Hometown Australia Lennox Australia Pty Ltd v Schoenheimer

NCAT Appeal Panel|2023-05-03

Introduction

This is an internal appeal under s 80(2) of the Civil and Administrative Tribunal Act 2013 NSW (NCAT Act) against a decision made in the Consumer and Commercial Division of the Tribunal on 11 November 2023 (Decision).
The application to the Tribunal was brought by Ms Schoenheimer, the respondent to this appeal, against Hometown Australia Lennox Pty Ltd, the appellant in this appeal, and the respondent at first instance.
Internal appeals may be made as of right on a question of law, and otherwise with leave (that is, the permission) of the Appeal Panel: s 80(2), NCAT Act.
This appeal raises a question of law in relation to the proper construction of s 109 of the Residential (Land Lease) Communities Act 2013 NSW (RLLC Act). That question may be stated as follows: where, within a residential community, there are multiple residential sites "of similar size and location" to that of an outgoing homeowner with different site fees payable, how is an assessment to be made of whether the site fees under the new site agreement "exceed fair market value" within the meaning of subsections 109(5) and 109(6) of the RLLC Act?
For the reasons set out below, we have decided to allow the appeal.

Notice of Appeal

The Notice of Appeal was lodged on 25 November 2022, which is within the 14 day period specified in cl 25(4) of the Civil and Administrative Tribunal Rules 2014 NSW (NCAT Rules). Ms Schoenheimer's representative at the appeal hearing (correctly, in our view) did not press an earlier contention (in the Reply to Appeal) that the appellant's appeal had been lodged out of time.
The grounds specified in the Notice of Appeal are:
The Tribunal erred in finding that the "fair market value" within the meaning of s 109(6) of the RLLC Act is to be determined: a. By reference to the "average site fees" of all "similar sites", and b. As at the time of provision of a disclosure statement.
The Tribunal erred in finding that the "term of the site agreement regarding site fees" of the operator was void pursuant to s 12 of the RLLC Act.
The Tribunal ought to have found that identification of the "site fees currently payable for residential sites of a similar size and location within the community" within the meaning of s 109(6)(b) of the RLLC Act requires: a. Identification of residential sites which are of a similar size and location within the community, if any, and b. Identification of the site fees payable for each such residential site as at the time of entering into the "new site agreement" within the meaning of s 109 of the RLLC Act.
The Tribunal ought to have found that the site fees under a new site agreement would not "exceed fair market value" within the meaning of s 109(5) of the RLLC Act if those sites did not exceed the site fees payable at one or more of residential sites of a similar size and location within the community within the meaning of s 109(6)(b), and that the site fees in the site agreement between the appellant and the respondent did not do so.
The Tribunal ought to have dismissed the application of Ms Schoenheimer.
In essence, the appellant submitted that the Member's finding that Ms Schoenheimer's site fees exceeded "fair market value", as defined, was in error, because the Member did not properly construe the legislation.
The appellant's grounds of appeal raise questions of law for which leave to appeal is not required.

