PINES MANAGEMENT (ACT) PTY LTD v EASTICK AND ORS (No 2) (Retirement Villages)

[2018] ACAT 17

ACT CIVIL & ADMINISTRATIVE TRIBUNAL

PINES MANAGEMENT (ACT) PTY LTD v EASTICK AND ORS (No 2) (Retirement Villages) [2018] ACAT 17

RV 1/2017

Catchwords:              RETIREMENT VILLAGES – Tribunal approval of proposed annual budget – determination of recurrent charges –no orders as to costs

Legislation cited:      Criminal Code 2002 s 23

Retirement Villages Act 2012 ss 147, 154, 163, 166, 167, 181, Dictionary

Subordinate
Legislation cited:      Courts Procedures Rules 2006 Part 2.18

Cases cited:Deahm v The Fairways Partnership (Retirement Villages) [2011] NSWCTTT 232

Pines Management (ACT) Pty Ltd v Eastick and Ors [2017]ACAT 109

Tribunal:                   Presidential Member G McCarthy

Date of Orders:  23 February 2018

Date of Reasons for Decision:         23 February 2018

AUSTRALIAN CAPITAL TERRITORY  )

CIVIL & ADMINISTRATIVE TRIBUNAL       )          RV 1/2017

BETWEEN:PINES MANAGEMENT (ACT) PTY LTD

Applicant

AND:EASTICK and those parties listed in schedule 1[1]

[1] There were 26 respondents to the application, each of whom is a resident in the subject retirement village. The names of the respondents are at Schedule 1 to these reasons for decision

Respondents

TRIBUNAL:             Presidential Member G McCarthy

DATE:  23 February 2018

ORDER

The Tribunal orders that:

1. The approved spending of Pines Management (ACT) Pty Ltd for the financial year ending 30 June 2018 be in accordance with the amended annual budget at annexure A to this order.

2. The proposed amendment of recurrent charges take effect, modified to $429 per month. The modified recurrent charges are payable monthly by a resident of each residential unit in the retirement village that is the subject of a village contract (as defined in the Dictionary to the Retirement Villages Act 2012) and by Pines Living in relation to each of the six vacant residential units. The amendment take effect from 1 July 2017.

………………………………..

Presidential Member G McCarthy

Annexure A

Expenses	2017-2018 Budget
Auditing	3,500
Accounting	0
Bank Fees	150
Legal Fees	0
Fire Appliances Servicing & Monitoring	3,811
Lift Maintenance	4,186
Insurance (Building & Workers Compensation)	12,062
Petty Cash Expenses by Manager	1,000
Cleaning	5,824
Gardening	1,300
Repairs & Maintenance	300
Capital Maintenance	30,000
Window cleaning	3,600
Pest Spray	1,200
Office Supplies	500
Village Manager	31,200
Rates	6,000
Telephone &Internet	2,000
Electricity	8,300
Water	3,500
Contingencies	1,000
Capital Works Fund	4,000
Total Expenses	123,433

REASONS FOR DECISION

Background

1. Pines Living Pty Ltd is the Crown lessee of Block 2 Section 9 Farrer, ACT (the land). Pines Living has constructed a nursing home and a retirement village on the land. The retirement village is comprised of 24 residential accommodation units, six of which remain vacant.

2. For each unit that is now occupied, a resident has entered into a service agreement with Pines Management Pty Ltd for it to manage and operate the retirement village. The service agreement constitutes a ‘village contract’, as defined in the Dictionary to the Retirement Villages Act 2012 (the RV Act).

3. Under section 154 of the RV Act, Pines Management was able to apply to the Tribunal in relation to a proposed amendment of recurrent charges payable under the service agreement if the consent of the residents is required before the proposed amendment can take effect and the residents do not consent to the proposed amendment. That occurred in this case.

4. Under section 163(1) of the RV Act, and clause 5.11 of the service agreement, Pines Management was also able to apply to the Tribunal “for an order in relation to the spending proposed for the financial year”.

