Jomal P/L v Commercial and Consumer Tribunal & Ors [2009] QCA 326 | Case summary

SUPREME COURT OF QUEENSLAND

CITATION: Jomal P/L v Commercial and Consumer Tribunal & Ors [2009] QCA 326

PARTIES: JOMAL PTY LTD (applicant/respondent) v COMMERCIAL AND CONSUMER TRIBUNAL (first respondent/not a party to the appeal) DELPHINE POWER, VIOLET WILSON, MARGARET BEEVERS, DOROTHY ZORNIG, SYD HILL (second respondents/appellants) DOREEN JONES, HEATHER ABERCROMBIE, ELNA CUSAK, HELGA CHILLMAN, ELISABETH WOODALL, CARLYLE BALLINGER, KEITH BAKER, ADOLF LABUDDA, SALLY HANRAHAN (DECEASED) (second respondents/not a party to the appeal)

FILE NO/S: Appeal No 2406 of 2009 / SC No 3924 of 2008

DIVISION: Court of Appeal

PROCEEDING: General Civil Appeal

ORIGINATING COURT: Supreme Court at Brisbane

DELIVERED ON: 27 October 2009

DELIVERED AT: Brisbane

HEARING DATE: 9 September 2009

JUDGES: McMurdo P, Keane JA and Applegarth J / Separate reasons for judgment of each member of the Court, each concurring as to the order made

ORDER: Appeal dismissed

CATCHWORDS: STATUTES – INTERPRETATION – INTERPRETATION ACTS AND CLAUSES – GENERALLY – PRINCIPLES APPLICABLE – where appellants are residents of retirement village – where appellants alleged retirement village scheme operator ("the respondent") was liable to replace sacrificial anodes of water heaters located within respective accommodation units – where primary judge found that residence contract between the parties rendered appellants liable by its terms – where appellants alleged on appeal that on a purposive interpretation of the Retirement Villages Act 1999 (Qld) the respondent should be liable to pay from the maintenance reserve fund funded by all residents – whether appellants liable to pay replacement costs / Acts Interpretation Act 1954 (Qld), s 14B / Retirement Villages Act 1999 (Qld), s 3, s 11, s 14, s 15, s 20, s 37, s 42, s 45, s 48, s 56, s 57, s 61, s 62, s 74, s 76, s 84, / s 91, s 93, s 94, s 96, s 97, s 98, s 99, s 102A, s 103, s 110 / Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue [2009] HCA 41, cited / Betella v O'Leary [2001] WASCA 266, cited / Borthwick v Carruthers (1787) 99 ER 1300, cited / Carr v Western Australia (2007) 232 CLR 138; [2007] HCA 47, applied / Coco v The Queen (1994) 179 CLR 427; [1994] HCA 15, applied / Jomal P/L v Commercial & Consumer Tribunal & Ors [2009] QSC 3, affirmed / Kelly v The Queen (2004) 218 CLR 216; [2004] HCA 12, cited / Melrose Farm Pty Ltd t/as Milesaway Tours v Milward (2008) 175 IR 455; [2008] WASCA 175, cited / Official Trustee in Bankruptcy v Buffier (2005) 54 ACSR 767; [2005] NSWSC 839, cited / R v JS (2007) 175 A Crim R 108; [2007] NSWCCA 272, cited

COUNSEL: D C Rangiah SC for the appellants / R M Derrington SC, with J S B Payne, for the respondent

SOLICITORS: David Wise Solicitor for the appellants / Minter Ellison for the respondent

McMURDO P: The appeal should be dismissed. I agree with Keane JA's reasons and orders.
KEANE JA: The appellants are residents of the Sunnymeade Park Retirement Village ("the village"). The appellants reside in the village under a "retirement village scheme" within the meaning of the Retirement Villages Act 1999 ("the RVA"). The first respondent is the scheme operator. The relationship between these parties is governed by the terms of the RVA and the standard form residence contracts between the scheme operator and individual residents ("the residence contracts").
A dispute arose between the parties as to whether the appellants were obliged to meet the cost of replacing the sacrificial anodes of water heaters located within the accommodation unit occupied by each appellant in the village. The water heaters were owned by the first respondent but were fixtures within the units. The appellants argued that the cost of replacement of these items was required to be met, not by the appellants individually, but from a maintenance reserve fund required to be established under the RVA to which all residents in the village are obliged to contribute.
The dispute was initially focused upon the interpretation of the residence contracts; but as the dispute evolved, the focus of concern turned to the issue whether, if the residence contracts did purport to cast the cost of replacement of such items on the residents, the RVA operated to preclude that result. The second respondent, the Commercial and Consumer Tribunal ("the Tribunal"), (which took no part in the proceedings in this Court) resolved this latter issue in the appellants' favour.
On an application to the Supreme Court for judicial review of the Tribunal's decision, the learned primary judge quashed the Tribunal's decision and declared that, upon its proper construction, the RVA does not preclude the parties from agreeing that the resident is liable to maintain, repair and replace items owned by the scheme operator and which were within or affixed to an accommodation unit. Other declarations were also made the effect of which was that the appellants were obliged under their residence contracts to meet the costs of the work in question.
On the appeal to this Court from the decision of the learned primary judge, the appellants contend that the effect of the RVA is to preclude a scheme operator and a resident from agreeing in a residence contract that the resident is obliged to repair items such as those in question. Rather, so they argue, such expenses are to be defrayed from the maintenance reserve fund required to be established by the RVA.
Before I discuss the arguments of the parties in this Court, it is necessary to outline the relevant terms of the RVA and the residence contracts, and to summarise the decision at first instance.

