Chapman v Nambucca Village Pty Ltd

Legislation

1. Section 37 of the Act provides, relevantly: 37 Operator's responsibilities (1) The operator of a community has the following responsibilities - … (f) to the extent that it is within the operator's control, to ensure the continuity of supply of utilities to residential sites occupied by home owners, …
2. Section 56 of the Act provides, relevantly: 56 Retaliatory conduct by operators (1) The operator of a community or a close associate of the operator must not engage in retaliatory conduct against a home owner if the conduct reasonably appears to have taken place wholly or partly in consequence of - … (c) an application made by the home owner to the Tribunal or a court, or … Maximum penalty - 100 penalty units. (2) The Tribunal may, on application by a home owner, make an order resolving a dispute concerning an operator's compliance with this section. (3) In this section - retaliatory conduct by an operator or a close associate of an operator against a home owner includes - (a) amending community rules in a way that is detrimental to the home owner (whether or not it is detrimental to other home owners), and (b) giving or threatening to give the home owner a termination notice, and (c) any action that is of a kind prescribed by the regulations.
3. Regulation 9 of the Residential (Land Lease) Communities Regulation 2015 provides: 9 Retaliatory conduct For the purposes of paragraph (c) of the definition of retaliatory conduct in section 56 (3) of the Act, the withdrawal or withholding of a service or use of a facility (whether or not provided for in a site agreement) is prescribed.
4. Section 64 of the Act provides, relevantly: 64 Power of Tribunal to reduce site fees (1) The Tribunal may, on application by the home owner under a site agreement, make an order that the site fees payable under the agreement be reduced by an amount the Tribunal considers appropriate if it is satisfied - (a) the amenity or standard of the community's common areas has decreased substantially since the agreement was entered into, or (b) a communal facility or service provided at the community when the agreement was entered into has been withdrawn or substantially reduced, or (c) a communal facility or service as follows has not been provided at the community - (i) a communal facility or service described in advertising, done by or for the operator, of which the home owner was aware before the site agreement was entered into, (ii) a communal facility or service described in a document made available to the home owner by the operator before the site agreement was entered into. (2) The Tribunal may consider any of the following documents for the purposes of subsection (1) - (a) the site agreement, (b) a disclosure statement or other document containing information about the community and provided to the home owner by the operator, (c) any relevant advertising made available to the home owner by the operator before the site agreement was entered into, (d) any other document that the Tribunal considers is relevant.
5. Section 157 of the Act provides, relevantly: 157 Orders that may be made by Tribunal (1) The Tribunal may, on application by a party to a dispute or other matter before the Tribunal, or in any proceedings under this Act, make one or more of the following orders - (a) an order that restrains an action in breach of this Act or a site agreement or collateral agreement, (b) an order that requires a person to comply with an obligation under this Act or a site agreement or collateral agreement, … (d) an order for the payment of an amount of money, (e) an order for the payment of compensation, … (j) an order for anything else necessary or desirable to resolve a dispute. (2) An order under subsection (1)(a) or (b) may be made even though it provides a remedy in the nature of an injunction or order for specific performance in circumstances in which such a remedy would not otherwise be available.

