ARCADIA WATERS MIDWEST PTY LTD -v- DARCEY [2025] WASC 92 (21 March 2025)

(a) an affidavit in support from Gordon Bragg, a solicitor and director of Arcadia's lawyers, sworn 19 June 2024 (First Bragg Affidavit);

(b) submissions filed 19 June 2024;

(c) a second affidavit from Mr Bragg sworn 11 February 2025 (Second Bragg Affidavit);

(d) further submissions filed 5 March 2025; and

(e) a third affidavit from Mr Bragg sworn 18 March 2025 (Third Bragg Affidavit).

1. Arcadia has also filed affidavits confirming that each Resident has been served with:

(a) a copy of the First Mr Bragg's Affidavit;

(b) the Form 76 Notice of Appointment to Hear Originating Summons; and

(c) Listing of the Application by the Supreme Court dated 27 November 2024 specifying that the hearing will be on 17 March 2025.

I am satisfied that Arcadia has complied with Rules of the Supreme Court 1971 (WA) (RSC) O 58 r 19(3). None of the defendants filed a notice of appearance or appeared at the hearing on 17 March 2025 (though the executor for the ninth defendant was in the gallery).

1. The tenth defendant is the Commissioner for Consumer Protection (Commissioner), as is required by RVA s 22(2). The Commissioner entered an appearance on 16 July 2024 and filed submissions on 29 October 2024. The Commissioner does not act as a representative of the residents under the retirement village scheme. Rather, the Commissioner's role is to ensure that all relevant considerations are drawn to the court's attention.[1]
2. The eleventh defendant is the Commissioner for Titles, and the twelfth defendant is the Registrar of Titles. They took no part in the proceedings, but were properly joined to enable the orders made by the court to be given effect to.

1. RVA s 22 in full provides:
   1. Termination of retirement village scheme

(1) A retirement village scheme cannot be terminated without the approval of the Supreme Court while a person who has been admitted to occupation of residential premises under the scheme remains in occupation of those premises.

(2) The Commissioner is a party to any proceedings in which the Supreme Court's approval of the termination of a retirement village scheme is sought.

(3) If the Supreme Court approves the termination of a retirement village scheme it may make such orders as it thinks necessary to protect the interests of existing residents.

1. It is evident that there are two requisites to the power of the Supreme Court to terminate a retirement village scheme:

(a) the scheme must at law be a 'retirement village scheme'; and

(b) there must be at least one person who has been admitted to occupation of residential premises under the scheme who remains in occupation of those premises.

1. If these two prerequisites are established, then the power of the Supreme Court to terminate the scheme is enlivened. The exercise of that power is in the discretion of the court.[2] In exercising the discretion, the court may make such orders as it thinks necessary to protect the interests of existing residents.

1. The term 'retirement village scheme' is defined in RVA s 3 to mean (so far as is relevant):

retirement village scheme means a scheme established for retired persons or predominantly for retired persons, under which -

(a) residential premises are occupied in pursuance of a residential tenancy agreement or any other lease or licence; or

...

but does not include any such scheme under which no resident or prospective resident of residential premises pays a premium in consideration for, or in contemplation of, admission as a resident under the scheme

1. Other relevant definitions in RVA s 3 are:

premium means a payment (including a gift) made to the operator of a retirement village in consideration for, or in contemplation of, admission of the person by or on whose behalf the payment was made as a resident in a retirement village (including any such payment made for the purchase of residential premises in a retirement village or for the purchase, issue or assignment of shares conferring a right to occupy any such residential premises) but does not include - (a) any such payment excluded by regulation from the ambit of this definition; or (b) a levy or recurrent charges;

residential premises means any premises or part of premises (including any land occupied with the premises) used or intended to be used as a place of residence and includes a hostel unit;

residential tenancy agreement has the same meaning as in the Residential Tenancies Act 1987;

retired person means a person who has attained the age of 55 years or retired from full-time employment or a person who is or was the spouse or de facto partner of such a person;

retirement village means a complex of residential premises, whether or not including hostel units, and appurtenant land, occupied or intended for occupation under a retirement village scheme or used or intended to be used for or in connection with a retirement village scheme.

