HN ASSET PTY LTD -v- COMMISSIONER FOR CONSUMER PROTECTION [2024] WASC 358 (26 September 2024)

1. The plaintiffs own land which is subject to a retirement village scheme. The plaintiffs seek approval to terminate the scheme. They require approval due to the Retirement Villages Act 1992 (WA) (the Act).[1] The Act gives the Court a broad discretion, unconfined in its terms, to approve the termination of a retirement village scheme.
2. Further, as required by the Act,[2] a memorial has been registered against the land, recording that the land is being used for the purpose of a retirement village scheme and may be the subject of charges securing repayment of money to residents in the retirement village. The plaintiffs seek a declaration to the effect that the land is not subject to such a charge. It is for the Registrar of Titles to decide whether a memorial should be removed. However, in making that decision, the Registrar may wish to consider whether there are any such charges. Accordingly, if the plaintiffs prove there are no such charges, there may be utility in a declaration to that effect.
3. The residents do not oppose the relief sought. Nor does the Commissioner for Consumer Protection. The Registrar did not file an appearance.
4. The issues are therefore:

(1) Should the Court exercise its discretion to approve the termination of the retirement village scheme?

(2) Should a declaration be made to the effect that the land is not subject to a charge securing repayment of money to residents?

1. For the reasons that follow, I would give approval to terminate the scheme and would make a declaration to the effect that there are no statutory charges on the land.

Should the Court exercise its discretion to approve the termination of the retirement village scheme? Facts

