Stadhams v Wellington Manor Pty Ltd
[2013] QCAT 38
| CITATION: | Stadhams v Wellington Manor Pty Ltd [2013] QCAT 38 |
| PARTIES: | Eric Stadhams (Applicant) |
| v | |
| Wellington Manor Pty Ltd t/as Wellington Manor Retirement Village (Respondent) |
| APPLICATION NUMBER: | OCL101-11 |
| MATTER TYPE: | Other civil dispute matters |
| HEARING DATE: | On the papers |
| HEARD AT: | Brisbane |
| DECISION OF: | Sandra G Deane, Member |
| DELIVERED ON: | 18 January 2013 |
| DELIVERED AT: | Brisbane |
| ORDERS MADE: | 1. Wellington Manor Pty Ltd is to pay residents’ Maintenance Reserve Fund contributions into the MRF Trust bank account within a reasonable time of receipt of those contributions. 2. Wellington Manor Pty Ltd is to exercise its powers to invest the Maintenance Reserve Fund in accordance with the Retirement Villages Act 1999 and the Trust Act 1973 and where appropriate rules or principles of law and equity. |
| CATCHWORDS: | RETIREMENT VILLAGE – MAINTENANCE RESERVE FUND TRUST – whether failure to comply with Retirement Village Act 1999 – whether the Act expressly sets out all obligations relating to the trust fund – whether operator required to transfer contributions to a trust account within a particular timeframe – whether operator required to invest trust moneys – whether operator breached such obligations – whether operator required to reimburse the maintenance reserve fund for an amount equivalent to interest not earned Retirement Villages Act 1999, ss 20, 46, 97, 100, 101 Tew & Kelly v Masonic Care Queensland [2008] QCCTRV 6 |
APPEARANCES and REPRESENTATION (if any):
This matter was heard and determined on the papers pursuant to s 32 of the Queensland Civil and Administrative Tribunal Act 2009 (QCAT Act).
REASONS FOR DECISION
Mr Stadhams is a village resident at Wellington Manor Retirement Village at Birkdale. Wellington Manor Pty Ltd (Wellington) is the village operator.
Mr Stadhams contends that Wellington has failed to comply with ss 20, 97, 100 and 101 of the Retirement Villages Act 1999 (the Act) as he contends that the Maintenance Reserve Fund (MRF) trust monies have not been invested to ensure the best results in order that residents’ contributions could earn maximum interest.
Mr Stadhams originally sought the following orders:
a) Wellington pay residents’ Maintenance Reserve Fund contributions each month into the MRF Trust bank account in accordance with ss 20 and 97 of the Act.
b) The reserve component of the MRF Trust bank account be invested as intended by ss 100 and 101 of the Act.
c) Wellington to provide documentary evidence of these deposits and interest earned during the periods 1 July 2007-30 June 2008; 1 July 2008-30 June 2009; 1 July 2009-30 June 2010; 1 July 2010-30 June 2011.
d) The MRF budgets for the periods 1 July 2007-30 June 2011 be recast and determine the interest that should have been earned during that period.
e) Wellington to deposit an amount being interest that could have been earned into the MRF Trust Bank account.
During the course of the matter bank statements and audited financial statements were produced so it is no longer necessary to make orders as referred to at [3](c).
By submissions dated 11 May 2012, Mr Stadhams sought an order that compensating amounts representing interest that could have been earned during the period July 2007 to June 2010 be provided by Wellington and deposited into the MRF bank account.
By submissions dated 28 September 2012, Mr Stadhams submits that:
a) having regard to account balances in 2007/2008 an amount of $90,000.00 was available to be invested in interest bearing deposits (IBD);
b) it would have been prudent for 2 IBDs (one of $10,000.00 and one of $80,000.00) to have been made;
c) in 2008/2009 the $80,000.00 IBD should have been reduced to $70,000.00 due to the deficits incurred that year;
d) interest should have been reinvested in the IBDs;
e) interest rates had been obtained from St George Bank;
f) on his calculation that if the above steps had been taken $13,179.00 could have been earned during July 2007-June 2010 as opposed to the $763.00 which was earned.
It is not disputed that:
a) the residents pay general services charges monthly to Wellington and that a portion of those charges are MRF contributions[1];
b) during the period under review Wellington paid the residents’ MRF contributions into the MRF Trust bank account at irregular intervals;
c) interest earned on the MRF during the 3 financial years commencing July 2007 to June 2010 totalled $763.00, being $79.00, $24.00 and $660.00 respectively;
d) the Act provides that the MRF is to be held on trust on behalf of the residents[2] and may not be used by Wellington for purposes other than those prescribed by the Act[3].
[1] Section 20 of the Act.
[2] Section 97(1)(b) of the Act.
[3] Section 97(3) of the Act.
A MRF is established under the Act for the maintaining and repairing of a village’s capital items.[4]
[4] Sections 19 and 97 of the Act.
Wellington is obliged to ensure that the residents’ MRF contributions and interest received on investments belonging to the MRF are paid into the MRF[5].
[5] Section 100 of the Act.
Mr Stadhams contends that:
a) the common law trustee’s duties apply to the trust created by the Act;
b) the common law includes a duty to ‘get in’ and preserve trust property and this duty requires trust funds to be banked into a trust account as soon as reasonably practicable;
c) the common law imposes a duty to invest trust funds.
Wellington contends that the Act:
a) does not prescribe a timeframe for the payment of the MRF contributions to the trust bank account;
b) contains all of the obligations in relation to investing funds standing to the credit of the MRF;
c) is much more prescriptive in section 46 than the provisions dealing with the MRF in relation to dealing with trust moneys and that if additional ‘trust’ obligations were to be imposed they would be expressly set out, therefore no additional obligations apply;
d) does not expressly provide a right to have interest which could have been earned calculated retrospectively.
