleges that the plaintiffs suffered no loss.
108The defendant relies on the principles in Robinson, Haines, and Amann that an award of contractual damages is intended, so far as money can achieve, to place the plaintiff in the position they would have been in had the contract been properly performed. This measure of damages is known as expectation damages, and the onus of proof falls on the plaintiff. The defendant states that this burden has not been discharged.
109The defendant contends that the plaintiffs’ submissions do not adopt the correct counterfactual approach – namely, they have not shown that, had there been no breach and the Leases been duly performed, the plaintiffs would have received a Settlement Payout.
110In the alternative, even if the plaintiffs suffered loss and damage as a result of the defendant’s breach, the defendant submits that the plaintiffs are estopped from claiming such loss and damage because, on 16 February 2017, Mrs Colborne (through Mrs Ingpen) accepted an offer to relocate the new facility to permit the demolition of The Lodge (“the 16 February 2017 agreement”).
111The defendant contends that the 16 February 2017 agreement was not contractual in nature but is instead evidenced by the “Acknowledgment of Relocation” (“the Acknowledgment”), which states:
“I have accepted an offer from Baptcare of permanent accommodation at Baptcare Templestowe Orchards Community commencing on when the Facility is commissioned and ready for occupation.”
112The defendant submits that, through the Acknowledgement, Mrs Colborne expressly (or alternatively, impliedly) agreed that Baptcare was under no obligation to seek to re-let the Apartments. The defendant further notes that the Acknowledgment was not withdrawn during the six-month period prescribed in clause 10.2(c) of the Leases, nor did the plaintiffs require the defendant to re-let the Apartments in accordance with clause 10.1 of the Leases.
113Accordingly, the defendant submits that, viewed objectively, from at least 16 February 2017, the parties proceeded on the assumption and expectation that The Lodge would be demolished, and that the defendant was not obliged to re-let the Apartments. In light of these circumstances, it is unconscionable for the plaintiffs now to allege that the defendant breached clause 10.1 of the Leases.
114The defendant further submits that the plaintiffs have not alleged or pleaded that Mrs Colborne’s death re-engaged Baptcare’s obligation, in some way.
115The defendant states that the plaintiffs themselves demanded that Baptcare agree to the appointment of an expert in accordance with Schedule E, thereby affirming the parties’ shared understanding regarding the redevelopment of the site.
116Citing Dixon J in Grundt v The Great Boulder Pty Gold Mines Ltd[13] and Mason CJ in Commonwealth v Verwayen,[14] the defendant states that the “fundamental purpose” of estoppel is to provide protection against the detriment which would flow from a party’s change of position if the assumption which led to it were deserted.
[13] (1937) 59 CLR 641 at 674 (“Grundt”).
[14] (1990) 170 CLR 394 at [29] (“Verwayen”).
117The defendant also cites the equitable principles of estoppel as referred to in Norman v Federal Commissioner of Taxation,[15] Verwayen,[16] Riches v Hogben,[17] Australian Financial Services and Leasing Pty Ltd v Hills Industries,[18] and Delaforce v Simpson-Cook.[19]
[15] (1963) 109 CLR 9 at 33.
[16] Verwayen at 415 per Mason J, 429 per Brennan J, 445 per Deane J.
[17] [1985] 2 Qd R 292 at 300-302.
[18] (2014) 253 CLR 560 (“AFS and Leasing”).
[19] (2010) 78 NSWLR 483 at [5] (“Delaforce”).
118The defendant submits that, to succeed in its estoppel claim, it need only establish that it has suffered detriment, which is not limited to monetary loss. Detriment includes “the consequences that would enure to the disadvantage of a person who has been induced to change his or her position if the state of affairs so brought about were to be altered by the reversal of the assumption on which the change of position occurred.” [20]
[20] AFS and Leasing at [84].
119The defendant submits that detriment need not necessarily involve adverse consequences suffered by them, but may include any "source of prejudice".[21] The defendant contends that the plaintiffs cannot now allege breach of clause 10.1, as they themselves demanded that the defendant agree to the appointment of an expert valuer pursuant to Schedule E of the Leases and Schedule 3 of the Regulations – which the defendant did.
[21] Grundt at 675.
120The defendant further submits that it suffered detriment by losing an opportunity of “real and substantial value”,[22] referring to the proposed evidence of Timothy Patrick O’Toole – that the Apartments could have been re-let, albeit at a discounted rate, with any new resident subject to relocation upon demolition.
