Paton v New Concepts Developments Pty Ltd
[2010] QCAT 101
•20 January 2010
| CITATION: | Paton v New Concepts Developments Pty Ltd [2010] QCAT 101 |
PARTIES: David and Diane Paton
v
New Concepts Developments Pty Ltd
APPLICATION NUMBER: MH025-09
MATTER TYPE: Other civil disputes
HEARING DATE: On the papers
HEARD AT: Brisbane
DECISION OF: Ms K O’Callaghan
DELIVERED ON: 20 January 2010
DELIVERED AT: Brisbane
ORDERS MADE: Application dismissed
CATCHWORDS: Manufactured Homes (Residential Park) Act 2003, s22 -variation of site agreement-
Meaning of special terms
APPEARANCES and REPRESENTATION (if any):
The hearing took place on the papers by agreement between the parties.
REASONS FOR DECISION
Introduction
This is an application filed under the Manufactured Homes (Residential Parks) Act 2003 (“the Act’) by David and Diane Paton on 29 July 2009 in the Commercial and Consumer Tribunal seeking variation of a site agreement entered between themselves and Kurrajong Sanctuary. The agreement was with respect to a site at the Kurrajong Sanctuary, a manufactured home park. It would appear that the Respondent named in these proceedings, New Concept Developments is the owner of Kurrajong Sanctuary.
From 1 December 2009 the Queensland Civil and Administrative Tribunal (the Tribunal) has replaced the Commercial and Consumer Tribunal (the Former Tribunal) on the commencement of the Queensland Civil and Administrative Tribunal Act 2009 (the QCAT Act).
Under section 256 of the QCAT Act, a pending proceeding (being a proceeding commenced in one of the Tribunals abolished by the QCAT Act but not heard by the abolished tribunal prior to 1 December 2009) is taken to be a proceeding before the Tribunal. According to section 271 of the QCAT Act, the Tribunal only has the functions that the Former Tribunal had had in relation to the pending proceeding.
The applicants seek an order that clause 10 of the site agreement be varied on the basis that it amounts to “unfair trading” and that it contravenes section 72 of the Act.
The Respondents have defended the application on the basis that-;
(a) The applicants have no standing to bring the application; or
(b) The application is beyond the jurisdiction of the Tribunal; or
(c) In the event that the applicants do have standing and the Tribunal does have jurisdiction to hear the application, it is not appropriate for the Tribunal to vary clause 10.
In accordance with a directions order of the Former Tribunal made on 14 September 2009, both parties have delivered written submissions and confirmed that they consent to the application being determined on the papers. The submissions attached the site agreement and correspondence between the parties.
Background:
The parties entered into the site agreement on 23 June 2004. The term of the agreement that the applicant seeks to have varied is clause 10 in Part 1 of the agreement which is headed “Site Rent Increases” and provides-:
“Method of calculation (e.g. current rent + CPI or %)… That the said licence fee will be determined on September 1st each year by applying the following formula to the licence fee existing during the preceding twelve month period. RxC+(x/y)+(z/y) where “R” represents the annual fee during the preceding twelve month period , x represents the increase in Local Authority charges applicable to the park,”z” represents the increase in State Land Tax applicable to the park, “y” represents the number of sites in the park and “C” represents the percentage increase of the Consumer Price Index for the preceding final year PROVIDED THAT in no event shall the fee be decreased from the previous year and further provided that the said Licence Fee will be reviewed to market on the third anniversary of the commencement date and at each three yearly anniversary thereafter.
Frequency of increases: Annually
Specify any other regular review periods; 1st September”.
On 25 June 2009, the applicants wrote to the respondents seeking variation of the site agreement by removal of the words “PROVDED THAT in no event shall the fee be decreased from the previous year” from clause 10. The respondent wrote on 13 July 2009 acknowledging receipt of the letter and advising “when we have had time to consider your request you will be given an appropriate response”. On 16 July 2009 the applicants wrote again to the Respondent requesting a substantive response to their proposal by 24 July 2009 failing which they would proceed with an application .No further correspondence was entered into and on 29 July 2009, the applicants filed this application seeking orders that the words “PROVIDED THAT in no event shall the fee be decreased from the previous year” be deleted and that the wording be changed to read “CPI annually and review to market every three yearly annually thereafter”
The Legislation:
The provisions of the Act that are relevant to the issues to be determined are sections 19,21,22,23,24 and 72 which provide relevantly as follows-:
"19.The following are taken to be included as terms of a site agreement
(a) the home owners responsibilities under section16
(b) the park owners responsibilities under section17
(c) the park rules for the residential park
(d) the terms of any tribunal order in force about the agreement
(e) other duties imposed on, or entitlements given to, the park owner or home owner under this Act.