Home Owner's case

1. The Home Owner's evidence and submissions included the following.
2. The Operator's actions in ceasing to supply electricity and instead engaging a third party supplier to supply to the Home Owner was retaliatory conduct, being the withdrawal or withholding of a service, contrary to section 56 of the Act, as it was conduct which reasonably appeared to have taken place wholly or partly in response to her application to the Tribunal for repayment of overpaid electricity charges. The change to Humenergy took place between the date of the Tribunal's decision on the Home Owner's application and when the repayment was made by the Operator. The proximity, both temporally and in subject matter, between the proceedings and the withdrawal of the services strongly indicates the Operator's actions were wholly or partly retaliatory within the meaning of section 56.
3. The Operator's unilateral decision to cease supplying the Home Owner with electricity also constituted a breach of the site agreement, and the applicant seeks orders under section 157 of the Act requiring compliance with the site agreement and for compensation in the amount of the higher electricity costs being imposed.
4. As a result of the Operator ceasing to supply electricity, a communal facility or service provided at the community when the site agreement was entered into has been withdrawn or substantially reduced. An ongoing site fee reduction from 5 February 2020 in the amount of $10 per week (reflecting the increase in electricity cost following the move to Humenergy) should remain in place until the Operator restores the withdrawn service or the site agreement ends.
5. The on-supply of electricity by an operator is a different service to the supply of electricity by an electricity retailer for the purposes of section 64 of the Act, and there has therefore been a withdrawal of a service in the sense that on-supply of electricity by the Operator is no longer occurring; or there has been a substantial reduction under section 64. This is because the supply of electricity is no longer bound by the Act (including the price restrictions in section 77), and is therefore not being provided on the same terms as existed at the time the site agreement was entered into, and the cost to home owners for electricity has increased. Also, the benefits of having the Home Owner's supplier on-site to attend to any issues, concerns or disputes no longer exist, and ability to pay for electricity onsite has been removed.
6. The Home Owner acknowledges that, in practice, it may be difficult to order the Operator to resume supply of electricity. An approximate remedy would be for the Operator to compensate the Home Owner for the increased costs in an ongoing manner, by way of a reduction in site fees for the duration of the site agreement, reflecting the DSC charged by Humenergy of 151.25 cents (including GST) per day. The claim is for $10 per week.
7. Under the site agreement, the Operator is obliged to be the supplier of electricity to the Home Owner. The applicant relies on clauses 8 to 10 of the site agreement, which apply because the Operator was "the supplier or re-supplier of a utility to [the] residential site." It is a term of the site agreement that the Operator supplies the Home Owner with electricity and in turn that the Home Owner pay the Operator for the use of electricity at the site. This is supported by the Disclosure Statement and the Questions and Answers document provided by the Operator at the time the site agreement was entered into. The Operator's decision to purportedly withdraw from their role as the supplier of electricity was a breach of the site agreement and an impermissible attempt to unilaterally vary the terms of the site agreement.
8. To the extent necessary, the Home Owner seeks an extension of time for the bringing of the application.

Operator's case

1. The Operator's evidence and submissions included the following.
2. The implementation of the Reckless method, combined with the increasing complexity surrounding the provision and charging of electricity due to the changing regulatory environment led it to find a retailer who could remove the burden on the Operator who is not in the business of supplying electricity. It was incumbent on the Operator to identify more efficient ways of operating. The decision to cease on-selling electricity to the Home Owner was not a result of the Home Owner's application to the Tribunal. The expiration of the previous electricity contract for the park allowed the incoming retailer the ability to contract their own supply.
3. The obligation under section 37(1)(f) of the Act has been met. There is no requirement for the Operator to be the retailer or on-seller of utilities. As electricity has continued to be supplied, there is no withdrawal or reduction in service, and the Operator has not failed to comply with an obligation under the Act or site agreement. It follows that no compensation is payable.
4. Even if there has been a withdrawal or substantial reduction in a relevant service, as a result in the change in arrangements for the supply of electricity, the supply of electricity still continues and no compensation or reduction in site fees is warranted. That would be a direct cost to the Operator, who does not benefit from any perceived cost the Home Owner is claiming. Utilities have never been charged as a part of site fees.

