1 Civil and Administrative Tribunal New South Wales Case Name: Sadlo v Australian Retirement Holdings Pty Ltd Medium Neutral Citation: [2019] NSWCAT Hearing Date(s): 8 July 2019 Date of Orders: 11 November 2019 Date of Decision: 11 November 2019 Jurisdiction: Consumer and Commercial Division Before: J A Ringrose General Member Decision: The application is dismissed because the Applicant has failed to establish grounds upon which the Tribunal could make the orders claimed by the Applicant. Catchwords: Retirement Villages – whether in the present case the air conditioning unit is an item of capital – whether a resident of a retirement village may carry out capital maintenance or replacement of an item for which the operator of the village is responsible. Legislation Cited: Retirement Villages Act 1999 ss.92,93,95 Cases Cited: Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] 219 CLR 165 Texts Cited: Category: Principal judgment Parties: Walter Sadlo Applicant Australian Retirement Holdings Pty Ltd Respondent Representation: The Applicant appeared in person Mr Boatswain, solicitor of Eakin McCaffery Cox Lawyers, appeared for the Respondent File Number(s): RV19/10105 2 REASONS FOR DECISION Application 1 By an application filed on 28 February 2019 the Applicant, as a resident of the retirement village described as Mt Gilead Estate sought an order that he be reimbursed for the cost of carrying out urgent capital maintenance or replacement of his ducted air conditioning system which, he claimed, had failed in December 2018 and had been repaired at a cost of $1375.90. 2 A copy of the repair invoice was attached to the application along with a copy of a service invoice dated 4 February 2019 for the same unit in a total sum of $130. 3 The application was listed before the Tribunal on 8 April 2019 when the applicant appeared in person and Mr Boatswain, solicitor, appeared on behalf of the Respondent. The matter was adjourned for a hearing date to be fixed and the applicant was directed to provide all of his documents in support of the application by 6 May 2019 with the Respondent to provide its documents by 3 June 2019. 4 It is noted that on 30 May 2019 another resident of the Mt Gilead Estate Retirement Village sought access to the material filed by parties in this matter expressing a concern that the result of the case may impact on servicing and maintenance arrangements for most other air conditioning units in the retirement village and the manner in which they are financed. The request was referred to the Director and Divisional Registrar of the Tribunal and was refused, it seems, on the basis that the application had not been finalised. 3 5 By the time the matter came to be listed for hearing the Applicant was seeking a refund of $22,500 which had been paid to the Respondent or its builder when he and his wife purchased the unit, along with a refund of the cost of repairs and an order that the air conditioning unit was part of the capital of the village. He also sought an order pursuant to s.128 of the Retirement Villages Act that the air conditioning was a capital item an order pursuant to s. 95(3) of the Act, that he be reimbursed for the costs of repairs. He sought an order that the Respondent had engaged in deceptive conduct when entering into the contract with the Applicant by negating its responsibility to maintain the ducted air conditioner and he sought a further order that it had breached s.101 of the Act by selling the air conditioner to him. 6 The final order sought by Mr Sadlo was an order pursuant to s128(1)(f) of the Act for compensation in whatever amount the Tribunal deemed to be appropriate. In the light of findings of the Tribunal that the sum of $22,500 paid as variations was wholly unjustified. 7 As the Respondent was apparently prepared to meet the various amendments to the application the matter was allowed to proceed on the basis that all issues could properly be addressed. Applicant’s Evidence 8 Mr Sadlo provided his own affidavit and submissions to which he annexed a number of items including the 99 year lease in respect of Unit 49/72 Glendower Street Gilead commencing on 26 November 2010 and ending on 25 November 2109. It is noted that Annexure 2 to the lease included a schedule of fixtures, fittings and furnishings which made reference to some upgraded items but no reference to the ducted air conditioning unit. 9 Annexure “B” to the affidavit included the disclosure statement of Viceroy Mt Gilead, the then operator of the village. The disclosure statement noted that in order to become a resident an ingoing contribution of $368,000 was required but if there were optional enhancements chosen the ingoing contribution may increase to above $400,000. 4 10 Annexure “C” was a list of the enhancements which had been offered including an integrated zone ducted air conditioner. This was included along with other items such as a sealed driveway for second car parking, a mid mounted wall oven, security in door screens and disabled toilets along with other items. 11 Annexure “D” to the affidavit was a settlement statement dated 25 November 2010 when the sale of the unit to the Applicant was completed. It is clear that the total ingoing contribution was limited to $368,000 which was paid to Viceroy Gilead Pty Ltd. 12 The additional payment of $22,500 made in respect of the air conditioning and other items was not included in the Applicant’s papers. 