1. I agree with the following observation of Pritchard J in Retirement Care Australia:[3]

Some of the terms used in s 22 are defined in the RV Act. Others are not. Determining the meaning of s 22 as a whole, and how it was intended to be applied, therefore requires a consideration of the defined meaning of any terms, and the ordinary meaning of the remaining words in the section, considered within their context. That context includes matters such as the meaning of the language used within the statute when viewed as a whole, the provisions of the statute as a whole and how they work together, and the purpose to which the statute was directed. A construction that would promote the purpose or object underlying the statute is to be preferred to a construction that would not promote that purpose or object.

1. Her Honour went on to consider the definition of a 'retirement village scheme' in some detail. For present purposes, it is sufficient for me to agree with her Honour that there are three elements to a retirement village scheme:[4]

(a) the scheme must be established for 'retired persons' or predominantly retired persons;

(b) the scheme is one in which 'residential premises' are occupied by those retired persons; and

(c) at least one resident or prospective resident has paid a premium in consideration for, or in contemplation of, admission as a resident under the scheme.

1. In relation to the Scheme, as to the first requirement, as mentioned, Mr Bragg deposes the scheme by-laws for the survey strata plan contains a restricted use condition that the occupancy of the dwelling be restricted to at least one occupant being disabled or physically dependant or aged person, or the surviving spouse of such a person.[5] However, the land was only subdivided in March 2022. Prior to this date, there was a memorial on the title to similar effect.[6] I am satisfied that the scheme is for retired persons or predominantly retired persons.
2. As to the second requirement, each resident has a right to occupy their respective unit under the lease for life agreement. Although these leases for life are not subject to the Residential Tenancies Act 1987 (WA),[7] they are nonetheless 'any other lease'. The first to eighth defendants currently live in their respective units. So I am satisfied that each unit is a residential premise.
3. As to the third requirement, in my view, the Lease Loan Amount is a 'payment.... made to the operator of a retirement village in consideration for, or in contemplation of, admission of the person by or on whose behalf the payment was made as a resident in a retirement village'.
4. It follows that I am satisfied that the Scheme is a 'retirement village scheme' for the purposes of the RVA s 22. The Commissioner did not argue to the contrary.

Is there at least one person who has been admitted to occupation of residential premises under the scheme who remains in occupation of those premises?

1. Mr Bragg deposes that each of the first to eighth defendants remain in occupation of the respective lots over which they enjoy leases for life.[8]
2. Accordingly, I am satisfied that court approval is required to terminate the Scheme and that the court's power to do so is enlivened. Again, the Commissioner did not argue to the contrary.

1. In Retirement Care Australia Protection Pritchard J made the following observation in relation to the discretion, which I endorse:[9]

Section 22 clearly gives the court a discretion as to whether to approve the termination of a retirement village scheme. That discretion is unconfined in its terms. The factors which may be taken into account in the exercise of that discretion are similarly unconfined, save in so far as there may be found in the subject matter, scope and purpose of the RV Act some implied limitation on the factors to which the court may legitimately have regard.

The fact that the court may approve the termination but with such orders as it thinks necessary to protect the interests of existing residents conveys the Parliament's intention that the protection of the interests of existing residents should be at the forefront of the court's consideration of whether to grant approval for the termination of a scheme, and if so, as to whether any orders should be made to protect the interests of the residents. It was common ground between the parties that the interests of the existing residents were the paramount consideration in the exercise of the court's discretion. However, no party suggested that that was the only consideration to which the court could, or should, have regard.

...

In determining whether to approve the termination of a retirement village scheme, the court has a wide discretion. It is not necessary to determine the factors which may be relevant to the exercise of that discretion, save to make two observations. First, the interests of existing residents will be at the forefront of the court's consideration in exercising that discretion. Secondly, if a statutory charge applies to the land in the retirement village, and if it is not proposed that that charge be extinguished by repayment, the continued existence of the charge would ordinarily weigh very heavily against the exercise of discretion to approve the termination of the retirement village scheme. It does not appear to have been contemplated by the Parliament that a scheme could be terminated without the repayment of the statutory charge.

