SMITH and VILLAGE MANAGEMENT PTY LTD
[2020] WASAT 71
•7 JULY 2020
JURISDICTION : STATE ADMINISTRATIVE TRIBUNAL
ACT: RETIREMENT VILLAGES ACT 1992 (WA)
CITATION: SMITH and VILLAGE MANAGEMENT PTY LTD [2020] WASAT 71
MEMBER: MS R PETRUCCI, MEMBER
HEARD: DETERMINED ON THE DOCUMENTS
DELIVERED : 7 JULY 2020
FILE NO/S: CC 1693 of 2019
BETWEEN: MARK SMITH
First Applicant
PARKVILLA RESIDENTS CLUB INC
Second Applicant
AND
VILLAGE MANAGEMENT PTY LTD
Respondent
Catchwords:
Retirement Villages Act 1992 (WA) - Retirement village - Recurrent charges - Levy - Dispute between residents and administering body regarding increase in recurrent charges or imposition of levy - Proper construction of clause 5.6 of residency deed - Proper construction of clause 8.2(d) and clause 18.4 of trust deed - Whether administering body is entitled to include pay-roll tax in Levy payable by residents - Whether imposition of pay-roll tax is a breach of residency deed and trust deed - Turns on its own facts
Legislation:
Fair Trading (Retirement Villages Interim Code) Regulations 2020 (WA), cl 15, cl 17(1), cl 17(3), cl 17(6), cl 24
Land Tax Assessment Act 2002 (WA)
Pay-roll Tax Act 2002 (WA)
Pay-roll Tax Assessment Act 2002 (WA)
Retirement Villages Act 1992 (WA), s 3, s 25, s 52, s 52(1), s 56(1)(b), s 57A, s 57A(2), s 57A(4)
Retirement Villages Act 1999 (NSW), s 115(6)
Retirement Villages Act 1999 (QLD), s 12(3)
Retirement Villages Amendment Bill 2012 (WA)
Retirement Villages Bill 1991 (WA)
Retirement Villages Regulation 2017 (NSW), reg 23(d)
Retirement Villages Regulations 1992 (WA), reg 11(3)
State Administrative Tribunal Act 2004 (WA), s 60(2)
Taxation Administration Act 2003 (WA)
Result:
Application unsuccessful
Category: B
Representation:
Counsel:
| First Applicant | : | In person |
| Second Applicant | : | In person |
| Respondent | : | Mr M Reid and Ms K Blatchford |
Solicitors:
| First Applicant | : | N/A |
| Second Applicant | : | N/A |
| Respondent | : | Jackson McDonald |
Case(s) referred to in decision(s):
Australian Retirement Homes No. 2 Pty Ltd v Minkara Retirement Village Residents Committee (Retirement Villages) [2009] NSWCTTT 276
Governors Retirement Resort Pty Ltd v The Residents Committee (Retirement Villages) [2009] NSWCTTT 697
Milstern Retirement Services P/L v Linfield Manor Retirement Village (Retirement Villages) [2005] NSWCTTT 749
Milstern Retirement Services Pty Ltd v McQueen & Ors (Retirement Village) [2007] NSWCTTT 535
Queens Lake Village Pty Ltd v Queens Lake Village Residents Association [2011] NSWDC 21
Smith and Village Management Pty Limited [2019] WASAT 70
The Residents of Forest Place Retirement Village Durack as named in Application filed 30/10/03 v Forest Place Group Ltd [2004] QCCTRV 7
REASONS FOR DECISION OF THE TRIBUNAL:
Introduction
The residents of the Woodlands Retirement Village (Village) and the administering body, Village Management Pty Ltd (the respondent) have found themselves in dispute as to whether the respondent can include the expense of pay-roll tax in the monthly 'Levy' payable by the residents of the Village to the respondent (Levy). Pay-roll tax was included as an expense item in the Village budget for the first time in the 2018/19 financial year.
Proceedings before the Tribunal commenced on 26 March 2019 when a resident of the Village, Mrs Yvonne Barbara Smith through her representative, Mr Mark Smith, sought an order under s 57A(4) of the Retirement Villages Act 1992 (WA) (RV Act) requiring the respondent to 'stop charging (and refund) pay-roll tax as an ongoing levy in our operating account'. The special resolution authorising the application to be made to the Tribunal, as required by s 57A(2) of the RV Act, had not been passed at that time with the consequence the Tribunal gave leave for the application to be amended to be an application under s 56(1)(b) of the RV Act. Ultimately, that application, under s 56(1)(b) of the RV Act, was dismissed because the Tribunal did not have jurisdiction (see Smith and Village Management Pty Limited [2019] WASAT 70).
Subsequently, on 1 November 2019, Mr Mark Smith, a resident of the Village, and the Parkvilla Residents' Club Inc (the applicants) made an application under s 57A(2) of the RV Act seeking the following order from the Tribunal (as set out on page 4 of the application):
For the Respondent to stop charging (or threatening to charge) Payroll Tax as an ongoing levy in our Operating Account within our Retirement Village in Woodlands (plus potentially 6 other Retirement Villages in Western Australia), and to refund any amounts already deducted.
It is the most recent application under s 57A(2) of the RV Act that requires determination by the Tribunal. The respondent opposes the order sought by the applicants and urged the Tribunal to dismiss the application.
For the reasons which follow, the Tribunal concludes that the applicants' application is unsuccessful.
Relevant procedural history and evidence
Following the usual programming orders, the Tribunal ordered on 7 April 2020 that the matter be determined on the documents pursuant to s 60(2) of the State Administrative Tribunal Act 2004 (WA).
In addition to the applicants' application filed on 1 November 2019, the Tribunal had following documents before it:
(a)the applicants' statement of issues, facts and contentions filed on 13 December 2019;
(b)the applicants' bundle of documents filed on 13 December 2019 (and resubmitted on 28 December 2019 and 2 January 2020);
(c)the respondent's statement of issues, facts and contentions (responsive SIFC) filed on 24 January 2020;
(d)the respondent's bundle of documents filed on 24 January 2020;
(e)the applicants' response to the respondent's responsive SIFC of 24 January 2020 filed on 14 February 2020;
(f)the respondent's reply to the applicants' response of 14 February 2020 filed on 11 March 2020;
(g)the applicants' reply to the respondent's response of 11 March 2020 filed on 31 March 2020; and
(h)the transcript of the directions hearing held on 7 April 2020.
Included in the respondent's bundle of documents were the following relevant documents:
(a)'Parklands Villas Woodlands Residency Deed' undated and unsigned (residency deed). The parties to the residency deed are LLP WA Village Holdings Pty Ltd (referred to as 'LLP WA'), the respondent (referred to as 'Manager') and a blank space for insertion of the name of the resident (referred to as 'Resident'). The document appears to be a template with a note on the foot of each page with the reference 'ME Ref: LJG: BPA[insert] Woodlands Parkland Villas Residency Deed PVWV01_RD_CR28_290915 ME_151083952_1;
(b)'Parkland Villas-Woodlands Trust Deed', signed but undated with the note at the foot of each page that the document was 'Updated 17 June 2020' (trust deed). The parties to the trust deed are LLP WA Village Holdings Pty Ltd (referred to as 'LLP WA') and Mr Keith Roddick Bales (referred to as 'Trustee') and the respondent (referred to as the 'Manager'); and
(c)Minutes of the meeting of the Advisory Board of the Village held on 10 May 2018 (Advisory Board minutes).
The applicants included extracts from the residency deed and the trust deed in their bundle of documents. Despite the lack of an executed copy of the residency deed and a dated copy of the trust deed, there has been no dispute between the parties as to the respective terms of either the residency deed or the trust deed. The dispute between the parties concerns the interpretation of the deeds and in particular clause 5.6 of the residency deed and clauses 8.2(d) and 18.4 of the trust deed. The Tribunal will return to the proper construction of these clauses.
Included in the applicants' bundle of documents was the following relevant document:
(a)Minutes of Parkvilla Residents Club Inc general residents meeting held on 21 October 2019 (Residents' minutes).
Factual background
The following facts are as set out by the respondent in its responsive statement and were agreed by the applicants. They are uncontroversial and the Tribunal finds them to be relevant facts. The paragraph numbering used by the respondent is used for ease of reference.