20.Standard terms
(1) A regulation may prescribe terms for inclusion in a site agreement.
(2) The terms prescribed for this section are the standard terms of a site agreement.
21.Special terms
The ‘special terms’ of a site agreement are the terms of the agreement that are not-;
(a) standard terms; or
(b) terms taken to be included in the agreement under section 19.
22.Variation of a special term
(1) A special term of a site agreement may be varied at any time while the agreement is in force.
(2) A variation of a special term of a site agreement is void unless it is written and signed by the parties to the agreement.
(3) Subsection (4) applies if a party to a site agreement does not agree to a variation of a special term of the agreement proposed by the other party to the agreement.
(4) On application by the other party the tribunal may make the order the tribunal considers appropriate about the proposed variation.
23.Contracting out prohibited
(1) An agreement is void to the extent to which it purports to exclude, change or restrict the application or operation of a provision of this Act about the terms of a site agreement.
24.Inconsistency
(1) If a provision of this Act is inconsistent with a special term of a site agreement, the provision prevails and the term is void to the extent of the inconsistency.
(2) if a standard term of a site agreement is inconsistent with a special term of the agreement the standard term prevails and the special term is void to the extent of the inconsistency.
25.Written agreement
(4) The agreement must-
(d)state the following-
(i)the site rent and other charges payable under the agreement;
(ii)when the site rent and other charges are payable and how they must be paid;
(iii)how and when the site rent may be varied…
72Site rent reduction on application to tribunal by home owner
On application by the home owner under a site agreement, the tribunal may make an order that the site rent payable under the agreement be reduced by an amount the tribunal considers appropriate if it is satisfied-
(a) the amenity or standard of the residential park’s common areas and communal facilities has decreased substantially since the agreement was entered into; or
(b) a communal facility or service provided at the park when the agreement was entered into has been withdrawn.”
The issues:
As a result of the submissions made by the parties, the issues for determination are-
(i)Is clause 10 of the agreement a special term about which the Tribunal can make variation orders.
(ii)If so, have the jurisdictional pre requisites for section 22 of the Act been established
(iii)If so, is the proposed variation appropriate in terms of section 22.
The submissions:
Both parties have filed submissions on these issues.
(i)Is clause 10 of the agreement a special term within the meaning of section 22?
The applicant submits that clause 10 is ”an insertion by the respondent and does not constitute a standard term “. They point out that section 20 of the Act provides for standard terms to be prescribed in a regulation and that no such terms have been prescribed.
The respondent’s submission provides an analysis of the site agreement and sets out relevant extracts from the agreement. The document is in four parts-:
Part 1: Schedule (detailing the site, rent, and terms and conditions of use). Clause 10 is contained in part 1.
Part 2: Terms of site agreement which provides in section 1.4 “Any terms of this agreement negotiated in addition to those terms required by the Act are ‘special terms’. Special terms are set out in part 3 of this agreement.
Part 3: Special terms of the agreement which provides “Special terms are not prescribed by legislation but are terms subject to negotiation between the parties and relate to the particular park involved”.
Part 4: Acceptance of site agreement.
The respondent submits that the terms contained in Part 1 Schedule are not special terms because -:
(a)The terms are prescribed by the Act in section 25(4) and therefore are not special terms because Part 3 of the agreement provides that special terms are not prescribed by the Act
(b)Section 25(3) gives as an example of a “standard term” a matter contained in Schedule 1(name of the parties and description of the site) and as such all terms in schedule 1 must be standard terms.
(c)The form of the agreement makes it clear that the special terms are those contained in part 3 and the relevant term is contained in Part 1.
(ii)Are the Jurisdictional pre-requisites for section 22 established?
The respondents submit that the jurisdiction of the Tribunal will only be invoked under section 22 of the Act if both of the following jurisdictional pre-requisites are satisfied:
(a)A party must propose a variation of the site agreement; and
(b)The other party must not agree to the variation proposed.