The Legislation

Section 3 of the RLLC Act refers to the objects of the Act, as follows: 1. to improve the governance of residential communities, 2. to set out particular rights and obligations of operators of residential communities and home owners in residential communities, 3. to enable prospective home owners to make informed choices, 4. to establish procedures for resolving disputes between operators and home owners, 5. to protect home owners from bullying, intimidation and unfair business practices, 6. to encourage the continued growth and viability of residential communities in the State.
The objects reflect that the RLLC Act seeks to strike a balance between the rights of homeowners and operators.
In the context of Part 10 of the RLLC Act, which relates to the sale of homes in a residential community, the balancing is, principally, between, on the one hand, the rights of the homeowner who wants to sell a residential site in a community, including as to the sale of a residential site at a fair price, and on the other hand, the rights of the operator, including the operator's right as to the continued growth and viability of the operator's residential community.
While the operator must not interfere with a homeowner's right to sell a home in the residential community, there is no absolute obligation upon the operator to accept a sale. The operator may decline to enter into a site agreement with a prospective homeowner if it has reasonable grounds, such as unfavourable information about the prospective homeowner (e.g., in a residential tenancy database), or the prospective homeowner has been evicted from the community or another community within the past 5 years for breach of a site agreement: see RLLC Act, subsections 107(3) and (4).
Further evidencing a balancing of rights between an operator and a selling homeowner, subsection 109(2) of the RLLC Act provides that an operator is not required to make a new site agreement if the operator and the prospective homeowner do not agree on the terms of a proposed site agreement.
The object of Part 10 and of s 109 particularly, was described in Hometown Australia Lennox Pty Ltd v Bullivant [2022] NSWCATAP 161 (Bullivant) at [33] - [34]: [33] The object and purpose of Part 10 as explained in the Second Reading Speech of the Residential (Land Lease) Communities Bill 2013, 12 November 2013, was to provide "a simpler and more effective process for home owners wishing to sell their homes on site." Those homes are, as the definition of "home owner" makes plain, the subject of site agreements with operators. [34] Consistent with that object, s 109 of the Act seeks to facilitate the sale of a home by a home owner, by providing a safeguard in relation to the site fees which an operator is permitted to charge in relation to a new site agreement that a purchaser or a prospective purchaser requests an operator to enter into. It does so by providing that the site fees for the new site agreement "must not exceed fair market value" (s 109(5)). It also prescribes a mechanism to determine fair market value (s 109(6)).
The relevant terms of s 109 are as follows:

109 OPERATOR TO ENTER NEW SITE AGREEMENT 1. This section applies if a purchaser or prospective home owner under a contract, or proposed contract, for the sale of the home (the "sale contract") requests the operator of the community to enter into a new site agreement (the "new site agreement") for the residential site with the purchaser or prospective home owner. … (5) The site fees under the new site agreement must not exceed the fair market value. (6) Fair market value is the higher of the following - 1. the site fees currently payable by the home owner who is selling the home, 2. the site fees currently payable for residential sites of a similar size and location within the community.

As indicated, the site fees under the new site agreement exceeded the site fees payable by the homeowner selling to Ms Schoenheimer. Accordingly, the relevant legal question for the Tribunal at first instance was whether the site fees under the new site agreement exceeded "the site fees currently payable for residential sites of a similar size and location" within the community, within the meaning of subsection 109(6)(b) of the RLLC Act.

The Tribunal Member's Reasons for Decision

The Member considered that, where subsection 109(6)(b) applies, the process required to fulfill the requirement in s 109(5) involves three (3) steps (see Decision at [32] - [34]): 1. The identification of all sites of "a similar size and location", or of "a size that has a likeness to or resembles that of the applicant's site", 2. The identification of the site fees payable by those sites, and 3. The averaging of those site fees.
In the Member's determination, none of those steps had taken place; instead, the operator had 'cherry-picked' a single comparator site (Site 4), by applying the fees payable ($192) at that site for its new site agreement with Ms Schoenheimer: see Decision at [33].
The Member made findings that sites of similar size (or surface area) within the community to Ms Schoenheimer's site were Site 4 (365 square metres, and $192 per week), Site 32 (346 square metres, and $174.50 per week), and Site 80 (282 square metres, and $166.50 per week): see Decision at [32].
In our view, paragraph 32 of the Decision must be considered with paragraph 18 of the Decision (referred to earlier), where the Member accepted that all sites of the residential community are "objectively similar in terms of location". Read that way, the Tribunal's factual finding was that Sites 4, 32, and 80, are of similar size (and location) to Ms Schoenheimer's site. The appellant did not cavil with that factual finding.
As to the question of how to determine the site fees within the meaning of subsection 109(6)(b), where the Tribunal had found multiple sites of a similar size and location but with different site fees, the Member made these findings at [34] of the Decision: There is no evidence as to why any one site is "more similar" or why one site should be preferred. The average site fees for the 3 similar sites identified above is $177.66 ($533 divided by 4* = $177.66), and I find that is "fair market value" at the time the disclosure agreement was given to the applicant. That is the amount which the site fee should not have exceeded when the site agreement was entered into. I further find the respondent did not comply with its obligation under section 109(5) of the Act, when it entered into site fees set at $192. This is not a case of minor differences of opinion about fair market value under section 109. Here the operator has only ever considered one similar site, which is the highest of all similar sites. It knew, or ought to have known, it was at risk of being found to have breached section 109. (*There is typographical error in the Decision - the numeral 4 in [34] should be read as "3").
The Tribunal ordered that the appellant comply with its obligations under the RLLC Act, as construed by the Tribunal.