[22] Delaforce at [5]; Talacko v Talacko (2021) 272 CLR 478 at [42]; Allianz Australia Insurance Ltd v Delor Vue Apartments CTS 39788 (2022) 277 CLR 445 at [79]-[91] per Kiefel CJ, Edelman, Steward, and Gleeson JJ, [160]-[168] as per Gageler J (“Allianz”).
121In relation to reliance and causation, the defendant refers to Derring Lane Pty Ltd v Fitzgibbon and submits that reliance may be inferred from the conduct of the parties.[23] It contends that reliance should be inferred from the plaintiffs’ failure to revoke the Acknowledgment within the six-month period stipulated in clause 10.2(c), and from their appointment of an expert valuer under Schedule E of the Leases and Schedule 3 of the Regulations.
[23] (2007) 16 VR 563 at [111].
122The defendant submits that by these actions, the plaintiffs waived any right to pursue the defendant for alleged non-compliance with clause 10.1.[24]
[24] Allianz at [28]-[29], [62]-[63], [79]-[91] per Kiefel CJ, Edelman, Steward, and Gleeson JJ, [126]-[159] per Gageler J.
123Finally, the defendant rejects Mr Mitrione’s expert evidence , submitting that it is of no probative value because:
(a) first, Mr Mitrione’s valuation does not comply with the methodology mandated by Schedule E of the Leases and Schedule 3 of the Regulations (noting that the plaintiffs do not seek alternative orders for an independent valuation to be conducted in accordance with those provisions); and
(b) second, the assumptions Mr Mitrione relied upon in his 9 May 2023 report were “self-serving”.
124The defendant concedes that, even in the absence of expert opinion, it is evident that the capital value of the Leases – being leases of two Apartments that were to be demolished within two years of the valuation date – would have negligible or no value to prospective residents. The defendant refers to s 79 of the Evidence Act 2008 (Vic), citing that no “specialised knowledge based on [a] person’s training, study or experience” is required to reach this conclusion.
125The defendant further submits that Mr Mitrione’s 9 May 2023 report lacks probative value on the issue of loss and damage, as such loss and damage must be assessed on the “hypothetical” basis[25] that no breach occurred. However, the plaintiffs have not properly alleged that they would have been able to recover damages even if Baptcare had performed its contractual obligations.
[25] Amann, 94 per Mason CJ and Dawson J; 99 per Brennan J; 116-117, 122-123 per Deane J.
The witnesses
126Although six witnesses were initially listed to give evidence at trial, the written outlines of evidence of each of the lay witnesses Mrs and Mr Ingpen and Johanna Horsley (for the defendant) were accepted into evidence without challenge. The parties also produced a List of Agreed Facts. As a result, only three witnesses gave evidence at trial.
Gino Mitrione
127Gino Mitrione was the plaintiffs’ expert witness. He gave evidence in line with his written reports and was cross examined. For the reasons set out below, while Mr Mitrione generally presented as an independent, thoughtful and measured witness, I have given little weight to his reports due to the instructions he was given and the assumptions underpinning his opinions.
Laila Ann Burnet
128Laila Ann Burnet was the defendant’s expert witness. She was called to give evidence and her written reports were tendered. She was not cross examined; instead the plaintiff relied on its written objections to her evidence. I was not able to assess her oral evidence, but I am satisfied that her written reports demonstrate her opinions are considered and impartial. Having said that, for the reasons discussed below, I have given the reports little weight, due to the instructions she was given and the assumptions underpinning her opinions.
Timothy Patrick O’Toole
129Mr O’Toole was a lay witness for the defendant. The parties agree that his Further Amended Witness Outline (“the FAO”) dated 20 October 2023 stands as his evidence-in-chief. Mr O’Toole confirmed that the contents of the FAO are true and correct and he provided further oral evidence-in-chief during the trial. His evidence was largely confined to reporting on the documents tendered and he did so in a professional and well-prepared manner.
130In the FAO, Mr O’Toole states that he has been employed as a Senior Administration Officer at Baptcare since 1996. In that role, he is responsible for managing residents’ ingoing contributions, calculating and distributing refunds, liaising with residents in relation to applicable fees and charges, and ensuring compliance with relevant legislation.
