Murphy v The Trustees of Catholic Aged Care Sydney - [2018] NSWCATCD 34 - NSWCATCD 2017 case summary — Zoe

NSWNSWCATCD

Murphy v The Trustees of Catholic Aged Care Sydney

[2018] NSWCATCD 34

NCAT Consumer and Commercial|2017-12-21

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Court

NCAT Consumer and Commercial

Decision date

2017-12-21

Source

Original judgment source is linked above.

Judgment (17 paragraphs)

[1]

REASONS FOR DECISION

This matter involves a dispute between a resident of a retirement village and the retirement village operator. The subject matter of the dispute concerns the financial treatment of annual account deficits, the repayment of funds by the operator and repair works undertaken to an ornamental fountain. The retirement village at the centre of the dispute is 'Vaughan Village', a retirement living facility located in Watsons Bay, in Sydney's Eastern Suburbs (the Village). The Village has 34 residential units that are predominantly, or exclusively, occupied by retirees with 'village contracts' with the respondent, Trustees of Catholic Aged Care Sydney (the Operator).
There is no dispute that, in these circumstances: 1. the Village is a 'retirement village' for the purposes of the Retirement Villages Act 1999 (NSW) (the RV Act); and 2. the Operator is the 'operator' of a retirement village within the meaning of s 4(1) of the RV Act.
The applicant, Mr Murphy, is a resident of the Village. Like the other Village residents, Mr Murphy's relationship with the Operator is governed by a village contract, the Village Rules (the Rules), the RV Act and by the regulations made under s 203 of the RV Act. Until 1 September 2017, the relevant regulation was the Retirement Villages Regulation 2009 (NSW) (the 2009 Regulation). The Retirement Villages Regulation 2017 (NSW) (the 2017 Regulation) replaced the 2009 Regulation on 1 September 2017. At that time, the 2017 Regulation became the relevant regulation.
The present dispute involves two applications by Mr Murphy: Application RV 17/28737 and Application RV 17/44236. To understand the legal and factual frame of reference for these applications, it is necessary to refer to the course of earlier proceedings before the Tribunal which involved Mr Murphy and the Operator.

[2]

Earlier Proceedings

S 128 of the RV Act gives the Tribunal the power to make a broad range of orders to ensure compliance with the terms of a retirement village contract, the rules of a retirement village or the applicable legislation. On 1 September 2014, Mr Murphy filed Application RV 14/43869 with the Tribunal for orders under s 128(1) of the RV Act. The Application, as ultimately determined by the Tribunal in amended form, involved nine orders which Mr Murphy argued as necessary to require the Operator to comply with its obligations. Some of those orders remain relevant to the determination of the present dispute.
Mr Murphy framed order 1 in the earlier proceedings in broad terms. On its face it was to require the Operator to 'enforce the Rules and prevent changes detrimental to the residents' future'. The generality of the order obscured the particular context in which Mr Murphy raised it. Mr Murphy complained that the Operator had detrimentally compromised access to the Village, particularly for emergency services, by changing visitor car parking arrangements. The Tribunal declined to make that order. It was not satisfied that there had been any breach of the Rules. It found that the visitor carparking arrangements were consistent with amendments made to the Rules by special resolution of the residents at a meeting of the Residents Association on 17 November 2014. The Senior Member held at paragraph [54] of the Tribunal's decision: On the evidence available to me I am satisfied that there is currently no breach of the Village Rules in regard to parking that requires any orders of the Tribunal.
Order 2 in the previous proceedings was to require the Operator to repay an amount of $23,973.00 used to balance the Village's audited 2014 financial year (FY) accounts. Mr Murphy's complaint was the Operator had breached the RV Act by using these proceeds, paid from a fund, variously described in the evidence as 'the Residents Special Fund', a 'Capital Works Fund', 'the Vaughan Village Special Reparation Account', a 'Deferred Maintenance Fund', or as constituting 'Reserve Funds' (the Fund). The Tribunal declined to make that order.
Order 4 in the earlier proceedings related to an ornamental fountain that Mr Murphy described as in a state of dilapidation. The order was to require the Operator to put the fountain into proper working condition. The Tribunal made the following order on 22 September 2015 directing the Operator to carry out repairs or to replace the fountain: An order is made pursuant to the provisions of the Retirement Villages Act s 128(1)(a) directing the respondent to comply with the obligations imposed on it pursuant to s 93 of the Retirement Villages Act 1999 and specifically pursuant to s 128(1)(d) the operator is to repair or replace the fountain the subject of [the prior proceedings]. All such work is to be completed within 90 days of the date of these orders.
Any amount, including rent, that a village resident pays under a village contract on a recurrent basis is a 'Recurrent charge' as defined in s 4 of the RV Act. Order 5 in the earlier proceedings was to require the Operator to repay recurrent charges paid in the 2014 FY, and to require the Operator to comply with the provisions of the legislation relating to the presentation and approval of budgets. The Tribunal made an order to require the Operator to fully comply with its statutory obligations. The Tribunal did not make an order to require the Operator to repay any recurrent charges.
Mr Murphy filed a Notice of Appeal appealing the Tribunal's decision on 30 August 2016.
Mr Murphy challenged the Tribunal's decision refusing order 2 on the grounds that the Tribunal had:
misconceived the substance of Mr Murphy's complaint; and
failed to have regard to the relevant operation of the legislation.
The Appeal Panel upheld this aspect of Mr Murphy's appeal on the basis that the Tribunal had made a legal error in the way it had considered and determined Mr Murphy's complaint (Murphy v Trustees Catholic Aged Care Sydney [2017] NSWCATAP 139): 112 In our view, Mr Murphy's submissions with respect to proposed order 2 must be rejected. Essentially both Mr Murphy and the Operator agree that the source of funds to make up the proposed budget deficit for 2013/2014 (and perhaps some prior years as well) was the fund which came about as a consequence of the Operator offering reparations to the residents. On Mr Murphy's view, the residents are the beneficial owners of the fund and on the Operator's view, as expressed by counsel during the hearing, the ownership of the fund is a matter of some complexity and controversy. It may be a fund held on trust for the benefit of those in residence from time to time. It is not necessary for us to determine who owns the fund except to say that both sides assert that the fund is not the property of the Operator. It follows from that position (i.e. that the fund is not the property of the Operator) that the onus falls to the Operator to establish that it had the residents' authority to use the fund to finance the deficit. The Operator relied upon the meeting of 20 May 2013. 113 In view of the Operator's concession that the fund was not the property of the Operator, which does not appear to have been made in the proceedings below, we are of the view that the question of whether that fund may be utilised to fund deficits has not been fully considered. In particular, the impact of s 120C(1) and 120C(2)(b) of the RV Act have not been considered…
The Appeal Panel made the following order remitting a limited question to the Consumer and Commercial Division of the Tribunal: (6) The application is remitted back to the Consumer and Commercial Division of the Tribunal for a rehearing limited to the question of whether the Tribunal should make an order that the deficit of $23,960.00 in respect of the 2013/2014 year paid from the account variously described as the village special account or the reparation account be repaid by the Operator to that account, and in respect of the remittal, the parties may file fresh evidence.
Application 17/28737 is for the rehearing of that question.
The second aspect of the current proceedings relates to Application 17/44236. Mr Murphy filed that Application with the Tribunal on 17 November 2017. Mr Murphy applies by way of 'renewal proceedings' for further orders relating to the presentation of the Village's proposed budgets, the enforcement of the visitor car parking rules, the repairs carried out to the fountain, and the payment of an amount of $1,600 by the Operator: s16 and s 17, Cl 3(1) of Sch 4 and Cl 8 of Sch 4 of the Civil and Administrative Act 2013 (NSW) (the NCAT Act).