The RVA

Under the RVA, an older member of the community or a retired person may enter into a residence contract with a scheme operator. Under a residence contract, a right is conferred on the resident, whether by way of freehold or leasehold title, to reside in an accommodation unit within the village.
Section 3(1)(a) of the RVA provides that one of the main objects of the Act is to promote consumer protection and fair trading practices by declaring particular rights and obligations of residents and scheme operators and by facilitating disclosure of information to prospective residents to ensure that their rights and obligations may easily be understood. Section 3(1)(b) of the RVA provides that the other main object of the RVA is "to encourage the continued growth and viability of the retirement village industry in the State".
Section 84 of the RVA requires that the scheme operator must give a prospective resident a public information document ("PID") before the prospective resident enters into a residence contract for the village. Under s 74 and s 76 of the RVA, a PID must disclose information concerning the contributions which a resident is obliged to pay by way of "contributions to particular funds".
Section 91 of the RVA obliges a scheme operator to establish and keep a fund "for replacing the retirement village's capital items" ("the CRF"). Under s 91(2), "[t]he scheme operator is solely responsible for contributing to the [CRF]". The amount contributed by the operator is calculated as a proportion of the amounts received by the operator by way of ingoing contributions being an amount paid to secure a person's right to reside in a retirement village.¹ Under s 91(3)(a), no amount standing to the credit of the CRF may be applied or used for a purpose other than "replacing the village's capital items".
Under s 97(1) of the RVA, a scheme operator must establish and keep a maintenance reserve fund ("MRF") for "maintaining and repairing the retirement village's capital items". Under s 97(2), "[r]esidents are solely responsible for contributing to the [MRF]". Section 97(3)(a) provides that: "[t]he scheme operator must not use an amount standing to the credit of the [MRF] for a purpose other than–(a) maintaining and repairing the village's capital items".
Sections 91 and 97 are to be found in pt 5 of the RVA which also deals with other categories of expenses which may be incurred in relation to a retirement village and the means of defraying those expenses. Where there is to be an enhancement to the village capital by way of "an improvement", the operator of the scheme is solely responsible for the cost of the enhancement from its own funds. In addition to the MRF contribution, the scheme operator may impose on residents charges for general services that are supplied, or made available, to all residents of a retirement village, such as management and administration of the village, gardening and day-to-day maintenance, a village shop or a communal recreation area. The scheme operator may also provide optional services to an individual resident such as laundry, meals or cleaning. The provision of these services and payment for them are matters for agreement between the scheme operator and individual residents.

"20 What is a maintenance reserve fund contribution

A maintenance reserve fund contribution is that part of the general services charges, decided by the scheme operator and described in the public information document as a contribution to the maintenance reserve fund.

…

37 Public information document forms part of residence contract

(1) A public information document for each resident is taken to form part of the resident's residence contract to which the public information document relates.

(2) A notice given to the chief executive and a resident under section 36 is taken to form part of the resident's residence contract.

(3) If a provision of a public information document is inconsistent with a provision of any other part of the residence contract, the provision that is more beneficial to the resident prevails.

(4) If a provision of a public information document is inconsistent with a provision of this Act, the provision of this Act prevails.

…

42 Purpose and intention of [Part 3]

(1) The purpose of this part is to state minimum requirements for residence contracts.

(2) However, it is not the intention of this part to prevent a scheme operator agreeing in a residence contract or otherwise to conditions that are more beneficial to a resident or former resident than the provisions of this part.

…

45 Content of residence contract

(1)A scheme operator must ensure each residence contract for the retirement village includes details about the following–

…

(d)the ingoing contribution payable under the contract;

(e)the exit fee payable under the contract;

(f)the resident's exit entitlement;

(g)the services charges;

(h)the amounts payable, and when the amounts are payable, by the resident for the [MRF] …;

…

(2) A provision of a residence contract is of no effect to the extent that it is inconsistent with this Act or purports to restrict or exclude the operation of a provision of this Act.

(3) Also, a provision of a residence contract is of no effect to the extent that it purports to restrict or exclude the operation of a public information document, or a provision of a public information document, taken to form part of the contract under section 37."

The important expression "capital items" is defined in the schedule to the RVA as follows:

"capital items include the following–

(a)all buildings and structures located in the retirement village and owned by the scheme operator, including the communal facilities, amenities and accommodation units, other than items that, under the residence contract, are to be maintained, repaired and replaced by the resident;

(b)all plant, machinery and equipment used in the operation of the village, other than items that are body corporate property;

…

(c)all village infrastructure owned by the scheme operator.

…" (emphasis added)

The words I have emphasised in para (a) of the definition of "capital items" direct one to the residence contract between the scheme operator and the resident to ascertain whether or not items are "capital items". The statutory definition contemplates that the parties may agree that certain items are to be "maintained, repaired and replaced by the resident". Where such an agreement is made, if it is legally effective, then neither s 91 nor s 97 of the RVA apply to the expense agreed to be met by the resident, and the expense is outside the CRF or MRF contribution regimes. And this may be so even though the particular item is owned by the operator and not by the resident.
It is convenient now to turn to a consideration of the relevant terms of the residence contracts.