1. In HN Asset Pty Ltd v Commissioner for Consumer Protection, Archer J identified six factors which may be relevant to the exercise of the discretion:[10]

(a) whether the land is subject to a statutory charge;

(b) the differences between the existing residents' terms of occupation and the terms that will apply if the scheme is terminated, including their security of tenure and continued access to presently provided services;

(c) if any existing residents are entitled to share in any increase in capital value, the impact of the proposed termination and future use of the land on the capital value;

(d) the benefits or detriments to existing residents of the retirement village operator's proposed future use of the land;

(e) the attitude of the existing residents to the termination of the scheme; and

(f) the impact on the operators if approval is not granted.

1. Perhaps the most significant factor in relation to the termination is how Arcadia intends to deal with the Lease Loan Amount. The Lease Loan Amount (less agreed deductions) is a 'premium' for the purposes of the RVA. By RVA 19(3) and s 20(1), where a premium is paid under a contract by a resident of a retirement village on terms that it will be repaid in whole or in part on the happening of a contingency, the resident's right to repayment of the premium in whole or in part becomes a charge on the land in the retirement village.
2. Under each of the contracts entered into with the residents of the Scheme, rights to repayment of the Lease Loan Amount were provided for on the termination of the lease for life.
3. Although the RVA does not preclude the termination of a retirement village scheme whilst a statutory charge remains in place, the interests of the existing residents will be at the forefront of the court's consideration in relation to whether to grant approval for termination. As such, it has been said that a court will not ordinarily approve the termination of the retirement village scheme where a statutory charge to a resident remained in place.[11]
4. Crucial to the outcome is the terms of the Deed. As regards Arcadia, its core obligations are contained in cl 3:[12]

Covenants by Arcadia

3.1 Subject to the Residents complying with their obligations under this Deed Arcadia covenants with the Residents to:

(a) apply to terminate the retirement village scheme under the provisions of section 22 of RVA;

(b) apply for a release of the charge under the Memorial in accordance with section 15 of RVA and the cancellation of the Memorial registered on the title to each Lot; and

(c) on termination of the Retirement Village Scheme and release of the Memorial to transfer to each Resident legal and freehold ownership of his/her respective Lot under the provisions of the Strata Titles Act free from payment of any consideration, costs and encumbrances (save for the Restrictive Use, interests notified on the Strata Plan, easements registered on each Certificate of Title and the provisions of the Strata Titles Act) in exchange for the surrender of the Resident's Lease and the Resident releasing Arcadia from repayment of the Lease Loan and other monies under the Resident's Lease.

3.2 Arcadia will be responsible at its cost for obtaining all approvals from all relevant authorities to give effect to the transactions as outlined in Clause 3.1.

3.3 Arcadia will be responsible for the payment of all transfer duty payable on this Deed under the Duties Act 2008 and the transfer of the legal ownership of the Lot to each Resident for his/her Residence.

3.4 Arcadia must ensure that the Residents are entitled to access, on the same terms as other owners and occupants, any communal facilities that may possibly be constructed by Arcadia on the Land following termination of the Retirement Village Scheme.

3.5 If Arcadia cannot on terms and conditions acceptable to it:

(a) terminate the Retirement Village Scheme under the provisions of section 22 of RVA; and

(b) obtain the release of the charge under the Memorial in accordance with section 15 of RVA and the cancellation of the Memorial registered on the title to the Land

then Arcadia may at its option by notice in writing to the Residents terminate this Deed and if this Deed is terminated no party shall have any claim on any other party and this Deed will have no further effect.