131Mr O’Toole refers to capital sum payments made in respect of other apartments at Templestowe Orchard as follows:
(a) Apartment 106 (lease commenced on 11 June 2016) sold for $290,635;
(b) Apartment 114 (lease commenced on 4 May 2015) sold for $290,000;
(c) Apartment 110 (lease commenced on 7 February 2015) sold for $290,000;
(d) Apartment 149 (lease commenced on 19 January 2015) sold for $280,000;
(e) Apartment 121 (lease commenced on 5 September 2014) sold for $290,000;
(f) Apartment 128 (lease commenced on 24 November 2014) sold for $290,000;
(g) Apartment 119 (lease commenced on 2 June 2014) sold for $300,000;
(h) Apartment 129 (lease commenced on 12 February 2014) sold for $300,000; and
(i) Apartment 106 (lease commenced on 20 November 2013) sold for $320,000.
132In relation to the estoppel defence, Mr O’Toole states that if Mrs Colborne’s Acknowledgment had been withdrawn, Baptcare could have re-let the Apartments on terms that were “at least the current loan terms”, allowing incoming residents to relocate to the New Facility at a “significant discount” and “without any additional contribution”.
133Mr O’Toole further notes that the market value of the apartments in the New Facility would have been “significantly higher” than those in The Lodge.
134Mr O’Toole also refers to several examples of transition incentives offered to incoming residents. He provided details for 6 residents, including their names, addresses and the incentives offered. I have not included these details in this decision to protect the privacy of the residents, who are not parties to this proceeding. Suffice to say that the incentives included the following:
(a) the opportunity to transfer to a room in the New Facility from an existing apartment upon payment of an amount representing the difference in value between the two. Alternatively, if the resident elected not to transition, they would receive a full refund of the ILA they paid for their existing apartment;
(b) the opportunity to transfer to a room in the New Facility from an existing apartment, at a price effectively providing a discount of $347,000.00 on the value of the New Facility room;
(c) the opportunity to transfer to a room in the New Facility from an existing apartment, at a price effectively providing a discount of $330,000.00 on the value of the New Facility room;
(d) the opportunity to transfer to a room in the New Facility from an existing apartment, at a price effectively providing a discount of either $309,000.00 or $354,000.00[26] on the value of the New Facility room;
(e) the opportunity to transfer to a room in the New Facility from an existing apartment, at a price effectively providing a discount of $347,000.00 on the value of the New Facility room; and
(f) the opportunity to transfer to a room in the New Facility from an existing apartment, at a price effectively providing a discount of $347,000.00 on the value of the New Facility room.
[26] The arithmetic provided by Mr O’Toole may be incorrect. Nothing turns on this.
135Mr O’Toole referred to other “special deals”, such as a provision that the “Deferred Payment must not exceed 40% of the Capital Sum”. Mr O’Toole distinguishes this with the Leases Mrs Colborne entered into, capping the DMF at 65% of the NIL. Mr O’Toole also notes that in a “Disclosure Statement” completed pursuant to the Act, another owner was informed that they would not have to pay for reinstatement if they departed their apartment less than 12 months before the date of demolition of the apartment.
136Other examples included one owner paid an ILA and when they left The Lodge to move into the New Facility, the same amount was subsequently applied as their payment. Several other owners also moved from The Lodge into the New Facility, and they received a refund of their ILA which was applied, in full, towards their residence at the New Facility – with no additional charges. During cross-examination, Mr O’Toole accepted that it is standard practice for promises about refunds to be documented in agreements between Baptcare and its residents.
137Mr O’Toole said that residents of The Lodge with “low means” were transitioned to the New Facility without being required to make any further payment, provided they were not otherwise entitled to receive a Settlement Payout in respect of their ILA to The Lodge.
138Mr O’Toole stated that a planning document was created in either June or July 2017, describing the details of how each apartment in The Lodge was to be sold, the amount being paid, and any of the residents’ specific needs. Mrs Colborne was not on the list of residents in the document, as she had passed away some months prior. A summary of the planning document, which Mr O’Toole provided input into but was otherwise substantially prepared by the Sales Team, was included in Ms Burnet’s valuation report dated 28 September 2022.
Analysis
A. What is the proper construction of the Leases?
Contractual interpretation principles
139It is not in dispute between the parties that, upon purchasing Templestowe Orchard, a contractual novation occurred whereby Baptcare assumed all rights and obligations of the TBC Community Centre, including in respect of Mrs Colborne’s leases over Apartments 124 and 125.[27]
[27] See generally Bi v Touvanna [2025] VSC 153.
140Pursuant to the Leases, Mrs Colborne’s estate – represented by the plaintiffs – is entitled to a Settlement Payout arising from the termination of the Leases upon Mrs Colborne’s death, in accordance with clause 7.3(a).