The residence contracts

The residence contracts relevant to the original dispute between the parties were in three chronological categories: 1995, 1998 and 2001. It is common ground between the parties that the 1995 and 1998 residence contracts are of no relevance to the appeal in this Court.
The 2001 residence contracts contained covenants by the resident in the following terms:

"7. The Resident undertakes and agrees with the Scheme Operator:

…

7.5.2. To regularly maintain and properly repair or replace (with items of the same or similar quality to those in use when they were last replaced[)] any fixtures, fittings, equipment, appliances, furniture, furnishings and other property in and on the Accommodation Unit that are made available by the Scheme Operator.

…

9.6.2 Nothing requires the Scheme Operator to maintain, repair or replace anything that is the responsibility of the Resident under the Lease or the Act or the responsibility of other residents of the Retirement Village under their leases or the Act." (emphasis added)

Clauses 1.1.9 to 1.1.11 of the public information document ("the PID") which accompanied the residence contracts for the year 2001 provided:

"1.1.9 The capital replacement fund is for the replacement of the retirement village's capital items. Unless it is provided for in an existing residence contract, the scheme operator is solely responsible for contributions to the capital replacement fund.

1.1.10 Capital items include:

(a) buildings and structures owned by the scheme operator such as:

…

(iii) accommodation units;

…

1.1.11Capital items do not include accommodation units and communal facilities that are owned individually by residents or by the body corporate under a community title scheme of which the residents are members. In such cases, the resident or the body corporate is responsible for replacement of these capital items."

The decision of the learned primary judge

It was common ground before the learned primary judge that the water heaters in question were all owned by the operator and were internal fixtures in each accommodation unit. It was also common ground that the work which was done by way of replacement of the sacrificial anodes was work which is properly described as "repair" or "maintenance" of the water heaters.
The learned primary judge concluded that the replacement of the sacrificial anodes of the water heaters was maintenance or repair undertaken by residents under the residence contracts.³ That conclusion is not now disputed.
What the appellants do dispute in this Court is what the learned primary judge described as the "freedom of contract issue". In this regard, the learned primary judge said:⁴

"The freedom of contract issue

The tribunal took the view that while there was no express prohibition against contracting out of the Act, nevertheless the provisions in, for example, s 74(5)(b) and s 76(a) requiring a PID to provide residents' contribution information without specifying whether they were personally liable for maintenance, repair and replacement of fixtures within a unit, suggested that parliament did not intend that residents could be made responsible for such costs because of the consumer protection focus of the Act (Power & Ors v Jomal Pty Ltd [2007] CCT VH 003-07 at [31], [32], [43] and [49]).

That approach was criticised as an unwarranted gloss on the Act, inconsistent with the definition of 'capital items' and with the fundamental principle of freedom of contract. Section 42(2) contemplates that the parties may agree to more beneficial conditions for a resident just as the definition of 'capital items' permits them to agree that certain items are to be maintained, replaced or repaired by the residents. It was also submitted that the fact that it is the residents' contributions to the maintenance reserve fund that would pay for the maintenance of such items on that analysis in any event, argues effectively against the view that the consumer protection focus of the Act requires such an approach to its construction.

In my view those arguments are correct and the Act cannot be read to prevent the parties from agreeing that a resident may pay the costs of maintaining, repairing and replacing certain capital items.

The effect of s 97 of the Act

That conclusion is reinforced by the terms of s 97(3)(a) which penalises a scheme operator if it uses an amount in the maintenance reserve fund for a purpose other than maintaining [and] repairing the village's capital items. The submission was that, to require the scheme operator to use the maintenance reserve fund to replace the anodes when, by agreement, they were not capital items, was an error of law. At least in respect of the 2001 residence contracts, that seems to be right."

The arguments in this Court

The first respondent makes the simple point that, as a matter of definition, the village's "capital items" do not include items which, under each residence contract, are to be "maintained, repaired and replaced by the resident". Accordingly, expenses of the kind in question are the responsibility of the individual residents and outside the MRF regime established by s 97 of the RVA.
The appellants advanced a number of arguments whereby they sought to demonstrate that the repair or maintenance of their water heaters falls within s 97 of the RVA. First, it was said that the legislation should be read so as to give effect to its objectives, especially the consumer protection objectives of s 3(1)(a), and that the definition of "capital items" was not an operative provision of the Act and should not be slavishly applied where to do so would defeat the evident purpose of the Act.
It was also said by the appellants that the definition of "capital items" should be understood as applying only to residence contracts in existence at the time the RVA came into force. In this regard, the appellants relied upon materials extrinsic to the legislation in an endeavour to confine the general language of the definition of "capital items".
Finally, it was argued on behalf of the appellants that reference to other provisions of the RVA showed that a mechanistic application of the definition of "capital items" could not have been intended by the legislature because of the absurd outcomes which would ensue.