1. As regards each resident, their core obligations are set out in cl 4:[13]

Covenants by Residents

4.1 Each of the Residents jointly severally and irrevocably covenant with Arcadia and each other to:

(a) surrender his or her Lease under the provisions of RVA;

(b) release Arcadia from repayment of the Lease Loan and any other monies payable by Arcadia to the Resident under the provisions of the Resident's Lease; and

(c) do all things and sign all documents as may be required by Arcadia to give effect to the terms of this Deed including as may be required by Arcadia, at its cost, to apply to terminate the Retirement Village Scheme under the provisions of section 22 of RVA

on condition that each Resident obtains legal and freehold ownership under the provisions of the Strata Titles Act of the Lot for his/her Residence as specified in Item 8 free of payment of any consideration and encumbrances save for the Restrictive Use, interests notified on the Strata Plan, easements registered on each Certificate of Title and the provisions of the Strata Titles Act.

4.2 The Residents jointly severally and irrevocably covenant with Arcadia and each other to indemnify and keep Arcadia indemnified from all costs expenses liabilities claims, demands and losses incurred by or for which Arcadia may become liable for or arising from or incidental to a Resident failing to perform or comply with the terms of this Deed.

1. In essence the proposal put forward by Arcadia, and agreed to by each resident, is that they will exchange their benefits and protections[14] under the RVA for freehold title to the strata lot for the unit in which they reside. They forgo the statutory charge for, in effect, an early in specie repayment of their Lease Loan Amount by virtue of transfer of title. Arcadia does not seek to reduce the notional Lease Loan Amount by any Deferral Facility Fee or repair costs that it could have changed on the termination of the lease for life. Moreover, the Lease Loan Amount in each case (what the resident gives up) is less than the valuation of the lot (what the resident gets). So each resident gets the benefit of the increase in capital value of their unit over the time of their occupancy.
2. In my view, as a matter of law, transfer of the property as consideration for Arcadia retaining the Lease Loan Payments is a permissible way for the statutory charge to be extinguished. I note that in Retirement Care Australia Pritchard J observed that, having regard to the view her Honour took of the RVA, repayment of the entry premium was the only way in which (other than as a result of sale of the land by order of the court) the charge can be extinguished.[15] However, what the Deed provides is in effect repayment by in specie transfer. It is the same in substance to the:

(a) Lease Loan Amount being repaid to the resident; and

(b) the resident paying to Arcadia a sum equivalent to the Lease Loan Amount as the purchase price for the particular lot.

So the view I have taken is consistent with the substance of the view adopted by Pritchard J. I also note that in Swancare, her Honour approved the termination of a scheme whereby, untimely, a resident would end up being the registered proprietor of a strata unit, albeit on the basis that the entry loan was repaid before termination of the scheme. For the avoidance of any doubt, and the assistance of the Registrar of Titles, there should be a declaration to the effect I have just described.