141The Leases contemplate two alternative methods for calculating the Settlement Payout. As is required by the proper approach to contractual construction, I begin by considering the express terms of the Leases before addressing any ambiguity that may arise. As explained by Gibbs J in ABC v APRA:[28]
“It is trite law that the primary duty of a court in construing a written contract is to endeavour to discover the intention of the parties from the words of the instrument in which the contract is embodied. Of course the whole of the instrument has to be considered, since the meaning of any one part of it may be revealed by other parts, and the words of every clause must if possible be construed so as to render them all harmonious one with another. If the words used are unambiguous the court must give effect to them, notwithstanding that the result may appear capricious or unreasonable, and notwithstanding that it may be guessed or suspected that the parties intended something different. The court has no power to remake or amend a contract for the purpose of avoiding a result which is considered to be inconvenient or unjust. On the other hand, if the language is open to two constructions, that will be preferred which will avoid consequences which appear to be capricious, unreasonable, inconvenient or unjust, "even though the construction adopted is not the most obvious, or the most grammatically accurate", to use the words from earlier authority cited in Locke v. Dunlop (1888) 39 Ch D 387, at p 393 , which, although spoken in relation to a will, are applicable to the construction of written instruments generally; see also Bottomley's Case (1880) 16 Ch D 681, at p 686 . Further, it will be permissible to depart from the ordinary meaning of the words of one provision so far as is necessary to avoid an inconsistency between that provision and the rest of the instrument. Finally, the statement of Lord Wright in Hillas &Co. Ltd. v. Arcos Ltd. (1932) 147 LT 503, at p 514 , that the court should construe commercial contracts "fairly and broadly, without being too astute or subtle in finding defects", should not, in my opinion, be understood as limited to documents drawn by businessmen for themselves and without legal assistance (cf. Upper Hunter County District Council v. Australian Chilling and Freezing Co. Ltd. (1968) 118 CLR 429, at p 437). (at p110)” (emphasis added)
[28] ABC v APRA at 109.
142Looking to the words of the Leases, clause 10.2 sets out the landlord’s obligation to pay the Settlement Payout to an outgoing resident, sourced from the NLA, within:
(a) fourteen days upon receipt of the NLA;
(b) fourteen days after a new person has taken residence; or
(c) “on a day which is not more than six (6) months after the non-owner has delivered up vacant possession.”
143The plaintiffs contend that clause 10.2(c) is engaged, as Baptcare failed to pay the Settlement Payout within six months of 6 April 2017, when the plaintiffs delivered vacant possession of the Apartments to Baptcare. Accordingly, the Settlement Payout should be calculated pursuant to clause 10.4(a), which requires the DMF to be deducted from the ILA. Under Schedule A, Item 11, the DMF is expressed as a percentage of the NLA – here, $nil. On this basis, the plaintiffs bring a debt claim for the full ILA amount of $370,000.00 as the Settlement Payout.
144Conversely, the defendant submits that the Settlement Payout should be calculated pursuant to clause 10.5, which provides that any amount owed to Mrs Colborne “under the Act or the [Regulations] prior to the receipt of the new loan amount” (emphasis added) must be calculated in accordance with Schedule E of the Leases, which incorporates Schedule 3 of the Regulations. Under this construction, the NLA is substituted with a “proxy amount” representing the “current market value of the residence rights” in the Apartments.
145Ambiguity arises as to which provision applies in circumstances where no NLA can be obtained – as in the present proceeding, where Baptcare has elected to demolish the Apartments. The question for determination is whether the Settlement Payout should be calculated on the basis that the NLA is $nil, or whether the term “new loan amount” is to be substituted with a “current market value” proxy.
146I then refer to the approach reiterated by the High Court that, where there is ambiguity on express words in contractual interpretation, the Court must consider the intention of the parties in contracting.[29] This is an objective, not subjective, approach, as aptly summarised in Toll (FGCT) Pty Limited v Alphapharm Pty Limited:[30]
180On 3 May 2023, Mr Mitrione received further instructions from the plaintiffs’ solicitors to prepare a supplementary valuation report of the market value of the Apartments as at 1 May 2017, with additional assumptions. Subsequently, he published an amended valuation report dated 9 May 2023.
181During cross-examination, Mr Mitrione stated that he did not have regard to the Leases, the Act, nor the Regulations in his valuation reports, because he did not find them relevant.