13 Annexure “E” included the first claim for repairs to the air conditioner from Leading Contract Services Pty Ltd addressed to Mr Sadlo. It was found that the unit was displaying an EAH 3 error noting that he high pressure switch was faulty and required a replacement. That work was undertaken at a cost of $1,245.90 for which the Applicant has sought reimbursement An additional sum of $130 for servicing of the unit was also claimed under an invoice dated 4 February 2019. 14 Anne xure “F” was a letter from Mr Sadl o to the General Manager of the Respondent date 7 February 2019. The letter enclosed the two invoices previously referred to and threatened that if reimbursement of the costs was not made within 14 days the Applicant would contact the Department of Fair Trading. 15 The letter was responded to by email on 21 February 2019 pointing out that air conditioners were the responsibility of the resident under the terms of the lease and as such costs of service and mechanical repairs were to be borne by the owner. 5 16 Annexure “G” related to a decision of Senior Member Smith in the Tribunal in a matter heard 12, 13 & 14 December 2011. The Member’s decision is clearly specific to Lots involved as the Member made a determination on 12 March 2012 that the lease documents in each case provided that the air conditioning systems were capital items for which the operator must accept maintenan ce responsibility. The Member’s determination is clearly distinguishable from the lease in the present case and in any event it is noted in the Applican t’s affidavit that following the dec ision of Senior Member Smith the Respondent had offered to organise routine preventative maintenance providing that it was paid for under additional levies. The proposal was rejected by the residents and ultimately the residents declared that the air conditioners were their responsibility. The applicant for some reason suggests that no formal vote was taken and no formal agreement was reached, however it is difficult to reconcile his assertion that the units were the owners’ responsibility in the absence of a specific formal vote or a specific agreement. 17 An attempt to reconcile this issue was referred to in a Statutory Declaration of Colin Elliott who claimed that in 2013/14 he was the president of the Residents Committee. His statement is flawed on a number of bases particularly in respect of the claim a ballot was flawed and that the entire process was invalid. It is noted that no proceedings were ever taken to the Tribunal concerning this issue after 2014 but it seems clear that the residents had accepted the air conditioning unit to be their own property and not a capital asset of the village operator. 18 Mr Sadlo also sought to rely on an affidavit of his wife dated 2 July 2019 where she claimed to have overheard a conversation between her husband and Gaye Wagener. The effect of the affidavit is somewhat obscure because Gaye Wagner simply acknowledged that Mr Sadlo did not ask her to lie for him. 19 In cross- examination Mr Sadlo was shown an annexure known as “PS3” to the affidavit of Mr Paul Singer which constituted a Purchase of Variation Form which included variations and extras totalling $26,917 which were discounted 6 down to a sum of $22,500. Included in these variations was the cost of an air conditioning unit for a sum of $10,000 which was not paid as part of the village contract but which was paid as a separate variation. He agreed that the sum was for enhancements and that it was paid to the builder and not to the operator. 20 In further cross-examination Mr Sadlo agreed that in May of 2015 he had appeared for and assisted Mr and Mrs Hopkins in a claim from Unit 39 in a claim against the Respondent relating to the status of their air conditioner. The sole issue in that case was whether the Respondent was obliged to reimburse the applicant for repairs to an air conditioner which the Applicants claimed was an item of capital as defined within s.4 of the Retirement Villages Act. The Tribunal was not satisfied that the Applicants had not demonstrated that the air conditioner required repairs and that it was an item of capital. The application was accordingly dismissed. 21 A further claim brought by Mr and Mrs Hopkins and assisted by the Applicant was dismissed on 10 December 2015 (RV15/54129) by Senior Member Boyce. Neither of these Tribunal applications were referred to in the material relied upon by Mr Sadlo. He referred only to the decision of Senior Member Smith in 2011. Respondent’s Submissions 22 The evidence on behalf of the Respondent consisted of an affidavit of Paul Singer sworn 4 June 2019 and an affidavit of Ross Garlick sworn on the same date. Mr Singer described himself as a director of Australian Retirement Holdings Pty Limited which, at the date of his affidavit, was the owner and operator of Mt Gilead Estate Retirement Village. The village was purchased by Australia Retirement Holdings Pty Limited in 2004 from a company known as Viceroy Gilead Pty Ltd and he was at that stage the sole director of Viceroy and was responsible for the establishment of the village. 