[3]

The Hearing and Adjournment Application

Both Applications were listed for hearing by the Tribunal on 21 December 2017. Mr Murphy appeared in person on that day. Mr M Walsh of counsel, instructed by Makinson d'Apice, appeared for the Operator.
At the commencement of the hearing, the Operator made an application to adjourn the proceedings, or alternatively to adjourn so much of the proceedings as related to the rehearing of the remitted question. The Operator explained that the proceedings should be adjourned to permit the Operator to commence proceedings in the Supreme Court of New South Wales for a declaration as to the ownership of the Fund. Mr Murphy opposed the Operator's application and indicated that he was ready to proceed.
The Tribunal has an undoubted power and discretion to adjourn proceedings: s 51 of the NCAT Act. That power, like all other procedural powers and rules of the Tribunal, have the objective of facilitating the just, quick and cheap resolution of the real issues in dispute. All of the Tribunal's procedural powers must be exercised consistently with that objective, and to enable the Tribunal to decide matters on the basis of equity, good conscience and the substantial merits of the case: s 36(1) and s 38(4) of the NCAT Act.
In Expense Reduction Analysts Group Pty Ltd v Armstrong Strategic Management and Marketing Pty Limited (2013) 250 CLR 303, the High Court confirmed the correct approach to interlocutory issues, such as amendment applications. It said: In Aon Risk Services Australia Ltd v Australian National University, it was pointed out that case management is an accepted aspect of the system of civil justice administered by the courts in Australia. It had been recognised some time ago by courts in the common law world that a different approach was required to tackle the problems of delay and cost in the litigation process. Speed and efficiency, in the sense of minimum delay and expense, are essential to a just resolution of proceedings. The achievement of a just but timely and cost-effective resolution of a dispute has effects not only upon the parties to the dispute but upon the court and other litigants. The decision in Aon Risk Services Australia Ltd v Australian National University was concerned with the Court Procedures Rules 2006 (ACT) as they applied to amendments to pleadings. However, the decision confirmed as correct an approach to interlocutory proceedings which has regard to the wider objects of the administration of justice.
The Appeal Panel's decision in Armee v Brealey [2017] NSWCATAP 141 makes clear that the High Court's approach in Expense Reduction applies to proceedings in the Tribunal. This is because s 36(1) of the NCAT Act is in relevantly identical terms to s 56(1) of the Civil Procedure Act 2005 (NSW), which was the provision considered by the High Court in the Expense Reduction decision.
Tribunal matters should proceed to final hearing on the date the Tribunal fixes for hearing. This is in recognition of the difficulty that adjournments have on the opposing party to proceedings, and the disruption and delay that adjournments cause to the orderly and timely disposition of the Tribunal's business.
An adjournment will almost invariably result in additional costs to the litigants. It will generally disrupt the orderly and efficient management of the Tribunal's resources. This is an important aspect of the Tribunal's existence. The Tribunal prides itself as a forum where litigants have their disputes determined expeditiously, and the Tribunal arranges its day to day affairs to ensure that objective. Adjournments hamper this. An adjournment of a hearing will typically require adjustment and a diversion of the Tribunal's resources. The management of these is often complicated because it has many part-time members and their availability is a significant feature of the Tribunal's hearing calendar. Accordingly, an adjournment of a hearing will possibly affect when litigants in the Tribunal can have their matters heard. Accordingly, the Tribunal grants an adjournment of proceedings fixed for final hearing with reluctance, and as an exception, rather than something done as an ordinary matter of course.
The effect that an adjournment will have on the other party, and the legitimate expectation of having the dispute determined by the hearing date fixed, is also an important consideration in the exercise of the Tribunal's discretion on an application for adjournment of proceedings. That expectation is not always one that can be compensated by an award of costs, particularly where the other party is a self-represented litigant having to cope with the stress of an unresolved dispute. In that regard, the Appeal Panel in Sayhoun v Owners Corporation Strata Plan 75123 [2014] NSWCATAP 112 said: 17. We are satisfied that the respondent would be prejudiced if an extension of time were granted. That prejudice may be addressed by an award of costs, although we note the remarks of the plurality in Aon Risk Services Aust Pty Ltd v Australian National University [2009] HCA 27; (2009) 239 CLR 175 at [100] that justice cannot always be measured in money and that a judge is entitled to weigh in the balance the strain the litigation imposes upon litigants; and their approval (also at [100]) of Bowen LJ's statement in Cropper v Smith [1884] 26 Ch D 700 that: Non-compensable inconvenience and stress on individuals are significant elements of modern litigation. Costs recoverable even on an indemnity basis will not compensate for time lost and duplication incurred where litigation is delayed or corrective orders necessary.
Where the adjournment is, at least in part, caused by the delay of the party seeking the adjournment, or by non-compliance by that party with an order of the Tribunal, there should be adequate and sufficient explanation to explain the delay. This is an aspect of the exercise of discretion which the High Court considered significant in Aon Risk Services Aust Pty Ltd v Australian National University (2009) 239 CLR 175.
If having to establish the ownership of the Fund was regarded as a significant feature for the Operator's defence to Mr Murphy's applications, then the ownership of the Fund then this must have been considered to be a live issue for a significant period of time. It was for the Operator to determine the grounds for opposing the orders of Mr Murphy at an early stage of these proceedings, and to consider the material that it would rely on in that regard. If the Operator required orders from the Supreme Court of New South Wales to oppose Mr Murphy's applications, then it was incumbent on the Operator to commence proceedings at a much earlier time. The Operator did not do so.
The Tribunal was not satisfied with the Operator's explanation as to why it had not commenced proceedings for a declaration well before the scheduled hearing date. The Tribunal considered that the Operator had ample opportunity to do so, and did not take that opportunity.
For these reasons, the Tribunal rejected the Operator's adjournment application and the matter proceeded to hearing.
After hearing brief oral submissions from both Mr Murphy and Mr Walsh, the parties indicated that they were content for the Tribunal to determine the proceedings on the basis of written submissions, and the material provided to the Tribunal. The Tribunal made a direction for the parties to provide the Tribunal with supplementary written submissions dealing with the construction of s 120C of the RV Act and the question that the Appeal Panel had remitted to the Division for rehearing.
The Tribunal reserved its decision.

[4]

The Documentary Material

As a result of the procedural directions made by the Tribunal in proceedings 17/28737, including the Tribunal's directions made at the conclusion of the hearing, the Tribunal received, and has had regard to, the following material on which Mr Murphy has relied: 1. written submissions, and a 58 page paginated bundle of documents in support of those submissions filed with the Tribunal on 3 August 2017 in application RV 17/28737; 2. written submissions, and a 98 page, paginated bundle of documents in support of those submissions filed with the Tribunal on 17 November 2017 in application RV 17/28737; and 3. written submissions in response to the Operator's supplementary submissions dated 13 February 2018 and filed with the Tribunal on 14 February 2018 in application RV 17/28737; 4. submissions and a bundle of documents in support of those submissions, filed with the Tribunal 3 August 2017 in application RV 17/44236; and 5. submissions and a bundle of documents in support of those submissions, filed with the Tribunal on 17 November 2017 in application RV 17/44236.
As a result of the procedural directions made by the Tribunal in proceedings 17/28737, including the Tribunal's submission at the conclusion of the oral hearing, the Tribunal received, and has had regard to, the following material on which the Operator has relied on the hearing of those proceedings: 1. submissions referred to in a letter from Makinson d'Apice to the Tribunal dated 25 October 2017, which in turn referred to various documents, including the Operator's original submissions in response to Mr Murphy's original application filed with the Tribunal on 20 May 2015; and 2. submissions and a bundle of documents in support of those submissions, filed with the Tribunal on 31 January 2018 in application RV 17/28737; 3. in application RV 17/44236 earlier submissions referred to in a letter from Makinson d'Apice to the Tribunal dated 25 October 2017 and a bundle of documents in support of those submissions, filed with the Tribunal on 25 October 2017, including the evidence served on the previous application, and in application in RV 16/39068; and 4. submissions and a bundle of documents in support of those submissions, filed with the Tribunal on 15 December 2017 in application RV 17/44236.