182In the 21 April 2023 report, Mr Mitrione’s valuation was based on instructions to assume that “both apartments would be demolished on the 10th November 2019”. Mr Mitrione noted that, given the lack of sales transactions that he could rely upon, his analysis was based on the present value of potential income streams for the Apartments. Further, in preparing the 21 April 2023 report, Mr Mitrione did not comment on the methodology and conclusion of Ms Burnet’s valuation report dated 28 September 2022.
183In the 9 May 2023 report, Mr Mitrione was directed to assume that:
(a) first, it was not known when the Apartments would be demolished as part of the redevelopment of Templestowe Orchards, but that that demolition would be within two years of 1 May 2017; and
(b) second, only a person prepared to enter into a lease with Baptcare in respect of the Apartments would be entitled to reside in the Apartments on a permanent basis, and the resident of the Apartments was not entitled to assign any lease in respect of the Apartments, or any interest in such as lease.
184Mr Mitrione stated that the first assumption did not change his valuation from the 21 April 2023 report, of $22,000.00 for each of the Apartments. However, as for the second assumption, Mr Mitrione instead valued the Apartments at $nil each, given the restrictions on sub-letting. Mr Mitrione confirmed that he did not refer to Schedule 3 of the Regulations in writing his valuation reports.
185In a hypothetical situation where a prospective tenant is seeking to move into an apartment in a retirement village that will cease to exist in two years, Mr Mitrione’s opinion was that the prospective tenant would want to pay a substantially reduced amount for residence rights. However, if, in the hypothetical situation, a new facility was being built adjacent to the retirement village, and the prospective tenant was told that in two years’ time, they would be able to move into the new facility at no charge, Mr Mitrione agreed that the reduced amount would depend on the conditions and circumstances of the agreement, as well as the parameters of the new facility. As he had no instructions about those matters he was unable to provide a further opinion.
186The defendant takes issue with, among other things, Mr Mitrione’s findings and the assumptions underlying them. I agree with the defendant that Mr Mitrione has failed to take into account all relevant factors in assessing the meaning of “market value”. It is obvious that the “capital value of a proposed lease of an apartment in a retirement village that will cease to exist (be demolished) ‘within two years’ of the valuation date will, without more, have a negligible or zero value to potential in-going residents” (underlining added). However, as discussed above, there is “more” to be considered – including that the purchaser was aware the New Facility was being constructed adjacent to Templestowe Orchard, and that they would be able to move into the New Facility at no cost and/or receive a “special deal”.
187Further, Mr Mitrione had originally assessed the Apartments as if they were not part of a retirement village, with the right to sublet and use them for an income stream. He said: “My analysis has been based on assessing the present value of the potential income stream [rental] of the asset[s] for a period of 32 months.” He has compared the Apartments to the “general state of the residential rental market within Doncaster East suburb from March 2017 to November 2019.” Those assumptions are clearly incorrect and do not allow for the actual facts of the matter. They are not the comparators relevant to a hypothetical purchaser of a retirement unit.
Ms Burnet’s opinion
188On 28 September 2022, Ms Burnet issued an expert report assessing the market value of the Apartments as at 1 May 2017, at $260,000.00 per apartment (unrefurbished) or $290,000.00 per apartment (refurbished). Her valuations were based on the last four sales of comparable apartments at Templestowe Orchard, selling refurbished for between $280,000.00 and $290,000.00.
189On 19 June 2023, Ms Burnet issued an amended expert report in which she made the declaration under the Code of Conduct and confirmed she had regard to the Regulations and to clause 10 of the relevant Leases. Her opinion as to the valuations did not change.
190On 10 July 2023, she issued a further expert report, responding to Mr Mitrione, and taking into consideration further assumptions provided to her that:
(a) the new resident would relocate to a room in the new facility upon its completion;
(b) they would not have been required to make any further payment, or, alternatively a further payment discounted to the differential between the market value of the Apartments (on the one hand) and the market value of the room in the new facility (on the other hand); and
(c) the market value of residence rights pertaining to each room in the new facility would have been, at the time of relocation, not less than $290,000.00, noting that residence in the new facility involved payment of a “refundable accommodation deposit” within the meaning of the Aged Care Act 1997 (Cth).
191Ms Burnet’s opinion was that if Mrs Colborne had a “resident right” to relocate to a room in the new facility upon its completion and commissioning that has a market value of not less than $290,000.00, and if this same “right” was offered to a new resident entering the Apartments after they had been refurbished, with full knowledge that The Lodge was to be demolished within two years and they would be relocated to the new facility on the basis of the further assumptions, then the value of the subject apartments would be assessed in accordance with clause 10 of the Leases and with the Regulations.