23 He deposed that in about November 2010 the Applicant Mr Walter Sadlo and his wife Carola Herta Sadlo entered into a 99 year lease to occupy Villa 49 in 7 the village. A copy of the contract which commenced on 26 November 2010 was attached. 24 Mr Singer specifically noted that an ingoing contribution of $368,000 was paid to Viceroy Gilead and an amount of $22,500 was paid for variations. The amount of $22,500 included the cost and installation of an air conditioning system in Villa 49 and was paid by the Applicant to A and N Building Services Pty Ltd being the builder engaged by the developer of the village. He noted that air conditioning was not, and never had been, a standard fixture or fitting and it was not specified in Section 2 of the lease. 25 Mr Singer claimed that at the request of an incoming resident an air conditioning system could be added to the resident’s pr emises and it was the village operator’s usual practice to consent to and air conditioner being added on the condition that the builder engaged by the developer of the village was engaged to install the air conditioner and that the incoming resident was to pay the builder directly for the air conditioning system including costs of installation thereof. 26 Mr Singer explained in his affidavit that Viceroy had imposed standard conditions of consent to a request for the addition of an air conditioning unit in order to maintain a harmonious relationship between residents in the village in circumstances where:- (a) an air conditioning unit was not standard and there may be some residential premises with and some without air conditioning; (b) in the absence of standard conditions the air conditioning systems would be an item of capital for which Viceroy was responsible under the Retirement Villages Act (NSW) 1999 (c) if Viceroy were to be responsible for the air conditioning systems it would seek to fund the cost of maintaining the air conditioning 8 systems out of recurrent charges which would be charged to all residents whether or not they had air conditioning systems. 27 He pointed out that the Respondent is required to account to an outgoing resident for the air conditioning system at the end of the lease by deducting from the incoming resident’s income contribution an amount which represents the depreciated capital value of the air conditioning system. 28 Mr Singer referred to the various parts of the village contract and also the described process of negotiation for an original village contract. In 2010, Gaye Vagner had discussed various aspects of the proposed contract with the Applicant and his wife. Ms Vagner had originally been employed by Viceroy and was later employed by the current Respondent until 13 July 2016 . 29 A copy of the Purchase Variation Form which included the air conditioner was marked as “PS3” and attached to the affidavit of Mr Singer. He pointed out that the form was signed both by Mr and Mrs Sadlo and by Gaye Vagner on behalf of Viceroy in September 2010. 30 Mr Singer pointed out that following the decision of Senior Member Smith in 2012 (which was based on an error in the leases which had been drawn up for those parties) the manager proposed, in about April 2014, that the respondent assume responsibility for maintenance of residents’ air conditioning systems. At a Budget Meeting held on 27 May 2014 residents present voted and rejected that proposition on the basis it would be unfair to make all residents equally responsible for maintaining the air conditioning units of other residents. Mr Singer suggested that the residents had regarded it as being fairer for individual residents to continue to be responsible for their own air conditioners. He noted that Mr Sadlo had participated in the ballot and had voted to oppose the resolution. 31 The Respondent also sought to rely on an affidavit of Ross Garlick sworn 4 June 2019 which related initially with negotiations involving the Applicant in 2010 and a consideration of the option of residents handing over the 9 responsibility for air conditioners as a capital item in 2015. He quite clearly indicated that Viceroy did not purchase air conditioning was because it was not a part of its funding. Mr Sadlo was permitted to cross-examine both Mr Singer and Mr Garlick and in relation to cross-examination of Mr Singer he simply asked whether Ms Vagner had moved on from the respondent company after an employment dispute, that being a matter which could hardly affect the veracity of the deponent. Mr Garlick was also cross-examined and he agreed that there was an arrangement between Viceroy and the builder, A and N Building, and that he was the payment manager responsible for providing payments under the contract. Decision 32 At the outset it is appropriate to note that the submissions and materials provided by the parties in accordance with directions made on 8 July 2019 were not received from the Registry until after 19 August 2019. At that time it is noted that a document which was received on 14 August 2019 was also included. The document was addressed to “the responsible member NCAT” and it was described as a petition from residents of Mt Gilead Estate to be drawn to the attention of NCAT and indicated that it contained some 258 signatures. It is important to note that this document cannot and will not be taken into account in the determination of the present issues between the parties. It does not comprise evidence provided on behalf of either of the parties nor is it material that was requested from the Tribunal. It is important for parties and others to understand that the Tribunal must address the issues between the parties in the present case on evidence which has been provided by those parties in accordance with direction. Petitions or documents of that nature cannot in any way be considered as they do not constitute evidence upon which a proper decision can be made. 33 In all the circumstances the petition has not been reviewed or considered in any way and its contents must be totally disregarded. 