[5]

The Fund

Mr Murphy submitted that 'the ownership of the funds has long been accepted, by all parties, as a reparation payment for not providing originally advertised services despite fraudulent claims and so called legal advice': Mr Murphy's 17 November 2017 submissions in RV 17/28737.
Mr Murphy referred the Tribunal to a letter from the Vaughan Village Residents Association (the Association) to Ms Wendy Fisher of the Aged Care Rights Service dated 13 March 2004 (p 31 of the RV 17/28737 17 November Submission). Mr Murphy relied on that letter as accurately reflecting the nature of the Fund, and explaining source of the Fund's proceeds. The Association's 13 March 2014 letter states: The….accumulated funds as at 30-6-04 represents compensation for lack of aftercare and should now be used to cover escalating costs and benefit the residents as intended.
The Operator did submit that it owned the Fund. The Operator acknowledged that the proceeds of the Fund were derived from 'a share of the departure fees otherwise payable by departing residents to the [Operator] when they depart[ed] the Village'. The Tribunal understood the Operator wanted to have the Supreme Court of New South Wales make a declaration as to the ownership of the Fund to establish the individual or collective ownership of the Fund in the hands of the residents of the Village.
Mr Murphy's submissions were that the Operator's 'reparation payments' were to make up for the Operator's 'fraudulent claims' in the promotional material. The Tribunal understands that self-represented litigants are not experienced in making submissions which are consistent with the substantive and procedural laws that the Tribunal applies. Sometimes, the submissions of a self-represented litigant will stray into areas that an experienced lawyer's submissions would not, and ethically should not, enter the same areas. The Tribunal considers Mr Murphy's submission referring to 'fraudulent claims' is such a submission.
There is no evidence to warrant that submission. If a representation is made that something will happen in the future, and that event does not happen, it does not necessarily follow that the representation was a deliberate lie, or that the representation was made fraudulently. Often things are promised and are not delivered because unforeseen things prevent them from happening, or circumstances which existed when the promise was made unexpectedly change. The law of unbroken promises is generally the law of contract, not the law of deceit and fraud. Mr Murphy has not established to the Tribunal's satisfaction that the Operator made any representations about providing after care services 'fraudulently', as Mr Murphy submitted. The evidence does not establish that at the time of the Operator's representations about the expected availability of after care services, the Operator had no belief or intention to provide those services.
Mr Murphy's complaint about the Operator's unlawful use of the Fund to balance a deficit in the Village's annual accounts does not depend on Mr Murphy having to demonstrate fraudulent claims by the Operator. It is enough for Mr Murphy to establish that the Operator did not comply with the legislation in using the Fund as it did. The resolution of this question turns on the proper construction and operation of the RV Act, the 2009 Regulation, and the characterization of the proceeds in the Fund which were used to balance the deficit in the Village's audited accounts, not the nature of the representations made in the operational material.
The Tribunal makes the following finds based on the contents of the Association's letter, and the concessions made by the Operator:
when the Village was first built, promotional material represented that the Village could provide after care services to residents;
the Operator could not provide the after-care services as represented in that promotional material;
the Operator acknowledged the existence of at least a moral, if not a legal obligation, to compensate the residents for the representations made in the promotional material, and its inability to provide after care services;
the compensation proposed a compensation scheme, which it is reasonable to infer the residents of the Village accepted, by which the Operator agreed that of one-third of the 1.5% departure fees paid by departing residents under their village contracts would go to the residents of the Village (the Scheme); and
the payments made under Scheme were intended to provide the residents of the Village with payments that the Residents could use for 'Village maintenance' without any 'distinction between recurrent or deferred maintenance';
the Tribunal finds that the proceeds of the Fund represented the accumulation of the share of departure payments made to the residents under the Scheme; and
by 30 June 2004, payments of a share of the departure fees were being made on the basis that those payments would be used by the residents of the Village for 'Village maintenance'.
Presumably the Operator's submissions which referred to the Fund as a 'Deferred Maintenance Account'. The Tribunal understood that submission as reflecting the Operator's acceptance that the departure fee payments made under the Scheme, if not expended on maintenance in the year in which the payments were made, were carried forward and retained for future use of the residents in any subsequent year.

[6]

Audited Versus Unsigned Accounts

S 4(1) of the RV Act defines 'accounts' to mean the accounts referred to in Division 6 of Part 7 of the RV Act, being s118 to s 119B of the RV Act. 'Accounts' do not include proposed and approved annual budgets. Annual budgets come under a different part of the RV Act: Division 5 of Part 7 of the RV Act, in s 112 to s 117.
S 91 of the RV Act requires a retirement village's annual accounts to relate to a twelve-month period which is to commence and end on dates as determined by the operator. Each of the annual accounts of the Village related to the period 1 July to 30 June. Accordingly, the reasonable inference is that the Operator determined this period as being the Village's financial year (FY).
S 118 of RV Act requires an operator of a retirement village to prepare quarterly and annual accounts. The quarterly accounts are not required to be audited, whereas the annual accounts are.
S 119(2) of the RV Act sets out what Village's annual accounts are to include: (2) The audited accounts must include (but are not limited to): (a) the following particulars: (i) details of the income and expenditure of the village during the financial year, including income and expenditure of the capital works fund (if any), (ii) details of the balance of the capital works fund (if any), (iii) details of amounts received for insurance claims made in respect of any matter referred to in section 100 (2) (a) (i) or (ii) relating to the village during the financial year, (iv) details of any interests, mortgages and other charges affecting the property of, or forming part of, the village (other than property or premises owned by residents of the village) as at the end of the financial year, and (b) a statement that: (i) specifies whether or not money payable by the village operator to former residents during the financial year concerned was paid in full and on time, and, (ii) specifies, if any money so payable has not been paid, the amount concerned, details of the delay and the reasons for the delay, and (iii) contains the matters required to be included by subsection (3), and (iv) gives details of any matters that may prevent the village operator from meeting those liabilities, and (c) such other matters as may be prescribed by the regulations. (3) If the auditor is not satisfied that the operator has the capacity, during the financial year immediately following, to meet the liabilities relating to the village as and when they fall due, or if the auditor believes that there is considerable uncertainty regarding the ability of the operator to meet the liabilities of the village as and when they fall due during the financial year immediately following, a statement to that effect must appear in the audited accounts. (4) The format of the accounts must correspond as closely as possible with the layout of the proposed annual budget.
The Village's signed audited annual accounts for FY 2014 were included as Annexure B to the Operator's 20 May Submissions. Mr Murphy referred the Tribunal to discrepancies between the income and expenditure statements in an unsigned version of the annual accounts and the income and expenditure statements forming part of the signed audited annual accounts.
Mr Murphy's submissions also referred to a discrepancy of $13.00 in the recurrent charges set in the FY 2014 approved budget of $113,424.00, and 'resident maintenance fees' in the income reported in the FY 2014 accounts of $113,411.00. Having regard to the Independent Auditor's Report in the FY 2014 accounts, the Tribunal accepts the revenue derived in FY 2014 from recurrent charges paid by the residents as the amount appearing in the income and expenditure statement in the audited accounts, namely the amount of $113,411.
Mr Murphy's apparent objective in pointing to various discrepancies was to cast doubt on the financial treatment of various items of revenue and expenditure in the audited and signed annual accounts for the 2014 FY. The evidence does not explain why there were these differences. Perhaps the unsigned accounts were preliminary. Perhaps the unsigned accounts contained accounting errors, and this explains why the accounts were not signed at that point. These are possible explanations. However, the Tribunal's duty is to make its determination of the real issues in dispute, by reference to logically probative material, not on the basis of supposition or by speculation.
Accounts are audited to add a level of credibility to a reported financial position. The Village's signed audited accounts contain an Independent Auditor's Report to the Residents. This report expresses the opinion that the signed accounts fairly represent the financial position of the Village for the 2014 FY, viewed by reference to the appropriate accounting standards. That Independent Auditor's Report expresses the opinion that the accounts reflect the requirements of the RV Act in all material respects.
In the final analysis, the Tribunal does not accept that the discrepancies referred to in Mr Murphy's submissions cast reasonable and legitimate doubt on the Village's signed audited accounts. The audited accounts give the best available picture of the Village's financial position at the relevant time, and the Tribunal accepts that the signed and audited accounts for the 2014 FY as the most reliable and accurate financial reporting of the Village's actual income and actual expenditure for the 2014 FY.

