Sakkara Investment Holding Pty Ltd atf Sakkara Landings Trust v Residents Committee the Landings

[2017] NSWCATCD 29

Civil and Administrative Tribunal

New South Wales

Medium Neutral Citation:

Sakkara Investment Holding Pty Ltd atf Sakkara Landings Trust v Residents Committee The Landings [2017] NSWCATCD 29

Hearing dates:

13 and 14 April 2016; 15 September 2016; 14 October 2016

Decision date:

31 May 2017

Jurisdiction:

Consumer and Commercial Division

Before:

G Meadows, Senior Member

Decision:

1 Pursuant to section 115(2)(d) of the Retirement Villages Act 1999 (RV Act) I order that the expenditure is to be as itemised in the enclosed proposed annual budget annexed as Attachment 7 for the financial year commencing 1 July 2015 and ending 30 June 2016 to a total of $ $1,851,072.00

2   Pursuant to section 108(2) of the RV Act I order that the proposed variation to the recurrent charges payable by the residents be set at $701.16 per dwelling per month

Legislation Cited:

Retirement Villages Act 1999

Category:

Principal judgment

Parties:

Sakkara Investment Holding Pty Ltd atf Sakkara Landings Trust—applicant;
Residents Committee The Landings—respondent

File Number(s):

RV 15/66111

Publication restriction:

Nil

Table of Contents

APPLICATION

BACKGROUND

EVIDENCE

Documentary Evidence

Applicant’s Evidence

Statement of Charles Gordon Cupit

Statements of Suzanne Carmel Lawrence

Statement of 18 February 2016

Statement of 25 February 2016

Statement of 08 April 2016

Statement of 31 August 2016

Statements of Catherine Jane Montgomery

Statement of 17 February 2016

Statement in Reply of 08 April 2016

Statements of David Peter Bedingfield

Statement of 17 February 2016

Statement in Reply of 08 April 2016

Statement of Robert Stanley Jones 25 February 2016

Statement in Reply of Alan Dempsey dated 08 April 2016

Statement of Alex Marvelly dated 08 April 2016

Mitchell Burge Report of 17 September 2014

Mitchell Burge Report of 08 April 2016

Statement of Jerram Chippindale dated 08 April 2016

Respondent’s Evidence

Statements of Andrew Richard Burgess

Affidavit of 23 March 2016

Statement of 29 August 2016

Statement of 08 September 2016

Statements of Neil Leybourne Smith

Statement of 23 March 2016

LEGISLATIVE FRAMEWORK REGULATING RETIREMENT VILLAGES

CONSIDERATION AND DETERMINATION

Jurisdiction

Preliminary

“to facilitate resident input, where desired by residents, into the management of retirement villages”

Adequate Provision of Information

Capital Repairs, Capital Maintenance and Capital Replacement

Item 6: Wages Administration

Item 7: Wages Maintenance

Item 12: Wages Replacement Staff

Item 13: Recruitment Temporary Employees

Item 18: Insurances

Item 37: Tradesman Repairs

Item 45: Security, Annual Fire and Safety Audit

Item 46: Temper Valve Compliance

Item 48: Electricity

Items 63 and 64: Air Conditioning Maintenance Contract and Air Conditioning R&M Materials

Item 69: Optional Services Recouped

Item 70: Capital Works Fund

Attachment 1: FY16-3 Proposed Budget

Attachment 2: Items in dispute by budget version (variations compared to FY15)

Attachment 3: Items in dispute by budget version showing variation – compared to FY15 proposed budget

Attachment 4: Items in dispute by budget version showing variation – compared to FY15 actual budget

Attachment 5: proposed budgets for item 37: Tradesman Repairs.

Attachment 6: Parties’ Submissions

Attachment 7: Sakkara Budget 01/07/2015 to 30/06/2016

reasons for decision

APPLICATION

1. In these reasons I refer to the applicant as the operator, and to the respondent as the residents. It will be necessary to refer frequently to members of the residents committee or its sub-committees, as they participated in meetings and correspondence with representatives of the applicant. I will refer to those members from time to time as “the residents committee” by way of shorthand only, without identifying the individuals actually involved at any particular stage, unless it is necessary to do so. That is, frequently a reference to “the residents committee” below will in fact refer to one or more representatives of the residents committee.

2. The application was filed by the operator on 10 December 2015 seeking two orders:

1. Under section 115(2)(d) of the Retirement Villages Act 1999 (RV Act) an order that the expenditure is to be as itemised in the enclosed proposed annual budget annexed to the Application and marked Annexure K for the financial year commencing 1 July 2015 and ending 30 June 2016 to a total of $2,081,629: see Attachment 1.

2. Under section 108(2) of the RV Act an order that the proposed variation to the recurrent charges payable by the residents be set at $768.08 per dwelling per month.

BACKGROUND

3. There is a lengthy history of litigation in this Tribunal between these parties, principally in relation to budget disputes. Some of that history is set out in Mr Bedingfield’s affidavit dated 17 February 2016 at paragraphs 14 to 40. I consider it is not necessary to set this history out in any detail but it will be necessary to consider at least one of the previous decisions in the Tribunal. That decision is RV 14/54814 Sakkara Investment Holdings Pty Ltd ATF Sakkara Landings v Residents Committee, The Landings, which is a decision of Senior Member J Smith in relation to the proposed annual budget for 01 July 2014 to 30 June 2015 (“the FY15 decision”). That decision contains one item which has caused considerable controversy between the parties in relation to the proposed budget for 01 July 2015 to 30 June 2016 (“the FY16 budget”).

4. However, at this stage it will be helpful to set out the nature of the current controversies in relation to the FY16 budget, narrowing the issues down to the specific line items remaining in dispute. It will also be helpful to annex the three versions of the FY16 budget produced during the negotiations between the parties prior to the current proceedings being commenced.

5. The Statement of Suzanne Carmel Lawrence (the “Operations Manager” as at the date of these hearings) dated 18 February 2016 contains three versions of the FY16 budget (that is, the proposed budget) attached at “SL1”. The three versions are attached to these reasons. I will refer to each version respectively as FY16-1, FY16-2 and FY16-3.

6. The particular disputes between the parties relate to 13 line items in those versions, being:

No.	Item No.	Line Item
1	6	Wages Administration
2	7	Wages Maintenance
3	12	Wages Replacement Staff
4	13	Recruitment Temporary Staff
5	18	Insurance – General
6	37	Tradesman Repairs
7	45	Annual Fire Safety Certificate
8	46	Temper/Mixing Valve Compliance
9	48	Electricity
10	63	Air Conditioning Maintenance Contract
11	64	Air Conditioning R&M Materials
12	69	Optional Services Recouped
13	70	Contribution to Capital Works Fund

It should be noted in particular in the three versions of the FY16 budget attached that Item 70 “Contribution to Capital Works Fund” appears twice in the budgets, first in the “Income” section and again in the “Expenditure Section”. It is this item which relates to the FY15 decision of Senior Member Smith.

7. The Tribunal was handed a document, subsequently marked “MFI1”, being a useful summary of the changes in each version related to these particular items. This is reproduced (with some minor reformatting for clarity) as Attachment 1 below.

8. I refer to these 13 items as “the disputed items”: it is necessary to note that there are other items in dispute, or which were in dispute, between the parties which are not included in this application and should not be included in the category of “the disputed items” in these reasons.