The objectives of the legislation

The appellants place particular reliance on s 3(1)(a) of the RVA. It has been seen above, however, that s 3(1)(b) also states one of the main objectives of the legislation. That objective will not be advanced by an interpretation of the legislation which denies to scheme operators the possibility of agreeing with residents that the latter will bear expenses of maintenance, repair and replacement items affixed to their accommodation units. Scheme operators will be disadvantaged in comparison with those who provide other forms of accommodation to the elderly whose bargaining power is not constrained in the way in which the appellants suggest in this case. Further, insofar as the appellants' case is put on the footing that the expenses in question are to be defrayed from the MRF, acceptance of that argument would oblige other residents to underwrite the appellants' repair obligations under the residence contracts. That is an outcome which could not, on any view, be squared with any purpose discernible from the terms of the legislation.
In any event the terms of the RVA strike the balance so far as the pursuit of the legislature's objectives is concerned. It is to the text of the legislation that the court must look for instruction in this regard. As Gleeson CJ said in Carr v Western Australia:⁵

"Another general consideration relevant to statutory construction is one to which I referred in Nicholls v The Queen ((2005) 219 CLR 196 at 207 [8]). It was also discussed, in relation to a similar legislative scheme, in Kelly v The Queen ((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 … 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.

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.

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?"

The terms of the RVA are clear, at least insofar as the definition of "capital items" is concerned. The question is whether there is a sound basis for excluding the appellants' contracts from that definition. In an endeavour to persuade this Court to answer this question in the appellants' favour, they turn to the extrinsic materials.

The extrinsic materials

The appellants rely upon the Explanatory Notes to the Bill for the RVA which stated that it was intended to ensure that "residents are fully aware of costs associated with residing in the village". Reference is also made to the Minister's Second Reading speech where it was said:

"Expenditure for capital replacement will generally be the responsibility of the operator, with a number of exceptions including: capital items not owned by the operator, expenditure due to deliberate or wilful damage, or accelerated wear, and all existing contractual arrangements whereby residents are responsible for the cost of refurbishing their units … Residents will be generally be responsible for the ongoing maintenance of their villages."

It is said on behalf of the appellants that the Minister's Second Reading speech indicates that, generally speaking, the scheme operator, and not the residents, should pay for the replacement or repair of items of a capital nature. It is said that this statement and, in particular, the reference to "existing contractual arrangements" is a clear indication that the definition of "capital items" in the RVA should be read as if the words which I have emphasised in the definition referred, not to "the residence contract", but to "existing residents' contracts".
The Second Reading speech refers to the efforts of a "working party" composed of representatives of interested parties. The working party produced a document described as "Heads of Agreement – Retirement Villages Legislation Facilitation" ("the Heads of Agreement"). The appellants, invoking s 14B of the Acts Interpretation Act 1954,⁶ sought to rely particularly on the following provisions of the Heads of Agreement:

"3.2Definition of Capital Replacement

3.2.1It was agreed that as a general principle the concept of capital replacement spending appearing in the Body Corporate and Community Management Act 1997 be adopted – 'spending of a capital or non-recurrent nature (including the periodic renewal or replacement of major items of a capital nature and other spending that should be reasonably met from capital)' (refer section 100(2)(a), Body Corporate and Community Management (Standard Module) Regulation 1997).

3.2.2The definition would result in expenditure to replace the following items being characterised as capital replacement spending:

(a)all buildings and structures located in the village that are owned by the operator, including the community facilities and amenities and the interior (excluding those items of expenditure payable out of the Maintenance Reserve Fund or that are a resident's contracted responsibility) and exterior of all accommodation units;

(b)all plant, machinery and equipment used in the operation of the village community services (eg communal hot water and airconditioning services, kitchen and dining room equipment, community facility furnishings, gardening equipment, village bus/transportation services), and

(c)all village infrastructure (eg roadways, pathways, drainage, sewerage mains, landscaping, electrical distribution systems, water services and connections and distribution systems etc).

3.3Responsibility for Capital Replacement

3.3.1It was agreed that expenditure for capital replacement is to be the responsibility of the operator (on the basis that the operator is able to access funds available in a Capital Replacement Sinking Fund to be established and operated as outlined in 3.4) subject to the following exceptions:

the operator is only responsible for capital replacement expenditure relating to items of capital owned by the operator and not those capital items owned by:

– any resident (including improvements made to units by residents in leasehold/licence villages and the entire unit/lot in freehold title villages), or

–the body corporate in a freehold title village;

expenditure necessary due to deliberate or wilful damage or accelerated wear to the village assets (both internal and external to a unit) will be the relevant resident's responsibility; and

all existing contractual arrangements and practices requiring residents to be responsible for the cost of re-instatement or refurbishment of the interior of units will remain enforceable. In the case of residents entering a village after the commencement of the new legislation, unless otherwise specifically contracted, re-instatement or refurbishment is to be the operators responsibility in leasehold/licence villages and is to be paid out of the Capital Replacement Sinking Fund referred to in 3.4 (refer 6.5).

3.3.2The operator may at its discretion replace capital items of plant, equipment and chattels by way of lease/rental/hire purchase arrangements. The lease/rental/hire purchase payments are able to be met out of the Capital Replacement Sinking Fund referred to in 3.4.

3.3.3Any items of capital replacement that are not to be the responsibility of the operator because they fall within one of the exceptions in 3.3.1 must be clearly set out in the Public Information Document."