The respondent correctly points out that in their letter of 25 June the applicants proposed that certain wording, namely “PROVIDED THAT in no event shall the fee be decreased from the previous year” be deleted and that the proposal in the application goes further and seeks an order that in its place the words “CPI annually and review to market every three yearly anniversary thereafter” be inserted. The respondent says at no time did it “not agree” to the proposal and as such the Tribunal does not have jurisdiction to make the orders sought.
The applicants submissions are in general terms to the effect that in their letter of 29 June they offered to discuss the issue and that the respondent in “ignoring the invitation” should be taken to have disagreed with the proposal.
(iii)If the Tribunal does have jurisdiction, is it appropriate for the Tribunal to vary the term.
The respondent provides a detailed analysis of the circumstances where in their view a special term should be varied and submit that only if the special term is inconsistent with the provisions of the Act and/or standard term is it “appropriate” for an order to be made but if there is no inconsistency it is not appropriate.
The respondent submits the term is not inconsistent with the Act. They point out that the Act prescribes in section 25(4) that the agreement must set out how the site rent is to be varied but it does not prescribe how it is to be varied, it is left for the parties to agree and as such is not inconsistent with the Act.
The respondent submits that the term is not inconsistent with section 72 as suggested by the applicants. They submit that the application of clause 10 is restricted to the reviews of site rent performed by the respondent and that section 72 has a separate operation. It concerns an application to decrease rent that can be bought by the owner in the limited circumstances set out in section 72. They submit that the applicant’s right to bring a section 72 application is not effected by the operation of clause 10.
The respondent further submits that apart from the fact that the clause is not inconsistent with the Act it would not for other reasons be appropriate to vary the clause. They submit it is not appropriate to adjust the rent solely in line with the movement of the CPI. They submit, “a negative movement in the CPI or periods of deflation does not equate to a reduction in the respondents’ costs of operating the park”. They cite the decision of the Former Tribunal of Clifford Malcolm Leach and Elizabeth Anne Selleck v Paradise Lake Pty Ltd [2005] CCT M005-05 where the former Tribunal determined that in considering the “appropriateness” of a site rent review clause as a special term of a site agreement, the factors set out in section 70(3) ought to be considered. In this regard section 70(3) lists “any increase in the CPI number during the previous site rent period.” It does not refer to a change in CPI which would include a decrease. They argue it would be unreasonable for a landlord to be trapped in a perpetual lease where the rent could decrease.
Further issues raised by the respondent on the issue of whether it would be appropriate for the Tribunal to vary the term include-:
(a)The applicants were aware of the terms of the agreement before they purchased their home and obtained independent advice regarding the agreement.
(b)The respondent established its business on the assumption that the rent would not decrease on review and as such the term should not be varied as suggested without adequate compensation being paid by the applicants, the granting of which is beyond the jurisdiction of the Tribunal.
(c)The respondents provided substantial documentation evidencing an ongoing strained relationship between the parties and submitted that the applicants conduct to date suggests that they lack bona fides.
The applicants submission on this issue is essentially twofold-;
(a)Clause 10 is not “fair trading” in that it is restrictive and contrary to the open market.
(b)The wording of clause 10 contravenes section 72 of the Act which they say “does allow for a reduction in site fees when facilities are withdrawn and which the respondent practices on a regular basis”.
Findings-
Is clause 10 a special term of the site agreement?
When determining whether the term is a “special term” for the purpose of section 22, the Tribunal must have regard to the meaning of the term as it is defined in the Act.
The site agreement, as pointed out by the respondent defines the meaning in the context of the agreement but it is apparent that that definition is not necessarily consistent with the Act.
The respondent for example submits that the site agreement provides that “special terms” are not prescribed by legislation and because the provision of a rent variation clause is prescribed by section 25(4), the clause cannot be a special term within the meaning of section 22.
The Act however does not define special term in this manner. As such, simply because it is not a special term within the context of the site agreement does not mean it may not be such for the purposes of the Act.
Under section 22 special terms are those which are not-;
(a)standard terms
Section 20 says a regulation may prescribe terms for inclusion in a site agreement and that such terms are the standard terms of a site agreement. Whilst perhaps not intended by the legislature, this has the result that standard terms for the purposes of the Act are only those prescribed by regulation. The applicants are correct in their submission that there are no standard terms prescribed by regulation and as such for the purposes of the Act clause 10 is not a standard term.
(b)terms taken to be included in the agreement under section 19.