192She confirmed that it is her opinion that the market value of the residence rights of the refurbished apartments and having regard to the further assumptions, would have been not less than $290,000.00 per apartment.
193The plaintiffs did not cross examine Ms Burnet, but objected to her reports being admissible on the following grounds:
(a) First, they contended that the first and second reports are irrelevant, and therefore inadmissible, by reason of s 56(2) of the Evidence Act 2008 (Vic). Ms Burnet’s analysis is directed towards valuing a vastly different ‘residence right’ to that which Mrs Colborne enjoyed pursuant to the Leases. Any valuation taking into consideration the circumstances involving a new facility will open for examination a vastly different range of parameters, which were not known to the parties, and were then unascertainable, when they entered into the Leases in 2006; and
(b) Second, there is no evidence to substantiate the assumptions underpinning her analysis, and on the proper application of the “factual basis rules”, each of Ms Burnet’s reports is inadmissible.
194In relation to the objections to the first and second reports, I agree with the plaintiff that Ms Burnet has compared the terms of Mrs Colborne’s residence right with the terms of the residence right contained in the leases in the “last four sales between January 2015 and January 2016”, and that these residence rights may be different to those Mrs Colborne agreed with Baptcare’s predecessor.
195The plaintiff’s objection to the first and second reports is that Ms Burnet has assessed the value as if a hypothetical new purchaser, in the mould of Spencer, is purchasing the Apartments, instead of assessing the current market value of the lessee’s residence right, which they say is required by Schedule E. I agree her first and second reports may do that, but that issue is cured by her third report, and it is that report which I have taken into consideration.
196In relation to the second objection, I agree with the plaintiff that Ms Burnet has not set out all her “observations recorded upon internal and external inspection of the Property” in her first, second or third reports. Nor did she identify the sources of information derived from her “own research”, in particular, other “sales evidence at the date of valuation”. The source of that data has not been disclosed.
197However, she has address some of these issues in her third report, and I do not agree that her third report is inadmissible. The spreadsheet she referred to in that report is the one provided to her by the defendant (per Mr O’Toole’s evidence) and I accept it is “evidence of Lodge residents willing to relocate to the new facility” and the terms on which they did so.
198Having said that, I agree with the plaintiff that this evidence of nine sales highlights Ms Burnet’s decision to only refer to the “last four sales between January 2015 and January 2016” in her assessment. It is not clear from her third report what she has defined as Mrs Colborne’s residence rights. Is it based on the bundle of rights available to Mrs Colborne in 2006 (which the plaintiffs say it should be) or does it take into account the impending demolition (which the plaintiffs say it should) and/or the deals available to move to the new building (which the defendant says it should). Further, it is not clear how the value of the right to move to the new building as demonstrated by the nine apartments in the spreadsheet has impacted (if it has) her valuation based on the value of the last four sales.
Conclusion – an independent valuation under Schedule E is required
199As discussed above, I am unable to determine the “market value” of Mrs Colborne’s “residence right” from the valuation evidence before me. The valuations variously:
(a) do not define what they mean by Mrs Colborne’s residence rights;
(b) do not take into account the specific nature of the Apartments, that they are specifically for retirement living and the use is limited by the Leases, the Act, and the Regulations;
(c) do not include the impending or actual demolition; and/or
(d) do not address whether the right to move to the new building on a special deal should be (or has been) taken into account; and/or
(e) lack details of personal observations and research.
200I note here that I am not a valuer and do not have expertise to determine which of these matters are relevant in assessing ”market value” under the Leases. During the trial, I asked the parties whether, in the event I found the valuations to be inadequate, I should order that an independent valuation be conducted pursuant to Schedule E of the Leases and Schedule 3 of the Regulations
201The defendant submitted that this was what they had wanted the plaintiffs to do since June 2019, when Mr Valmoirbida was appointed to conduct the valuation. However they noted that the plaintiffs have not sought any alternative orders for the appointment of an independent valuer to conduct a valuation. Nevertheless, the defendant suggested the Court may have the power to make such an order under s 65M of the CPA.
202The plaintiffs reject the defendant’s “unpleaded call” for an independent valuation, submitting that clause 3 of Schedule E is not relevant to this proceeding. In any event, they contend that such a valuation would serve no utility, as Baptcare has admitted that the value of the Apartments as at May 2017 was $nil, and had previously been afforded the opportunity to obtain a valuation but failed to do so. Further, they submit that it was a matter for the defendant to obtain the valuation of a proxy amount, if they wished to claim the DMF in circumstances where there is no NLA.