The respondent does not accept that there is any occasion under s 14B of the Acts Interpretation Act for reference to the Heads of Agreement. It is not necessary to enter upon the resolution of this argument. In the third "dot point" in para 3.3.1 set out above, it is expressly acknowledged that in the case of contracts made after the commencement of the RVA, the parties may "specifically contract" that reinstatement and refurbishment of what would otherwise be items subject to the CRF regime may be made the responsibility of the individual resident.
It is, in my respectful opinion, readily apparent that even if one were to give full weight to the Explanatory Notes and the Minister's Second Reading speech, including the Heads of Agreement, one could not reach a conclusion different from that reached by the learned primary judge on this issue.
And in any event, the term "existing residence contract" is defined by s 11 of the RVA to mean "a residence contract existing immediately before the commencement of this Act". The expression "existing residence contract" is used in a number of operative provisions of the RVA.⁷ It is evident that the legislature made deliberate choices as to when, and when not, to refer to "existing residence contracts".

Other provisions of the RVA

In an endeavour to demonstrate the absurdity of reading "capital items" in s 97(1)(a) of the RVA exegetically with the definition of "capital items", the appellants referred to s 110(1) of the RVA which obliges a scheme operator to "insure and keep insured, to full replacement value, the retirement village, including the accommodation units … and the communal facilities". Under s 110(2)(a)(ii), this insurance must cover "costs incidental to the reinstatement or replacement of insured buildings". The appellants then point to s 94(1)(a) which provides that the scheme operator must ensure that "amounts received under insurance policies for the destruction of items of a capital nature" are paid into the CRF. It is said that these provisions cannot work, or at least cannot work in a reasonable way, if the term "capital items" is always to be understood as defined. In particular, it is said that the scheme operator would not be able to pay for replacement of "capital items" as defined from the insurance moneys paid into the CRF if such items were excluded from "capital items" by the effect of an agreement between the scheme operator and individual residents. There are a number of problems with this submission. The first is that the possibility that a defined term may not be applied consistently throughout an Act because the immediate statutory context suggests an intention to depart from the defined meaning in that context does not warrant a departure from the defined meaning in another context where there is no awkwardness in the application of the term as defined.⁸
The second point to be made here is that s 94(1)(a) does not use the defined term "capital items": rather, it speaks, apparently advisedly, of "items of a capital nature" recognising that part of the proceeds of the insurance required by s 110 may represent an indemnity to the resident in respect of items which the resident may be contractually obliged to replace even though the scheme operator was bound by the statute to take out the relevant insurance to cover all relevant interests in those items. In truth, this argument seeks to manufacture a difficulty where none exists. The argument proceeds on the assumption that the legislature meant to refer in s 94(2) to capital items, but mistakenly referred to items of a capital nature instead. There is no good reason for attributing such an error to the legislature; and there is every reason to think that the legislature used different language advisedly to express different concepts.

Summary

It is now accepted that the residence contracts purport to provide that residents must bear the cost of the repair of items such as those in question. To accept the conclusion that residents are legally bound by their agreement in this regard does not defeat the policy of the legislation that residents should be able to be "fully aware of the costs associated with residing in the village". Residents who agree to maintain, repair and replace appliances in their accommodation units are able to be aware that the repair of items within their accommodation units is to be their individual responsibility and to budget accordingly.
True it is that this conclusion assumes that residents are able to understand the terms of their residence contracts and the ramifications of those terms for the costs to them associated with residing in the village. But this is not a difficult assumption to make. It is an assumption which is fundamental to the common law of contract.⁹ It is also an assumption which the RVA and the extrinsic materials make.
Section 45 of the RVA does not require that a residence contract contain a provision to the contrary of the kind of agreement expressly contemplated by the RVA itself in its definition of capital items. Subsections 45(2) and (3) of the RVA are intended to nullify terms of residence contracts which are inconsistent with the terms of the RVA, but the terms of the residence contracts in question are not inconsistent with any provision of the RVA or of any PID. There is simply no provision of the RVA or of the relevant PID which requires that the replacement of appliances in units must be paid for by the operator or that the expense must be defrayed from the MRF or the CRF.
On behalf of the respondent, it is said that the courts should accept that Parliament intends to overturn a fundamental common law principle, such as freedom of contract, only where that intention is "clearly manifested by unmistakable and unambiguous language".¹⁰ In my respectful opinion, there is no need, in this case, to have recourse to this principle of statutory interpretation to reach a confident conclusion that Parliament had no intention of denying the possibility that a scheme operator and an individual resident might agree that, as between themselves, the resident would bear the expense of maintenance, repair and replacement of fixtures in accommodation units.
In summary, in my respectful opinion, the argument advanced for the appellants is unsustainable.

Conclusion and orders

The decision of the learned primary judge was correct.
The appeal should be dismissed.
In accordance with the agreement between the parties, there should be no order as to the costs of the appeal.
APPLEGARTH J: I have had the advantage of reading the reasons of Keane JA. I agree with them and the orders proposed. The reasons of Keane JA outline the background to the dispute between the parties, the relevant provisions of the Retirement Villages Act 1999 (“the RVA”), the relevant terms of the residence contracts, the decision at first instance and the arguments in this Court.
The appellants correctly identify the issue in the appeal as whether the RVA, upon its proper construction, precludes scheme operators from entering contracts with residents under which residents are personally liable to maintain items of a capital nature owned by the scheme operator.
The definition of “capital items” in the RVA¹¹ contemplates that a residence contract may provide that certain items in the buildings and structures owned by the scheme operator, including the communal facilities, amenities and accommodation units, are to be maintained, repaired and replaced by the resident. The appellants’ task is to explain why the definition should not be applied according to its terms. The appellants submit that the learned primary judge should have construed the RVA as preventing parties from agreeing that a resident pay the costs of maintaining, repairing and replacing items that form part of the buildings and structures owned by the scheme operator. This construction is submitted to be supported by a reading of the RVA as a whole and, in particular, by consideration of:

(a)the purposes of the RVA, which include consumer protection;

(b)the content of the Second Reading Speech for the RVA;

(c)what are submitted to be absurd or unintended consequences that would flow from a construction that permits parties to reach such agreements.