[7]

Revenue Other Than Recurrent Charges

S 112 is in Division 5 of Part 7 of the RV Act. It imposes a requirement on the operator of a retirement village to prepare a proposed annual budget for the residents. The section relevantly reads: (1) At least 60 days before the commencement of each financial year of a retirement village, or such other time as may be prescribed by the regulations, the operator of the village must supply each resident of the village with a proposed annual budget itemising the way in which the operator proposes to expend the money to be received by way of recurrent charges from the residents of the village during the financial year. Maximum penalty: 100 penalty units. … (3) The regulations may make provision for or with respect to: (a) matters that must be dealt with in a proposed annual budget, and (b) matters that must not be financed by way of recurrent charges, and (c) the form that the budget is to take.
Cl 17 of 2009 Regulation did make provision to matters of form and substance relevant to a retirement village's proposed annual budget for the purposes of s 112(3) of the RVA. At the time of the 2014 FY, the regulation relevantly said: 17 Matters that must be dealt with in proposed annual budget (1) For the purposes of section 112 (3) (a) of the Act, the matters that must be dealt with in a proposed annual budget are the following: (a) the amount of recurrent charges payable by residents of the village during the year (including any expected increases in those charges in line with a fixed formula), (b) the method by which that amount has been calculated, (c) the total expected income from recurrent charges for the village for the year, (d) the effect of the expected surplus or deficit (as the case may be) for the current year on the finances of the village, (e) all proposed categories of expenditure (without grouping together 2 or more unlike categories), (f) the proposed expenditure on each of those categories, the proposed expenditure on each of them as indicated in the approved annual budget for the current year, and the likely actual expenditure on each of them for the current year, (g) … (i) the total proposed expenditure of the village for the year, (j) the expected surplus or deficit for the year.
Cl 19 of the 2017 Regulation replaced cl 17 of the 2009 Regulation in dealing with the same matters.
Cl 17 of the 2009 Regulation referred to a proposed annual budget having to deal with total expected 'income', but only by reference to one possible source of that income; the amount anticipated from the payment of 'recurrent charges'. Mr Murphy's submission is that this is because the legislation requires only this one source of income to be used by an operator for the operation and maintenance of a retirement village.
In comparison to the proposed and approved annual budget for the 2014 FY, the income and expenditure statement in the Village's signed audited FY 2014 annual accounts (Annexure B to the 20 May Submissions) includes other items of income or revenue in the 2014 FY:
the Village's revenue for the 2013 FY included an amount of $24,000 described in the accounts as 'share of departure fees'; and
the income for FY 2014 included an amount of $1,100 described in the accounts as 'share of departure fees'.

[8]

Revenue and The Deficit

Division 7 Part 7 of the RVA (s 120A - 120C) deals with deficits and surpluses in a retirement village's annual accounts. The plain and ordinary English meaning of the word 'deficit', like its accounting meaning, is the opposite of 'surplus'. A deficit is 'an excess of expenditure or liabilities over income or assets for any defined period'; a 'surplus' the contrary.
The audited annual accounts for the 2014 FY establish that the overall Village expenditure for the 2013 FY was $128,118 and the 'total resident income' was $143,678, which included the amount of $24,000 as a 'share of departure fees'. The total residents' income over total expenditure for that FY produced a surplus of $15,560.
Section 120B of the RV Act states: Any surplus to be carried over (1) Any surplus in the annual accounts of a retirement village is to be carried forward to the accounts for the next financial year unless: (a) the residents of the village consent to a proposal for the expenditure of the whole or any part of the surplus, or (b) the residents of the village consent to a proposal that the operator distribute the whole or any part of the surplus to the existing residents of the village in equal shares. (2) A proposal under subsection (1) may be made by the operator of the retirement village or the Residents Committee (if any). (3) If the residents consent under subsection (1) (b) to a proposal made by the Residents Committee, the operator may apply to the Tribunal for (and the Tribunal may make) an order that: (a) the distribution is not to be made, or (b) approves or varies the proposed distribution. (4) In making an order under subsection (3), the Tribunal may consider the following: (a) the proportion of the surplus that is proposed to be distributed, (b) any other matter that the Tribunal considers appropriate.
According to note 3 in the accounts, the net surplus of $15,560 in the 2013 FY, which included the share of the departure fees paid for the 2013 FY, was carried forward into the FY 2014 annual accounts as part of the total net accumulated retained surplus at the beginning of the 2014 FY amounting to $288,818. The annual accounts for the 2014 FY record that the total residents' income of the Village for the 2014 FY was $137,384, comprising an amount of $113,411 from recurrent charges, $9,525 from interest, $525 from sundry income and $1,100 paid as a 'share of departure fees'. The annual accounts record a deficit of income over expenditure in the amount of $12,823, balanced by the retained surplus from previous years, which included the unexpended portion of the share of the departure fees paid by the Operator in the 2013 FY, which the accounts had carried forward.
Having regard to the audited annual accounts, which the Tribunal accepts as properly representing the financial position of the Village in the 2014 FY, the Operator accepted that the FY 2014 accounts indicated that there was a deficit in overall expenditure to total residents' income: paragraph [15] of the Operator's Supplementary Submissions dated 31 January 2018).
It is the use of the 'retained surplus' to balance the deficit recorded in the 2014 FY audited accounts that is foundation of Mr Murphy's complaint. Even though the audited accounts reported the 2014 FY deficit as $12,823, Mr Murphy claims repayment of a deficit for the 2014 FY in the amount of $23,960. Mr Murphy submitted that the deficit was substantially more than that recorded in the accounts because Mr Murphy calculated the deficit by ignoring the audited accounts' treatment of the payments of the shares of the departure fees as part of the Village's income or revenue. If that were the appropriate analysis, the total residents' income would be reduced to the amount of $113,424.00, rather than $124,561, and the deficit of total income over total expenditure would increase from $12,823 to $137,384.00 less $113,424, or $23,960.00.
Mr Murphy relies on s 112(1) of the RV Act in support of his submission that the operation of a retirement village must be exclusively funded from recurrent charges, and not from other funds, including the Fund created by the retention of the unexpended payment of the share of the departure fees under the Scheme. As the Tribunal understood Mr Murphy's submission, because s 112(1) makes no reference to the itemization of expenditure of any other component of revenue or other funds received, the inference must be that budgeted expenditure can only be from recurrent charges.
In most retirement villages, the residents pay recurrent charges, and this is exclusively or predominantly the only source of revenue that a retirement village will have. The mandatory requirements of the legislation that relate to the proposed annual budget of a retirement village are expressly concerned with how the operator proposes to expend the recurrent charges paid by the residents. It does not follow that s 112(1) codifies what a retirement village's financial accounts can only record or bring into account by way of income or revenue, other sources of funds, as Mr Murphy's submissions suggested.
The word 'income' or 'revenue' connotes an increase in economic benefits during a reporting period. An economic benefit can take the form of an either an inflow or enhancement of assets, or a decrease in liabilities. In this sense, the concept of 'income' encompasses both revenue and other gains and benefits. 'Revenue' relates to income that arises in the course of the ordinary activities of an entity.
The primary issue in accounting for revenue is determining when to recognise that revenue arises. Revenue will arise when it is probable that future economic benefits will flow to an entity and these benefits can be measured reliably: see Framework for the Preparation and Presentation of Financial Statements (as identified in AASB 1048 Interpretation of Standards). The Tribunal accepts that the audited accounts were prepared on the basis of the proper accounting standards, as specifically applicable to a retirement village, as the Independent Auditor's Report states.
The recording entity for the purposes of s 118 of the RV Act is the Village. In the ordinary course of the activities of the Village, 'recurrent charges' are paid by the residents of the Village. Therefore, as a reporting entity, it is appropriate to use the terminology of 'revenue' to refer to the recurrent charges paid by the residents of the Village because this is income that arises in the ordinary activities of the Village. Similarly, it may be apposite to refer to the payment of the share of departure fees as 'income' rather than 'revenue', because those payments were made under a compensation scheme, which is something that may not be considered as an inflow of funds arising in the ordinary course of a retirement village's operations.
Using this terminology, the recurrent charges paid by the residents of a retirement village is 'revenue' but not he exclusive or only income or benefit that the residents of a retirement village had available to use to expend on the maintenance or operation of the Village each year.
The Tribunal does not agree with Mr Murphy's submission as to the operation of s 112(1) of the RV Act. The Tribunal finds that s 112(1) and cl 17 of the 2009 Regulation relate to the required form and content of an annual proposed budget, to provide transparent information to the residents of a retirement village specifically geared to the expenditure of the residents' periodic payments, or the primary source of the retirement village's revenue. Nothing in s 112(1) of the RV Act expressly, or implicitly, limits what items or revenue or income must be brought to account in the audited financial accounts of a retirement village. S 112(1) is to ensure that recurrent charges are properly budgeted for, and that the residents of a retirement village have information as to how the operator is to expend the revenue received recurrent charges and any other source of income or financial enhancement or gain received, and does not limit or define how those funds were employed in paying for the operation and maintenance of a retirement village.
The Tribunal does not accept Mr Murphy's analysis as to how the deficit in the 2014 FY audited accounts is to be calculated. The 'share of departure fees' recorded against the Village's income in the detailed income and expenditure statement properly reflected the receipt of enhancements or gains paid by the Operator for the benefit of the residents, as compensation under the Scheme. Although this is not a usual form of income or revenue for a retirement village, it does not mean that the audited account did not give the payments their proper accounting treatment.
On the basis of the Scheme, as described in the Association's 13 March 2004 letter, and on the basis of the commonly accepted position that the proceeds of the Fund comprised 'reparation payments' by the Operator, the Tribunal finds that the payments made into the Fund, and which formed the retained surplus referred to in the audited accounts, represented an inflow or enhancement of assets available to the residents of the Village, increased the economic benefits of the residents in both the 2013 and 2014 FYs. In the 2013 FY, those 'reparation' or 'compensation' payments supplemented the revenue from recurrent charges to produce the result that the residents' total income was greater than the authorised expenditure in that year. In the 2014 FY, the payments made for the share of departure fees did not sufficiently supplement the revenue derived from the recurrent charges to produce the same result. In the 2014 FY, the residents' total income was less than the authorised total expenditure.
Accordingly, to the extent that a deficit existed in the 2014 FY accounts, that deficit was $12,823 as recorded in the income and expenditure statement in the accounts, and not $23, 960 as Mr Murphy submitted. The Operator used the 'retained surplus' of the unexpended accumulated payments of the share of departure fees to offset the deficit in the total residents' income in the 2014 FY by using those accumulated resources.