Relevantly, section 19 lists such terms as being, home owners responsibilities under section 16, park owners responsibilities under section 17 and other duties imposed on , or entitlements given to the park owner or home owner under the Act.
The variation of the rent is not a responsibility of the park owner or home owner nor is it a duty imposed on or an entitlement given to the parties under the Act. The Act simply provides that the agreement must contain such a term. Accordingly I find that clause 10 not being a standard term or a term included in the agreement under section19 is a “special term” for the purposes of section 22.
(ii)Have the jurisdictional pre-requisites for section 22 been established?
It is necessary to consider the proposed variations separately.
The proposal to delete the words “PROVIDED THAT in no event shall the fee be decreased from the previous year” was the subject of correspondence between the parties referred to earlier in this decision.
The respondent maintains they have not “not agreed to the variation proposal” and as such the pre requisite has not been established.
The respondent had the opportunity following the applicants’ correspondence of 25 June and 16 July to respond by indicating whether they were prepared to negotiate the proposal. The respondent did not take the opportunity and did not respond at all to the letter of 16 July. I find the non response is sufficient evidence of non agreement with the proposal as required by section 22 and in those circumstances the jurisdictional pre requisites have been established.
The same cannot be said however in relation to the second proposed variation set out in the application. The applicant asks that the following words be inserted into clause 10 “CPI annually and review to market every three yearly anniversary thereafter”. The applicant had not proposed this variation prior to the filing of the application. It cannot be found in those circumstances that the respondent did not agree to the proposal. They were not given the opportunity. I find that the jurisdictional prerequisites have not been established and dismiss the application to vary the agreement by the insertion of the proposed words.
(iii)Is it appropriate for the Tribunal to vary clause 10 by deleting the words “”PROVIDED THAT in no event shall the fee be decreased from the previous year”?
The respondent argues that the only circumstance where it would be appropriate for the Tribunal to vary a term is if the term is inconsistent with the Act. I do not agree with this and consider there may be circumstances where it may be appropriate to vary a term although it is not directly inconsistent with a provision of the Act. I do however accept that if a term is inconsistent it would be appropriate to vary the term.
In this case, the applicants’ principal submission is that the term should be varied as the words represent an attempt to contract out of and are inconsistent with section 72 (which allows rental reduction in certain circumstances) and as such is void under sections 23 and 24.
I accept the respondents’ submissions on this point. Clause 10 is limited in its operation to the annual review of the rental by the respondent. It is not inconsistent with nor an attempt to contract out of section72.
The applicant is not prevented from applying for a rental reduction in the limited circumstances provide for in section 72.
Indeed the site agreement itself in clause 3.5 of Part 2 embodies the provisions of section 72 and specifically provides an entitlement to the applicant to seek a rent reduction in the circumstances set out in section 72.Further, clause 3.5 is one included by section 19 of the Act (an entitlement of the park owner) and therefore by definition is not a special term (section 21) .As such in my view would override the special term in clause 10 if there was any inconsistency.
As such I find it is not appropriate to vary the term as requested on the basis of an alleged inconsistency with the Act
The applicants also seek to have the term varied on the basis that it amounts to “unfair trading”, that is, if there is a decrease in the CPI this decrease should be reflected in the rent.
The respondents argue in essence that the parties have freely negotiated this term as they are able to do and that as the CPI does not necessarily reflect the changes that occur in the operating expenses of the park it is a fair and reasonable term.
I accept the applicants’ submissions on this point. The Act makes it clear that the parties are able to negotiate the formula for rental review. This was done and I do not consider the negotiated clause to be “unfair trading” as suggested by the applicants. I agree with the Former Tribunal’s reasoning in the decision of Wayne Kolb-v- Sam Jarufe and Susana Jarufe [2005] CCT M002-05 where the member stated -:
“A factor that must be taken into account in considering whether to vary the disputed site rent increase provision is that such a provision has to remain effective throughout the indefinite duration of a site agreement…Such a site rent increase provision must be able to reasonably accommodate variations in operating costs which will be incurred by the park owner over along period of time.”
It is not unreasonable in circumstances where the CPI does not necessarily reflect the operating costs of the park for the park owner to have certainty that the rent will not decrease simply because there is a decrease in the CPI. The home owner has the protection of section 72 in the event that there is a decline in the park’s facilities or services that warrant a rent reduction.
I find that it is not appropriate in the circumstances for the Tribunal to vary the term.
Order:
The application is dismissed.
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