9. I provide the following summary of the monetary dispute between the parties, taken from the Respondent’s final submissions:

Item	Applicant Claim		Respondent Claim
Annual operating expense	$2,008,016.00	$1,624,486.00
deduct conceded	($10,000.00)
$1,998,016.00
deduct irrigation subsidy	($8,152.00)	($8,152.00)
deduct interest	($859.00)	($9,011.00)	($859.00)	($9,011.00)
Total Recurrent Charges Proposed	$1,989,005.00	$1,615,475.00
Item	Applicant Claim		Respondent Claim
FY15	FY16	Agrees	Disputes
Wages Administration - item 6	$289,413.00	$434,878.00	$304,878.00	$130,000.00
Wages Maintenance - item 7	$198,343.00	$222,227.00	$182,227.00	$40,000.00
Wages Replacement - item 12	$9,959.00	$13,547.00	$9,959.00*	$3,591.00
Recruitment Temporary Staff - item 13	$0.00	$28,644.00	$0.00	$28,644.00
Insurance - item 18	$103,862.00	$109,318.00	$105,276.00	$4,042.00
Tradesman Repairs - item 37	$39,274.00	$78,913.00	$41,237.00	$37,676.00
Annual Fire Safety Certificates - item 45	$1,382.00	$24,309.00	$9,088.00	$15,221.00
Temper Mixing Valves - item 46	$84.00	$29,718.00	$3,517.00	$26,201.00
Electricity - item 48	$114,627.00	$101,038.00	$88,023.00	$23,015.00
Air Conditioning Maintenance Contract - item 63	$31,420.00	$35,882.00	$22,597.00	$13,285.00
Air Conditioning R & M Materials - item 64	$34,614.00	$68,225.00	$38,225.00	$30,000.00
Optional Services Recouped - item 69	($30,694.00)	($23,299.00)	($40,731.00)	$17,432.00
Contribution to Capital Works - item 70	$174,401.00	$73,614.00	$17,977.00	$55,637.00
Totals	$966,685.00	$1,197,014.00	$782,273.00	$424,744.00

The respondent inserted the amount of $0.00 which does not make sense. I have changed this to the FY15 amount.

EVIDENCE

10. No doubt both parties will be concerned at the length of these reasons and the consequent delay in publishing them.

11. It may be appropriate to note that Tribunal Members are encouraged to set out clearly the findings of fact made by the Member and to relate those findings to the evidence, showing how any dispute has been resolved. Apart from that, Members are specifically encouraged not to summarise every witness’s evidence.

12. I have decided it is appropriate to set out the evidence in some detail, for the following reasons:

1. The extremely lengthy and complex history of litigation in the relatively short life of The Landings;

2. The detailed and particular nature of the evidence and the marked lack of agreement between the witnesses for one party and those of the other party;

3. The varied nature of the evidence, including evidence from residents, the operator, employed staff of the operator, external consultants and references to previous decisions (and the effects of those decisions) of this Tribunal and the Supreme Court;

4. The fact that this is a retirement village, a large retirement village with a high level of interest and concern from both residents (or some of them) and the operator, staff and contractors; and

5. Both parties and quite a number of the individual witnesses have previous experience in providing evidence for Tribunal hearings, and both parties have been legally represented by their current solicitors for some time, including in previous Tribunal proceedings. If both witnesses and their legal representatives consider it was appropriate to include all the material contained in their statements, they are due the respect to acknowledge that effort.

13. As will become clear below, some, or even most, of the individual witness statements contain much material which goes beyond a simple factual presentation of relevant evidence. There is a lot of material setting out the witness’s opinions, experiences and emotions about living or working in The Landings. Rather than rejecting these portions of the statements as “merely opinion” or as irrelevant, factors which would normally leading to such material being removed, I have found it is in fact necessary to include and to make findings in relation to that material, in coming to my decisions about the actual issues contained in the formal application. I hope I have made this clear in what follows.

14. In my opinion it will be fair to both parties and all interested persons to set out the nature of the evidence in this one document, allowing easy referral to that evidence when I come to making particular findings.

Documentary Evidence

Applicant’s Evidence

15. The Applicant’s evidence consisted of a large bundle of statements, most with numerous attachments, as follows:

10	Alan Dempsey	Statement 08 April 2016
12	Alex Marvelly	Statement 08 April 2016
2	Catherine Jane Montgomery	Statement 17 February 2016
9	Catherine Jane Montgomery	Statement 08 April 2016
1	Charles Gordon Cupit	Statement 12 February 2016
3	David Peter Bedingfield	Statement 17 February 2016
7	David Peter Bedingfield	Statement 08 April 2016
8	Jerram Chippindale	Statement 08 April 2016
6	Robert Stanley Jones	Statement 25 February 2016
4	Suzanne Carmel Lawrence	Statement 18 February 2016
5	Suzanne Carmel Lawrence	Statement 25 February 2016
11	Suzanne Carmel Lawrence	Statement 08 April 2016
13	Suzanne Carmel Lawrence	Statement 31 August 2016

Statement of Charles Gordon Cupit

16. Mr Cupit is the principal of Bedford CA which is the applicant’s external accountant. In his statement, Mr Cupit sets out his involvement in the preparation of the proposed FY16 budget which included several “pre-budget meetings” with the residents committee.

17. Mr Cupit purports to present himself as “an impartial third party” and he offers the opinion that:

“6.   … At that time [22 December 2014], I believed (and today I still believe) that the parties’ poor working relationship was the real reason why proposed budgets have not been approved in the past, rather than anything contained in past budgets per se. …”

18. Mr Cupit refers to meetings with the residents committee and “Sakkara” (obviously a reference to one or more individuals representing the operator) on 22 December 2014, 14 January 2015 and 09 March 2015. He asserts that the meetings were arranged with the intention of discussing an agreed agenda which, among other issues, included how the parties could obtain an approved FY16 budget. However, that particular matter was not achieved, because, as Mr Cupit states in his statement:

“12.   These meetings were set with the intention of discussing an agreed agenda, but would typically deteriorate to a discussion of historical issues (eg past defects, which had all been rectified in the previous financial year and so were not relevant to any expenditure in FY 16).

13.   I formed the view that the parties could not move forward unless the Residents Committee could let go of ‘historical legacies’, which they seemed unable to do. I then focused on assisting Sakkara to prepare the proposed FY 16 budget.”

This gives the appearance that Mr Cupit thereafter ceased attempting to improve the working relationship and restricted himself to preparing the proposed budget, although it is not necessary to make any such finding.

19. Mr Cupit provides a succinct description of his methodology, which I also extract:

“15.   The budget is an estimate of future expenditure at The Landings. Where the exact cost of future expenditure was known (eg there is a fixed fee for providing 12 months of services) I, or my staff working under my supervision, inserted that figure in the line item. Where the exact cost was unknown, various methodologies were used to estimate the amount of the expense.

16.   One methodology commonly adopted was to extrapolate the most recent eight months of expenditure from the accounting records of the current financial year (that is, from 1 July 2015) to arrive at an annualised figure.

That is:

(Cost incurred over last eight months/8) x 12 = projected cost

“17.   Where appropriate, I also increased that projected cost by the Consumer Price Index (CPI).

“18.   This is standard industry practice, and uses past expenditure as an indication of future expenditure. In the absence of accurate detail of future expenditure this methodology ensures that estimates of future expenditure are as accurate as possible.

“19.   Ms Lawrence and Tracey Dignam (who was the Village Manager at the time) collated a folder containing the proposed FY 16 budget, my calculations for each line item, and any supporting material upon which these calculations were based.”

20. The results of that work was the first budget (FY16-1) which was presented to the residents committee on 30 April 2015, following a “budget presentation” (Ms Lawrence’s phrase) to the residents in mid-April.