[9]

Making Good the Deficit

S 114 of the RV Act requires that the residents of a retirement village provide their consent to the operator's expenditure, as itemised in a proposed annual budget. The section relevantly provides: 114 Residents' consent to expenditure (1) The operator of a retirement village must (whether by way of a notice referred to in section 112 or otherwise) seek the consent of the residents of the village to the expenditure itemised in the proposed annual budget. Maximum penalty: 100 penalty units. (2) The operator must provide such information in relation to the proposed expenditure as the Residents Committee (or, if there is no Residents Committee elected for the village, any resident) reasonably requests for the purpose of deciding whether consent should be given to the budget. (3) Without limiting subsection (2), it is reasonable for the Residents Committee or a resident to request to see quotations for any work proposed to be carried out or for any service or facility proposed to be provided. (4) The residents concerned must, within 30 days after receiving a request for consent to a proposed annual budget (or an amended budget): (a) meet, consider and vote on the budget, and (b) advise the operator that they consent, or do not consent (as the case may be) to the budget, and (c) if they do not consent to the budget-specify the item or items in the budget to which they object. (5) If the operator is not advised as required by subsection (4) (b), the residents are taken to have refused consent to the budget. (6) If the operator fails to seek the consent of the residents, the residents are taken to have refused consent to the budget. ... (8) Subsections (1)-(6) do not apply, and the residents are taken to have consented to the proposed annual budget, if the recurrent charges payable by the residents: (a) have not been varied, or (b) have been varied in accordance with section 104 (1) (a) or 105A.
S 116 of the RV Act is a pivotal provision to the determination of Mr Murphy's complaint. S 116 is significant because: 1. it deals with the two circumstances under which a proposed annual budget may become an approved annual budget in subs (1); 2. it sets out in subs (3) that an operator cannot expend recurrent charges otherwise than in accordance with an approved annual budget (except for minor variations or variations falling within subs (3A)); and 3. subs (4) gives the residents the ability to have the operator refund any expenditure which contravenes the section.
S 116 states: 116 Expenditure to be in accordance with approved annual budget (1) A proposed annual budget is taken to be an approved annual budget if: (a) the residents of a retirement village consent to expenditure in accordance with the proposed annual budget, or (b) the Tribunal orders that the expenditure of the operator is to be as itemised in the proposed annual budget. (2) However, if the Tribunal makes any other order in relation to the proposed annual budget, the approved annual budget is taken to be that budget modified to accord with the order. (3) The operator must not expend money received by way of recurrent charges otherwise than in accordance (apart from minor variations) with the approved annual budget or any amendment authorised under section 117. Maximum penalty: 100 penalty units. (3A) An operator does not contravene subsection (3) if the expenditure that was otherwise than in accordance with the budget: (a) was a variation in expenditure between items in the approved annual budget, and (b) does not reduce the level of services provided by the retirement village, and (c) does not cause the total expenditure provided for by the approved annual budget to be exceeded. (4) If the operator: (a) contravenes subsection (3), or (b) did not (despite any order of the Tribunal under section 113) supply a proposed annual budget in respect of a current financial year, a resident may apply to the Tribunal for (and the Tribunal may make) an order directing the operator to refund the recurrent charges paid by the resident during so much of the financial year as has passed at the time the order is made.
The Operator proposed an annual budget for the Village for the 2014 FY (p 8 of the RV 17/28737 17 November Bundle) based on:
the estimated receipt of recurrent charges and interest in the amount of $114,840. This was the estimated income relevant for the purposes of obtaining authorization from the residents for the expenditure of the revenue derived from recurrent charges: s 112(1) of the RV Act and cls17(1)(a), (b) and (c) of the 2009 Regulation;
the proposed expenditure of the recurrent charges in the amount of $130,520.00, also as required by s 112(1) of the RV Act and cls 17(e) and (i) of the 2009 Regulation; and
an estimated deficit of $15,680.00 in the recurrent charges over proposed expenditure, as cl 17(d) and (j) of the 2009 Regulation required.
The residents of the Village considered and approved the proposed annual budget which estimated a deficit in expenditure over recurrent charges for the 2014 FY at a meeting of the residents on 20 May 2013. Having regard to the operation of s 116(3), once the residents of the Village had given their consent to the expenditure set out in the approved budget, the Operator had to expend the amount received from recurrent charges in that FY in accordance with the expenditure the residents had approved, but subject to minor variations in that expenditure.
A budget prepared for any organization represents the management's plan for the operations and resources of that organization, expressed in financial terms, for a specified period of time in the future. Accordingly, it is to be reasonably expected that the estimated expenditure recorded in an approved annual budget, which is forward looking, will inevitably not be in precise conformity with the actual expenditure incurred at the end of the financial reporting period.
There is no basis for the Tribunal to find that the recurrent charges referred to in the approved annual budget were not expended by the Operator as it was authorised to do under the approved budget. The consequence of the approval of the 2014 FY proposed budget with an estimated deficit of proposed expenditure to the revenue from recurrent charges, did not necessarily mean the 2014 FY accounts would also record a deficit of total residents' income over total expenditure. The estimated deficit of the proposed expenditure over revenue from recurrent charges ultimately depended on the share in departure fees received in that year under the Scheme.
Mr Murphy submitted that a proposed budget could not be prepared in deficit, or the Operator was at risk that the Operator would have to make good the deficit. It is difficult to reconcile that submission with the terms of cl 17 of the 2009 Regulation (now cl 19 of the 2017 Regulation). The Regulation expressly contemplates that a proposed annual budget can be proposed, and authorised, estimating either a surplus or in deficit in expenditure over the estimated recurrent charges. Accordingly, the Tribunal accepts the Operator's submission that it was open to the Operator to propose an annual budget for approval by the residents with the amount estimated the proposed expenditure for more than the estimated income from only the recurrent charges.
Mr Murphy submits that if the Operator did not breach the legislation by proposing an annual budget with a deficit or proposed expenditure over revenue from recurrent charges, the Operator was doing so on the basis that the Operator would eventually have to make that very deficit good from the Operator's own funds. This submission is apt to confuse. The 'deficit' in a proposed and approved annual budget is a deficit of proposed expenditure over revenue, namely over recurrent charges. This will not necessarily result in a retirement village having a deficit of expenditure over the total of all residents' income, which includes both revenue from recurrent charges and other items of income received during the financial year. Accordingly, a deficit as recorded in the proposed and approved annual budget of a retirement village may not result in a deficit in the annual accounts of the retirement village in the same financial year.