Reduction in site fees

1. An application for an order under section 64 may be made during the period that the site agreement is in force, and the application is therefore within time.
2. I am satisfied that there should be a reduction in site fees.
3. I am satisfied that "a communal facility or service provided at the community when the agreement was entered into has been withdrawn or substantially reduced" for the purposes of section 64 of the Act, by the Operator ceasing to on-sell electricity to the Home Owner. My reasons are as follows.
4. Electricity is "a service". If confirmation were necessary, that is provided by the definition of the term "utility" in section 4 of the Act: utility means any of the following services - (a) electricity, (b) gas, (c) sewerage, (d) water, (e) another service prescribed by the regulations.
5. Prior to February 2020, the Operator provided electricity to each home owner in the park through the embedded network. That can be considered a "communal service".
6. That service has been withdrawn or substantially reduced by the Operator no longer providing electricity by way of on-selling it to home owners within the park. It is true that electricity is provided, but that is now done by an external provider rather than being an on-selling by the Operator. I am satisfied it is a withdrawal of the service by the Operator which has been replaced by a different service, being a supply of electricity by an external provider. The supply is on different terms - it is now governed by a contract between the Home Owner and the external provider rather than by the Act. Had the Home Owner not entered into a contract with the external provider, it may be the supply of electricity would not continue. An example of the different terms for the supply is that the Home Owner is now charged the DSC, for which no equivalent appears to have been payable to the Operator immediately prior to February 2020, and the Home Owner's costs for electricity have increased approximately by that amount.
7. The Tribunal has a discretion as to whether to reduce the site fees, and in respect of the amount by which they should be reduced.
8. Although electricity continues to be supplied to the Home Owner's site, they have incurred additional costs of approximately $10 per week since the Operator ceased the supply of electricity. Had the withdrawn service been replaced by a similar service with no adverse consequences on the Home Owner, I would not have exercised my discretion to reduce the site fees. But that is not the case here.
9. The Operator submits that electricity has never been charged as part of site fees. However a relevant factor in relation to whether site fees for a community should be increased includes any increase in the outgoings and operating expenses for the community since the previous site fees increase. (See section 74 of the Act.) A practical effect of the implementation of the Reckless method appears to have been that home owners were not paying to a park operator as much as they had been previously for electricity. Consequently, an operator's outgoings and operating expenses may have increased and it is conceivable that that may be reflected in site fee increases.
10. I am satisfied that the discretion should be exercised to reduce the Home Owner's site fees by the requested $10 per week from the beginning of February 2020 to the date of the hearing (5 February 2021), as that reflects the Home Owner's loss as a result of the withdrawal of the service, and continuing until the Home Owner's site fees are first increased after that date.
11. The Home Owner seeks a reduction in site fees on an ongoing basis, until the Operator restores the withdrawn service or the site agreement ends. I am not satisfied however that that order should be made. I am satisfied that the reduction should continue until there is a site fee increase in accordance with the Act.
12. A collective application has been made to the Tribunal in respect of a recent site fee increase notice issued by the Operator to the Home Owner and other home owners in the community. In my view, consideration of what the site fees should be for the Home Owner should be considered in the context of that application, together with the position of the other home owners in the community. That will permit the relevant issues to be considered, including, as relevant, consideration of the impact on the Operator's expenses and outgoings of the implementation of the Reckless method and the cessation of the on-supply by it of electricity; and whether the increase is fair and equitable in the operation of the community.

Breach of agreement

1. The claim for a reduction in site fees was put as an alternative to the claim based on breach of the site agreement. In light of my conclusions in relation to the claim for a reduction in site fees, it is not necessary to consider the breach claim any further. Even if there were a breach, which I am not deciding, I would not be persuaded that any further relief than that already allowed would be warranted. I would not have ordered that the Operator re-commence on-selling electricity to the Home Owner.

Retaliation

1. For the same reasons, I do not need to further consider the retaliation claim.
2. In any event, I would not have been satisfied that the Operator has engaged in retaliatory conduct within the meaning of section 56 of the Act because I am not satisfied the decision to no longer on-sell electricity to home owners was taken wholly or partly in consequence of the Home Owner's application to the Tribunal for repayment of overpaid electricity charges. The implementation of the Reckless method for charging residents was, as the Operator acknowledges, part of the reason for the change, with the timing of the change apparently aligning with the end of the previous electricity supply contract. The implementation of that method did result in the Operator not recovering as much from home owners for electricity as they had previously. It is perhaps not surprising the Operator decided to take steps to alleviate that, which may have taken the form of an increase in site fees. The Operator however decided to cease on-selling electricity to residents.
3. It does not necessarily follow however that, because the decision to cease on-selling electricity was wholly or partly in consequence of the implementation of the Reckless method, that it was wholly or partly in consequence of the implementation of the Home Owner's application to the Tribunal, and I am not satisfied that was the case.

Conclusion

1. The orders are: 1. The site fees payable by the Home Owner under the site agreement are reduced by an amount of $10 per week from 5 February 2020 to 5 February 2021. 2. To give effect to order (1) above, the Operator is to pay to the Home Owner the sum of $520 within 14 days of the date of this decision. 3. The reduction in the site fees by an amount of $10 per week is to continue from 5 February 2021 until the site fees are (or were) first increased in accordance with the Residential (Land Lease) Communities Act 2013 after that date.

I hereby certify that this is a true and accurate record of the reasons for decision of the Civil and Administrative Tribunal of New South Wales. Registrar DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 04 August 2021