6.In the early 1980s, LLP WA Village Holdings Pty Ltd (LLP WA) developed land it owned at 52-54 Liege Street, Woodlands into the Woodlands Retirement Village (Village).
7.The Village is made up of:
(a)185 units;
(b) 36 apartments; and
(c) various communal amenities including a swimming pool, gym, lounges, dining rooms, library, workshop, craft room and bowling green.
8.The Village is a 'purple title' retirement village such that each owner of a unit or apartment in the Village holds a certificate of title for an undivided share in the whole of the parcel of land that makes up the Village.
9.The scheme by which the Village operates is set out in:
(a)the undated document tilted 'Parkland VillasWoodlands Trust Deed' (trust deed) between:
(i)LLP WA;
(ii)Keith Roddick Bales as 'Trustee'; and
(iii)the respondent as 'Manager' of the Village; and
(b)the document titled 'Residency Deed' (residency deed) between:
(i)LLP WA;
(ii)the respondent as 'Manager' of the Village; and
(iii)each person who has purchased a unit or apartment in the Village.
The following sets out the ownership of the respondent including details of the entity that the respondent says is liable for pay-roll tax as explained by the respondent in its responsive SIFC. The Tribunal finds them to be relevant facts.
1.The respondent is a private company which is ultimately owned by Lendlease Corporation Limited (Lendlease).
2.Lendlease operates retirement villages across Australia in various company and trust structures.
3.All the people engaged to work at the Village (and all retirement villages) are employed by LLRL Management Services Pty Ltd (LLRL).
4.The respondent provides the Village Services by LLRL providing persons to work in the Village in the roles of:
(a)Village Manager;
(b)Assistant Village Manager;
(c)Village Administrator;
(d)General Services Cleaner;
(e)General Services Housekeeper;
(f)Hairdresser; and
(g)Emergency Response Attendant (for 2018/19 only).
Persons are employed by LLRL and not by the respondent to provide the Village Services. In providing the employees to the respondent, LLRL incurs the cost of salary, leave allowances, superannuation of the employees and the pay-roll tax liability for those employees.
5.LLRL is ultimately owned by Lendlease.
6.LLRL is liable to pay pay-roll tax in respect of its employees who work at retirement villages operated by Lendlease.
The Tribunal turns, next, to set out the legislative framework for retirement villages in Western Australia as relevant to these proceedings.
Legislative framework for retirement villages in Western Australia
It is useful to start with a brief history of the RV Act and the Retirement Villages Regulations 1992 (WA) (RV Regulations). Having recognised that retirement villages are a fact of life in today's society (Western Australia; Parliamentary Debates, Legislative Assembly, 7 November 1991 (E Kingsley)), the government of Western Australia set about introducing the Retirement Villages Bill (the Bill) in 1991. On 26 November 1991, the Hon John Halden in reading the Bill for a second time stated in part:
Achieving a sense of balance has been important in developing this legislation. Effective consumer safeguards are a central feature and the experiences in other States have been valuable. Yet the level of regulation must not be so excessive as to stifle desirable growth in the industry.
…
The Bill borrows from the models provided from retirement villages legislation in South Australia, New South Wales and Victoria.
...
The Retirement Villages Bill will reassure the community that adequate protection is in place and it will help people to plan for their retirement with enhanced confidence. In total it will provide consumer protection through timely regulation of the growing retirement village industry.
(Western Australia; Parliamentary Debates, Legislative Council, 26 November 1991 (J Halden))
Amendments were made to the RV Act in 2012. The Hon Simon O'Brien in reading the Retirement Villages Amendment Bill 2012 (WA) for a second time, stated in part:
The government's key goal in advancing these reforms is to simultaneously balance the need for the retirement villages sector to grow with appropriate consumer protections that promote the interests of residents. Our population is ageing and the Australian Bureau of Statistics forecasts that in another forty years nearly a quarter of Western Australia's population will be over 65. It is essential, therefore, that Western Australia legislates now to adequately protect the interests of our seniors in the present and future. The reforms in this bill are long overdue. They go some way to addressing current imbalances in the power relationship between retirement village residents and industry. They introduce greater transparency into village contracts for the benefit of residents and help to enhance the overall effectiveness of the legislation for the benefit of all parties.
(Western Australia; Parliamentary Debates, Legislative Council, 14 August 2012 (S O'Brien))
It is clear that consumer protection through appropriate regulation of the retirement industry has been a central feature of the RV Act and RV Regulations.
Turning to the current RV Act, the Tribunal notes the long title is 'An Act to regulate retirement villages and the rights of residents in such villages and for related purposes'. Although not expressly stated the objectives of the RV Act are to:
(a)Outline the rights and obligations of residents, owners and administering bodies;
(b)Determine how residence contracts and retirement village schemes can be terminated; and
(c)Provide cost efficient mechanisms for the resolution of disputes.
Section 3 of the RV Act sets out the following relevant definitions:
administering body, in relation to a retirement village, means the person by whom, or on whose behalf, the retirement village is administered and includes a person (other than a resident) who is the owner of land within the retirement village;
levy means a single amount that the residents of a retirement village are required to pay to recover an unforeseen operating expense of the retirement village not provided for in the recurrent charges;
recurrent charge means any amount (including rent) payable by a resident to the administering body of a retirement village on a recurrent basis;
residence contract means a contract, agreement, scheme or arrangement which creates or gives rise to a right to occupy residential premises in a retirement village, and may take the form of a lease or licence;
resident, in relation to a retirement village, means a person who has been admitted to occupation of residential premises in accordance with a retirement village scheme and includes a spouse or de facto partner of such a person who
(a)is residing with that person; or
(b)was residing with that person at the time of his or her death;
service contract means a contract between an administering body or former administering body of a retirement village and a resident for the provision to the resident of
(a)hostel care; or
(b)infirmary care; or
(c)medical or nursing services; or
(d)meals; or
(e)administrative and management services; or
(f)maintenance and repair services; or
(g)recreation services or amenities or entertainment services or amenities; or
(h)any other services,
and any collateral agreement or document relating to the provision of any such service[.]
Section 25 of the RV Act prohibits an administering body from demanding or receiving payment from a resident or former resident in respect of a prescribed matter. The prescribed matters are set out in reg 11(3) of the RV Regulations as follows:
(3)Subject to subregulation (5), this regulation applies to a payment demanded or received by the administering body of a retirement village from a resident or former resident in respect of these matters
(a)subject to subregulation (4), the expenses incurred by the administering body of lodging or withdrawing a caveat in respect of the residential premises occupied by the resident, or formerly occupied by the former resident, of the retirement village;
(b)the expenses incurred by the administering body of complying with the Personal Properties Securities Act 2009 (Commonwealth) in relation to a security interest
(i)that arises under a residence contract; and
(ii)with respect to which the administering body registers a financing statement or a financing change statement under section 150 of that Act;
(c)the marketing or advertising of the residential premises occupied by the resident, or formerly occupied by the former resident
(i)to the extent that the payment demanded or received exceeds the expenses (if any) incurred by the administering body of that marketing or advertising; or
(ii)if the payment demanded or received does not relate to the marketing or advertising of only those residential premises;
(d)the marketing or advertising of the retirement village as a whole, to the extent that the payment demanded or received from the resident or former resident exceeds his or her appropriate portion of the expenses incurred by the administering body of that marketing or advertising;
(e)the expenses incurred by the administering body of
(i)obtaining legal advice; or
(ii)instituting or defending or otherwise participating in legal proceedings; or
(iii)participating in arbitration proceedings or mediation,
in relation to the retirement village, unless the residents have passed a special resolution that authorises those expenses to be paid by the residents;
(f)the expenses incurred by the administering body of complying with an order made against the administering body by the State Administrative Tribunal or a court to pay compensation, a penalty or another amount in relation to the retirement village, unless the residents have passed a special resolution that authorises those expenses to be paid by the residents;
(g)the provision by the administering body of administrative and management services to the residents of the retirement village, to the extent that the payment demanded or received from the resident or former resident exceeds his or her appropriate portion of
(i)the expenses incurred by the administering body of providing those services; and
(ii)if the administering body is a person on whose behalf the retirement village is administered and is the owner of land within the retirement village (otherwise than as a resident) a reasonable fee for providing those services;
(h)the provision by the administering body of a copy of the residence contract entered into by the resident or former resident (other than the copy provided under an applicable code when the resident or former resident entered into the residence contract), to the extent that the payment demanded or received exceeds the expenses incurred by the administering body of providing the copy;
(i)the refurbishment of the residential premises occupied by the resident, or formerly occupied by the former resident, to the extent that the payment demanded or received exceeds the expenses incurred by the administering body of that refurbishment;
(j)the provision by the administering body of information or documents to which the resident or former resident is entitled under an applicable code;
(k)the expenses incurred by the administering body relating to land tax, if the land used for the retirement village is eligible for an exemption under the Land Tax Assessment Act 2002;
(l)the expenses relating to the depreciation or amortisation of, or to writing off, the assets of the retirement village;
(m)the expenses incurred by the administering body of overseas travel by the administering body or the employees of the administering body;
(n)the expenses incurred by the administering body of accreditation or membership fees paid to a professional body or industry body, other than an industry body referred to in paragraph (o);
(o)the expenses incurred by the administering body of accreditation or membership fees paid to an industry body whose principal purpose is to represent the interests of administering bodies (however described) of retirement villages, to the extent that the payment demanded or received from the resident or former resident exceeds his or her appropriate portion of an amount equal to 50% of those expenses.