1. Counsel for Arcadia further advised the court that should the court's approval be obtained, it will make an application to the Registrar of Titles to remove the memorial on the titles under RVA s 15(8). This will remove any impediment for each resident (or their executor) to be able to sell their strata lot in due course.
2. Another important consideration is that every resident (or their executor) has consented to the termination through execution of the Deed. Their rights of occupation remain, and indeed are strengthened from that of a lessee to that of a registered proprietor.
3. A further factor favouring termination of the Scheme is that Arcadia never constructed the 'private village clubhouse' which in the Fixed Lease Loan it said it intended to do.[16] As the residents never received what they initially contracted for, the outcome where they now receive freehold title to a strata lot is in my view both fair and appropriate.
4. I accept Mr Bragg's evidence that Arcadia has formed the view that further construction and operation of the Scheme would not be financially viable. Its interests are relevant[17] and strongly favour the termination of the Scheme. If the Scheme is not terminated, it will be left unfinished, with the Residents being left with the restrictions of being in a retirement village scheme, without any of the benefits (for example, a clubhouse).
5. The Commissioner submits that the fundamental question for the Court in this case is whether the terms of the Deed provide sufficient protection of the interests of former residents, such that the court may exercise its discretion to approve the termination of the scheme on the basis that the residents will receive proprietorship (in lieu of repayment of their entry premiums), and the charges terminated, only after the scheme is terminated. The Commissioner does not, in principle, oppose the relief sought by Arcadia. However, as Arcadia's proposal is to transfer ownership of the properties to the residents, in lieu of repayment of the entry premiums, only following termination of the scheme, the Commissioner submits that if the Court exercises the discretion favourably to Arcadia, it may be appropriate to make the order for the termination of the Scheme subject to orders that condition the taking effect of the termination on the completion by Arcadia of its obligations under the deed.
6. Counsel for Arcadia submits that a conditional order of this kind may create uncertainty and be impractical. I agree.
7. However, I also agree with the Commissioner that completion of Arcadia's obligations under the Deed is essential to the termination being in the interests of each resident. Something more is required than the Residents being left with their common law right to enforce the Deed. That something more can be met by making termination of the Scheme conditional upon Arcadia filing and serving a written undertaking to the court, executed by its directors, to comply with the terms of the Deed. I would then give liberty to each defendant, including the Commissioner, to apply in relation to the compliance by Arcadia with this undertaking.
8. Aside from the issue of ensuring Arcadia complies with the Deed, there is no factor suggesting that the discretion should not be exercised to terminate the Scheme.
9. In my view, the arrangement put in place by the Deed both protects and advances the interests of each resident. The court should exercise its discretion to terminate the Scheme.
10. The appropriate final orders are:
    1. Subject to paragraph 2, pursuant to section 22 of the Retirement Villages Act 1992 (WA) the court approves the termination of the retirement village scheme on the land at 11 Fletcher Street, Port Dennison, Western Australia, being Lot 742 on Deposited Plan 29885 in Certificate of Title Volume 2549 Folio 709.
    2. The approval of the court in paragraph 2 is conditional on the plaintiff filing and serving a written undertaking to comply with the terms of the 'Deed - Arcadia Waters Port Denison' dated 3 November 2022 within 7 days of the date of this order.
    3. There be liberty to each defendant to apply in relation to the compliance by the plaintiff with the undertaking in paragraph 2.
    4. The court declares that upon the duly executed transfer by the Plaintiff of each relevant Lot to the First to Eighth Defendants, and to the executor of the Ninth Defendant, the statutory charges on each relevant Lot under s 20 of the Retirement Villages Act 1992 (WA) will be extinguished.
    5. There be no order as to costs.

Richard Bentley Ellames and Charmaine Verna Ellames (second and third defendants)

Roy Smith and Barbara Joan Smith (fifth and sixth defendants)

Ricky Bones as Executor of the Estate of Barry James Stewart (ninth defendant)

I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.

[1] Retirement Care Australia (Hollywood) Pty Ltd v Commissioner for Consumer Protection [2013] WASC 219 [127] (Pritchard J) (Retirement Care Australia).

[3] Retirement Care Australia [66] (references omitted).

[4] Retirement Care Australia [81] - [97].

[5] First Bragg affidavit, par 12, page 9.

[7] Pursuant to reg 3(1) of the Residential Tendencies Regulations 1989 (WA) any residential tenancy agreement in respect of premises in a retirement village is a prescribed agreement falling outside of the Residential Tenancies Act 1987 (WA).

[9] Retirement Care Australia [190] - [191], [203] (references omitted). See also: Swancare Group Inc Commissioner for Consumer Protection [2014] WASC 80 [94] - [110] (Pritchard J) (Swancare Group).

[10] HN Asset Pty Ltd v Commissioner for Consumer Protection [2024] WASC 358 [36] (Archer J), drawing on the approach of McIntyre J in Keyton Holdings Pty Ltd [2024] SASC 66 [61].

[11] Retirement Care Australia [158] - [159], [164], [186], [189].

[12] First Bragg Affidavit, pages 431 - 432.

[14] Retirement Care Australia [164].

[15] Retirement Care Australia [193].

[16] See for example, First Bragg Affidavit, page 33.