[10]

Making Good the Deficit

S 120C(1) of the RV Act states that a deficit in the annual accounts of a retirement village must be made good by the operator of the village. The RV Act does not expressly say how an operator is to make the deficit good. Section 120C(2) sets out what an operator of a retirement village must not do to 'make good' a deficit. Mr Murphy relies on s 120C(1) of the RV Act as the basis for an order requiring the Operator to repay the proceeds of the retained surplus used to balance the deficit in total expenditure to total residents' income using the Operator's own money. Section 120C (2) states: (2) Except as provided by the regulations referred to in subsection (3), an operator of a retirement village must not: (a) carry forward a deficit to a subsequent financial year, or (b) request or receive from the residents of the retirement village any special additional payments for the purpose of making good a deficit, or (c) increase or purport to increase recurrent charges payable by the residents of a retirement village in any financial year for the purpose of making good a deficit, or (d) use the whole or any part of the recurrent charges collected by the operator in a financial year to make good a deficit, or (e) use the whole or any part of the capital works fund for the retirement village to make good a deficit. (3) The regulations may prescribe circumstances in which the operator of a retirement village may: (a) increase the recurrent charges payable by the residents of a retirement village for the purpose of making good a deficit, or (b) use the whole or any part of the recurrent charges collected by the operator for the purpose of making good a deficit, or (c) carry forward a deficit to a subsequent financial year. (4) The operator of a retirement village must not charge the residents of a retirement village interest in respect of a deficit.
Cl 33 of the 2009 Regulation, now replaced by cl 30 of the 2017 Regulation, relevantly stated: Making good of deficit (1) For the purposes of section 120C (3) (c) of the Act, the operator of a retirement village may carry forward a deficit to a subsequent financial year to the extent that the deficit is caused by: (a) maintenance (but not replacement) of an item of capital in circumstances where the maintenance was for the purposes of rectifying any of the matters set out in section 92 (2) (a)-(k) of the Act, or (b) an increase in the cost of the following: (i) utilities (other than telephone), statutory charges including rates and taxes, (ii) wages and salaries increased under an award or an industrial agreement, (iii) workers compensation and public liability insurance. (2) For the purposes of clause 20 (5) of Schedule 4 to the Act, an operator is prevented in all circumstances from making a proposal under clause 20 (1) (b) (i) or (ii) of that Schedule that residents make good the whole or any part of any outstanding deficit except in circumstances where the deficit or relevant part of the deficit resulted from a request by the residents for an additional item of capital or service.
Mr Murphy and the Operator agreed that:
Cl 33 of the 2009 Regulation was the only regulation made for the purposes of s 120C(3) of the RV Act; and
as the Operator did not increase recurrent charges to make good the deficit in the 2014 FY accounts, and the Operator did not use recurrent charges for the purposes of making good the deficit, and the Operator did not carry the deficit forward to the 2015 FY accounts, cl 33 of the RV Act was not presently relevant.
Mr Murphy submitted that in using the Fund to balance the deficit in the accounts, the Operator had requested or received 'special additional payments' from the residents for the purposes of making good a deficit in the 2014 FY accounts, contrary to 120C (2)(b) of the RV Act: p 1 of the commencement of the typewritten submissions in RV 17/28737.
The Operator correctly submitted (paragraph [30] of the 31 January Submissions) that the RV Act does not define the expression 'special additional payments' in s 120 C(2)(b). The Tribunal sees the expression 'special additional payments' as connoting payments made by the residents of a retirement village at either an operator's request, or at the residents' own initiative, requested or made for the specific purpose of meeting a deficit in the annual accounts. The 'retained surplus' of the share of departure payments paid under the Scheme do not have that characteristic.
The Operator correctly identifies the policy which motivated the introduction of s 120C into the RV Act, as reflected in the passage from the Second Reading Speech referred to in paragraph [9] of the Operator's 31 January 20018 submissions, was to compel careful budget control by a retirement village operator. Here, the Operator had established the Scheme and had made payments into the Fund which had been accumulating as a retained surplus, if not expended in maintenance of the Village with the authority of the residents, in the year in which those income payments were made.
It is necessary to recall that by 2004, the Association recognised that the payments which had accumulated in the Fund at that stage had been made, and would continue to be made, for the benefit of the residents for maintenance of the Village. Accordingly, by the Operator using the Fund with the authority of the residents, the Operator was not either demanding or receiving any payment from the residents to make good the deficit in the 2014 FY accounts. The residents had authorised an expenditure which they understood by reference to the proposed 2014 FY annual budget would be more than the estimated revenue from recurrent charges, but on the basis that the residents had access to an accumulation of unexpended departure fees received as income of the Village in earlier years, and paid for the purpose of the very maintenance which the residents were approving.
The Tribunal considers it incorrect to characterize the proceeds of the Fund as money paid by the residents of the Village, and paid in addition to the payments already made by them in the FY in question, to make good the deficit in the 2014 FY accounts. The Tribunal accepts the Operator's submission that the type of payment caught by s 120C (2)(b) of the RV Act is in the nature of a 'special levy' raised for the purpose of making good a deficit in the accounts, not a accumulated surplus of retained earnings carried forward from one accounting year to the next.
As a retained surplus, the Fund did not represent 'special payments' made by the residents to the Operator to make good the deficit in the accounts.
Accordingly, The Tribunal finds that the Operator did not breach the RV Act, or the 2009 Regulation by obtaining the residents' consent to make the expenditure set out in the proposed budget for the 2014 FY, and then by using the proceeds in the Fund to pay for the shortfall in expenditure during the 2014 FY.
The Tribunal declines to make the order for which Mr Murphy has applied by Application RV 17/28737 and which the Appeal Panel remitted to the Consumer and Claims Division for rehearing.