10 34 Although the Applicant initially sought an order that he be reimbursed for the repairs and maintenance of his air conditioner his final submissions appear to seek the following relief: (a) An order pursuant to s.95(3) of the Retirement Villages Act that the Respondent must reimburse him for costs which he incurred in the repair and maintenance of the ducted air conditioning; (b) An order that the Respondent pay him, pursuant to s.128 (1)(m) of the Retirement Villages Act compensation for amounts that he was required to pay directly to the builder at settlement, (c) An order that he be compensated then reimbursed for costs that he incurred in obtaining legal advice and assistance in this matter, (d) An order pursuant to s.92 of the Act that all enhancements referred to in the Enhancement or Variation Schedule of the contract, were items for which the operator was responsible. 35 No application was ever made for leave to amend his claim but each of these matters has been dealt with in submissions by the Respondent and accordingly all matters in his final submissions will be addressed. 36 The Applicant and his wife are lessees of premises being Villa 49 at 72 Glendower Street Gilead under a lease which commenced on 26 November 2010 and which will terminate on 25 November 2109. The lease required a total ingoing contribution of $368,000 prepaid, comprising non-refundable rent in the sum of $10,000 and a refundable loan component of $358,000. 37 On 18 September 2010 both the Applicant and his wife signed a Purchaser Variation Form in which they had made their own selections of variations from the standard furnishings and fittings to be added to their unit upon its completion. 11 38 A Settlement Sheet which is shown as Annexure “D” to the material filed on behalf of the Applicant indicates that on 25 November 2010 the Applicant, through his solicitors Marsdens Law Group, paid the balance to the then village operator in a sum $331,200 and at the same time paid a bank cheque to A and N Building Services Pty Limited in the sum of $22,500 which related to variations. The variations clearly relate to the schedule which was signed by the Applicant and his wife in September 2010 and included a sum of $10,000 for the air conditioner. 39 In order for the Applicant to succeed in his application he must establish that the air conditioning unit, and those other items for which he seeks compensation, are the property of the Retirement Village operator. He has clearly submitted that the ducted air conditioner and all other enhancements referred to in the agreement dated September 2010 were not variations for which he was responsible by virtue of the Lease and the Act. 40 In general terms s.93 of the Retirement Villages Act 1999 requires the operator of a retirement village to maintain each item of capital for which the operator is responsible in a reasonable condition having regard to its age, prospective life and the money paid to the operator by the residents under a Villag e Contract (including ingoing contributions). An “item of capital” is defined in s.4 of the Act to relevantly mean any plant, machinery or equipment used in the operation of the village. 41 Section 92(1) of the Act provides that for the purposes of this Division an item of capital for which the owner of a retirement village is responsible means an item of capital within the retirement village other than an item of capital which (a) is owned by a resident of the retirement village or ...... As has been pointed out by Mr Boatswain on behalf of the Respondent the Applicant must establish what he is asserting, namely, that he does not own the air conditioner and in consequence the operator does own it. On this basis the ownership of the air conditioner is crucial to the applicant’s case. 12 42 It is the Applicant’s contention that the Villa 49 enhancements were optional enhancements amounting to upgrades of the Standard Items and not variations. This contention is not however established factually in the material that he has provided. Mr Boatswain on behalf of the Respondent has submitted that of the twelve Villa 49 enhancements, three could have been described as enhancing the existing residence, namely the concrete driveway wheel strips, the second car space and the mid mounted wall oven which would be more convenient for an elderly person. Disabled toilet might be described as more suitable for a disabled resident than a standard toilet but the other nine items were items which were specifically elected to be acquired by the applicant and his wife. 43 It is significant to note that none of the Villa 49 enhancements were included in the Schedule of Fittings and Finishes being Annexure 2 to the Lease, and in particular the air conditioner was not specified therein. The various fixtures and fittings included in Annexure 2 by Clause 7.2(2)(a) of the Lease were included in the residence and always remained the property of the operator. 