Finally, s 57A of the RV Act provides that residents of a retirement village may agree by special resolution to apply to the Tribunal in relation to a dispute about an increase in recurrent charges or the imposition of a levy. The Tribunal has jurisdiction to make such orders as it considers appropriate to resolve a dispute appropriately brought to it under s 57A. The section provides:
Disputes in relation to recurrent charges or levy payable by residents
(1)This section applies if a dispute arises between the residents of a retirement village and the administering body of the retirement village regarding an increase in recurrent charges or the imposition of a levy.
(2)If the residents pass a special resolution that authorises the application to be made, the residents may make an application in relation to the matter in dispute to the State Administrative Tribunal.
(3)In subsection (2)
special resolution means a resolution passed at a meeting of the residents of a retirement village that is held in accordance with the requirements in an applicable code for passing a special resolution.
(4)The State Administrative Tribunal may, on an application made under this section, make such orders as the State Administrative Tribunal considers appropriate.
(5)Nothing in this section limits the matters in relation to which an application may be made under section 56.
(6)Section 6(2) does not have effect in relation to this section.
The limitation on orders that may be made by the Tribunal as set out in s 52(1) of the RV Act do not apply to an order made by the Tribunal under s 57A(4) of the RV Act. Section 52 of the RV Act provides:
(1)The State Administrative Tribunal shall not make orders under this Act that are
(a)inconsistent with any applicable code; or
(b)inconsistent with a residence contract.
(2)Subsection (1) does not apply to a provision of a residence contract that contravenes section 6.
(3)Subsection (1)(b) does not apply to
(a)an order made under section 55(3) or 57A(4) or Part 5A; or
(b)if the order is made in relation to a residence contract an order made under section 56(4).
Finally, turning to the Fair Trading (Retirement Villages Interim Code) Regulations 2020 (WA) (RV Code), the following are relevant in these proceedings.
Clause 15 of the RV Code deals with special resolutions. It provides:
Special resolutions
(1)To pass a special resolution at a meeting of the residents of a retirement village
(a)the residents must have been given written notice of the meeting under clause 26; and
(b)there must be a quorum present (whether in person or by a vote by proxy) of
(i)a minimum of 5 residents entitled to vote on the resolution or 30% of the number of residents entitled to vote on the resolution (whichever is the greater); or
(ii)if the retirement village has fewer than 10 occupied residential premises, a majority of residents entitled to vote;
and
(c)the resolution must be carried by at least 75% of the number of residents who
(i)are present (whether in person or by proxy); and
(ii)are entitled to vote; and
(iii)vote at the meeting.
(2)A special resolution
(a)may be decided on a show of hands; or
(b)may be conducted by a secret ballot in accordance with clause 28.
Clause 17(3) of the RV Code sets out the requirements for a retirement village budget. Clause 17(1) requires the proposed operating budget to show separate line items including for:
(3)The proposed operating budget must be presented in a consistent format from one financial year to the next and must include a separate line item that presents, for the financial year, each of the following amounts
(a)income from residents and former residents in the form of recurrent charges other than as
(i)rental income; or
(ii)payments to a reserve fund;
(b)income from the administering body in the form of recurrent charges payable under the Retirement Villages Act 1992 section 23(5) other than as
(i)rental income; or
(ii)payments to a reserve fund;
(c)rental income used to meet village operating costs;
(d)any other forms of income used to meet village operating costs;
(e)total income;
(f)expenses for employee benefits other than for the training of, or for travel by, staff;
(g)expenses for the training of, or for travel by, staff;
(h)auditor's remuneration (including for both audit and non audit services provided to the village) to the extent that it is paid for by the residents of the village;
(i)expenses of marketing and advertising the village excluding any amount that a resident or a former resident of the village is contractually obliged to pay for marketing and advertising individual residential premises;
(j)repairs and maintenance expenses funded from recurrent charges other than recurrent charges payable to a reserve fund;
(k)accreditation and membership fees paid to any industry body whose principal purpose is to represent the interests of administering bodies;
(l)insurance expenses;
(m)legal expenses;
(n)finance costs;
(o)fees for the provision of management and administration services to the residents of the village;
(p)material classes of expenditure that are relevant to an understanding of the budget that have not been otherwise separately disclosed under this subclause;
(q)the amount, net of GST, for any budget item that is a GST taxable supply for which the administering body is entitled to an input tax credit;
(r)total proposed expenditure for the financial year;
(s)expected surplus or deficit for the financial year.
Further, the proposed budget is to include notes to the budget including the requirements set out in cl 17(6) of the RV Code as follows:
(6)A proposed budget must include notes to the budget disclosing
(a)the method by which the amount of recurrent charges payable by residents and former residents is calculated, including the method by which the amount that is a contribution to a reserve fund is calculated; and
(b)the method by which any amount of recurrent charges payable by the administering body under the Retirement Villages Act 1992 section 23(5) is calculated, including the method by which any amount that is a contribution to a reserve fund is calculated; and
(c)separate amounts for the auditor's remuneration according to audit and non audit services provided to the village; and
(d)for each line item that is derived by apportioning expenses between the village and another entity or entities (including but not limited to, management and administration fees)
(i)the method of calculation used to apportion the expenses; and
(ii)the separate disclosure of the material items of expenses that comprise the line item that have not been otherwise separately disclosed under this clause;
and
(e)for management and administration fees other than those described in paragraph (d)
(i)the method of calculation; and
(ii)the separate disclosure of the material items of expenses that comprise the management and administration fees that have not been otherwise separately disclosed under this clause;
and
(f)any other information relevant to an understanding of the proposed budget of the village.
Finally, cl 24 of the RV Code provides that the residents of the retirement village may establish a residents' committee whose function is to consult with the administering body on behalf of the residents about the day-to-day running of the retirement village and any issues or proposals raised by the residents.
In the next part, the Tribunal briefly explains pay-roll tax as it is relevant to these proceedings.
Pay-roll tax
Pay-roll tax is a State tax assessed on the wages paid or payable by an employer to its employees. In Western Australia, pay-roll tax is governed by the Pay-roll Tax Act 2002 (WA), the Pay-roll Tax Assessment Act 2002 (WA) and the Taxation Administration Act 2003 (WA) (together the pay-roll tax legislation). Pay-roll tax is payable when an employer's (or group of employers) total Australian taxable wages, which are not exempt wages, exceed a specified threshold amount. For the 2018/19 financial year in Western Australia an employer is liable for pay-roll tax at a rate of 5.5% of its taxable wages paid or payable by the employer or group of employers across all of Australia that exceeded the threshold amount of $850,000 per annum but less than $7.5 million. The threshold amount is subject to adjustment from time to time.
The term 'taxable wages' is broadly defined in Pay-roll Tax Assessment Act 2002 (WA) to encompass any payment provided to an employee in return for services provided to his or her employer. This includes salaries and wages, salary sacrifice arrangements, superannuation contributions, fringe benefits, termination payments, employee share acquisitions, contractor payments, commissions, bonus and allowances, and reimbursements.