21. Mr Cupit then provides his account of the budget negotiations. The first meeting for that purpose occurred on 05 May 2015. Mr Cupit suggests this discussion “kept reverting to a discussion about historical issues.” In response to an indication from the residents committee that they desired to have a better working relationship with the operator, Mr Cupit “explained to the Residents Committee that I believed that such a situation would practically only occur if future issues could be discussed without constant reference to these historical issues”. The meeting concluded with a request for additional supporting information for certain line items in FY16-1

22. This meeting of 05 May 2015 discussed a number of issues of relevance at that time, including in relation to the selection of an auditor, the working relationship with Mr Cupit and especially, it appears from the notes at least, in relation to the issues concerning the FY15 budget, then the subject of proceedings before the Tribunal. In relation to the FY16 budget, Mr Cupit advised the operator by email on 06 May 2015 as follows (“CC3”):

“2016 Budget

With respect to the 2016 I have 3 pages of notes/requests for additional information. Considering the fact they had not been consulted prior to delivery of the budget their requests are not unreasonable, (subject of course to how they receive the information we subsequently provide). They did give us the benefit of explaining their view of the costs so we at least understand what is the differential.

Zoe will scan my notes and she and Sue [Lawrence] can work on compiling the information which is necessary in any case.

There were no surprises and they actually provided a few sensible suggestions.

They did the complain the budget as delivered was not compliant because in their view it was incomplete because we had not at the time of delivery obtained all the quotes necessary, and that they will be meeting with the residents on 27 May where they doubted the budget would be accepted etc.”

23. Subsequently, Mr Cupit discussed with Mr Bedingfield by telephone a proposal that the operator may contribute to residents’ levies in order to achieve an agreed budget for FY16. He states that Mr Bedingfield agreed to the approach in principle but that any such contribution would be conditional upon the parties agreeing to “a moratorium on litigation and resolving a number of outstanding items”. The items are not identified.

24. Mr Cupit then spoke to Mr Burgess by telephone, during which call the meeting on 05 May was discussed and they agreed to form an agenda for a further meeting “about how to improve the working relationship between the parties by resolving past issues”. On 15 May 2015 Mr Cupit sent an email to Mr Burgess, in which were listed eight outstanding items in dispute, which, Mr Cupit states, was then referred to as “the eight point agenda”.

25. At “CC4” this email sets out the eight points as follows:

“1. 2016 Budget to be approved June 2015.

2. 2015 Budget to run its course in NCAT, (final submissions having been made).

3. 2014 – current application before NCAT be set aside and dropped.

4. Defects rectification matters be set aside and dropped and both parties agree to abide by a proposed procedure;

5. There be a 12 month moratorium of listing any matters before NCAT until 1 July 2017, (to encourage the parties to negotiate any issues that arise).

6. Sakkara make good the $14,000, (approximately), deficit as at 30 June 13, (done).

7. Process for the appointment of an auditor for 2015 be agreed.

8. Settlement of correct amounts to be invoiced for 2012.”

As stated on the phone Sakkara is willing to contribute $100,000 towards the levies subject to agreeing items 1-7 above on Friday.”

26. Mr Cupit then sets out his recollections of a number of meetings and discussions with the residents committee during May and June 2015. These meetings related not only to the FY16 budget, but also (and perhaps predominantly) to other issues included in the eight point agenda. In particular, Mr Cupit notes that at a meeting on 24 June 2015 the primary focus was on the role of the Operations Manager.

27. Also at that meeting, the residents committee provided their own form of budget which was adopted to progress the negotiations. The form was stated to be updated on a line-by-line basis to reflect those negotiations. Mr Cupit provides the last version of that form in his possession, at “CC5”. As I understand Mr Cupit’s paragraph 38, the residents committee’s form was used for negotiations after the other issues referred to in the previous paragraph above could not be agreed.

28. Mr Cupit then refers to correspondence between the residents committee and Mr Bedingfield, included at “CC6”. Mr Cupit comments that he understood this correspondence to mean that the residents committee opposed the appointment of an Operations Manager (line item 6) on the basis that the position was not necessary to run The Landings.

29. Mr Cupit attended two further meetings with the residents committee.

30. On 29 June 2015, at a meeting with Mr Burgess and Mr Agnew, Mr Cupit states that his recollection is that several FY16 budget issues were resolved and that “each side” left with a list of actions required to be undertaken to achieve an approved budget. Mr Cupit does not list either the resolved items or the action items.

31. On 27 July 2015 Mr Cupit attended a meeting together with Ms Lawrence and Ms Montgomery (by then appointed as Village Manager) with Mr Burgess and Mr Fletcher. Mr Cupit states that when that meeting concluded he believed “that all expenditures other than the Operations Manager wage were capable of being resolved on an ‘en globo’ basis”. He refers also to particular negotiations in relation to the Operations Manager wage and contract. He recalls that the operator stated it could not agree to the proposals from the residents committee because it considered the position was required and it had already made the offer of a substantial contribution to the budget.

32. That was the last time Mr Cupit was involved in the budget negotiations for FY16. However, he notes that he received a letter from Mr Burgess dated 05 August 2015 (although Mr Cupit states the letter was received on 04 August 2015) which identified a number of line items as being in dispute “which was entirely contrary to my recollection of the outcome of our negotiations. Upon reading the letter it was apparent to me that — while the members I met with seemed genuinely motivated to approve a budget and let go of animosity towards Sakkara — the Residents Committee as a whole was not, and clearly the members I met with did not have the authority to change that position”.

33. The remainder of Mr Cupit’s statement provides submissions in relation to each of the disputed items the subject of this application.

Statements of Suzanne Carmel Lawrence

Statement of 18 February 2016

34. Ms Lawrence commences her statement with a brief indication of her employment background prior to joining The Landings, and her initial employment at The Landings as a “business analyst” in February 2014. She notes that her wage (except for a holiday relief period) was paid direct by Sakkara. I infer that this means that her wage, or salary, was not paid from residents’ levies and therefore was not included in the FY14 and FY15 budget estimates.

35. Ms Lawrence states that Mr Bedingfield asked her to interview residents in relation to complaints received in relation to delays in addressing repair and rectification requests. She was to determine what improvements were required and to implement any necessary changes subject to the operator’s approval. In addition, she was required to provide “general assistance” to the then Village Manager, Mr Deery.

36. Ms Lawrence states that during that early period she became familiar with the running of The Landings. She also notes that she was treated “impeccably” by the residents.

37. Between paragraphs 9 and about paragraph 38, Ms Lawrence discusses her review of The Landings operations, her opinions as to the root causes of various problems and in particular her early development of the proposal to split the role of the Village Manager into two separate roles, one being the Village Manager and the other the Operations Manager.

38. Ms Lawrence states at paragraph 5 that she joined Sakkara as a “business analyst”. She states the Mr Bedingfield informed her that there had been complaints in relation to delays in addressing repair and rectification requests. She was requested to interview residents “and review The Landings’ processes and procedures to determine what improvements ought to be made. I was then to implement these changes, subject to Sakkara’s approval.”

39. Then, in paragraph 10, Ms Lawrence states:

“By about end March 2015, I concluded that there were some delays in actioning certain items. The cause of these delays was primarily the following:

Mr Deery’s workload being too large for a single person to manage; and

The Landings having poor cash flow which caused delays in work being undertaken in a timely manner.”

40. In this same portion of her statement, however, the primary focus is in relation to her allegations of poor treatment of her by the residents committee or at least some of the residents. “Poor treatment” is in fact too weak a term for her descriptions which amount to allegations of significant bullying and harassment. In describing this period, she also suggests that other people, particular Mr Deery and Ms Dignam, (previous Village Managers) were similarly treated and affected. She reports (by hearsay) various comments to her by those two people in relation to this harassment issue.