Does subsection 109(6)(b) require or permit "averaging"?

The appellant submitted that the critical findings at [34] of the Decision were in error because the Tribunal construed the words "the site fees currently payable for residential sites of a similar size and location within the community" in subsection 109(6)(b) as meaning "the average of the site fees currently payable for residential sites of a similar size and location within the community" (our addition and emphasis).
The appellant contended that the Tribunal's construction of the statute is wrong in principle and does not accord with the text of the RLLC Act, because s 109 speaks nowhere of an average; rather, it speaks of the site fees (plural) currently payable for residential sites (plural) of a similar size and location. In the appellant's submission, on a proper construction of subsections 109(5) and (6) of the RLLC Act, the site fees under a new site agreement will not "exceed fair market value" if they do not exceed the site fees currently payable at one or more of the residential sites of a similar size and location within the residential community, and that on the facts found (Decision at [18] and [32]), "fair market value" was not exceeded in the new site agreement between the parties.
We agree with the appellant's submission for the following reasons.
The notion of an average finds no support in the statutory text. We find that such notion is fatal to the construction of s 109 of the RLLC Act by the Member at first instance. As the High Court stated in Federal Commissioner of Taxation v Consolidated Media Holdings Ltd [2012] HCA 55 at [39]; (2012) 250 CLR 503: "This Court has stated on many occasions that the task of statutory construction must begin with a consideration of the [statutory] text": Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue [2009] HCA 41; (2009) 239 CLR 27 at 46, [47]. So must the task of statutory construction end. The statutory text must be considered in its context. That context includes legislative history and extrinsic materials. Understanding context has utility if, and in so far as, it assists in fixing the meaning of the statutory text. Legislative history and extrinsic materials cannot displace the meaning of the statutory text. Nor is their examination an end in itself.
Subsection 109(5) read together with subsection 109(6)(b) provides that the site fees under a new site agreement "must not exceed … the site fees currently payable for residential sites of a similar size and location within the community" (our emphasis). The relevant benchmark set by the statute which the site fees in the new site agreement are not to exceed are the site fees currently payable for other residential sites in the community. The approach of the Tribunal at first instance, however, is to set a different benchmark, namely the average of site fees payable for other residential sites. That average is unlikely to correspond to the site fees that any other resident currently pays. The words "currently payable" must be given meaning: Project Blue Sky Inc v Australian Broadcasting Authority [1998] HCA 28 (28 April 1998) at [71] (1998); 194 CLR 355.
Moreover, the words "currently payable" underscore that the benchmark is what is, in fact, payable at one or more sites within the residential community. Pertinently, the Member's average of $177.66 (see Decision, at [34]) is not an actual site fee payable for Sites 4, 32, and 80, respectively, which are the sites the Member had identified as being of similar size (and location) in the residential community. The Member found, incorrectly, that the "fair market value" was an amount which is not currently payable as the site fees for the Sites of similar size and location in the residential community.
We agree with the appellant's submission that the only approach which is consistent with the statutory text is to compare the site fees under the new site agreement with the site fees payable for all residential sites of a similar size and location within the residential community. There would be 'cherry-picking' if the operator had chosen some sites of a similar size and location upon which to base the site fees under the new site agreement with Ms Schoenheimer, but then ignored other sites of a similar size and location. However, given the factual findings arising from the Decision at [18] and [32], which were not challenged in this appeal, this did not occur in Ms Schoenheimer's case.
We are satisfied that under the approach advocated by the appellant, the criterion in subsections 109(5) and 109(6)(b) will be met if the site fees in the new site agreement do not exceed the site fees payable at one or more of the sites in a residential community which are found to be of similar size and location. As a practical matter, this approach means that the upper limit set by subsections 109(5) and 109(6)(b) will be the highest of the site fees payable for sites of a similar size and location within the residential community (where those exceed the site fees payable by the homeowner who is selling the home).
The proper construction of s 109 is understood in its statutory context. Subsections 109(5) and 109(6)(b), when read considering the other provisions of Part 10 of the RLLC Act, are, in substance, a restriction on the parties' freedom of contract. They place an upper bound on the site fees that may be agreed in a site agreement. This is in circumstances where an operator and an incoming homeowner may negotiate a lower level of site fees provided, consistently with subsection 109(6)(a), the site fees for the new site agreement are no more than the site fees currently payable by the outgoing (or selling) homeowner.
As the Appeal Panel said in Bullivant, the primary purpose of s 109 is not to protect the incoming homeowner; rather, it is primarily directed to protecting the selling homeowner. The aim is to ensure that an operator cannot unreasonably interfere in the ability of the selling homeowner to sell their home, recognising that in most cases the buyer or "prospective home owner" is likely to want to retain the home (albeit a moveable chattel) at its existing site within the residential community.
In our opinion, the new homeowner is otherwise protected in relation to making new site agreements, by more general provisions in the RLLC Act, some of which carry a penalty provision, such as s 21 (the requirement to be provided with a disclosure statement setting out prescribed information), s 25 (the prohibition on false, misleading, or deceptive inducements), and s 54 and Schedule 1 (rules of conduct for operators).