1. The first plaintiff, in its capacity as trustee for the HN Operations Trust, is the owner and operator of a retirement village known as 'Hollywood Village'.[3]
2. Hollywood Village is situated on three lots of land in Nedlands, Western Australia, referred to as Lots 101, 102 and 103 (together, the Land).[4] The Land is subject to a retirement village scheme.[5] A memorial, E9878333, is registered against the Land to notify that it is being used for the purposes of a retirement village.[6] However, only Lot 101 is used as a retirement village. Lot 102 contains an aged care facility and Lot 103 is vacant.[7]
3. The first plaintiff, in its capacity as trustee for the HN Resi Assets Trust, is the registered proprietor of Lots 101 and 103.[8] The second plaintiff is the registered proprietor of Lot 102.[9]
4. The first defendant (Commissioner) is required to be party to these proceedings by s 22(2) of the Act. The role of the Commissioner is to ensure that all relevant considerations are drawn to the Court's attention.[10]
5. The thirty‑seventh defendant is the Registrar of Titles.
6. The remaining defendants are, or were, residents of Hollywood Village.
7. The third, fourth, fifth, sixth and ninth defendants are residents of Hollywood Village under long‑term residency agreements.[11] Those agreements were entered into between 1983 and 2005. It is likely that each resident was 55 years of age or older at the time he or she entered into the agreement. First, for those who signed agreements after the Act commenced operation,[12] retirement schemes under the Act were schemes established for, or predominantly for, retired persons. 'Retired persons' are defined to be persons who are at least 55 years of age or retired from full‑time employment, or a person who is or was the spouse or de facto partner of such a person.[13] Second, the village was aimed at those in retirement. Assuming each of the long‑term residents was at least 55 years of age at the time he or she entered into the agreement, each must now be at least 74 years of age.[14]
8. The tenth and nineteenth defendants were residents of Hollywood Village when these proceedings commenced, but have since died.[15]
9. All the other defendants are residents of Hollywood Village under short‑term residency agreements terminable on one month's written notice.[16]
10. Of the existing residents, only the fourth defendant (a long‑term resident) paid an entry contribution on commencing her residency at Hollywood Village. That entry contribution was repaid in May 2022. The first plaintiff no longer holds any entry contributions.[17]
11. All the long‑term residents have entered transition deeds by which they consent to the termination of the scheme and the removal of the memorial. Under the transition deeds, they will obtain tenure in their current residences in similar terms to their existing agreements (but governed by the Residential Tenancies Act 1987 (WA) instead of the Act).[18] The terms of the proposed new arrangements are not identical to the terms of the current arrangements.
12. In some respects, the terms are more favourable to the residents. For example, the first plaintiff will now pay for the cost of the residents' reasonable outgoing calls and water consumption.
13. In two respects, the terms are arguably less favourable.
14. First, under the existing terms, the long‑term residents are entitled to remain for life, subject to limited exceptions. Under the new terms, the residents are entitled to remain for 20 years, subject to almost identical exceptions. However, the limit of 20 years may be of limited impact, as I have inferred that all of the long‑term residents are currently at least 74 years old. Further, the new terms include an indemnity from the first plaintiff in favour of the resident against any costs, losses or damages suffered by the resident caused by the first plaintiff exercising a right to terminate the tenancy agreement under the Residential Tenancies Act which is not available under the Act or would not have been available under the current terms.
15. Second, under the existing terms, a special resolution of the residents is required to vary or cancel any included amenities and services of Hollywood Village. Under the new terms, while residents will have some input into the provision of amenities and services as part of their participation rights, a special resolution is not required to vary or cancel any included amenities and services. However, the new terms include an indemnity from the first plaintiff in favour of the residents for any loss or damage suffered by the residents caused by any changes to the included facilities and amenities which the first plaintiff would not have had a right to make under the existing arrangements.
16. I am satisfied that, overall, the long‑term residents will not be worse off under the new arrangements.
17. All but one of the defendants on short‑term tenancy agreements have also entered transition deeds by which they consent to the termination of the scheme and the removal of the memorial. They will obtain tenure in their current residences on similar terms to their existing agreements, again governed by the Residential Tenancies Act.[19] Again, the terms of the proposed new arrangements are not identical to the terms of the current arrangements.
18. In some respects, the terms are more favourable to the short‑term residents. In particular, they will be guaranteed a minimum period of residency of one year from the date that they executed the transition deed, compared to the month‑to‑month contracts they are currently under. Further, as with long‑term residents, the first plaintiff will now pay for the cost of the short‑term residents' reasonable outgoing calls and water consumption.
19. In relation to some of the short‑term residents, however, the terms of the proposed new arrangements are less favourable in one respect. Under some of the short‑term residents' existing contracts, a special resolution of the residents is required to vary or cancel any included amenities and services of Hollywood Village. Unlike the terms proposed for the long‑term residents, the terms of the new arrangements for short‑term residents does not include an indemnity. However, given that the short‑term residents are currently on month‑to‑month contracts, I do not consider this to be a substantial detriment.
20. I am satisfied that, overall, the short‑term residents will not be worse off under the new arrangements.
21. The thirty‑sixth defendant (who is on a short‑term residency agreement) is the only defendant who has not executed a transition deed. Her residency agreement was terminated in February 2024, but she has refused to vacate her unit. She has not paid rent since July 2023. The first plaintiff has commenced an action in the State Administrative Tribunal to remove her from the unit.[20] Granting the relief sought will not have any impact on her legal rights.[21]
22. All of the defendants who entered transition deeds were offered the opportunity to obtain independent legal advice and medical advice of their capacity to understand the terms of the transition deeds, at the first plaintiff's expense.[22] Of the defendants on long‑term residency agreements, only the ninth defendant did not take up the invitation to obtain legal advice.[23] All of the signed transition deeds included a certificate of capacity from a medical practitioner.
23. Once the last long‑term tenancy has concluded, the first plaintiff will end any remaining short‑term tenancies, with a view to redeveloping Lots 101 and 103.[24]

1. Section 22(1) of the Act provides that 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.[25] As there are such persons in this case, the Court's approval is required.
2. Section 22(2) of the Act requires the Commissioner to be a party to any proceedings in which the Court's approval of the termination of a retirement village scheme is sought.
3. Section 22(3) provides that, if the 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.
4. As observed by Pritchard J[26] in Retirement Care Australia (Hollywood) Pty Ltd v Commissioner for Consumer Protection (citations omitted):[27]

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 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.