41. From paragraph 39 Ms Lawrence focusses on her role and responsibilities. As the role of the Operations Manager and the cost of employing an Operations Manager is, in my view, one of the main issues between the parties, I consider it is appropriate to set out Ms Lawrence’s summary in detail.

42. Ms Lawrence states she works about 62.5 hours per working week, comprised of 10 hours at work and about 2 to 3 hours afterwards at home.

43. Ms Lawrence states at paragraph 40:

“…, my main duties include:

Managing the lease. During my time at The Landings it became apparent there was no one charged with purely managing the lease to ensure both the resident and the operator are fulfilling their responsibilities under the lease.

Strategic operations. I am responsible for reviewing our maintenance program to determine the best and most cost effective methods of maintaining The Landings. For example, I review maintenance requests so Sakkara can arrange for single contractors to perform multiple maintenance works on a single day at a lower rate than sporadic attendances. I implement maintenance programs to minimise repair costs (eg I track equipment failures to determine whether reactive repairs or proactive replacement of all units is cheaper).

Property inspections. I inspect all 220 properties each year (five properties per week) to ensure that the resident enjoys capital equipment of a quality and condition promised in the lease. On average each inspection takes two hours to complete and then additional time is spent preparing reports and actioning items. During these inspections, I:

update photographic records of capital in Sakkara’s assets register;

confirm that all specifications reflect the quality promised under the lease – if not, I arrange repairs at Sakkara’s cost (eg carpet wear and tear);

identify any maintenance issues or safety hazards to be addressed (eg some residents install gardens that create tripping hazards);

discuss the residents experiences and expectations of living at The Landings, in order to identify future improvements; and

answer any questions that residents and their family members have about their lease and operations at The Landings.

Independent living suitability assessments. The Landings is an independent living community with an ageing population of residents. Residents that are no longer suited to this arrangement are at risk and are more likely to harm other residents and employees. I manage ongoing assessments in order to address these risks. Where appropriate, I assist with relocations of residents by liaising with families and doctors.

Disaster recovery planning. I prepare and implement safety procedures for events and natural disasters (eg action plans for black outs, evacuating residents if there is a bushfire in the adjacent national park). This extends to resident and staff training.

Service contract review. I regularly review contracts to ensure residents receive optimal value for the fees they pay (eg by ensuring all services are being received).

Garden management. I liaise with the Resident Gardening Committee and make arrangements on their behalf.”

44. Under the heading “Developing the 2015/2016 financial year budget”, Ms Lawrence summarises the continuing negotiations between about April 2015 until December 2015, in paragraphs 41 to 72. It is very difficult to summarise these paragraphs without simply producing a summary as long as the original, because Ms Lawrence’s statement is detailed and succinct in these paragraphs. I make the following general points.

45. “SL1” is an important attachment as it contains each of the three versions of the budget presented to the residents and then “sub-attachments” in relation to each of the disputed line items, given the same numbers as the line item has in the proposed budgets, that is, items 6, 7, 12, 13, 18, 37, 45, 46, 48, 63, 64, 69 and 70 (as set out in “Attachment 1” below). As necessary, I will refer to these attachments as “SL1-6” and so on.

46. I will now summarise Ms Lawrence’s statement in relation to the disputed items.

Items 37, 63 and 64 – ‘discrete items concept’

47. These three items are “tradesman repairs”, “air conditioning maintenance contract” and “air conditioning r&m materials”. The issue between the parties is that the residents committee considers these three items to be “capital replacement” items rather than “capital maintenance” items. Ms Lawrence states that their position is “based on a misinterpretation of the decision by Member Meadows in Smith v Sakkara Investment Holding Pty Ltd [2011] NSWCTTT 162”.

48. Ms Lawrence states that she understands the residents committee’s position is based on the principle that “anything that is a ‘discrete item’ (being anything that can be removed from equipment and replaced with a new part) is a capital replacement and payable by Sakkara”. Ms Lawrence states that she has contacted the Office of Fair Trading and two other retirement villages and that they have not heard of the alleged legal principle. Also, Mr Cupit is stated to be unaware that Smith supports such a concept.

49. Ms Lawrence states that she (and presumably also the operator) regard the three items are capital maintenance.

50. Ms Lawrence then sets out the procedures adopted by Sakkara for reviewing items of expenditure to determine if they are repair, maintenance or replacement. This process used a process called the “Defect Identification Process” developed in consultation with the residents committee following a series of NCAT proceedings in 2015 in which these issues were “argued vigorously”. This document is reproduced at “SL23”.

Item 6 – Wages Administration

51. This item is comprised of the total wages of the Village Manager, the Operations Manager, the Accountant, two Receptionists (making up together one full-time role) and the Social Coordinator.

52. At paragraphs 84 to 100, Ms Lawrence sets out in brief terms the duties of the above positions, submitting that they ensure the residents benefit by receiving high quality services and accommodation at the lowest possible levies. “CM13” (in Ms Montgomery’s statement) includes the statements of duty of each position, together with statements of duty of a number of positions reporting to the Operations Manager. I summarise the statements in relation to the Operations Manager and the Village Manager for the purpose of enabling a quick comparison:

Category	Village Manager	Operations Manager
Name	Ms Montgomery	Ms Lawrence
Division/Dept	The Landings	The Landings
Location	North Turramurra	North Turramurra
Job Title	Village Manager	Operations Manager
Reports to	General Manager	Village Manager
Position Purpose	• Manage The Landings effectively to ensure that it continues to be a leader in independent retirement living and a desirable place to live. Ensure that property values increase in line with the local area, whilst working to minimise costs and maximise profitability earned through continual Departure Fees.	• Assist the Village Manger to manage The Landings effectively to ensure that it continues to be a leader in independent retirement living. Ensure that the village and its operations are compliant with the Retirement Villages Act 1999, the individual property leases and the relevant Development application. • Work to progress improvements in service delivery, improved efficiencies in the functioning of the village, enhanced teamwork amongst staff, and improved communication with residents. • Develop and maintain the Landing Business Continuity Plan and Disaster Recovery processes.
Hours	• Full time position – 40 hours Monday to Friday (with occasional our of hours work required).	• Full time position – 40 hours Monday to Friday (with occasional our of hours work required).
Roles and Responsibilities
Asset Management	• Maintain a high standard of presentation within the village and work to ensure a positive atmosphere within the village community that will contribute to a continued high demand for property at The Landings and maximise property values for residents (aiming for no vacancies). • Oversee planned regular service on capital items/infrastructure to reduce replacement costs and minimise Sakkara’s costs.	• Assist the Village Manager to maintain a high standard of presentation within the village and work to ensure a positive atmosphere within the village community that will contribute to a continued high demand for property at The Landings and maximise property values for residents (aiming for no vacancies). • Ensure the properties are maintained in accordance with the Retirement Villages Act (1999) and the individual leases through annual property inspections. • Administer Village security through the maintenance of the Village Key Register. • Manage the Resident modification process. • Maintain and update village contracts to ensure the property inclusions are accurate.
Operational	• Manage the day to day functioning of the village that reflects a professional environment that is continually improving, welcoming and caring. • Manage staff including recruitment, rostering, reviews, adherence to policies, training and termination as required. • Develop knowledge of, and contact with key local community services, medical & allied health services, leisure services, church groups and other social groups for the benefit of residents. • Manage contractor provision of optional services for residents such as hairdressing, podiatry, catering etc that are cost effective and beneficial for residents and are sustainable for service providers. • Maintain good relationships with residents, their families and resident groups (Residents’ Committee, other committees and volunteers) and oversee effective communication with them.	• Work closely with the Village Manager to promote and maintain a caring and pleasant atmosphere at all times for residents and visitors. • Promote and encourage teamwork across all departments. • Develop and maintain management information and reporting. • Maintain processes and policy documentation and promote continuous improvement. • Conduct customer satisfaction surveys through individual interviews and property inspections. • Mange problems and develop action plans to reduce impact on residents. • Manage Defect Identification process and manage the repairs and maintenance programs within the village. • Act as the Village Welfare officer to ensure the duty of care responsibilities of the village are upheld. • Provide an in-house orientation for new residents to demonstrate use of emergency systems and appliances.
Financial	• Oversee the preparation of annual budgets in consultation with the Residents Committee and provide quarterly and year-end financial reports. • Monitor and control all budgets so as not to incur annual deficit. Authorise payments to staff, suppliers and contractors within budgets.	• Work with Village Manager to prepare annual budgets • Carefully Monitor and control operational spending • Ensure Capital spend is supported by sales revenue
Corporate	• Revise The Landings policies as required. • Revise and update The Landings Business Plan annually and coordinate with all areas of Sakkara.	• Develop and produce Management information package
Safety, Legal & Compliance	• Maintain current knowledge of Retirement Village Act (1999) and Retirement Village Regulations (2009) and ensure continued compliance in all areas. • Ensure that the village, staff and contractors maintain full compliance with current OH&S policies, and that equipment is maintained in good working order for any emergency. • Ensure that the annual safety audit is undertaken and recommended work completed. • Ensure that Emergency Evacuation procedure is regularly practised including staff and volunteer fire wardens training and that procedures are communicated effectively to residents (via documents and practise drills as necessary). • Ensure that the village is staffed appropriately at all times by suitably qualified staff able to effectively respond to emergency situations 24/7 as prescribed in the Emergency Response procedures. • Ensure that all contractual obligations to residents are met. • Act as Privacy Officer and ensure all staff comply with the privacy policy and ensure that records are maintained and that suitable technologies are in place for this purpose. • Comply with all Village policies and procedures as outlined in the Staff Policies & Procedures Manual relating to matters such as Resident Privacy, Manual Handling, Key Control, Emergency Procedures etc.	• Understand the Retirement Villages Act 1999 and Retirement Villages Regulations 2009 and how they operate. Ensure compliance and keep abreast of any changes. Implement any changes in management systems to ensure compliance. • Ensure that the village, staff and contractors maintain full compliance with current OH&S policies, and that equipment is maintained in good working order for any emergency. • Ensure that the annual safety audit is undertaken and recommended work completed. • Ensure that Emergency Evacuation procedure is regularly practised including staff and volunteer fire wardens training and that procedures are communicated effectively to residents (via documents and practise drills as necessary). • Document and maintain Village Business Continuity plan • Liaise with Ku-ring-gai council in matters relating to statutory approvals and compliance with Government regulation • Ensure that all contractual obligations to the residents are met. • Ensure all obligations between the Village and contractors are met • Comply with and maintain all Village policies and procedures as outlined in the Staff Policies & Procedures Manual relating to matters such as Resident Privacy, Manual Handling, Key Control, Emergency Procedures etc.
Village Promotion	• Manage sales and marketing of property re-sales paying attention to any necessary refurbishment • Oversee maintenance of The Landings website to reflect the village and its operations to further the marketing goals. • Invite Local community participation in village life to further maintain and further enhance the position of The Landings as a place of choice for independent living of those over 55yrs from the north shore area.
Essential skills/qualifications	• Real Estate Licence • Experience, knowledge and qualifications relevant to management of a retirement village • Effective communication, interpersonal and staff management skills • First Aid certificate • Sound financial skills in preparing & interpreting financial reports • Proactive approach • Commercial aptitude • Respect for the dignity and privacy of residents	• Experience, knowledge and qualifications relevant to management of a retirement village • Experience and knowledge of the Retirement Villages Act 1999 and Retirement Villages Regulations 2009 • Effective communication, interpersonal and staff management skills • Sound financial skills in preparing & interpreting financial reports • Proactive approach • Commercial aptitude • Respect for the dignity and privacy of residents

53. One primary submission is that there is no overlap between these roles and particularly between the role of the Operations Manager and the role of Village Manager. Ms Lawrence states that “I am confident that this is the bare minimum amount of administration employees that The Landings needs to operate”. That submission includes those administration employees who report to the Operations Manager.

54. Ms Lawrence also states that “Sakkara” approached five other villages and found that is has similar if now lower administration employee levels despite having a higher resident population than those other villages. A report in relation to that investigation was prepared by Ms Lawrence and is attachment “SL24”.

Item 7 – Wages Maintenance

55. This item refers to the wages of maintenance staff including the Facilities Manager, the Maintenance Handyman, and one full-time and one part-time General Hand. Ms Lawrence summarises their duties, which, in my opinion, contain no surprises or unusual duties. She adds that their wages reflect market rates having regard to their skills and experience.

56. This line item has increased due to:

1. small (but necessary and appropriate) increases in salary;

2. promoting one employee to general hand; and

3. employing an additional part-time employee to work on “basic tasks”.

57. Ms Lawrence notes that maintenance work is undertaken by Village employees or, where necessary, by third party contractors. “SL25” to “SL27” are summary reports of work undertaken by third party contractors for different periods.

58. At paragraph 111 of her statement, Ms Lawrence repeats her opinion expressed previously in her paragraph 98 and quoted above in paragraph 49.

59. Finally, in this section, Ms Lawrence refers to the Summary Reports just referred to forming part of the Village Master system, developed for submitting and tracking requests in the Village. She states that her review of “long term trends” using the Village Master confirms that maintenance requests are increasing.

Item 12 – Wages replacement employees

60. Ms Lawrence notes that this line item was calculated in error based on the Accountant’s and the Village Manager’s salary, rather than the Accountant’s and the Personal Care Assistant’s salary. Although a process of succession planning and cross training is implemented to reduce absentee wages, this cannot be used for the Accountant and the Personal Care Assistant, as other staff do not have the necessary qualifications. That is, replacement staff would have to be employed to replace these positions when the permanent employee is on leave.

Item 13 – Recruitment temporary employees

61. This item, obviously, comprises the costs of recruiting employees. Ms Lawrence states that this item increased due to the recruitment fees required to recruit a permanent Village Manager (Ms Montgomery). She refers to advice she received from Mr Bedingfield while she was acting Village Manager as to the difficulties in finding a suitable replacement for Ms Dignam and Ms Lawrence and that it became necessary to look “outside the industry”. She offers the opinion that “the cost was unavoidable but necessary to find a good fit for the Village Manager role”.

Item 37 – Tradesman repairs

62. This item comprises the costs of repairing all capital items (defined in the Village Contract) other than residents’ personal items by third party contractors. This line item increased in the FY16 budget in accordance with CPI increases and to correct a GST error. Also, there is an anticipated large scale roof repair to two of the units in the Village. Ms Lawrence refers again to the Summary Reports discussed above. She states that a breakdown of these costs is provided to the residents committee monthly meeting. In order to control costs, Ms Lawrence states the Village obtains several quotations in relation to “large scale work” (not defined) and by accruing minor works to permit a lower per unit cost.