Ms Shoenheimer's Submissions

The principal argument of the respondent's representative in this appeal was that there was no error of law in the Member's approach to averaging as it was consistent with the RLLC Act being consumer protection legislation. The respondent also relied upon authorities such as Tork v Parklea Operations Pty Ltd trading as Gateway Lifestyle Residential Park [2019] NSWCATAP 299 (Tork) and Murphy v Bevington Shores (Residential Parks) [2008] NSWCTTT 1458 (Murphy) to support an argument that 'averaging' is 'not new to the Tribunal' and therefore should be applied to the construction of subsections 109(5) and 109(6)(b).
In essence, the representative submitted that the objects of the RLLC Act and Part 10 are better achieved, as the Member had found, by reading subsection 109(6)(b) as if it provided for "fair market value" to be ascertained by reference to the average of the site fees payable for residential sites of a similar size and location within the community.
We do not accept the principal argument put on behalf of the respondent to this appeal for the following reasons. Firstly, authorities such as Tork and Murphy did not concern the interpretation of subsection 109((6)(b). Tork concerned the calculation of utility charges under s 77 of the RLLC Act, and Murphy was about s 57 of the RLLC Act's legislative predecessor, the now repealed Residential Parks Act 1998 NSW. Murphy in fact dealt with an application for reduced site fees following the installation of water meters. Whether 'averaging' has been applied by the Tribunal to other sections of the RLLC Act is, as a matter of statutory construction, irrelevant.
Secondly, the objects of Part 10 must be understood considering the general objects of the RLLC Act. The objects as stated in s 3, are clearly multiple objects which reflect, as referred to earlier, that the RLLC Act seeks to strike a balance between the rights of homeowners, on the one hand, and the rights of operators, on the other hand, including to encourage the continued growth and viability of residential communities in New South Wales.
In Carr v The State of Western Australia [2007] HCA 138 (23 October 2007) at [5] - [7], (2007) 232 CLR 138, 142 - 143, Gleeson CJ said, relevantly: [5] Another general consideration relevant to statutory construction is one to which I referred in Nicholls v The Queen [2005] HCA 1; (2005) 219 CLR 196 at 207, [8]. It was also discussed, in relation to a similar legislative scheme, in Kelly v The Queen [2004] HCA 12; (2004) 218 CLR 216 at 225-232, [22] - [40]. It concerns the matter of purposive construction. In the interpretation of a provision of an Act, a construction that would promote the purpose or object underlying the Act is to be preferred to a construction that would not promote that purpose or object. As to federal legislation, that approach is required by s 15AA of the Acts Interpretation Act 1901 (Cth) ("the Acts Interpretation Act"). It is also required by corresponding State legislation, including, so far as presently relevant, s 18 of the Interpretation Act 1984 (WA). That general rule of interpretation, however, may be of little assistance where a statutory provision strikes a balance between competing interests, and the problem of interpretation is that there is uncertainty as to how far the provision goes in seeking to achieve the underlying purpose or object of the Act. Legislation rarely pursues a single purpose at all costs. Where the problem is one of doubt about the extent to which the legislation pursues a purpose, stating the purpose is unlikely to solve the problem. For a court to construe the legislation as though it pursued the purpose to the fullest possible extent may be contrary to the manifest intention of the legislation and a purported exercise of judicial power for a legislative purpose. [6] To take an example removed from the present case, it may be said that