5. By application dated 27 June 2017, Pines Management applied for the following orders:

   (a)A declaration (or order) under section 154 of the RV Act approving an amendment in recurrent charges to $585 per month as set out in a notice to residents dated 12 January 2017.

   (b)A declaration (or order) under section 163 of the RV Act approving the annual budget as set out in the notice to residents dated 12 January 2017.

   (c)Such further or other orders as the Tribunal thinks fit.

6. On 18 December 2017, I made the following orders:

   1.   The approved spending of Pines Management (ACT) Pty Ltd for the financial year ending 30 June 2018 be in accordance with the annual budget at annexure A to this order.

   2.   The matter will be listed for further hearing in mid-January 2018 on the following questions

   (a) amendment to the recurrent charges payable by the residents; and

   (b) any order as to costs or the payment of money.

7. I published reasons for my decision.[2]

   [2] Pines Management (ACT) Pty Ltd v Eastick and Ors [2017]ACAT 109

8. Further to order 2, and arising from correspondence with the parties, by notice of hearing dated 9 January 2018 the matter was listed for further hearing on 15 February 2018 rather than mid-January 2018. Most of the respondent residents attended the further hearing, but no one appeared for the applicant, Pines Management. Nor did Pines Management send a communication of any kind to the Tribunal requesting an adjournment or explaining why no one would be able to attend the further hearing.

9. The Tribunal was forced to stand the matter down in order to make inquiries about Pines Management’s non-attendance. The Tribunal contacted Mr Peter Christensen, solicitor, who appeared for Pines Management at the earlier hearing. He advised that he did not have instructions from Pines Management regarding the further hearing, but was willing to attend and assist the Tribunal in its further consideration of the matter so far as he felt able. I record the Tribunal’s gratitude for his attendance.

10. Mr Christensen stated that he was, previously, receiving instructions from Mr Niranjan Krishan Aggarwal, who is a director and majority shareholder of Pines Living. The other directors of Pines Living are Arun Aggarwal and Ghauri Aggarwal. The other shareholder is Arun Aggarwal.

11. Mr N K Aggarwal is also a shareholder of Pines Management. The directors are Arun and Mahesh Aggarwal, who also own the balance of the shares in Pines Management.

12. At the further hearing on 15 February 2018, Mr Christensen stated that during January 2018 he communicated with Mr N K Aggarwal about the further hearing. Mr Christensen stated that on 1 February 2018, he reminded Mr N K Aggarwal that the matter was listed for further hearing on 15 February 2018 and that he needed instructions. At the further hearing, Mr Christensen stated that he received no further communication from Mr N K Aggarwal after 1 February 2018, but had heard that in early February Mr N K Aggarwal had had a fall and was in hospital.

13. Mr N K Aggarwal’s fall is of course unfortunate, but it did not appear to preclude him from giving Mr Christensen instructions on the matter, or from requesting an adjournment to a date when he could attend, or from engaging someone else to appear. Nor did it appear to preclude Arun Aggarwal, Mahesh Aggarwal or Ghauri Aggarwal, each of whom is a director and/or shareholder of Pines Management and/or Pines Living, from giving Mr Christensen (or someone else) instructions or communicating with the Tribunal regarding this litigation: Pines Management is the applicant. Pines Management’s apparent indifference to the Tribunal, and implicitly the law, is troubling.

14. At the further hearing, the respondent residents submitted that I should proceed to determine the recurrent charges payable by the residents and any other matters necessary to bring the litigation to its conclusion. I concluded on balance that I should do so. It was clear that Pines Management was aware of the date for the further hearing of the matter but had elected not to attend or to communicate with the Tribunal in any way. Further, where the only questions remaining to be determined concerned payment of monthly recurrent charges for a financial year that was already well advanced, there was an overarching importance that the litigation be concluded as soon as practicable.

Amendment of the budget

1. At the further hearing, the residents requested that I increase the amount determined as approved spending for capital maintenance from $6,100 to $30,000.