1. Her Honour said that the requirement that the Commissioner be a party to an application for approval under s 22(1) is consistent with Parliament's intention that the protection of the existing residents' interests should be at the forefront of the Court's consideration.[28] Her Honour also noted that:[29]

Although clearly [the Act] seeks to strike a balance between the rights and obligations of owners and residents, the balance falls heavily in favour of the protection of the interests of the residents of retirement villages, particularly in the long term certainty and security of their accommodation.

1. Section 19(3) of the Act gives residents the right to be repaid entry premiums in certain circumstances. By s 20, the rights of a resident to repayment of a premium, or part of a premium, under s 19 are a charge on land[30] in the retirement village (statutory charge). In Retirement Care, Pritchard J[31] observed that, although s 22 does not preclude the termination of a retirement village scheme while there remains an existing liability for the repayment of an entry premium, secured by a statutory charge, Parliament did not appear to contemplate that a scheme could be terminated in such circumstances.[32]
2. It was unnecessary for her Honour in Retirement Care to identify the factors that may be relevant to a consideration as to whether to approve the termination of a retirement village scheme. However, her Honour noted that one factor would be the loss of the significant benefits and protections conferred on the residents of retirement villages by the Act.[33]
3. In written submissions filed in these proceedings, the Commissioner referred to a decision of the Supreme Court of South Australia, Keyton Holdings Pty Ltd.[34] In that case, McIntyre J identified numerous factors that may be relevant to an application for approval to terminate a retirement village scheme under the Retirement Villages Act 2016 (SA) (South Australian Act), including:[35]

(1) the attitude of residents and the operator to the proposed termination;

(2) whether the proposed termination would have a positive or negative impact on residents;

(3) whether the proposed termination would impact upon the capital value of independent living units; and

(4) whether the proposed termination would involve a breach of any residency agreements.

1. As acknowledged by the Commissioner, there are material differences between the Act and the South Australian Act.[36] Nevertheless, I accept that the factors that McIntyre J considered were relevant under the South Australian Act are useful in considering what factors may be relevant under the Act.
2. Having regard to the objects and purpose of the Act,[37] and assisted by the helpful analysis of Pritchard J[38] in Retirement Care, the factors identified in Keyton Holdings, and the Commissioner's thoughtful submissions, I consider that the following factors[39] may be relevant in deciding whether to approve the termination of a retirement village scheme:

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

(2) 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;

(3) 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;

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

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

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

1. In this case, all premiums paid by existing residents that would give rise to a statutory charge have been repaid.

Comparison of terms of occupation if the scheme is terminated

1. In relation to the existing residents' terms of occupation, the evidence is that five residents have long‑term residency agreements and the remainder have short‑term tenancies, terminable on one month's written notice.[40]
2. The Commissioner has observed that the effect of no longer operating the retirement village scheme is that the residents will not receive the substantial benefits and rights conferred by the Fair Trading (Retirement Villages Code) Regulations 2022 (WA). These benefits and rights are greater than the benefits and rights given to tenants under the Residential Tenancies Act.
3. It is clear from the terms of the proposed new arrangements that the first plaintiff has sought to compensate for the differences. As explained earlier, I am satisfied that, overall, the residents will not be worse off under the new arrangements.

1. The terms of the existing agreements do not give residents any entitlement to share in any increase in capital value. This factor therefore does not apply.

The benefits or detriments to residents of the retirement village operator's proposed future use of the land

1. It appears that, once the five long‑term residents are no longer in occupation, the first plaintiff intends to redevelop the land. Accordingly, it is to be expected that, at that time, any remaining short‑term tenancies will be terminated. This would be detrimental to the short‑term residents but, given they are currently on month‑to‑month contracts, I consider the detriment to be limited.