Having set out the legislative framework, the Tribunal turns, next, to set out the relevant clauses of the residency deed and the trust deed.
Relevant clauses of the residency deed
The residency deed includes the following relevant clauses:
1.Defined terms & interpretation
1.1Defined terms
Levy has the meaning given in clause 5.
…
5.Levy
5.1Pay monthly levy
(a)From the date of commencement of the Resident's Occupancy Rights until settlement of the sale of the Resident's Estate or Purple Title, the Resident must pay a Levy to the Manager which is appropriate to the Villa or Apartment in which the Resident resides. The Levy is payable calendar monthly in advance on the first day of each month, the first and last payments being adjusted pro-rata as necessary, in case of periods of less than a month.
(b)The Resident is referred to Note 2 in the Notes Section.
5.2Amount of Levy
For the financial year (1 July to 30 June) which is current at the date of this Deed, the Levy is the amount referred to in:
(a)Item 3(a) of Schedule 1 where the Resident is a couple residing in an Apartment;
(b)Item 3(b) of Schedule 1 where the Resident is one person residing in an Apartment;
(c)Item 3(c) of Schedule 1 where the Resident is a couple residing in a Villa; and
(d)Item 3(d) of Schedule 1 where the Resident is one person residing in a Villa.
5.3Review of levy
The Levy must be revised annually to a figure the Advisory Board, in its discretion, decides is appropriate, bearing in mind changes in the costs of running the Village, including but not limited to, the costs referred to in clause 5.6 and any other factors which the Advisory Board considers relevant to the costs of running the Village.
5.4Considerations on review
In deciding on the Levy, the Advisory Board must give proper consideration to:
(a)the desirability of keeping increases in the Levy to a minimum;
(b)preserving, as far as is possible, relativity between the rate of increase in the Levy and increases in the general rate of economic inflation; and
(c)the Manager being able to pay the costs, expenses and outgoings of the Village.
5.5Interest on overdue levy
If the Levy remains unpaid for 30 days after it becomes due, the Manager may require the Resident to pay to the Manager interest on the Levy. The interest is calculated at a rate of 3% per annum above the minimum rate then charged by the Manager's bankers on overdraft current accounts of less than $100,000.00 from the date the money is due for payment to the date it is paid to or recovered by the Manager. Nothing in this clause 5.5 restricts the remedies stated under clause 20 for that default.
5.6Application of levy
(a)The Levy must be used by the Manager to pay all outgoings, costs and expenses (other than those specifically payable from time to time by any Resident) incurred for the maintenance, management and operation of the Village and includes but is not limited to:
(i)in relation to all Units (both Villas and Apartments):
(A)all land tax (if the Land is not eligible for an exemption under the Land Tax Assessment Act 2002 (WA) payable in respect of the Land;
(B)all rates, charges, assessments and fees of any public, municipal or government authority together with any excess water charges unless the Unit is separately rated or assessed;
(C)all insurance premiums payable for the Village as provided for in clauses 10.1 and 10.2 of the Trust Deed;
(D)all charges for water, gas, oil, electricity, power, telephone, garbage, sewerage, cleaning, caretaking, security and other services or requirements supplied to the Village for the general benefit of residents;
(E)all costs for repairs and maintenance to the Village and for maintenance contracts, other than work which is the responsibility of a Resident;
(F)the costs of external painting, repair and other maintenance work, cleaning Common Areas, landscaping and maintaining the garden areas in and near to the Village; and
(G)the fees, costs and expenses of the Woodlands Trustee, the AdvisoryBoard, the auditor and the Manager as provided in clauses 3.4, 18.1, 18.2, 18.4, 18.5 and 19.3 of the Trust Deed; and
(ii)in relation to Apartments only, the costs (including wages) of cleaning, linen laundry, supervision, catering and other services or requirements supplied to the Residents ofApartments.
(b)The Resident is referred to Note 3 in the Notes Section.
5.7Levy liability for unlicensed units
Subject to clause 23A of the Trust Deed, for those Units which are from time to time completed and unlicensed, LLP WA must, each calendar month, pay a Levy to the Manager (to be adjusted pro-rata as necessary on the sale of a Unit). The Levy payable by LLP WA must be calculated on the same basis as the Levy payable by a single resident. LLP WA Village must also pay all outgoings and expenses that may properly and fairly be allocated to undeveloped portions of the Land and to uncompleted Units.
6.Services and facilities provided by management
6.1Village Services
The Manager must in return for the payment by the Resident of the Levy provide the Resident with the Villages Services.
6.2Personal Amenities
(a)The Resident has the right to use the Personal Amenities on and subject to the terms and conditions set out in this Deed.
(b)The Resident must comply with the provisions and agrees to the rights relating to the Personal Amenities set out in Schedule 4.
6.3Communal Amenities
(a)The Resident has the right, in common with all Other Residents, to use and enjoy the Communal Amenities on and subject to the terms and conditions set out in this Deed.
(b)The Resident must comply with the provisions and agrees to the rights relating to the Communal Amenities set out in Schedule 5.
6.4Personal Services
(a)The Manager will provide the Resident with the Personal Services on and subject to the terms and conditions set out in this Deed.
(b)The Resident must comply with the provisions and agrees to the rights relating to the Personal Services set out in Schedule 6.
6.5Communal Services
(a)The Manager will provide the Resident with the Communal Services on and subject to the terms and conditions set out in this Deed.
(b)The Resident must comply with the provisions and agrees to the rights relating to the Communal Services set out in Schedule 7.
7.Additional services for Residents of Apartments
For Residents residing in Apartments, the full Levy paid by them additionally entitles them to:
(a)a weekly linen service which launders bed linen and towels on the basis of one change of linen each week;
(b)supervision of the Apartment Building at all times;
(c)the regular cleaning of the Apartment, at the times and in the manner, as the Manager determines.
Village Services are set out in Schedule 2 to the residency deed as follows (Village Services):
(a)24 hour a day monitored emergency call system.
(b)Comprehensive insurance cover on all buildings in the Village.
(c)Provision and maintenance of Communal Amenities including Lounges, Dining Rooms, Library, Heated Swimming Pool, Heated Spa Pool, Workshop, Craft Room, Gym, BBQ area, all weather Bowling Green.
(d)Administration and management of Village.
(e)Maintenance of Common Areas, Village buildings and Communal Amenities.
(f)Lawn mowing, gardening, maintenance of landscaping and reticulation of grounds.
(g)Security Patrols.
(h)Apartments in the Lodge are provided with the following additional services, for the full Levy:
(i)Morning and afternoon tea.
(ii)Changing and making of beds where required.
(iii)Weekly laundering of bed linen and towels.
(iv)Weekly cleaning of Apartment (including fridge cleaning).
(v)Happy hour each fortnight.
Relevant clauses of the trust deed
The trust deed includes the following relevant clauses:
8.ADDITIONAL COVENANTS BY MANAGER
8.1Manager required to Manage Village
(a)The Manager has the primary responsibility for the daily management, maintenance, improvement and administration of the Village.
(b)The Manager and any general manager and other staff appointed by it are the primary point of contact with the Residents.
(c)The Manager must ensure the Residents comply with the provisions of the Residency Deed and the Carport Licence.
8.2Manager's Obligations
The Manager agrees with the Trustee, so that the benefit of this agreement applies not only to the Trustee but also for the benefit of the Residents jointly and to each of them severally, that the Manager must
(a)make and keep available to the Trustee, details that the Trustee reasonably requires of all matters relating to its management of the Parkland Villas - Woodlands Trust,
(b)comply with all requirements of the Corporations Law and, where applicable, without prejudice to the generality of the foregoing, with all statutory requirements about the filing of reports, statements and keeping open registers for inspection and similar matters:
(c)comply with all requirements of the Retirement Villages Act and the Code of Fair Practice;
(d)pay or cause to be paid within a reasonable period after they become due and payable, all rents, rates, taxes, duties, assessments, liabilities and outgoings assessed or levied against the Village unless, the Manager has certified to the Trustee that the Manager has contested any assessment or levy and has legal advice that it has reasonable grounds to do so[;]
18.FEES AND EXPENSES OF TRUSTEE AND MANAGER
…
18.4Payment of Manager's Costs and Expenses
The Manager must be paid:
(a)all costs, charges and expenses reasonably and properly incurred by or on behalf of the Manager; and
(b)any stamp or other duty which is payable from time to time regarding the carrying out or exercise by the Manager of any duty, obligation, right, privilege, power, authority or discretion imposed or conferred expressly or impliedly by this Deed on the Manager.