the underlying purpose of an Income Tax Assessment Act is to raise revenue for government. No one would seriously suggest that s 15AA of the Acts Interpretation Act has the result that all federal income tax legislation is to be construed so as to advance that purpose. Interpretation of income tax legislation commonly raises questions as to how far the legislation goes in pursuit of the purpose of raising revenue. In some cases, there may be found in the text, or in relevant extrinsic materials, an indication of a more specific purpose which helps to answer the question. In other cases, there may be no available indication of a more specific purpose. Ultimately, it is the text, construed according to such principles of interpretation as provide rational assistance in the circumstances of the particular case, that is controlling. [7] As explained in Kelly and Nicholls, the general purpose of legislation of the kind here in issue is reasonably clear; but it reflects a political compromise. The competing interests and forces at work in achieving that compromise are well known. The question then is not: what was the purpose or object underlying the legislation? The question is: how far does the legislation go in pursuit of that purpose or object?
More recently, Rares and Colvin JJ held in Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing, and Allied Services Union of Australia v Qantas Airways Limited (2020) 282 FCR 130 at [33] that there are challenges in applying a purposive approach where it is apparent that interacting purposes were balanced in settling upon the particular terms of legislative provisions.
Read in that way, the statutory text does not provide any warrant for reading subsection 109(6)(b) as requiring comparison with an average (when, as considered earlier, that concept finds no footing in the statutory text); as opposed to simply requiring what the statutory text says: a comparison with the site fees currently payable for all sites of a similar size and location within the residential community.
Thirdly, it is not the Tribunal's role to rewrite the statute: R v Young (1999) 46 NSWLR 681 at [5] - [15] per Spigelman CJ, with whom Abadee and Barr JJ agreed. There is no warrant to effectively read in the words 'the average of' in subsection 109(6)(b). If the words of the provision do not accurately reflect the Legislature's true intention, that is a matter for the Parliament to address.
In summary, we find that primacy must be given to the statutory text. The statute does not refer to an average, but to the site fees "currently payable" for certain residential sites within a residential community. The Member at first instance did not give effect to that statutory demand. For those reasons, his approach to the construction of the statute cannot be correct, and the orders made consequent upon the Member's construction of the statute must be set aside.
The respondent's representative raised other arguments such as that the appellant bears the onus of providing the Tribunal with evidence of the residential sites of a similar size and location within the residential community. However, we find that those other arguments were not material to the matters in issue before us on this appeal, which proceeded on questions of law, not of fact. It is not for us to determine what sites are of a similar size and location within the residential community; but rather, how the evidence that was before the Member at first instance is to be used to apply subsection 109(6) of the RLLC Act. The parties to this appeal put evidence before the Member at first instance (including maps of the residential community) and made submissions to the Tribunal as to the sites they considered to be of similar size and quality, and the Member (Decision at [18] and [32]) then made findings as to which residential sites were of a similar size and location. Those findings are not on appeal.