44 Where plant machinery or equipment used in the operation of the village was not included in Annexure 2, Clause 7.2 (2) (a) of the lease would not apply and there would not be any acknowledgement by the resident that fixtures fittings and furnishings were and would remain the property of the operator. 45 The question and answer document in relation to the village stated that air conditioning would be provided at the cost of the resident and it is submitted that this document that was explained to the Applicant and his wife at the time when they enquired about occupancy in the village. 46 There is no doubt the Applicant and his wife signed the Purchase Variation Form with provision for signature by the builder and there is further also no doubt that he paid over a separate cheque of $22,500 on settlement of his property. That amount was the total of the variat ions to Viceroy’s joint venture partner, A and N Building Services Pty Limited. 13 47 The total contribution by the residents to enter the village was a sum of $368,000 and that is the amount which was paid to the then village operator, Viceroy Pty Limited. That was the minimum sum payable by any person seeking to require a unit of a similar type to the Applicant and his wife and that sum determined the extent of the loan and ultimately the amount which would be repaid to the Applicant and/ or his estate when the tenancy came to an end. The total ingoing contribution was established under the lease itself and the parties are bound by that contract. See Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] 219 CLR 165. 48 Mr Sadlo refers to a decision of the Tribunal in 2011 involving the same Retirement Village. In the cases referred to and decided by Senior Member Smith (Carol,Bedding & Thomas v Viceroy Gilead Pty Ltd RV10/35928 RV10/35927 and RV10/35920) Senior Member Smith held that it was the obligation of the retirement village to carry out necessary repairs and maintenance to the air conditioning system. It is however a matter of unexplained concern that the Applicant failed to refer to two related and later decisions involving the same village where, in two separate decisions, the Tribunal held that the air conditioning unit was not an item of capital and was not required to be repaired by the village operator (Hopkins v Australian Retirement Holdings Pty Ltd RV15/0433 and Hopkins v Australian Retirement Holding Pty Ltd RV15/54129). In each of those cases the applicants were assisted by Mr Sadlo who was or ought to have been fully familiar with the decisions made therein and the reasons upon which those decisions were based. In neither of those cases was there an appeal brought and the Applicant has failed to explain to the Tribunal any reason why he referred to an earlier decision in his favour yet failed to produce decisions which, in the same circumstances went against him. 49 An analysis of the relevant decisions shows clearly that in the earlier decision before Senior Member Smith the lease was in different terms and it include reference to the air conditioner. In the later matters the lease was in terms which excluded the air conditioner but which had that part of the property referred to in a variation although, in one of the cases involving Mr Hopkins it 14 was suggested that the air conditioning unit had been added somehow to the lease document after it had been executed. In any event the Members dealing with those two later matters had no difficulty in determining that the air conditioning unit was not a capital asset owned by the village operator. 50 Analysis of the approach taken by the Respondent indicates clearly that it was intended to exclude items such as more expensive kitchen fitouts and air conditioning units from the basic village contract because, as explained by Mr Singer, it would have given rise to an inequity where parties without air conditioning or more luxurious fittings were required, through their recurrent charges, to subsidise those who had the benefit of such items. For these reasons the Applicant has failed to demonstrate that any of the enhancement items are items of capital for which the operator is responsible and the whole of his application must fail. Although the Applicant made an application for reimbursement of the legal costs he had incurred there was no application for costs on behalf of the Respondent and having regard to the provisions of s.60 of the Act I find it is appropriate that the provisions of s.60 of the Act should prevail, although there are some matters of concern about the way in which the Applicant appeared to have omitted documents which may not have assisted his case and has failed to refer to decisions of the Tribunal which would have gone against his case notwithstanding that he was well familiar with the outcome of those decisions. 15 ********** I hereby certify that this is a true and accurate record of the reasons for decision of the New South Wales Civil and Administrative Tribunal. Registrar