18.5Manager's Annual Fee
In addition to the payments to which it is entitled to under Clause 18.4, and as from the commencement of each calendar month which follows the date that construction of the Village is finally completed in accordance with the plans, the Manager is entitled to a fee for acting as manager under this Deed of $47,900.00 including GST per annum as at 1 July 2008. That fee is payable by equal calendar monthly instalments in arrears and must be adjusted annually on 1st July in each year subsequent to the year in which the annual fee is fully paid ('the Adjustment Date') in accordance with the following formula:
Where:
F = Existing Fee paid prior to Adjustment Date;
AF = Adjusted Fee payable subsequent to Adjustment Date;
PCPI = The Consumer Price Index determined prior to the preceding Adjustment Date, or where this fee is being adjusted for the first time, prior to the preceding 1st July.
CPI = The Consumer Price Index determined immediately prior to the Adjustment Date.
Formula:
AF = F x
The next section sets out the issues to be determined by the Tribunal.
The issues
The applicants contend that the issue is simply whether or not the respondent can pass on the expense of pay-roll tax in the Levy (as that term is defined in clause 5 of the residency deed) to the residents of the Village.
The respondent set out what it considered to be the relevant issues at para 5 of its responsive SIFC which are set out in [37] below. The Tribunal accepts it is necessary to consider the issues as identified by the respondent in order to determine the crux of this matter, as identified by the applicants, that is, whether or not the respondent can pass on the expense of pay-roll tax to the residents of the Village in the Levy.
The Tribunal will address the following issues:
(a)Does the Tribunal have jurisdiction under s 57A(2) of the RV Act to determine the dispute between the parties?
(b)If the answer to part (a) is 'yes', is the respondent entitled to include the expense of pay-roll tax in the Levy (as that term is provided for in clause 5 of the residency deed) payable by the residents in the Village?
(c)If the answer to both parts (a) and (b) is 'yes', what order, if any, should the Tribunal make under s 57A(4) of the RV Act?
The position of each party is summarised next.
The applicants' position
The applicants' position as expressed by the First Applicant may be summarised as follows.
1.In March 2018 the residents of the Village first became aware that the respondent was seeking to pass on the pay-roll tax to the residents. An amount of $29,000 was included in an early draft of the 2018/19 budget for pay-roll tax (or an amount equivalent to 5.5% of the salary and wages paid in respect of people working at the Village) under the heading 'salary costs'.
2.The issue of pay-roll tax was raised with the respondent by the Residents Finance Committee several months before the Advisory Board meeting was held in May 2018. No response was received and therefore the Advisory Board approved the budget for the 2018/19 financial year at the May 2018 meeting. The approval was subject to the removal of the line item for pay-roll tax if the respondent did not produce a satisfactory authority for the imposition of the payroll tax.
3.On 20 November 2018 the Office of State Revenue advised the first applicant that the Parkland Villas Woodlands Trust and LLRL Management Services T/F LLRL Management Services Trust did not constitute a group for pay-roll tax purposes.
4.The respondent may structure its business however it wants to. However, if the respondent is required to pay pay-roll tax because of the way it has set up its business structure, that should not be a financial burden on the residents of the Village which is comprised of residents 40% of whom are on a full pension, 40% of whom are on a part pension and the remaining 20% are fully self-funded.
5.Pay-roll tax is not an employee cost. Rather, it is an employer expense for running a business (the respondent's business) and therefore should not be passed onto the residents of the Village. Neither the residents nor the Advisory Board have any control over the respondent's business and therefore should not be required to pay the respondent's pay-roll tax.
6.Clause 8.2(d) of the trust deed states in part '… pay or cause to be paid within a reasonable period after they have become due and payable, all rents, taxes, duties, assessments, liabilities and outgoings assessed or levied against the Village …'. Pay-roll tax is not an outgoing assessed or levied against the Village and therefore cannot be passed on to the residents of the Village by way of the Levy.
7.The respondent (as the Manager of the Village) has not certified to the Trustee that the respondent (as Manager) had contested any assessment or Levy (per clause 8.2(d) of the trust deed).
8.Clause 5.6(a) of the residency deed provides in part 'outgoings, costs and expenses … incurred for the maintenance, management and operation of the Village'. This relates specifically to the operation of the Village and does not extend to matters which fall outside that characterisation. Costs in respect of operating the respondent's business include pay-roll tax and therefore cannot be said to be incurred in the operation of the Village.
9.Clause 5.6(a)(i)(G) of the residency deed states in part '… the fees, costs and expenses of the Woodlands Trustee, the Advisory Board, the auditor and the Manager as provided in clauses 3.4, 18.1, 18.2, 18.4, 18.5 and 19.3 of the Trust Deed …'. Clauses 18.4 and 18.5 of the trust deed concern the respondent and importantly the word 'tax' in not included in either of clause 18.4(a) or 18.4(b). The respondent's (as Manager) annual fee is included in the budget and is paid by the residents from the Levy (per clause 5 of the residency deed).
10.The pay-roll tax of about $24,000 for a year is not a small or insignificant amount for the residents of the Village. This is because the amount equates to about $8.70 per month for each of the 221 households (185 villas and 35 apartments) in the Village. This equates to an ongoing and indefinite cost of about $105 per annum for each household in the Village which the residents did not expect when they entered the Village.
The respondent's position
The respondent's position may be summarised as follows:
1.The Levy (per clause 5 of the residency deed) falls within the definition of a 'recurrent charge' under the RV Act.
2.There was a slight increase in the Levy payable by residents in the 2018/19 financial year as compared to the 2017/18 financial year. However, for the 2019/20 financial year there was no increase in the Levy from 2018/19.
3.The respondent is responsible for the daily management, maintenance, improvement and administration of the Village Services which is provided through the Village Services. The services are set out in Schedule 2 of the residency deed.
5.Pursuant to clause 5.6 of the residency deed, the Levy payable by the residents of the Village is to enable the respondent to pay all outgoings, costs and expenses of the Village it incurs for the maintenance, management and operation of the Village. Further, clause 5.6(a)(i)(G) of the residency deed expressly provides that the Levy is to be used by the respondent to pay the fees, costs and expenses of the respondent (as the Manager) as provided for in clause 18.4 of the trust deed.
6.The amount the respondent is required to pay to LLRL is for the people employed by LLRL that are provided to the Village to work in roles as set out earlier. The pay-roll tax is an amount properly included in the monthly Levy payable by the residents of the Village.
7.The inclusion of pay-roll tax in the Levy has not resulted in an excessive or unwarranted increase in the Levy and as such the Tribunal should not make the order sought by the applicants.
Finally, the Tribunal, turns, to consider each of the issues.
The Tribunal's consideration
Does the Tribunal have jurisdiction?
The applicants seek an order from the Tribunal requiring the respondent to not include the expense of pay-roll tax as a recurrent charge in the Levy (as that term is provided for in clause 5 of the residency deed) and to refund any pay-roll tax that has already been included in the Levy. The Tribunal understands that the order the applicants is seeking is in relation to the 2018/19 financial year and that the applicants' position is that the inclusion of pay-roll tax in the Levy is not provided for in the residency deed or the trust deed and to include such expense in the Levy would be inconsistent with the RV Act and the RV Regulations.
There is no dispute that the first applicant is a 'resident' of the Village, the Village is a 'retirement village' (as those terms are defined in s 3 of the RV Act) and that the respondent is the 'administering body' (as that term is defined in s 3 of the RV Act). Further, it is common ground that the residents of the Village established the Parkvilla Residents Club Inc (refer cl 24 of the RV Code). There is no dispute that the residents passed a special resolution (see cl 15 of the RV Code) as required by s 57A(2) of the RV Act. The Residents' minutes report that a special resolution was passed authorising the application to be made to the Tribunal.