The objects of the RVA and consumer protection

Consumer protection is not the only object of the Act. The Act also seeks “to encourage the continued growth and viability of the retirement village industry in the State”,¹² and “to provide a clear regulatory framework to ensure certainty for the retirement village industry in planning for future expansion”.¹³ As Gleeson CJ observed in Carr v Western Australia,¹⁴ legislation rarely pursues a single purpose at all costs, and the general rule of interpretation which prefers a construction that would promote the purpose or object underlying an Act is of little assistance when legislation strikes a balance between competing interests.
The fullest commitment to consumer protection by the legislature arguably might have resulted in an Act which, for the possible protection of consumers, precludes an operator from entering into a contract with a resident by which the resident assumes responsibility to maintain, repair and replace items owned by the operator. Alternatively, the legislature might have adopted, in the interests of consumer protection, a different regime for disclosure of information, which requires specific disclosure of such a contractual obligation and its possible financial consequences. However, the extent to which the Parliament pursued the object of consumer protection, including disclosure of information to prospective residents, at the possible expense of other interests, was a legislative choice. It is not for the Court to alter that choice in the purported exercise of judicial power. The legislature, by the clear words adopted in the Act, indicated that residents might agree to be responsible for the maintenance, repair and replacement of certain items in the units they occupy, for instance hot water systems or air conditioning units. Such arrangements may suit the interests of some residents, who perceive them to be to their financial advantage, compared to the cost of contributing to a maintenance reserve fund (“MRF”) that is used to maintain and repair similar items in other people’s homes.
The Act’s words do not suggest that residents should not be able to agree to such a contractual arrangement. The Second Reading Speech does not. On the contrary, as Keane JA explains, the extrinsic material envisaged that residents and operators might contract in respect of the replacement of certain capital items. The then Minister stated that expenditure for capital replacement will “generally” be the responsibility of the operator, and the Heads of Agreement reached by the working party to which the Minister referred contemplated that new contracts could specifically provide for residents to be responsible for the reinstatement or refurbishment of capital items. Nothing in the extrinsic material suggested that residents and owners could not contract for residents to be responsible for the maintenance, repair and replacement of certain capital items. More importantly, the words used by the legislature in defining “capital items” expressly contemplated such agreements.

“If the resident can be made to pay personally for maintenance of items of a capital nature, the amount of the annual MRF contribution disclosed in the PID… will be low and therefore, appear attractive. This benefits the scheme operator in enticing residents, but at the expense of potential residents being fully informed as to the true expenses they are likely to incur as a result of residing in the retirement village.”¹⁸

I do not accept that the construction of the RVA favoured by the learned primary judge necessarily benefits operators over residents. In any event, the balance struck between the interests of operators and the interests of residents in this regard was a matter for the legislature. The appellants submit that arrangements which result in a low MRF contribution may appear attractive. Appearances may be deceptive. However, they also may be accurate. A smaller MRF contribution may not only appear attractive. It may be attractive to some consumers. An informed consumer may judge that it is not in his or her interests to assume the responsibility to contribute towards the costs of maintaining and repairing capital items, such as hot water systems and air conditioning units, used by other residents in their homes, being items over which the consumer has no control. He or she may prefer to assume the responsibility to maintain and repair such items in the accommodation unit in which he or she lives, and pay less by way of contribution to a MRF that otherwise would be used to pay for the maintenance and repair of such items used throughout the retirement village. For instance, a consumer may be willing to maintain and repair an air conditioning unit, the use of which they control, and may wish to have direct control over by whom such maintenance and repair is undertaken and at what cost it is undertaken. Some consumers may consider that the inherently unpredictable cost of maintenance and repair of such an item over time is still likely to be less than an alternative arrangement. They may consider that the costs associated with this contractually-assumed obligation can be budgeted for and managed, and are likely to be less than the cost of contributing to the collective costs of maintaining and repairing all of the air conditioning units in residents’ homes.

Most consumers may prefer the predictability of making contributions to a MRF that is used to maintain and repair such items. Others, however, may prefer to pay a smaller contribution to a MRF, and to assume contractual obligations to maintain and repair certain capital items, such as the items that are the subject of contention in this matter.
In summary, the actual or perceived interests of consumers are not necessarily prejudiced by allowing residents to enter into arrangements that the appellants submit are precluded by the RVA. An informed consumer may determine that such an arrangement is in his or her interests. If, however, the appellants are correct in submitting that the construction favoured by the learned primary judge tends to benefit the interests of operators over prospective residents, then this simply means that the legislature did not promote the interests of consumers to the fullest possible extent. It does not call for a construction of the Act that is at odds with the language that the legislature chose, or entitle the Court to alter the balance of interests that was determined by the legislature.