Section 46 of the Act is more detailed as to how ingoing contributions are to be dealt with but is also silent as to whether the usual obligations of a trustee apply.
I am not satisfied that the Act sets out all obligations upon Wellington in relation to dealing with the MRF trust money. I find it is appropriate to look beyond the express terms of the Act when considering Wellington’s obligations. If the obligations were no greater than those specifically set out in the Act then there would be no need for the legislature to describe the MRF as being held on trust.
Holding money on trust imposes obligations on trustees including to act in the best interests of the beneficiaries of the trust and not to mix trust money with the trustee’s own money. The latter obligation was recognised by the Commercial & Consumer Tribunal, the tribunal previously charged with jurisdiction to determine disputes under the Act.[6]
[6] Tew & Kelly v Masonic Care Queensland [2008] QCCTRV 6 at [21].
The consequence of this obligation[7] is that in the absence of an express timeframe for transferring trust monies to the trust bank account it is required to be done within a reasonable time of receipt.
[7] Not to mix funds.
Mr Stadhams is the applicant in these proceedings and bears the onus of proving his case. Mr Stadhams has not provided to the Tribunal any evidence of what would be reasonable in the industry. He has merely made submissions as to what he or his representative, Mr Armstrong, consider ought to be done in relation to the timing of transferring the funds.[8] Mr Stadhams has not established that he or Mr Armstrong have any particular expertise in this regard upon which I should be content to rely.
[8]Submission dated 28 September 2012 – [1] - transfer during the same month of receipt or within 2 or 3 business days in the ensuing month.
For most of the period under review there is insufficient evidence to find that each of the transfers of the MRF contributions to the trust bank account were not made within a reasonable time of receipt or what would constitute a reasonable time in the circumstances.
There is evidence before the Tribunal that in respect of part of the period under review Wellington only made 2 transfers within a period of approximately 18 months.[9]
[9]In respect of the financial year 2007/2008 there was only one transfer in February 2008 and the next transfer was not made until November 2008.
Given that contributions are received monthly I find that the transfer of those contributions were not made within a reasonable time and that this constitutes a failure to comply with s 97(1)(b) of the Act as Wellington failed to hold the amounts standing to the credit of the MRF on trust solely for the benefit of residents in a trust account for a period of time ie for the period after a reasonable period expired after receipt of the contributions until the MRF contributions were transferred to the trust bank account.
The issue then becomes one of remedy for this non-compliance.
Mr Stadhams’ submissions are to the effect that the remedy is for Wellington to compensate the MRF for lost interest on investments which he contends ought to have been made had the contributions been transferred to the trust bank account in a timely manner.
It is relevant to consider the provisions of the Trusts Act 1973, which applies to trusts whether constituted before or after the Trusts Act 1973 commenced except where the Trusts Act 1973 otherwise provides.[10] Trusts for the purposes of the Trusts Act 1973 are broadly defined.[11] I find that the Trusts Act 1973 applies to the trust created in respect of the MRF.
[10] Trusts Act 1973, s 4(1).
[11] Trusts Act 1973, s 5.
The Trusts Act 1973 provides that a trustee may[12], unless expressly forbidden by the instrument creating the trust, invest trust funds in any form of investment.[13]
[12] My emphasis.
[13] Trusts Act 1973, s 21(a).
The Act does not forbid investment but it does prohibit a scheme operator such as Wellington from investing the MRF other than in an authorised investment under the Trusts Act 1973. Conversely, the Act does not expressly require the MRF contributions to be invested. It is clear that this is a power which may be exercised but is not mandatory.
The Trusts Act 1973 provides that:
a) a trustee must in exercising a power of investment exercise appropriate care, diligence and skill depending upon whether or not the trustee’s business is or includes acting as a trustee or investing money for others.[14]
b) rules or principles of law or equity imposing a duty on a trustee exercising a power of investment continue to apply except where it is inconsistent with the Trusts Act 1973 or another Act.[15] It sets out a number of rules or principles.[16] These include a duty to exercise the powers of a trustee in the best interests of all present and future beneficiaries, not to invest in speculative investments, to act impartially and to obtain advice.
[14] Trusts Act 1973, s 22.
[15] Trusts Act 1973, s 23.
[16] Trusts Act 1973, s 23(2).
Section 24 of the Trusts Act 1973 sets out the matters a trustee must have regard to in exercising a power to invest and makes it clear that these are not the only matters which a trustee may consider. The mandatory matters include the purpose of the trust, the need to maintain the real value of the capital of the trust, the length of the term of the proposed investment, the liquidity of the investment, the total value of the trust estate, the effect of the investment on the trust’s tax liability and the costs including fees and charges of making the investment. The exercise of such a power necessarily includes a power to decide not to invest.
Mr Stadhams has not provided to the Tribunal any evidence of what would be reasonable in the industry in the circumstances of this MRF. He has merely made submissions as to what he or his representative, Mr Armstrong, consider ought to have been done in relation to the amount to be invested and the manner in which it should be invested. As stated earlier in these reasons Mr Stadhams has not established that he or Mr Armstrong have any particular expertise in this regard upon which I should be content to rely.
Wellington is required to exercise the power to invest in accordance with the Act and the Trusts Act 1973 and where appropriate rules or principles of law and equity.
I am not satisfied that there is sufficient evidence upon which I can rely to find that:
a) a particular investment strategy ought to have been implemented during the period under review;
b) Wellington breached its obligations to exercise its power to invest;
c) Wellington ought to compensate the MRF in any particular amount.
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