Both parties identified the dispute as being whether the expense of payroll tax can be included in the recurrent charges, that is in the Levy (see clause 5 of the residency deed) and therefore passed on by the respondent to the residents of the Village. More precisely, the dispute concerns pay-roll tax in the amount of $23,957 included as an expense item for salary and wages in the Village budget for the 2018/19 financial year.
The Tribunal accepts the submission from the respondent that there has not been the imposition of a levy (as that term is defined in s 3 of the RV Act). This means that it is necessary for the Tribunal to find that the dispute has arisen due to an increase in recurrent charges. If the dispute has not arisen from an increase in recurrent charges, then one of the requirements to invoke s 57A of the RV Act will not be met, and the Tribunal will not have jurisdiction to determine the dispute.
It is common ground that the Levy (per clause 5 of the residency deed) is a recurrent charge as the residents are required to pay it to the respondent on a monthly basis. What the Levy comprises and for what it is to be used is considered later in these reasons. However, what needs to be determined here is whether there has been an increase in the Levy (the recurrent charge).
The Village's salary and wage expense was budgeted at $448,625 for the 2018/19 financial year and $413,913 for the 2019/20 financial year as shown in the following table. In regards to the 2019/20 financial year the respondent reported that it removed the amount for pay-roll pending the outcome of these proceedings. The total expenditure budget for 2018/19 was $1,056,279 (including pay-roll tax of $23,957) and for 2019/20 it was $1,008,720 (excluding pay-roll tax).
Salary & Wages
2018/19
2019/20
Wages – Administration
$200,504
$223,762
Wages – Emergency Response Attendants
$35,206
Wages –Hotel services
$144,425
$150,000
Pay-roll tax
$23,957
Staff recruitment
$1,000
$1,000
Superannuation
$35,599
$32,763
Training and education
$3,678
$3,439
Uniforms
$1,100
$1,100
Work Cover Premium
$2,001
$1,849
Annual leave $21,220 Long service leave $3,892 Total $448,625 $413,913
The respondent says that on or about 10 May 2018 the Advisory Board approved the Village's budget (refer cl 17(3) and cl 17(6) of the RV Code) for the 2018/19 financial year which included the amounts for salary and wages as set out in the above table. The respondent says that the Advisory Board, which includes a resident representative (see clause 3.1 and 3.2 of the trust deed) and is responsible for giving directions to the Manager (the respondent in this case) regarding performance of the Manager's duties under the trust deed and the residency deed, determined that the Levy payable by the residents of the Village for the 2018/19 financial year would include all of the salary and wages amount including pay-roll tax of $23,957. The Tribunal notes that the recommendation to approve the budget for the 2018/19 financial year, which included pay-roll tax, was carried 4:1 as reported in the Advisory Board minutes. However, the resident representative, Mr Peter Tennant, expressed concerns at the meeting of the Advisory Board that there was an 'arbitrary imposition of payroll tax'.
The respondent stated that the Advisory Board approved the next Village budget for the 2019/20 financial year in or about May 2019. That budget, as noted earlier, did not include pay-roll tax according to the respondent, pending the outcome of these proceedings. Further, the respondent submitted that there was no increase in the Levy payable by the residents of the Village for the 2019/20 financial year as compared to the 2018/19 financial year.
The respondent submitted that the Levy payable for the 2018/19 financial year as compared to the 2017/18 financial year increased from a range of a $3 per month increase for a single villa to a $6 per month increase for an apartment. That increase in Levy was not disputed by the applicants. The Tribunal finds that there was an increase in the recurrent charges, from the 2017/18 financial year to the 2018/19 financial year, being the increase in the Levy. As the Tribunal is satisfied there was an increase in the recurrent charges this means that all of all of the requirements to invoke s 57A of the RV Act have been met. The Tribunal therefore concludes that it has jurisdiction to determine the dispute.
Is the respondent entitled to include the expense of pay-roll tax in the Levy payable by the residents of the Village?
It is common ground that the taxable wages of the employees who work at the Village would not, as a 'stand-alone' retirement village incur pay-roll tax. The issue of the expense of pay-roll tax has arisen because the management, maintenance, improvement and administration of Lendlease's 10 retirement villages in Western Australia, including the Village where the respondent is the Manager, have been carried out by people employed by LLRL and LLRL is liable to pay pay-roll tax.
The respondent's evidence is that the taxable wages paid by LLRL to its employees who work at the 10 retirement villages in Western Australia exceeds the relevant threshold and it is therefore liable to pay pay-roll tax in Western Australia. The Village itself has not been grouped with the respondent, LLRL or Lendlease for payroll-tax purposes. The applicants do not dispute this.
The applicants accept that the residents of the Village are required to pay for the salary and wages of the employees provided to work in the Village to provide the Village Services. However, the applicants strongly reject that the residents of the Village should have to pay the expense of pay-roll tax. This is because, according to the applicants, the expense of pay-roll tax is a cost to do with the respondent's business structure and has nothing to do with the management, maintenance, improvement and administration of the Village.
The respondent submitted that in consideration for LLRL providing its employees to work at the Village to carry out the Village Services (as set out in Schedule 2 of the residency deed) for the residents of the Village which include administration and management of the Village for and on its behalf (as the Manager), the respondent, upon receipt of a monthly invoice from LLRL, is required to pay to LLRL the 'cost' that LLRL incurred in providing its employees to work in the Village in the various roles set out above, such as the Village Manager. That 'cost', according to the respondent, includes the salary, leave allowances and superannuation as well as the expense of pay-roll tax incurred by and paid for by LLRL in respect of those employees.
Section 25 of the RV Act is the starting point. That section prohibits an administering body, in this case the respondent, from demanding or receiving payment from a resident or former resident of a retirement village in respect of a prescribed matter. The prescribed matters can be found in reg 11(3) of the RV Regulations (set out earlier). Land tax is expressly included as an expense incurred by an administering body that it must not require payment from the residents of the retirement village where the land is eligible for an exemption under the Land Tax Assessment Act 2002 (WA) (see reg 11(3)(k) of the RV Regulations). However, reg 11(3) of the RV Regulations is silent with regards to pay-roll tax (and other taxes such as fringe benefits tax).
As the RV Act and RV Regulations do not expressly prohibit the administering body from requiring payment from residents of a retirement village of the expense of pay-roll tax, the issue comes down to the proper interpretation or construction of a number of clauses in the residency deed and the trust deed in particular clause 5.6 of the residency deed and clauses 8.2(d) and 18.4 of the trust deed. No, evidence or submissions were submitted in relation to the background to the making of the residency deed and the trust deed. As, noted earlier, the residency deed appears to be a template. On the documents before the Tribunal, it can do no better than interpret the residency deed and the trust deed standing on their own.
In construing the relevant provisions of the residency deed and the trust deed, the Tribunal will apply the principles of contractual interpretation which were stated by his Honour Levy SC DCJ in Queens Lake Village Pty Ltd v Queens Lake Village Residents Association [2011] NSWDC 21 (Queens Lake) as follows:
68In giving business efficacy to the terms of the agreement, the required approach is to consider what a reasonable person in the position of the other party would have understood the contract to mean in the context in which it was intended to apply: Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; 219 CLR 165, at p 179, [40]. In this case, this must mean balancing the relative interests and needs of the residents and theoperator.
69This requires that a literal, technical, artificial or overly syntactic or semantic based analysis that yields absurd results is to be avoided in favour of more purposive conclusions that reveals business commonsense: Antaios Compannia Naviera SA v Salen Rederierna AB [1985] AC 191, per Diplock LJ at 201.
70In construing relevant statutory provisions, the purposive interpretation is also the preferred or required approach in order to achieve the benefit intended by the legislation, recognising that in the context of this case, the RV Act and the RV Regulations contain significant consumer protection provisions. At the same time, the purposive approach to interpretation also requires recognition of the need for operators of retirement villages to be able to continue their operations profitably. However, in the context of a consumer protection statute, profitability is not the dominant consideration and fairness to consumers is at least a dominant balancing consideration to be weighed in the exercise.
The applicants say that the pay-roll tax is not an outgoing assessed or levied against the Village (per clause 8.2(d) of the trust deed) and therefore it cannot be passed on in the Levy. Further, the applicants say that clause 5.6(a) of the residency deed specifically relates to the operation of the Village and that pay-roll tax falls outside that because the cost is incurred as part of the respondent's business structure and not in the operation of the Village. In addition, the applicants say that the word 'tax' is not included in clause 18.4(a) or clause 18.4(b) of the trust deed.