Item 45 – Annual Fire Safety Certificate including tagging

63. Under this item, Ms Lawrence asserts that the operator must:

1. maintain fire dampeners annually

2. test fire seals annually in relation to annual fire safety certification;

3. maintain and/or test about 100 anchor points used to attach safety harnesses when conducting certain repairs (such as roof repairs—although it is not stated if or how such anchor points relate to fire safety certification)

64. This line item, besides the above, includes the cost of annual auditing and annual reviews to ensure policies are updated relevant to legislative changes, reflecting “best practice” and noting the premises are adjacent to a bushfire zone.

65. These estimated costs are based on quotations, the relevant quotations being included in “SL21”.

66. Ms Lawrence states that the operator “has performed limited testing and tagging in previous financial years, but did not include these costs in previous budgets for the sake of obtaining an approved budget”. However, for FY16 “we have decided we cannot continue to absorb these costs without comprising [sic: “compromising”] the longevity of The Landings. It is stated that these costs represent the “full cost” of complying with legislative standards and ensuring the safety of all residents and employees.

Item 46 – Temper valves

67. Temper (or tempering) valves are components in the village’s hot water system. [I note that the purpose of a tempering valve is to reduce the temperature of the hot water being supplied to outlets in residential premises (such as bathrooms) from the scalding temperature at which hot water in holding tanks is required to be maintained, usually 60�, to a safer temperature, usually 50�, by mixing cold water with the hot water before it is delivered to the user.] Ms Lawrence asserts the operator maintains these valves by servicing each of them 4 times annually and replaces them each 5 years. Ms Lawrence provides a brief description of such a service. Ms Lawrence submits that “the valves are a consumable component of the overall hot water system”.

68. The budget estimate for this line item is said to be based on quotations received by the operator and which are included in “SL1”.

69. Ms Lawrence states that the residents committee suggested these valves are not necessary. She submits that first of all they are mandatory and so is the maintenance of the valves, and also that such work is essential to residents’ safety.

Item 48 - Electricity

70. This item was estimated initially by annualising the first 9 months of expenditure based on FY15 actual costs. There was then a reduction of the estimate on the basis that the parties believed there would be a reduction in electricity costs for FY16. That advice turned out to be incorrect (as described by Ms Lawrence) and the estimate was therefore increased again in FY16-3.

71. Ms Lawrence states that she has reviewed actual costs for the period 23 July 2015 to 06 January 2016 (almost 6 months) and taking into account higher electricity use during the year and summer, she states that the forecast for this line item was accurate.

Item 63 – Air-conditioning maintenance contract

72. This is one of the items discussed by Ms Lawrence previously: see paragraphs 45 ff above.

73. In relation only to the estimate for this item, Ms Lawrence states that Sakkara engaged a firm called “Licensed to Chill” following a competitive quoting process. The estimate reflects the contract price with that contractor, in relation to preventative maintenance of air-conditioning units. Noting the significant increase between the original estimate of $22,959 in FY16-1 to $35,882 in later estimates, Ms Lawrence states that increase occurred because the contractor increased their price to that amount.

Item 64 – Air-conditioning R&M Materials

74. This item is the actual cost of repairing broken air-conditioning units in FY15 annualised from 9 months of costs. Later, the FY15 audit report showed the actual cost for 12 months was $81,227.

75. However, Ms Lawrence states, Sakkara considered that the preventative maintenance programme carried out in FY15 should reduce the costs of repairing broken air-conditioning units in FY16. In addition, the operator allowed the contractor to retain spare parts from the broken units in exchange for reducing its repair fees. As a result of those savings, the line item estimate was only $68,225, 84% of the actual FY15 cost.

Item 69 – Optional services

76. This item comprises rent from on-site service providers, personal service charges and telephone and internet recoveries. These sums are deposited into the operator’s operating account in order to reduce the total of recurrent charges collected from residents.

77. Apparently by way of additional explanation of this item, Ms Lawrence refers to the following:

1. Rent: amounts received from the sales office operated by Sakkara Investment Holdings Pty Ltd, the hairdresser and the caterer.

2. Personal services recoveries: some residents request personal services from maintenance staff to perform work the residents are unable to perform, such as changing light bulbs. The “nominal fee” is $9.00 per 15 minutes and these amounts are also deposited in the operating account.

3. Telephone and internet recoveries: this refers to Sakkara’s arranging, for certain residents (who opt in) discounted service packages. The differences between the FY16-1, FY16-2 and FY16-3 budgets resulted from the operator inserting amounts for the purpose of negotiations rather than the actual cost. However, the estimate for the FY16-3 is said to be estimated based on actual expenditure.

Item 70 – Capital Works Fund

78. Ms Lawrence states that this item reflects the quoted cost of “large scale painting works”, based on the quotations from Programmed Property Services set out in “SL1”.

79. Ms Lawrence submits that maintaining such a fund is “best practice” in retirement village management to ensure the premises are suitably maintained. Using a quoting system ensures best value and quality.

80. During budget negotiations, Ms Lawrence states, the residents committee contested the cost of painting on the basis that it included the cost of painting an area found to be defectively painted in RV 14/14827. Ms Lawrence states this is incorrect and that there is no overlap between the works the subject of prior Tribunal orders and the works in this line item.

Statement of 25 February 2016

81. This short statement attaches evidence from Licensed to Chill and Pure Plumbing, prepared specifically for these proceedings as “SSL1” and SSL2”.

82. The first is a report in relation to the repairs and preventative maintenance program in respect of “all 361 air conditioning units at The Landings”. This figure reflects that total of all units in the common areas and residences of The Landings. The second is a report in relation to maintenance of thermostatic mixing valves under AS3500, dated 24 February 2016.

Statement of 08 April 2016

83. Ms Lawrence notes that this statement is a statement in reply, having reviewed the statements of Andrew Burgess, 2 statements of Neil Smith and statutory declarations of Francis Lerner, Clive Glover, Sally Elliott, Graham Laurance, Lindsay McEachern and Richard Fletcher. Ms Lawrence makes the following submissions.

1. Lindsay McEachern

The air conditioner referred was one which required replacement and the machine was therefore a new machine, an Actron machine replaced at a cost of $9,865 replacing the previous form of air conditioning unit common across the village. It was found to have a fault within the warranty period, repaired under warranty. “SLS1” is a copy of the quotation from Licensed to Chill dated 13 November 2014 for the replacement cost.

2. Clive Glover

1. Ms Lawrence states that in order to understand Mr Glover’s statutory declaration it is important to understand the sales process at The Landings. The sales agency staff explain to prospective residents the Retirement Villages Act and walk through the disclosure statement and the “enquiry statement” for the particular type of residence being considered.

2. The disclosure statement on page 3, point 6 of “Financial Management” states that recurrent charges are not linked to a fixed formula or to CPI.

3. Residents “typically engage their own lawyers” and the disclosure statement and contracts are issued through the solicitors to the residents and their lawyers”.

4. Ms Lawrence states that “we have found from experience … that often prospective residents forget what has been said to them”.

1. Air conditioning replacement and repairs

5. Ms Lawrence states that the residents’ evidence suggests that the maintenance process of the air conditioners was a “fail and fix” process, whereby the operator waited until a unit failed before fixing it.

6. In fact, she submits, the process is more correctly described as follows:

• Review of the units to assess current operating status;

• A report for each item to identify its condition (examples attached as “SLS2”);

• If required work is identified, a quotation is obtained;

• The operator would then determine if the work constituted repairs and maintenance or replacement, based on the Defect Identification Process policy referred to at paragraph 79 of Ms Lawrence’s statement of 18 February 2016; and

• The works would then be carried out.