[11]

Discretion

Section 128 of the RV Act states: 128 Order of Tribunal (1) The Tribunal may, on application by a resident (or residents) or an operator under this Act, make one or more of the following orders: (a) an order directing the resident (or residents) or operator to comply with a requirement of this Act or the regulations, (b) an order that varies or sets aside a provision of a village contract that conflicts with this Act or the regulations, (c) an order that: (i) restrains any action in breach of any village contract or village rule, or (ii) requires the performance of any village contract or village rule, (d) an order directing the resident (or residents) or operator to perform such work or take such other steps as the order specifies to remedy a breach of a village contract or village rule, (e) an order for the payment of an amount of money, (f) an order for compensation, (g) an order that requires payment to the Tribunal of all or part of any recurrent charges payable by a resident (or residents) to the operator until the whole or part of any village contract has been performed or any application for compensation has been determined, (h) an order that requires payment (out of recurrent charges paid to the Tribunal) towards the cost of remedying a breach of a contract or towards the cost of any compensation, (k) in the case of an application in relation to any other dispute made by a resident (or residents) or an operator of a retirement village that is subject to a community land scheme and with the concurrence of the other party to the dispute--any order that the Tribunal may make under the Community Land Management Act 1989 to determine the dispute, (k1) in the case of an application in relation to any other dispute made by a resident (or residents) or an operator of a retirement village that is subject to a strata scheme and with the concurrence of the other party to the dispute--any order that the Tribunal may make under the Strata Schemes Management Act 2015 to determine the dispute, (l) any other order prescribed by the regulations for the purposes of this section. (2) Nothing in this section limits the orders that the Tribunal may make under this Act.
If the use of the Fund was in breach the RV Act, as Mr Murphy submitted, the Tribunal considers the following factors are relevant to the exercise of the Tribunal's exercise of its discretion as to whether to make an order under s 128 of the RV Act to require the Operator to make the deficit in the 2014 FY good from its own money:
the Operator's use of the Fund to offset a deficit in the residents' total expenditure over the total residents' income was authorised by the residents of the Village, consistently with the Tribunal's findings;
the Operator used funds that it paid under the Scheme, and paid for the benefit of the residents of the Village for 'Village maintenance' for the purpose for which the payments were made. The use of retained surplus meant that the residents were able to achieve an amenity by the authorised expenditure which they approved, without the necessity for paying for that expenditure by an increase in the payment of recurrent charges;
an order requiring the Operator to make good the deficit in the 2014 FY from its own funds would effectively make the Operator liable to pay for expenditure that the residents wanted, and authorised, and punish the Operator for then following the requirements of s 116 (3), but understanding that the residents had available a fund of unexpended income received for 'Village maintenance';
the Tribunal was not satisfied that no part of the $12, 823 could not have been carried forward into the 2015 FY under cl 33 of the 2008 Regulation;
the residents agreed to the Scheme, and accepted that the payment of the share of departure fees was for use in 'Village maintenance' and accordingly the residents suffered no loss or disadvantage because the Funds were used as intended, conversely, the Operator would be prejudiced by having to pay its own money to make up a deficit which was not the product of the Operator's mismanagement of expenditure, or any failure to provide the residents of the Village with a transparent proposed budget as to how and what it proposed to expend, and how any resulting deficit would be made good;
a finding requiring the Operator to make good the deficit in the 2014 FY accounts from its own funds, in circumstances where the residents had authorised the use of the Fund for that purpose, would effectively emasculate the ability of the residents to authorise the use of proceeds available to them and require funding of any desired maintenance from only one particular source of the Village's available funds;
the Tribunal accepts the Operator's submissions that:
if the Tribunal were to make an order requiring the Operator to repay the deficit in the 2014 FY to the Fund, the repayment would give the residents of the Village a 'windfall gain' to the Operator's detriment; and
the Operator did not receive some unfair advantage or gain by using the Fund to offset a deficit in the proposed and authorised expenditure over the total residents' income.
For these reasons, even if the Tribunal's analysis of the relevant provisions of the RV Act is not correct, and the Tribunal had accepted Mr Murphy's submission that the Operator's use of the Fund was not authorised by the legislation, the Tribunal would have exercised its discretion in declining to make the order which Mr Murphy has applied for to require the Operator to repay the amount of $12,823 to the Fund.
Accordingly, the Tribunal dismisses Application RV 17/28737.

[13]