203I note the plaintiff’s reluctance to agree during their closing submissions to the question I posed. However, I will give them the opportunity to reconsider, in circumstances where I have not accepted their expert evidence.
204I consider that this is open to me based on the plaintiffs’ Prayer for Relief and is the appropriate order to make consistent with the Court’s and the parties overarching purpose under the CPA. I will invite the parties to address whether the expert should be Mr Valmoirbida or someone else. I will also require the parties to agree on a set of facts and assumptions to be provided to the valuer.
205Alternatively, it is open to the parties to agree to proceed with the Schedule E process without the involvement of the Court. In that case, they may propose orders to address costs and to conclude this proceeding.
C. Did Baptcare breach the terms of each Lease and, if so, what loss and damage have the plaintiffs suffered?
206In the alternative to the debt claim discussed above, the plaintiffs claim that the defendant is in breach of the Leases, because Baptcare did not attempt to re-let the Apartments for “such a loan amount as is attainable” and to act in “good faith” in doing so, contrary to clause 10.1. As a result they have suffered loss and damage, being “the amount of the Loan, being $370,000, together with interest accruing on that amount”.[40] The defendant does not dispute that it did not take any steps to re-let the Apartments. Its argument focussed on whether the plaintiffs have suffered loss and damage.
[40] Statement of Claim at [43].
Legal principles
207There is no dispute that the general rule at common law as that, “where a party sustains a loss by reason of a breach of contract, he is, so far as money can do it, to be placed in the same situation, with respect to damages, as if the contract had been performed".[41] As per Amann, “[t]he corollary of the principle in Robinson v. Harman is that a plaintiff is not entitled, by the award of damages upon breach, to be placed in a superior position to that which he or she would have been in had the contract been performed.”[42] The “onus of proving damages sustained lies on a plaintiff and the amount of damages awarded will be commensurate with the plaintiff's expectation, objectively determined, rather than subjectively ascertained”.[43]
[41] Amann at 80, per Mason CJ and Dawson J, citing Parke B in Robinson at 855.
[42] Amann at 82, per Mason CJ and Dawson J.
[43] Amann at 80.
Legal analysis
208The quantification of loss and damage, if any, must proceed on the counter factual basis that there was no breach and that the defendant had performed its contractual obligations. In this case, in my view, that means that the parties would have followed the agreed processes set out in clauses 10.2(c) and 10.5 and Schedule E of the Leases. The parties had agreed that those provisions would provide the remedy for any consequence arising from a failure to attempt to, or to, re-let within six months. The counterfactual result to the breach is that the parties would have allowed a “current market value proxy amount” for the NLA.
209As discussed above, the plaintiffs have not obtained a “current market value proxy amount” as they have not followed the process of obtaining an independent valuation. They have therefore not provided any evidence comparing the loss they allege they have suffered by reason of the breach with what their financial situation would have been if the contract had not been breached.
210The plaintiffs have not discharged their onus to demonstrate that, had Templestowe Orchard not been earmarked for demolition, they would have received a Settlement Payout. On the contrary, if there were no demolition planned, on the evidence before me, it is more likely that any NLA obtained following Mrs Colborne vacating the Apartments, would have been consistent with the estimates of the Settlement Payout provided by the defendant on 24 July 2015, March 2016, and in the letters dated 29 August 2016. Accordingly, had the Apartments not been earmarked for demolition, I find that the Settlement Payout available to the plaintiffs would likely have been lesser than the current debt claimed.
D. Are the plaintiffs estopped from alleging that Baptcare breached its obligations under clause 10.1 of the Leases by failing to use its best endeavours to re-let the Apartments during the time prescribed by clause 10.2(c) of the Leases?
211Given my finding above that the plaintiffs have not discharged their onus of proving that they suffered loss or damage arising from a breach of the Leases, I do not consider it necessary to make a finding on this question.
212If I am wrong about that, I would find that the defendant’s estoppel or waiver defence is not supported by the evidence. Baptcare pleads a promissory estoppel, that by executing and delivering the Acknowledgment, Mrs Colborne expressly – alternatively impliedly – represented to the defendant that she consented to her permanent relocation at New Facility, to commence when it was commissioned and ready for occupation, and she consented to the redevelopment of the land and the demolition of her Apartments. Further, the plaintiffs did not seek to resile from the Acknowledgement, or advise that they considered the value of the Apartments was $nil, at any time prior to the expiry of the period of time prescribed by clause 10.2(c) of the Leases. The defendant pleads further that it relied on these representations or matters, by not attempting to re-let the Apartments within six months after the death of Mrs Colborne.