The suggested unintended consequence that the purpose of the CRF will be defeated and the MRF deprived of significant purpose

Section 91 of the RVA provides that the capital reserve fund (CRF) may be used only for replacing the village’s capital items, paying a quantity surveyor’s reasonable fees and paying tax on amounts paid into the fund.¹⁹ Under s 91 the scheme operator is solely responsible for contributing to the CRF. The appellants submit that it is apparent that the legislature intended that generally the scheme operator, and not residents, should pay for replacing items of a capital nature owned by the scheme operator. This accords with what the then Minister said in the Second Reading Speech that is quoted by Keane JA.²⁰ The appellants submit that the construction of the RVA adopted by the learned primary judge would not only allow responsibility for the cost of maintenance of buildings and structures to be transferred from the MRF to residents, it would allow the transfer of responsibility for replacement of buildings and structures from the scheme operator to residents, contrary to the intention of Parliament, as reflected in the terms of s 91. Such a consequence is said to be unintended. The appellants further submit that the MRF and the CRF could have “little work to do” if residents could be made personally responsible for the costs of maintenance of buildings and structures, since the operation of these funds would be limited to plant, machinery and equipment and certain village infrastructure owned by the scheme operator.
The terms of s 91 in relation to the purpose of the CRF and the scheme operator’s responsibility for contributing to it are not inconsistent with a construction of the Act that permits residents and operators to agree that residents will maintain, repair and replace certain items that would otherwise constitute “capital items”. The Minister’s Second Reading Speech, in stating that responsibility for capital replacement “will generally be the responsibility of the operator”, recognised that in certain instances residents might be responsible for expenditure to replace capital items. Sub paragraph (a) of the statutory definition of “capital items” clearly identifies that one such instance is when a resident contracts to do so.
The construction of the Act adopted by the learned primary judge creates the possibility that residents could assume onerous responsibilities to replace expensive buildings and structures that are owned by the operator. However, one should not readily conclude that prospective residents who were invited to assume such responsibilities would be unaware of such an obligation, notwithstanding that the disclosure regime does not require the public information document to make specific provision in respect of such a contractual arrangement. A contractual responsibility to replace buildings and structures at great expense, as distinct from, say, an obligation to replace certain equipment and appliances that are fixed in an accommodation unit, would be unlikely to be assumed by residents, or be unlikely to be assumed without a significant financial benefit, such as a reduced ingoing contribution or a reduced “exit fee”. It seems unlikely that many residents would contract to assume such obligations without corresponding financial benefits, or that rival operators, who did not seek to impose such onerous obligations, would not alert prospective residents to these matters. Prospective residents may be deterred from entering such contracts, either by their own reading of the contracts or by being alerted to such provisions by other operators. The theoretical possibility exists that an operator may seek to have residents contractually commit to replace buildings and structures at great cost. However, the theoretical possibility that residents might agree to replace buildings and structures, leaving the CRF with “little work to do”, does not justify the construction of the Act for which the appellants contend. That construction would prevent an agreement in which residents agree to maintain repair and replace certain minor items that are fixed in the units in which they reside.

The appellants’ submission that other absurd or unintended consequences will flow

The appellants submit that a construction of the Act that does not prevent parties from agreeing that a resident pay the costs of maintaining, repairing and replacing items owned by a scheme operator leads to other consequences which the appellants submit are absurd or unintended. I shall briefly address each of the suggested absurd or unintended consequences after making some general observations about these submissions.
If the statutory definition of “capital items” cannot be uniformly applied on all of the occasions in which that expression is used throughout the Act, that does not justify the conclusion that it should not be applied in respect of s 97 concerning the use of the MRF, if it is clear that the definition is to apply in that context.²⁸ The proper approach is to assume that the expression “capital items” is used in s 97 as defined, and to ask whether a contrary intention can be shown. It may be appropriate to consider the legislation as a whole.²⁹ However, the existence of other provisions in the Act in which a contrary intention appears, making it appropriate to depart from the definition in those contexts, does not, of itself, justify the conclusion that the statutory definition does not apply in respect of s 97.³⁰ The same principles apply in respect of the application of the statutory definition in respect of s 91 concerning the use of the CRF.

Reinstatement under s 62(4)

No absurd or unintended consequence flows from the conclusion that a scheme operator may be required to pay for the cost of reinstatement work pursuant to s 62(4) after an existing contract is terminated. Depending on the terms of the relevant contract, the operator may be able to pay for the cost of replacement out of the CRF, or for the cost of reinstatement work out of the CRF if s 62 requires this work to be paid by the scheme operator.

Quantity Surveyor’s Report

The RVA requires the scheme operator to obtain a quantity surveyor’s report for the village before deciding a budget for the CRF and before deciding a budget for the MRF. The survey report under s 92(1) concerns “the expected capital replacement costs for the village for the next 10 years”, and the survey report under s 98(1) concerns “the expected repair and maintenance costs for the village for the next 10 years”. The quantity surveyor’s reports relate to all items in the village, including items in a resident’s unit that the resident may have agreed to maintain, repair or replace. However, this does not require the displacement of the statutory definition of “capital items” for the purpose of resolving a dispute of the present kind. The quantity surveyor’s report provides a basis for a budget under s 93 for the CRF and a budget under s 99 for the MRF. It is to be expected that any budget will take account of items that residents have contracted to maintain, repair and replace, and the cost of reinstatement that the operator is obliged to pay under s 62(4). The provisions in relation to quantity surveyor’s reports do not give rise to any absurdity or unintended consequence.