7. The contractor (Licensed to Chill) is instructed to conduct the review, in two stages, such a review being carried out in FY15, thus explaining why the cost in the audited accounts was larger than normal air conditioning maintenance cost, those accounts being attached as “SLS3”. Because of the success of this FY15 maintenance program, the maintenance costs estimated in FY16 are reduced. “SLS4” is a copy of the reports of the six only air conditioners requiring repair following the Autumn 2016 review, two of which are the subject of an insurance claim related to Ausgrid.

8. The Wood & Grieve report included in Mr Smith’s statement of 24 March 2016, incorporates costs from both the FY15 year and the beginning of the FY16 year. Some of the costs relate to the insurance claim.

9. The insurance claim is related to “excess amperage” provided by Ausgrid, which caused damage estimated at $125,000 caused to air conditioning units (still the subject of the undecided insurance claim), including machines referred to in the Wood & Grieve report. This issue was discovered during the preventative maintenance review of air conditioners.

10. At a management meeting with residents in about June 2015, residents were advised that failure rates due to no maintenance would fall significantly because the units were operating efficiently and brought up to a proper working standard.

11. Annexure “NS4” to Mr Smith’s second affidavit, the Manager’s report to the residents, refers to the insurance claim. The cost of the insurance claim is not included in the FY16 budget but the actual repair costs are included as actual costs, the total amount being $70,507, an increase of $47,531 from the budget amount, but this amount will be reduced once the amperage insurance claim is brought into account.

12. Ms Lawrence refers to communication with Mr Nick Agnew on 10 March 2016 and the residents committee on 21 March 2016 in which this insurance claim was discussed.

13. Ms Lawrence restates her submission that actual ongoing maintenance costs for air conditioners has been reduced as a result of the preventative maintenance program, but these savings have been hidden by the amperage fault repairs.

14. Ms Lawrence notes that the replacement cost of air conditioning units is between $9,000 and $11,000, three quotations being attached as “SLS5”.

Repair or replace air conditioning units

15. Under this heading, Ms Lawrence repeats some of her submissions summarised in the previous section. However, she adds the information that when Licensed to Chill conducts their annual inspection, if a unit fails and the cost of repair is greater than 70% of the replacement value, then that unit is replaced. The same happens when a machine fails and a maintenance request is made.

16. Ms Lawrence states that there has been a significant reduction in failures and that most repairs are within the range referred to in the Wood & Grieve report at page 11, being less than $2,500.

17. The costs of replacing are shown in “SLS6”, a schedule of replacement of units at The Landings in the last two financial years.

Defects and conclusions of proceedings RV 14/14827

18. These proceedings are stated to have arisen from the residents’ application commencing in about 2012, claiming reinstatement of the (operator’s) costs of repairing defective works arising from the initial construction of the village. Various applications culminated in the RV 14/14827 proceedings.

19. Consent orders made on 17 July 2015 (“the July orders”) included a process agreed at mediation to identify and distinguish “defective works” from “repairs and maintenance works”. This is the “defect identification process” included in Annexure E to the July orders, and the balance of the proceedings was dismissed. The orders are annexed as “SLS7”.

20. Ms Lawrence states that her involvement in the defects identification process is in line with the agreed process. She states that “[a]t no stage was there any discussion or claim made in relation to any type of defect or claim other than the matters that were dealt with in those orders. All other claims arising were dismissed”.

21. The following items relating to the July orders which remain outstanding are:

• Fire safety ground floor 2 SNMD;

• Stormwater seepage through basement walls;

• Stormwater pumps in 2 and 4 SNMD;

• Roof leak 6 Caribou;

• Southern boundary fence, report item 17, Harrison street;

• Loose and broken cobblestones in entry at Bobbin Head Road; and

• Various defects in fire trail.

22. Ms Lawrence then sets out some details of a meeting with the residents committee in January 2016 in relation to the outstanding items (minutes attached as “SLS8”) and the establishment of the defects identification panel.

23. The process tends to be that the residents committee provides “a long list of matters” claimed to be defects, which are then reviewed and assessed by Ms Lawrence, including confirming with each of the (I infer, affected) residents.

24. Ms Lawrence refers to Mr Smith’s first affidavit, paragraph 166, including an extract from a report forming the basis of the claim in RV 12/12787, which was finally determined in the July orders and “absolutely finalised” with the dismissal of the balance of the proceedings in the July orders in RV 14/14827. The issue sought to be raised was the subject of “long and acrimonious litigation” including the matter of painting referred to by Mr Smith which is at an end. Ms Lawrence states firmly that “[t]here is no defective paint work arising from the claims of by the residents in the previous proceedings left in the Village”.

25. Programmed Property Services Pty Ltd quoted only in relation to surfaces requiring repainting because the existing coats were up to 12 years old. This is confirmed in the report dated 07 April 2016 at “SLS9”.

Tradesmen’s repairs

26. Ms Lawrence states that it is a common theme presented by residents that repairs and maintenance in the village is overstated because it does not exclude “discrete items of capital” which are said to be the obligation of the operator. She refers to the report by accountant Bishop Collins annexed to Mr Smith’s affidavit of 24 March 2016 which lists and analyses the actual expenditure for repairs and maintenance for FY15 and some expenditure from 01 July 2015 (that is, the beginning of FY16).

27. Ms Lawrence refers to her “SLS10” which is a breakdown of the repairs and maintenance to date from 01 July 2015. This breakdown shows the largest item of expenditure relates to “roof”, being repairs to the roofs of 7 villas. She states that two quotations were received “for the two separate roofs which are part of the budget documents”, consistent with the policy described in her statement of 18 February 2016. These estimates are discussed with the residents committee monthly meetings and are “again tested” by the annual audit. Ms Lawrence reports an extract of a discussion with Mr Burgess at a meeting in February 2016, as follows:

Mr Craig, who has appropriate qualifications, reported on air conditioners in detail, including “run to fail”, at end of life, approaching replacement cost, invoices did not provide hourly rates or the number of hours so could not be estimate as reasonable or otherwise.

Mr Craig cross examined about manufacturer’s specifications for operation but noted he requested these manuals and was expressly refused [“go online”].

Both McClelland and Craig cross examination: both impressive witnesses.

Mr Burge Licensed to Chill should be rejected. Not an expert witness, has a financial interest although he sought to deny that interest because “I’m a Christian” repeated over and over. Claims he “bankrolled” the village although he conceded at the date of hearing there were no outstanding payments. Submitted he was prepared to give evidence that would advance his financial interests and should be accepted only with caution.

Less Optional Services – item 69

FY15 budget: ($30,964); FY16 budget: ($23,299): Respondent agrees with: ($40,731).

Respondent evidence Mr Burgess @ [71] and Mr Smith @ p12(xii).

FY16-2 proposed ($40,731) which was reduced without explanation in FY16-3. Original amount (about $40,000) noted in email of Mr Cupit to Mr Burgess on 30/07/2015 and Mr Burgess replied on 31/07/2015 ‘accepted with appreciation’. Respondent submits that should end the matter.

Otherwise no reasons for the decrease have been provided by Applicant. Respondent submits an increase should be granted because:

494. Sales office operated by Applicant runs on “cost recovery” only, not a commercial rent, allegedly because, as Applicant says, it provides a high net worth service to the residents: Mr Cupit @ [86]. Should note it provides a high net worth to the Applicant, which charges a non-negotiable 3.3% of the ongoing contribution in selling to residents who pay DMF.

495. Caterer, Pinnacle Catering, pays below market rate: Mr Cupit @ [85]. Applicant private company servicing outside private and commercial entities selling meals at full market prices. An excellent deal for them and explains why they exercised their option to extend the rental agreement.