213The defendant relies on the evidence of Mr O’Toole, that if the plaintiffs had withdrawn Mrs Colborne’s Acknowledgment after her death, Baptcare could have re-let the Apartments on terms that were “at least the current loan terms”, allowing incoming residents to relocate to the New Facility at a “significant discount” and “without any additional contribution”.
214While that statement was not challenged, Mr O’Toole’s evidence does not go so far as establishing that the alleged representations were made, or that the defendant actually relied on, to its detriment, the representations or the plaintiffs’ conduct.
215Instead, the written correspondence and Mrs Ingpen’s evidence show that Mrs Colborne was not happy about the move but was resigned to being relocated because it was “inevitable”. It cannot be disputed that it was inevitable, because the plans to redevelop Templestowe Orchards had been years in the making. From the time Baptcare bought the property in 2012, it had intended to put in place the redevelopment. It was under an obligation to procure the planning permit and planning arrangements, even before settlement of the sale took place.
216By 2016, the residents were told “our new Templestowe Orchards Community facility is well underway and is estimated to be completed between May and July 2017 … Most of you will be aware that the Lodge will not be continuing to operate once the new facility has been completed, but you will also be aware that all current Lodge residents will have the option to move into this beautiful new community.”
217The residents were then told in early March 2017 that there had been a delay of about one month: “Progress on the new Orchards Community has been delayed and is now set to be completed in June 2017 with an estimated move into the new building in August 2017.”
218This correspondence confirms that at all times it was clear that Mrs Colborne was reluctant about the move. The Acknowledgement cannot be construed as giving rise to the representation, express or implied, that is alleged. Further, the plaintiffs’ subsequent silence (if any) cannot be held against them when they gave vacant possession of Mrs Colborne's Apartments in early April 2017 and they had been told the existing Lodge would not be continuing to operate, and residents would be moving on in August 2017.
219Further, I do not accept Mr O’Toole’s evidence that the defendant relied on the representations or the plaintiffs’ conduct to its detriment by not using its best endeavours to re-let the Apartments for at least the current loan amounts. Mr O’Toole referred to a lease of Apartment 106, which commenced on 11 June 2016, as evidence that even though occupancy of the Lodge was only for a few months, the defendant could have taken steps to re-let the Apartments. That is the only lease in evidence entered into after the death of Mrs Colborne. The terms of that lease are not comparable to Mrs Colborne’s, as the new tenant was given a very different kind of propriety and contractual arrangement, where that security of propriety and contractual interest was not protected in anything like the same way.[44] The new tenant was given a “special deal,”[45] as he was going to get his refund back in total whether he moved to the new building or not. I do not accept that new lease is evidence that the defendant relied on the plaintiffs’ conduct to its detriment in the present matter.
[44] T257/3.
[45] T237/17.
220I accept the plaintiffs’ submission that the Acknowledgement does not alter the terms of the Leases, and those terms dictate what was to happen following cancellation. The estoppel defence fails, because the defendant has not established the necessary representation, nor the reliance on that alleged representation, because the circumstances that were put in place, the circumstances that the parties found themselves in in March/April 2017, were a consequence of decisions that had been made years earlier by the defendant on its own motion without Mrs Colborne's consent.
E: Are the plaintiffs entitled to declaratory relief, pursuant to their pleadings?
221I note that the plaintiffs have sought declaratory relief in their Statement of Claim, but submissions were not made pertaining to this. In light of my findings above, I decline to make any declarations at this time.
F: Are the plaintiffs entitled to have costs taxed on an indemnity basis?
222I have set out above the cost submissions made by the plaintiffs. In light of my findings above, it is premature to make any costs orders at this time.
223I note that I have accepted the defendant’s submissions in relation to the interpretation of the Leases and have not made any findings (yet) in favour of the plaintiffs.
224Further, there may need to be additional evidence and submissions made in relation to costs, in case any settlement offers are relevant.
Conclusion
225I invite the parties to consider these Reasons and to provide minutes of proposed orders for the future conduct of the proceeding.
Certificate
I certify that these 61 pages are a true copy of the judgment of Her Honour Judge Kirton delivered on 8 July 2025.
Dated: 8 July 2025
Gavin Choong
Commercial Associate at the County Court of Victoria
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