Deliberately damaged items and accelerated wear

Section 96 makes a resident liable for the cost of replacing a capital item that is deliberately damaged by the resident or subject to accelerated wear caused by a resident’s actions. The appellants submit that s 96 would be of “little purpose” unless the legislature intended that ordinarily the costs of capital replacement were to be met from the CRF.
Section 96 imposes a liability to pay costs in certain circumstances, and it has a sensible operation in a variety of cases. For instance, in the present case it would oblige a resident to pay the costs of replacing an item that he or she deliberately damaged but which was not the subject of a contractual obligation to repair or replace. In other cases, the section operates to impose an obligation on a resident when otherwise replacement costs would be paid from the CRF. It is because ordinarily (but not invariably) replacement costs are paid for out of the CRF that s 96 makes specific provision for cases of deliberate damage and accelerated wear. The possibility that contracts may specifically provide for residents to pay for the cost of replacement of certain items does not deprive s 96 of a sensible operation. Section 96 operates to achieve its intended purpose if the construction adopted by the learned primary judge applies.

Insurance provisions

I agree with the analysis and conclusions of Keane JA in respect of these provisions.
In summary, none of the provisions pointed to by the appellant result in consequences that are absurd or unintended if the construction adopted by the primary judge applies.

The freedom of contract contention

My conclusion does not rest on the proposition urged by the first respondent that clear words are required to override freedom of contract. Legislation like the RVA frequently encroaches on freedom of contract in the interests of consumer protection or other interests. My conclusion rests on the words that the legislature chose, and the absence of any indication that the legislature did not intend its words to mean what they say.

Conclusion

The RVA, in its definition of “capital items”, and in the application of that definition to the maintenance, repair and replacement of items, envisages that village residents may come to terms with a scheme operator about certain items owned by the operator. The Minister’s Second Reading Speech is consistent with permitting such arrangements, however, it is doubtful if the occasion arises under s 14B of the Acts Interpretation Act 1954 to refer to such extrinsic material.
A construction of the RVA that permits village residents and a scheme operator to agree that the resident will maintain, repair and replace certain items may have benefits for the village resident, the scheme operator, or both. A prudent resident, who carefully maintains fixed appliances in his or her unit, who makes little use of such appliances or who is able to repair them without substantial cost, may make an informed decision that assuming contractual obligations to maintain, repair and replace an item is to his or her financial advantage. The cost of maintaining and repairing such an item over a period of years may be thought by such a resident to be probably less than the cost of contributing to a maintenance reserve fund to maintain and repair numerous similar items throughout a village, being items over which the resident has no control in respect of their use and maintenance, and limited say in determining the cost of maintaining and repairing them out of a maintenance reserve fund. Such an arrangement may prove to be in the interests of a prudent consumer contemplating entering into a residence contract.
The fact that many retirement village residents will prefer the predictability, and the possibly greater cost, of contributing to a maintenance reserve fund, does not mean that the legislature, in the wholesale pursuit of consumer protection or some other interest, intended to preclude those who wish to voluntarily assume contractual obligations from doing so.
A construction that precludes residents from entering into such an arrangement does not reflect the words of the Act. It is not necessary to achieve the purposes of the Act. It does not lead to absurd or unintended consequences. A construction that permits such arrangements reflects a legislative determination that residents and scheme operators should be able, if they choose to do so, to reach agreements which they perceive to be in their interests. Depending upon individual circumstances and the extent of the contracted obligation, entry into such an arrangement may in fact be in the interests of a resident.
Entry by residents and scheme operators into such contractual arrangements, which the parties perceive to be to their mutual benefit, may encourage the continued growth and viability of the retirement village industry, and thereby advance one of the objects of the Act. As the appellants argue, entry into such an arrangement may disadvantage consumers, especially in circumstances in which a party enters into such an arrangement without knowing of its potential financial consequences. However, in other cases consumers will make an informed assessment of the advantages and disadvantages of such an arrangement, and it would be erroneous to simply assume that prospective consumers are unaware of the contents of such contracts.

Footnotes

Section 14(1) of the RVA. ↩
Section 102A and s 103 of the RVA and schedule definition "general services". ↩
Jomal P/L v Commercial & Consumer Tribunal & Ors [2009] QSC 3 at [22] – [23]. ↩
[2009] QSC 3 at [38] – [41] (citation footnoted in original). ↩
(2007) 232 CLR 138 at 142- 143 [5] – [7] (citations footnoted in original). The dicta of Gleeson CJ were referred to with approval by Hayne, Heydon, Crennan and Kiefel JJ in Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue (2009) 239 CLR 27 at 47 [51]. ↩
14B Use of extrinsic material in interpretation ↩
Cf s 15(2), s 56(1), s 57 and s 61 of the RVA. ↩
Betella v O'Leary [2001] WASCA 266 at [13] – [14]; Official Trustee in Bankruptcy v Buffier (2005) 54 ACSR 767 at 776-777 [29] – [30]. ↩
Borthwick v Carruthers (1787) 1 TR 649; 99 ER 1300. ↩
Coco v The Queen (1994) 179 CLR 427 at 437; R v JS (2007) 175 A Crim R 108 at 119 [31]. ↩
See [15] of the judgment of Keane JA. ↩

Jomal P/L v Commercial and Consumer Tribunal & Ors

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