The attitude of the residents to the termination of the scheme

1. Each of the residents was joined as a party. None have entered an appearance. The thirty‑sixth defendant (who is on a short‑term residency agreement) is the only defendant who has not executed a transition deed.
2. All of the defendants who entered transition deeds were offered independent legal advice and medical advice of their capacity to understand the terms of the transition deed, at the first plaintiff's expense. Of the defendants on long‑term residency agreements, only the ninth defendant did not take up the invitation to obtain legal advice.[41]
3. All of the signed transition deeds include a certificate of capacity from a medical practitioner and a 'consent' by the resident to this application.
4. From these matters, I infer that none of the residents oppose the termination of the scheme.

The impact on the operators if approval is not granted

1. The plaintiffs do not seek to rely on this factor in their favour.

1. Having regard to the above, I am satisfied that I should exercise my discretion to approve the termination. In particular, I am satisfied that none of the existing residents will be adversely affected by the termination.

Should a declaration be made in relation to the memorial? Legal principles

1. Neither a memorial nor any statutory charge in respect of the land in a retirement village form part of the 'retirement village scheme' within the meaning of the Act. Rather, they are consequences which may follow the establishment of a 'retirement village scheme' and of a 'retirement village' under the Act.[42]
2. The primary purpose of the memorial required by the Act is to notify others that the land is used as a retirement village (with the associated rights and obligations), that the land may be subject to a statutory charge, and that any such charge will have priority over subsequent encumbrances.[43]
3. Section 15(8) provides a memorial can be cancelled by applying to the Registrar and satisfying the Registrar that the land is no longer used, or proposed to be used, as a retirement village.

1. To support an application to the Registrar to cancel the memorial, the plaintiffs seek a declaration to the effect that there are no statutory charges on the Land.
2. The evidence adduced in these proceedings establishes this. As this fact would be relevant to the Registrar's decision, the declaration sought would be of use. I am satisfied it would be appropriate to make a declaration to this effect.

1. Accordingly, I would give approval to terminate the scheme and make a declaration to the effect that there are no statutory charges on the Land. I will hear from the plaintiffs and the Commissioner as to the form of the orders.

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

[1] Section 22 of the Act.

[2] Section 15 of the Act.

[3] Affidavit of Rowan Edwin Clarke filed 4 April 2024 (First Clarke Affidavit) [8].

[6] First Clarke Affidavit [6]. The memorial is attachment REC‑4 to the First Clarke Affidavit.

[7] First Clarke Affidavit [4], [19] and [20] and Affidavit of Malcolm Peter Ross filed 3 May 2024 [4].

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

[13] Section 3 of the Act.

[14] The evidence included certificates of capacity for each long‑term resident. Although not mentioned during the hearing (or in submissions filed prior to the hearing), each certificate recorded the resident's date of birth, showing that the long‑term residents are currently between 82 and 106 years old (see pages 34, 94, 154, 214 and 335 of the First Clarke Affidavit).

[15] First Clarke Affidavit [17]; Affidavit of Rowan Edwin Clarke filed 31 May 2024 (Second Clarke Affidavit) [3].

[18] First Clarke Affidavit [12]; Second Clarke Affidavit [8].

[20] Affidavit of Rowan Edwin Clarke filed 19 September 2024 (Third Clarke Affidavit) [5] ‑ [12].

[22] See cl 4.3 of the transition deeds (for example, pages 23 and 447 of the First Clarke Affidavit).

[24] Second Clarke Affidavit [9] ‑ [10].

[25] See also Retirement Care [126], [135], [138] ‑ [139].

[27] Retirement Care [190] ‑ [191].

[28] Retirement Care [127]. See also [175].

[30] With some exceptions, not relevant here, namely residential premises owned by a resident and any prescribed part of, or interest in, a retirement village - see s 20(1)(a) and (b) of the Act.

[32] Retirement Care [158] ‑ [159] and [203].

[33] Retirement Care [164]. And see [169] ‑ [173].

[34] Keyton Holdings Pty Ltd [2024] SASC 66.

[36] See Keyton Holdings [48] ‑ [55].

[37] As to which, see Retirement Care [166] ‑ [177].

[39] I do not intend this list to be read as exhaustive.

[43] Retirement Care [114] ‑ [116].