On the other hand, the respondent contends that in accordance with clause 18.4(a) of the trust deed, the amount that the respondent is required to pay to LLRL is a cost, charge or expense reasonably and properly incurred in its daily management, maintenance, improvement and administration of the Village and it is therefore proper to include the expense of pay-roll tax in the Levy because clause 5.6 of the residency deed provides that the Levy payable by the residents of the Village is to enable the Manager of the Village (the respondent) to pay all outgoings, costs and expenses of the Village it incurs for the maintenance, management and operation of the Village. Further, the respondent relies on clause 5.6(a)(i)(G) of the residency deed which provides that the Levy is to be used by the respondent to pay the fees, costs and expenses of the respondent as provided for in clause 18.4 of the trust deed.
There is no evidence that the residents of the Village had previously consented to the inclusion of such pay-roll tax, and indeed it would appear that such pay-roll tax had not previously been included in the Village budget until the 2018/19 financial year.
Neither party referred to the Tribunal to any cases to support their respective interpretation of the residency deed and the trust deed. While the issue of whether an administering body may pass on the expense of pay-roll tax to residents of a retirement village has not been judicially considered in Western Australia, a number of decisions have been handed down by the New South Wales Civil and Administrative Tribunal (or its predecessor) (NCAT) and the Queensland Civil and Administrative Tribunal (or its predecessor) (QCAT) in relation to the equivalent RV Act and RV Regulations. It is useful to review those decisions.
The first decision is that of QCAT in The Residents of Forest Place Retirement Village Durack as named in Application filed 30/10/03 v Forest Place Group Ltd [2004] QCCTRV 7 (30 July 2004) (Forest Place). There, QCAT concluded that pay-roll tax is a component of the management administrative costs of the retirement village as contemplated in the definition of 'general services' in s 12(3) of the Retirement Villages Act 1999 (QLD) and therefore the charging to the residents of the retirement village for a proportion of the total pay-roll tax liability of the retirement village was not a breach of the relevant residence contract. In that case the operator (or administering body) operated five retirement villages and that the function and wages of numerous employees such as the General Manager of Operations, accountants, payroll, human resources and care services were shared across the five villages. The term 'general services' in s 12(3) of the Retirement Villages Act 1999 (QLD) was relevantly defined as follows:
general services are the services supplied, or made available, to all residents of the retirement village.
Examples of general services-
•management and administration
•gardening and general maintenance
•a shop or other facility for supplying goods to residents
•a service or facility for the recreation or entertainment of residents
There are a few relevant decisions of NCAT which were made before the amendment to the Retirement Villages Regulation 2017 (NSW) which, with effect from 1 March 2010, provided that pay-roll tax must not be financed by way of recurrent charges unless either of the following applied, as set out in reg 23(d):
(i)the wages paid by the operator in respect of operating the retirement village to which the recurrent charges relate (including any wages apportioned to the retirement village by the operator's head office) are more than the threshold amount within the meaning of Schedule 1 to the Payroll Tax Act 2007, or
(ii)before 1 March 2010, the residents of the retirement village consented to the financing of payroll tax by way of recurrent charges and that consent has not been revoked[.]
Decisions made by NCAT which considered reg 23(d) as set out above were not considered by the Tribunal.
In MilsternRetirement Services P/L v Linfield Manor Retirement Village (Retirement Villages) [2005] NSWCTTT 749 (9 November 2005) (Milstern 1) NCAT was asked to review several line items of a village budget to decide if they were recoverable from residents as a cost of managing the village. NCAT accepted that under the Retirement Villages Act 1999 (NSW) an operator (or administering body) may aggregate its accounts for pay-roll tax purposes. The operator calculated the proportion of pay-roll tax attributable to the retirement village based on the ratio of the number of its employees to the total in the group. The operator claimed $14,561 for pay-roll tax for the 2004 year. NCAT accepted that an operator may aggregate its accounts. However, NCAT was not satisfied that it was reasonable for the residents of the village to bear a proportion of the pay-roll tax which was solely a consequence of the size of the operator's business. NCAT held that in isolation, the operation of the retirement village would not attract a liability for payroll tax and therefore it was not an expense reasonably incurred in operating the village in 2004 with the consequence the line item for pay-roll tax was disallowed. In that case the operator had grouped other different businesses, such as a hotel, together in seeking to collect pay-roll tax from the residents in its villages.
In Milstern Retirement Services Pty Ltd v McQueen & Ors (Retirement Village) [2007] NSWCTTT 535 (13 September 2007) (Milstern 2) NCAT accepted the residents' argument that the operator's obligation for pay-roll tax arose from the combination of the individual business entities within the group and therefore it could not be said to be an expense incurred in operating the retirement village but rather it was an expense of the operator expanding its business. NCAT concluded that pay-roll tax was not an expense in operating the retirement village but rather an attempt to defray part of the costs incurred by the operator in conducting its business activity.
In Australian Retirement Homes No. 2 Pty Ltd v Minkara Retirement Village Residents Committee (Retirement Villages) [2009] NSWCTTT 276 (RV 08/41351) (Minkara) NCAT held that pay-roll tax could be recovered on a pro rata basis across a number of villages operated by the same operator (or administering body) as regards the salary costs of the operator's employees adjusted according to the work they did for each village. In that case the residents argued they should not be responsible for the pay-roll tax for the village as it had only arisen due to the corporate structure of the operator and that the wages of the village would not exceed the pay-roll tax threshold except for the fact that the liability is imposed as it is a member of the group of companies. NCAT held that the relevant NSW legislation envisaged that a person may be the operator of more than one village and can apportion the expenditure between the villages as long as the method of calculation of apportionment was disclosed. NCAT was satisfied that the amount sought to be paid in the statement of proposed expenditure was properly appropriated between the corporate entities that made up the applicant's group of companies and that the liability extended to the wages of the employees of the retirement village. NCAT distinguished Milstern 1 and Milstern 2 (supra) and found the operator was entitled to recover a payroll tax expense from the residents of the village.
In Governors Retirement Resort Pty Ltd v The Residents Committee (Retirement Villages) [2009] NSWCTTT 697 (24 December 2009) (Governors) NCAT was considering an application to reduce the proposed expenditure of the village to be recovered by way of recurrent charges which included pay-roll tax and a management fee. NCAT there determined the issue by considering whether pay-roll tax was a reasonable cost by considering what, if any, benefits were gained by the residents arising from being part of a large organisation. NCAT concluded that the benefits relied upon by the operator of the retirement village were in support of its claim to be paid the management fee and not in support of its claim to be paid the payroll tax and therefore it was not reasonable to seek two separate expenses in the budget for providing the same type of benefits to the residents. NCAT decided the pay-roll tax expense claimed was not a reasonable cost in providing services to the village for the 2009/10 budget. Following Milstern 1 and Milstern 2 (supra) NCAT concluded that it did not follow that pay-roll tax incurred by the operator as a consequence of its corporate structure necessarily meant that a pro-rata contribution by residents of one of its retirement villages should be approved under s 115(6) of the Retirement Villages Act 1999 (NSW) which provided NCAT may have regard to:
(a)the reasonable cost of services provided (or proposed to be provided) in the village,
(b)the need for the services to be provided in the village,
(c)any other relevant matter.
to determine if the expense should be approved as a budget item when the residents did not consent to the particular expense proposed.
None of the above decisions are binding on this Tribunal. However, what the decisions made before the amendments to Retirement Villages Regulation 2017 (NSW) show is that the issue of whether pay-roll tax can be passed on by the administering body to the residents of a retirement village is a contentious issue.
In Milstern 1, the operator's (or administering body's) different businesses including a hotel were grouped with its retirement village operations for pay-roll tax purposes with the consequence NCAT decided that the pay-roll tax could not be passed on to the residents of the village. In contrast, in the present case, the respondent submitted that from about 2016/17 the 10 retirement villages (including the Village) operated by Lendlease in Western Australia were grouped and LLRL provided its employees to carry out various roles in the Village. The pay-roll tax the respondent seeks to pass on is limited to the taxable wages of the LLRL employees provided to the Village only.