2. Mr Christensen did not have instructions on the proposal, but could not suggest (nor could I envisage) any reason why Pines Management would not agree to an increase in its budget for capital maintenance.

3. Pines Management could amend the budget with the approval of the residents under section 167(1)(a) of the RV Act. That pathway would not require a Tribunal order approving the amendment. However, I concluded that on this occasion the better course was for me to amend the approved budget in the manner requested: the matter needed to progress.

4. I had significant reservations about increasing the funding for capital maintenance to $30,000 where Pines Management could identify only approximately $6,000 spent on capital maintenance in the previous year, but came to the view that I should do so for several reasons.

5. First, the residents requested the amendment, no doubt concerned about the need to maintain the retirement village in which each of them has a significant financial interest, and I could not envisage a reason why Pines Management would oppose it.

6. Second, under section 166(1) of the RV Act, Pines Management would commit a strict liability offence[3] if it spent money allocated to capital maintenance otherwise than on capital maintenance unless the expenditure was in accordance with the exception under section 166(3).

   [3] A strict liability offence is defined in section 23 of the Criminal Code 2002 (ACT).

7. Third, the exception under section 166(3) of the RV Act applies if the change in spending is “between items” in the approved annual budget; does not reduce the level of services that the retirement village provides; and does not cause the total spending provided for by the approved budget to be exceeded. The exception would not permit money approved for capital maintenance to be spent on a capital expense or capital replacement because the former can be paid from recurrent charges, per an approved budget, but the latter must be paid by an operator from its own money.[4] In other words, money approved for capital maintenance cannot be used for capital expenditure with reliance on the exception under section 166(3) because this would not entail a change in spending “between items”, per section 166(3)(a), in the approved annual budget.

   [4] See Pines Management (ACT) Pty Ltd v Eastick and Ors [2017]ACAT 109 at [125] – [129]

8. Fourth, Pines Management will be required to account to the residents for its expenditure on capital maintenance, and the residents would remain able to contend that money has not been properly expended on capital maintenance notwithstanding audited accounts.[5]

   [5] See Pines Management (ACT) Pty Ltd v Eastick and Ors [2017]ACAT 109 at [125] – [129, [222] – [224]

9. The residents also requested I increase the amount determined as approved spending for telephone and internet from $1,600 to $2,000. Ms Carscadden on behalf of the residents explained that the amount needed to be increased because of an error in the calculation of these costs in the previous year. Mr Christensen did not suggest any reason why the amendment should not be made. I will therefore also approve that amendment.

Recurrent charges

1. In my earlier decision in this matter, I raised several issues that might be relevant regarding recurrent charges. At the further hearing, those issues were resolved.

2. My first concern was that many unit holders had differing contractual limits on the amount they must pay by way of recurrent charges. This was resolved by Ms Carscadden and Ms Wall on behalf of all the residents stating that all residents that held any contractual benefit by way of a limit on the amount they are required to pay as recurrent charges had agreed to waive that benefit. Mr Christensen did not have instructions on the matter, but could not suggest (nor could I envisage) why Pines Management would object to a unit holder (resident) paying more by way of recurrent charges than they are contractually required to pay. To their credit, the residents appear to have adopted a position that they should all contribute equally.

3. My second concern was with Pines Living’s contribution towards recurrent charges arising from the six vacant units. This was resolved by Mr Christensen stating that Pines Living (as the Crown lessee) has been paying, and will continue to pay, an amount by way of recurrent charges equal to the recurrent charges levied against each of the occupied residential units in relation to each of the six vacant units in accordance with section 147 of the RV Act.[6]

   [6] See Pines Management (ACT) Pty Ltd v Eastick and Ors [2017]ACAT 109 at [229(c)]

4. My third concern was with the date from which the modified recurrent charges should apply. The residents had a common position that the recurrent charges I set should apply from 1 July 2017. Mr Christensen could offer no basis for why I should decide otherwise. Ms Carscadden provided me with a document to evidence that the residents have been paying recurrent charges of between $433.33 and $559 per month. The residents submitted that each of them should have a credit in relation to ongoing recurrent charges to the extent that the recurrent charges I set are less than the recurrent charges they have been paying since 1 July 2017. Again, Mr Christensen could offer no basis for why that should not occur.