496. No evidence of any rental moneys banked at least to 29/02/2016; and

497. Invoices provided as evidence by Applicant and commented on by Mr Smith indicate that electricity and gas from the caterer cannot be considered as fairly calculated amounts.

Ms Montgomery does not deal with this in chief.

Contribution to Capital Works – item 70

FY15 budget: $174,401 (per Member Smith); FY16 budget: $73,614; Respondent agrees with: $17,977.

Respondent evidence in Mr Burgess @ [72] and NS @ p13 et al.

The disputed amounts should not be passed on to the residents because:

498. The painting of the 12 buildings should have been carried out under earlier “defect” agreements: see reasons for decision of Bordon dated 19/04/2013 in RV 11/29123, RV 12/12787 and RV 12/32770. The external structures of these buildings were not painted then and have now suffered further deterioration: see Tompson report;

499. The previous decision of Bordon suggested such large-scale painting was “more than maintenance”;

500. Parliament did not intend that residents should pay for painting as expressed by the withdrawal prior to 01 March 2010 of Reg 5(1)(a) which would have placed cost of external painting onto residents;

501. Applicant did not disclose the FY16 costs was only the first year’s cost of a proposed 3-year contract; and

502. Applicant should have been aware of the poor painting prior to purchasing the village and taken account of that in the purchase price to recover their cost of doing the painting, or sought a reduced price because of the existence of defects.

Respondent rejects Applicant submission @ [235]: plainly false, Residents Committee never involved in any prior discussions about a 3-year contract and nor were residents advised in any of the three versions of Fy16.

Other Matters

503. Applicant concerned at low level of departures (and hence low recovery of departure fees) and acted to increase levies to encourage or force departures: see Village Manager job description;

504. Actions taken by Applicant to make it difficult for original entrants to remain, including:

505. Intro of OM;

506. Removal of services – reduction of in-house maintenance tradesmen from 3 to 1, intro of bureaucratic method of maintenance control leading to delays and more expensive through use of external contractors;

507. Charing residents rather than Applicant for time on work which benefits Applicant more than residents such as remediation of defects, refurbishment of dwellings and time on sales and legal work on behalf of A; and

508. Use of CWF monies to fund village operating costs.

509. Applicant spends monies in accordance with the very high proposed budget rejected by the residents, suggesting a belief that Applicant can determine itself what is reasonable and necessary, a major move from the intention of the Act.

Costs

Respondent applies for costs.

ATTACHMENT 7: SAKKARA BUDGET 01/07/2015 TO 30/06/2016

Proposed Budget 2015/2016
Recurrent charges per resident per month	$701.16
Recurrent charges per resident per year	$8,413.96
Number of properties (divisor)	$220.00
Estimated Income From recurrent charges	$1,851,072.00
INCOME
Levies
Resident Levies	1	$1,777,458.00
Utilities Adjustment Charge	2
Operator Contribution / Unsold Stock	3	$8,152.00
Resident Levies For Capital Works Fund	70	$73,614.00
Cont. Vacant Land Council Rates	4
Interest Income	5	$859.00
Total Operating Income	$1,860,083.00
EXPENDITURE.
Employment Costs
Wages Administration	6	$304,878.00
Wages Maintenance	7	$222,227.00
Wages PCA	8	$88,199.00
Annual Leave Loading	9	$1,863.00
Superannuation	10	$71,227.00
Payroll Tax	$4,466.00
Insurance - Workers Comp	11	$27,379.00
Wages Replacement Staff	12	$7,000.00
Recruitment Temporary Staff	13	$0.00
Staff Training	14	$3,447.00
PCA Emergency Callouts	15	$701.00
Staff Meeting Time	16
Uniforms	17	$1,863.00
Total Employment Costs	$733,250.00
Administration Expenditure
Insurance - General	18	$105,276.00
Computer and Office Equipment	19	$14,639.00
Photocopy & Printing	20	$8,878.00
Stationery & Office Supplies	21	$4,196.00
Residents Committee Expenses	22
Admin Telephone	23	$5,651.00
Admin Internet	24	$1,344.00
Postage	25	$202.00
Newspapers	26	$447.00
Staff Amenities	27	$992.00
Subscriptions	28
Audit Fees (William Buck, HLB Mann Judd resigned)	29	$12,100.00
Bank Fees	30	$3,313.00
First Aid Supplies
Total Administration Expenses	$157,038.00
Grounds Maintenance
Garden Maintenance	31	$84,232.00
Lawn Cutting & Edging	32	$25,150.00
Materials, Plants & Shrubs	33	$4,771.00
Tree Removal & Tree Lopping	34	$18,453.00
Total Grounds Maintenance	$132,606.00
Building Repairs & Maintenance
Window/Gutter Cleaning	35	$40,447.00
Cleaning Materials & Equipment	36	$2,662.00
Tradesman Repairs	37	$66,967.00
Painting	38
Maintenance Consumables	39	$15,016.00
R&M Electrical/Light Globes	40	$10,098.00
Plumbing and Sewer R&M	41	$10,627.00
Pest Control	42	$7,480.00
TV Maintenance/Foxtel Contract	43	$4,128.00
R&M Locksmiths	44	$690.00
R & M Equipment
Total Building Repairs & Maintenance	$158,115.00
Legislative Requirement Costs
Annual Fire Safety Certificate	45	$9,628.00
Temper/Mixing Valve Compliance	46	$29,718.00
Fire/Essential Services - Tests & Parts	47	$19,834.00
Total Legislative Requirement Costs	$59,180.00
Utilities
Electricity	48	$101,038.00
Gas	49	$14,106.00
Total Energy	$115,144.00
Council/Water Rates & Waste
Municipal Rates	50	$93,586.00
Water Service - Fixed Charge	51	$22,725.00
Wastewater (sewerage) - Fixed	52	$95,164.00
Water Usage	53	$70,623.00
Trade Waste	54	$8,153.00
Total Council/Water Rates & Waste	$290,251.00
Vehicle Expenses
Bus Expenses	55	$5,876.00
Carts Maintenance	56	$850.00
Toyota Ute Expenses	57	$2,421.00
Total Vehicle Expenses	$9,147.00
Elevators
Elevator Contract, R&M and Registration	58	$35,008.00
Elevator - Telephones	59	$2,097.00
Total Elevators	$37,105.00
Emergency Call System
Emergency Calls - Batteries	60	$372.00
E/call System - R&M	61	$9,404.00
E/call System - Pagers	62
Total Emergency Call System	$9,776.00
Air Conditioning Maintenance
Air Conditioning Maintenance Contract	63	$22,959.00
Air Conditioning R&M Materials	64	$64,980.00
Total Air Conditioning Maintenance	$87,939.00
Swimming Pool Maintenance
Pool Chemicals	65	$286.00
Pool Repair & Maintenance	66	$4,773.00
Total Swimming Pool Maintenance	$5,059.00
Clubhouse & Kitchen
Bowling Green Expenses	67	$8,603.00
Tea, Coffee & Clubhouse Supplies	68	$6,075.00
less Optional Services Recouped	69	-$31,830.00
Total Clubhouse & Kitchen	-$17,152.00
Contribution to capital works fund	70	$73,614.00
Total Operating Expenditure	$1,851,072.00
Annual Levy	$8,413.96
Monthly Levy	$701.16
Surplus/Deficit	$0.00

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I hereby certify that this is a true and accurate record of the reasons for decision of the Civil and Administrative Tribunal of New South Wales.

Registrar

Decision last updated: 07 June 2017