The Forest Place and Minkara decisions support the administering body passing on the expense of pay-roll tax. The decision in Milstern 2 supports the applicants' position that payroll tax is not an expense in operating the Village but rather an attempt to defray part of the costs incurred by the administering its business activity.
The Governors case is the most recent (before the 2010 amendments in NSW). In that case, NCAT decided that pay-roll tax was not a reasonable cost in providing services to the retirement village for the 2009/10 budget because the claimed benefits, for example economics of scale such as group procurement, were a consequence of the size and capacity of the corporate entity and were relevant to the question whether it was a reasonable cost for the management fees (and not pay-roll tax). In this case, unlike in the Governors case, the Manager's annual fee (or management fee) is an amount payable in addition to the amounts payable under clause 18.4 of the trust deed for costs and expenses reasonably and properly incurred by or on behalf of the Manager. The annual fee is to be calculated using the specified formula with reference to the Consumer Price Index as set out in clause 18.5 of the trust deed.
The RV Act does not have a provision equivalent to s 115(6) of the Retirement Villages Act 1999 (NSW), which was discussed in the Governors case, that regard may be had to the reasonable cost of the services provided in the village, the need for the services to be provided in the village and any other relevant matter to determine if the item of expenditure for pay-roll tax is to be itemised in the proposed annual budget. Nonetheless, it is useful to consider those factors to determine if the expense of the pay-roll tax was a cost that was reasonably and properly incurred by or on behalf of the Manager, particularly in terms of clause 5.6 of the residency deed and clause 18.4 of the trust deed.
Neither party made any submissions on whether or not the Village Services as provided for in Schedule 2 of the residency deed were needed for the relevant period (the 2018/19 financial year). The Village Services include a 24 hours a day monitored emergency call system, administration and management of the Village as well as the provision of security patrols. The Village Services are provided to all of the residents of the Village by LLRL providing its employees to work at the Village in various roles including that of Village Manger, Village Administrator and General Service Cleaner. The applicants did however state that for the 2019/20 financial year the costs of salary and wages for the Village was less because they did not have a Village Manager for about four to five months and they did not have an emergency response attendant which saved about $35,000. For the relevant period (the 2018/19 financial year), the Tribunal accepts that the Village Services were needed and that those services were provided by employees of LLRL and because of its business structure, LLRL is liable to pay pay-roll tax.
In this case the respondent has not contested any pay-roll tax assessment, and on that basis, the respondent submitted that it was required to pay the 'cost' of the employees which included pay-roll tax to LLRL upon receipt of an invoice from LLRL pursuant to clause 8.2(d) of the trust deed. The Tribunal accepts that there is no evidence that the respondent (as the Manager) has contested any payroll tax assessment and therefore it is required to pay the 'cost' of the employees which includes pay-roll tax to LLRL.
The respondent submitted that insofar, as it has to pay LLRL, there is no basis to any suggestion that the amount of pay-roll tax is unreasonable or was improperly incurred. The Tribunal agrees that the amount of pay-roll tax is not unreasonable as it is the amount payable by LLRL pursuant to the pay-roll tax legislation. It is not an arbitrary amount. Rather, it is calculated by reference to the amount of taxable wages as provided for in the pay-roll tax legislation. The Tribunal accepts that the respondent has incurred the expense of pay-roll tax on the basis that LLRL provided its employees to the Village to provide the Village Services for an on behalf of the respondent as the Manager.
Bearing in mind the need to balance the relative interests and needs of the residents of the Village and the administering body (the respondent), the Tribunal in giving business efficacy to the relevant documents being the residency deed and the trust deed, concludes that a reasonable person would understand the residency deed and the trust deed, and in particular clause 5.6 of the residency deed and clauses 8.2(d) and 18.4 of the trust deed to mean that pay-roll tax is an outgoing, cost or expense and where the administering body is part of a business retirement village group, and that an entity within that group provides its employees to carry out various roles in the Village, such as the General Manager to provide the Village Services, then the pay-roll tax is directly associated with the operation of the Village and therefore the expense of pay-roll tax can be passed on in the Levy to the residents of the Village (per clause 5.6 of the residency deed). This is so even when the residency deed (clause 5.6) does not expressly state that the pay-roll tax (or other taxes such as fringe benefits tax) is a cost for which the Levy must be used for. This interpretation is supported by s 25 of the RV Act which when read with reg 11(3) of the RV Regulations does not prohibit the administering body from demanding or receiving payment of pay-roll tax from a resident or former resident of the retirement village.
For all of these reasons, the Tribunal concludes that the proper construction of the residency deed and the trust deed in this case is that the expense of pay-roll tax is incurred for the maintenance, management and operation of the Village (clause 5.6 of the residency deed) and it is an expense that is reasonably and properly incurred by or on behalf of the respondent as the Manager (clause 18.4 of the trust deed).
What orders should the Tribunal make?
The Tribunal respectfully concurs with the observation in QueensLake at [66] that the Tribunal: 'has been assigned the role of resolving disputes in a transparent and fair manner, or not in a manner that is arbitrary or unfair to a party'.
The Explanatory Memorandum to the Retirement Villages Amendment Bill 2012 (WA) provided at page 13:
Section 57A recognises that many residents within retirement villages are on limited incomes such as the aged pension and as such would be adversely affected by substantial increases in recurrent charges or the unexpected imposition of a levy. The ability to take such matters to SAT will safeguard residents against excessive or unwarranted increases in recurrent charges or the unreasonable imposition of a levy.
It is therefore appropriate that s 57A(4) of the RV Act provides that the Tribunal may make such orders as it considers appropriate.
The respondent urged the Tribunal not to make the order sought by the applicants. This is because, according to the respondent, the pay-roll tax is an amount properly included in the monthly Levy payable by the residents; and the inclusion of the pay-roll tax in the Levy has not resulted in an excessive or unwarranted increase in the Levy.
The applicants dispute that the pay-roll tax is not excessive or that it is a warranted increase in the Levy. The applicants stated that the Village budget has over four dozen individual line items for expenses which are reviewed regularly and consistently for ways to reduce expenses and hence reduce the Levy (or to minimise increases) payable by the residents of the Village. Further, the applicants say that if it were not for the residents volunteering their time to review and consider all options and making changes their Levy would be considerably higher. The applicants suggested that if the residents are to pay the pay-roll tax the management fee payable to the respondent pursuant to clause 18.5 trust deed should be reduced accordingly.
The Tribunal does not accept the applicants' suggestion to reduce the manager's annual fee by the amount of the pay-roll tax. This is because clause 18.5 of the trust deed prescribes how the annual fee is to be calculated by reference to the Consumer Price Index. Further, the applicants failed to provide evidence to support their position that the increase in the Levy was excessive apart from the submissions made in point 10 of [39] and at [83].
The RV Act and the RV Regulations, being the legislative scheme under which the present dispute arises, seek to balance commercial realities that are needed for the retirement village industry to survive with the potential financial and other possible vulnerabilities of retired people. This is manifested in the provisions of the RV Act where the legislation contains elements of consumer protection alongside the obligation on residents of the retirement village to pay for certain defined categories of expenditure which are incurred by the administering body, subject to compliance by the administering body with particular reporting, auditing and other processes set out in the RV Act and RV Regulations.
The residents of the Village clearly do not want the burden of the expense of pay-roll tax. However, as set out earlier, the proper construction of the residency deed and the trust deed in this case is that the expense of pay-roll tax has been incurred for the maintenance, management and operation of the Village it is an expense that is reasonably and properly incurred by or on behalf of the respondent as the Manager of the Village. Therefore, the respondent (as the Manager) is entitled to include the expense of pay-roll tax, calculated pursuant to the pay-roll tax legislation on the taxable wages of the LLRL employees provided to work in Village to provide the Village Services, in the Levy. In all of the circumstances of this case, the Tribunal concludes that it is not appropriate to exercise its discretion under s 57A(4) of the RV Act to make the order sought by the applicants. The Tribunal will therefore dismiss the applicants' application.
Orders
The Tribunal orders:
1.The applicants' application is dismissed.
I certify that the preceding paragraph(s) comprise the reasons for decision of the State Administrative Tribunal.
MS R PETRUCCI, MEMBER
7 JULY 2020
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