Other Matters

These are other matters flowing from the Member's Reasons for Decision, which we now address.
Having found that the site fees payable under Ms Schoenheimer's new site agreement exceeded "fair market value" as construed, the Member held that the term of the site agreement which required payment of site fees of $192 per week was void pursuant to s 12 of the RLLC Act: see Decision at [36]. As we have decided that Ms Schoenheimer's site fees did not exceed "fair market value" within the meaning of subsection 109(6) of the RLLC Act, the Member's finding at [36] falls away.
The Member found (correctly, in our view) that an operator cannot 'cherry-pick' sites when applying subsection 109(6) of the RLLC Act: see Decision at [33]. Where there are multiple sites of similar size and location in a residential community, the proper construction of s 109(6)(b) does not enable an operator to select only one site (presumably, the site most preferable to it), while ignoring other sites that meet the criterion in subsection 109(6)(b)). The proper construction of s 109(6) requires all sites of similar size and location to be ascertained, and the new site fees cannot exceed the site fees currently payable within the list of sites of similar size and location.
The Member (see Decision at [18], and [32]) found that Site 4 is of a similar size and location to Ms Schoenheimer's Site. As referred to, that finding was not challenged and is not on appeal. Accordingly, as we have found the proper construction of the legislation is in accordance with the appellant's submission, the "fair market value", within the meaning of subsection 109(6)(b), was $192 per week, such that the appellant has complied with the RLLC Act.
Further, the Member at first instance held that the comparison of site fees for the purpose of applying subsection 109(6) was to occur with reference to the site fees payable at the time of provision of a disclosure statement: see Decision at [34].
Agreeing with the Member's finding at [34], the respondent's representative also relied upon s 21(2)(a) of the RLLC Act, to support a submission that the requirement to include "details of the fees and charges that will be payable under the proposed agreement" in a disclosure statement, means site fees payable as at that date, are to be used to calculate "fair market value" for the purposes of subsections 109(5) and (6).
However, for the reasons given above, the proper construction of the subsections requires consideration of the site fees "currently payable", such that the fees payable as referred to in subsection 109(6)(b) are those payable at the time of entry into the "new site agreement", and not a disclosure agreement.
The words "currently payable" must be given meaning and effect.

Conclusion and Orders (including costs)

For the reasons given, the appeal is allowed, the orders made by the Tribunal on 11 November 2022 are set aside, and Ms Schoenheimer's application for orders of the Tribunal under the RLLC Act must be dismissed.
Rule 38A of the NCAT Rules does not apply to the appeal. Therefore, the general rule operates that parties bear their own costs of the appeal, unless there are "special circumstances": see NCAT Act, s 63. Consistent with a condition of the Appeal Panel granting leave to the appellant for legal representation at the appeal hearing, the appellant's counsel did not ask for a costs order, but in any case, we do not consider that there are any special circumstances as would warrant the making of a costs order in favour of the appellant.
Accordingly, the orders of the Appeal Panel are:
Appeal allowed.
Orders 1, 2, and 3 made by the Tribunal on 11 November 2023 are set aside.
In substitution of the Tribunal decision, order that the application of Ms Schoenheimer in the proceeding constituted by File No RC 22/08431, be dismissed.
No order as to costs, with the intent that each party is to bear their own costs of the appeal.

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: 11 May 2023

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