5. Having regard to these matters, and where the amended budget will be increased to $123,433, under section 154(2)(a) of the RV Act I modify the proposed amendment of monthly recurrent charges to $429 per month. The calculation is made by dividing $123,433 by 24, being the number of residential units, and then dividing that number by 12 to arrive at a monthly amount rounded up to $429.

6. Each resident is entitled to a credit regarding monthly recurrent charges for the period 1 July 2017 to the extent that they have paid recurrent charges in excess of $429 per month. The Tribunal presumes that arrangements can be reached between Pines Management and the residents regarding provision of that credit, for example by future monthly recurrent charges being met in part by payment and in part by use of credit. However, if agreement cannot be reached, the Tribunal can make orders under section 181 of the RV Act to resolve any lack of agreement.

Enforcement

1. Ms Wall enquired as to what enforcement action was available to the residents if Pines Management or Pines Living did not comply with the Tribunal’s orders in terms of the budget, implementation of recurrent charges (as modified) or expenditure of funds in accordance with the approved budget.

2. I record immediately that I have no reason to think that Pines Management or Pines Living would not comply with the Tribunal’s orders, and thus I have no reason to think that the question of enforcement will arise.

3. However, in answer to the enquiry, the Tribunal does not have any power to enforce its orders. It can only determine rights and obligations under the Act. Enforcement is a matter for the Magistrates Court or the Supreme Court as appropriate under Part 2.18 of the Courts Procedures Rules 2006.

Costs

1. Where no party applied for any order that another party pay any cost of the proceeding, I will not make any order as to costs.[7]

   [7] Section 181 of the RV Act provides that the Tribunal may make an order for the payment of an amount of money. This includes costs: Deahm v The Fairways Partnership (Retirement Villages) [2011] NSWCTTT 232

   ………………………………..

   Presidential Member G McCarthy

Schedule 1

Doug Eastick

First Respondent

Ann-Marie Eastick

Second Respondent

Connie Praag

Third Respondent

Myra Cooper

Fourth Respondent

John Cooper

Fifth Respondent

Doreen Henson

Sixth Respondent

Roy Henson

Seventh Respondent

Wendy Hotchkiss

Eighth Respondent

Dianne Mitchell

Ninth Respondent

Greg Mitchell

Tenth Respondent

Krishnan Aggarwal

Eleventh Respondent

Kathy Carscadden

Twelfth Respondent

David Carscadden

Thirteenth Respondent

Marcia Else

Fourteenth Respondent

Noeline McGuffin

Fifteenth

Respondent

Arthur McGuffin

Sixteenth Respondent

Irene Jadkonis

Seventeenth Respondent

Dan McKay

Eighteenth Respondent

Mary-Ann Wall

Nineteenth Respondent

George Wall

Twentieth Respondent

Dell Fitzpatrick

Twenty First Respondent

Harlinah Longcroft

Twenty Second Respondent

Pines Living Pty Ltd

Twenty Third Respondent

Margaret Rea

Twenty Fourth Respondent

Helen Thirkell

Twenty Fifth Respondent

Ronald Alpress

Twenty Sixth Respondent

HEARING DETAILS

FILE NUMBER:	RV1/2017
PARTIES, APPLICANT:	Pines Management (ACT) Pty Ltd
PARTIES, RESPONDENT:	Doug Eastick and Others
COUNSEL APPEARING, APPLICANT	N/A
COUNSEL APPEARING, RESPONDENT	N/A
SOLICITORS FOR APPLICANT	N/A
SOLICITORS FOR RESPONDENT	N/A
TRIBUNAL MEMBERS:	Presidential Member G McCarthy
DATE OF HEARING:	15 February 2018