The Fountain

The Tribunal made the following order on 22 September 2015 directing the Operator to carry out repairs or to replace the Village's defective fountain (the Repair Order): An order is made pursuant to the provisions of the Retirement Villages Act s 128(1)(a) directing the respondent to comply with the obligations imposed on it pursuant to s 93 of the Retirement Villages Act 1999 and specifically pursuant to s 128(1)(d) the operator is to repair or replace the fountain the subject of [the prior proceedings]. All such work is to be completed within 90 days of the date of these orders.
Mr Murphy now seeks the following order from the Tribunal to require the Operator to replace the fountain: An order pursuant to the provisions of the Retirement Villages Act s 128(1)(a) directing the respondent to comply with the obligations on it pursuant to s 93 of the Retirement Villages Act 1999 and specifically pursuant to s 128(1) the operator is to replace the fountain with a comparable fountain of similar appearance and quality to the original fountain.
The Operator submitted that the Operator used 'its best endeavours and completed the fountain replacement works in about March 2016'. The Operator tendered an invoice for payment from Kentfish Pty Ltd, trading as 'Kenthurst Fish & Filters' dated 21 March 2016 in support of that submission. This proves that the Operator paid for work which the invoice describes as 'replace old fountain with new' and 'clean, repair and waterproof old fountain' and 'replace new pump'. A copy of the receipt of payment dated 23 March 2016 to Kenthurst Fish and Filters is at pages 41 to 42 of the documents filed with the Tribunal in support of the Operator's 15 December 2017 submissions.
Mr Murphy submitted that:
the Operator erected a fiberglass 'tank, purporting to be a fountain' in May 2016, which fell over in June 2016;
the tank was eventually repaired, but continued to leak;
the tank was effectively an aquarium and not a fountain; and
accordingly, the Operator did not comply with the Repair Order.
The Operator made the following bare submission to justify that it did comply with the Repair Order: 'the respondent has not received any complaints from any other residents in relation to the fountain. On 27 November 2017, the respondent conducted a clean of the fountain, and the fountain is in working order'.
Mr Murphy's submission was that the fountain is 'occasionally in operation', which would be consistent with the Operator's submission that the fountain was in operation in 27 November 2017.
At p 7 of the bundle of documents filed with Mr Murphy's submission filed in support of the renewal application, the minutes of a meeting of what appears to have been the Association states: Fountain: Leanne has agreed to ask Tony the gardener whether he can re-paint the inside of the fountain with a more durable paint. Otherwise the fountain is working.
The documents on which Mr Murphy relies include a ledger of the Village accounts that establish that in July 2017, the Village has paid for ongoing waterproofing works to the interior of the fountain, which supports Mr Murphy's submission that the base of the fountain has leaked.
The Operator did not attempt to deal with the evidence of the waterproofing works tendered by Mr Murphy, beyond making a bare assertion that no other resident of the Village has complained, and that the fountain was in working order on 27 November. Although the invoice from Kenthurst Fish and Filters, coupled with Mr Murphy's submission about the work done, is enough for the Tribunal to be satisfied that the Operator did replace the fountain, it does not prove that the work which was carried out was done well.
The Operator's bare submission of a lack of complaint by other Village residents fails to deal with the gist of Mr Murphy's complaint; that the fountain is leaking, and that what the Operator has replaced does not match the original, which Mr Murphy's submission described as 'stone and figurative'.
The Tribunal finds that the tank which replaced the original fountain undertaken in March 2016 leaked, and that the interior of the tank was painted in an attempt to fix the problem and that this also required waterproofing works to be carried out to the interior of the fountain in July 2017. The Repair Order was required so that the Village would have an ornamental fountain which was in working order, by repair if possible, or replacement if not.
Mr Murphy's complaint about the look of the fountain are not determinative of whether the Operator complied with the Repair Order. Aesthetics are largely subjective, and what one person finds attractive another may not. The Tribunal would consider the Operator as not having complied with the Repair Order by ensuring the Village has an ornamental feature, commensurate with the original feature, and in good in working order. The Tribunal is not satisfied on the material that the fountain in its current state of repair, following the internal work carried out in July 2017, is not in a proper state of repair, and not capable of operation as an ornamental feature, as originally intended. Accordingly, it would decline to make the order which Mr Murphy has applied for in relation to the repair of the fountain on this ground.
The Operator however also opposes the order for the replacement of the fountain which Mr Murphy has applied for by way of renewal proceedings on other grounds. Firstly, the Operator submits that Application RV 17/44236 was filed too late because the Application was not filed 'within 12 months after the end of the period' for the order specified by the Tribunal. The Operator also submitted that Mr Murphy was not entitled to the order he now claims for the replacement of the fountain because the order was the subject of an internal appeal, and therefore an order falling within the exclusion in Schedule 4, Clause 8(5)(b) of the RV Act.
In the appeal hearing before the Appeal Panel, Mr Murphy made submissions on the fountain repair order made by the Tribunal. The Appeal Panel's decision records: 84 During the appeal hearing, Mr Murphy agreed that he had no complaint concerning the order made for the fountain to be repaired or replaced. Rather, his complaint is that the Operator has not fully complied with that order. We informed Mr Murphy that if he maintains the view that the order has not been complied with, he needs to lodge a fresh application with the Tribunal. His remedy is not one that can be dealt with by way of an appeal.
It was presumably as a result of the Appeal Panel's comments, that Mr Murphy filed Application RV 17/44236 and seeks an order now for the replacement of the fountain.
The Operator is correct to submit that Mr Murphy raised his complaint concerning the Operator's repair of the fountain with the Appeal Panel. However, it is clear that in doing so Mr Murphy was not challenging the Repair Order at all, but raising his complaint as to the breach of the Repair Order. The exclusion in Schedule 4, Clause 8(5)(b) of the RV Act is intended to deal with Tribunal orders that are the subject of a challenge in an internal appeal.
The Repair Order was not the subject of a challenge in an internal appeal. Accordingly, the Tribunal rejects the Operator's submission that the order for the replacement of the fountain was the subject of an internal appeal, and therefore excluded by way of renewal proceedings.
It is correct to submit that if the Operator breached the Repair Order, it did so by failing to repair or replace the fountain within the 90 period stipulated by the Tribunal. As the Operator unsuccessfully applied to extend that 90 day period by application to the Tribunal on 7 December 2015 (see paragraph [10] of the Operator's 15 December 2017 submissions), Application RV 17/44236 was filed more than '12 months after the end of the [relevant] period' relating to the Repair Order. However, other orders were made by the Tribunal in the earlier proceedings, and the renewal proceedings relate to those other orders. There is an issue as to whether the 12 month period in cl 8(2) of Sch 4 of the NCAT Act can be made referrable to the period any one order of the Tribunal, if the Tribunal makes more than one order, or whether it must relate to the particular order which an applicant is seeking to revisit in the renewal application. It is unnecessary for the Tribunal to decide that question in the present proceedings because the Tribunal finds that there is no other order of the Tribunal which the Operator failed to comply with "within the period specified by the Tribunal' within the meaning of Cl (1) of Sch 4 of the NCAT Act which Mr Murphy can rely on to come within the 12 month period.
For these reasons, the Tribunal declines to make any order requiring the Operator to replace the fountain, as Mr Murphy has claimed.

[14]

The Balanced Budget Order

Mr Murphy applies for an order to require the Operator to ensure that only balanced budgets must be presented to the Village, only financed only by recurrent charges, and that any deficit in all budgets is to be made good by the Operator.
For the reasons set out earlier in this decision, the Tribunal finds that the Operator is not required to only propose balanced annual budgets to the residents of the Village. The Operator is entitled to propose, and to obtain approval, for annual budgets which estimate either a surplus or a deficit of proposed estimated expenditure over the only one source of income with which s 112(1) of the Act relates, namely recurrent charges.
The Operator must comply with the legislation, and if the annual accounts of the Village record a deficit in total residents' income, from sources of revenue and income over total expenditure, the Operator must make at deficit good. It cannot make any deficit good by adopting a means which s 120C(2) of the RV Act states the Operator cannot adopt. The RV Act does not state how the Operator must make a deficit good, and if it cannot do so except by doing what s 120C(2) states it must not do, then it must make that deficit good using the Operator's own funds.
The Operator has not breached the legislation by making good the deficit in the 2014 FY accounts, and the Tribunal sees that there is no basis to make the order which Mr Murphy has applied for. Accordingly, the Tribunal declines to make the order for which Mr Murphy has applied for on this ground.
The Operator has also submitted that the Tribunal should also decline to make the order Mr Murphy has applied for on the following grounds, which the Tribunal accepts as valid grounds to refuse Mr Murphy's order:
the Appeal Panel did not overturn the Tribunal's rejection of the similar order which Mr Murphy applied for in the earlier proceedings;
the renewal application is too late because it was filed outside the period of 12 months referred to in Cl 8(2) of Sch 4 of the NCAT Act; and
the renewal application relates to an order which was the subject of an internal appeal, and Mr Murphy is using Application 17/44236 to appeal an internal appeal decision of the Appeal Panel.

[15]

Visitor Carparking Arrangements

In order to appreciate the background to this order, it is necessary to consider the state of the relevant village rule before 17 November 2014. At that time, visitor parking rule 4(e) stated: Visitor parking spots (if any) are available for people using just the facility. They are not to be used by residents, guests staying overnight or longer, tenants or staff.
A meeting of the residents of the Village purported to modify the visitor car parking rule by special resolution at a meeting on 17 November 2014. The amendment made added the following proviso to the rule (Rule 4(g)): An exception to the above rule would be residents waiting to purchase a space in the secure parking area. If, in the judgment of the operator, there is no greate pressure for spaces in the visitor parking section, such residents may occupy a temporary parking space in the visitor parking section.
In the earlier proceedings, the Tribunal refused the parking order that Mr Murphy had been seeking, which as stated earlier, was expressed in the most general of terms, on the basis that on the evidence before the Tribunal the Tribunal considered the amendment introducing the proviso was valid, and accordingly was not satisfied that there was any breach of the Rules to warrant the Tribunal making any order.
Mr Murphy appealed that decision to the Appeal Panel. The Appeal Panel considered that the Tribunal had made an error of law in finding the resolution to amend the parking rule as valid.
In overturning the Tribunal's decision, the Appeal Panel made a direction that the Operator was to take all reasonable steps to ensure residents complied with Rule 4(e) without the proviso which the resolution on 17 November 2014 purported to introduce.
On 24 October 2017, the residents of the Village passed a further resolution which provides: Residents authorise the Management of Vaughan Village to have discretion to permit or not permit, on an individual basis, those Residents, who are waiting for a secure parking space, to park in the Visitor Parking Area of the Robertson Place Garage.
In proceedings RV 17/44236, Mr Murphy seeks the following order from the Tribunal: Pursuant to the decision made by the Appeal Panel on the 23 June 2017 (Murphy v Trustees Catholic Aged Care Sydney (2017) NSWCATAP 139) s 54(2)(a) that; (4) The operator is directed to take all reasonable steps to ensure residents comply with village rule 4 (in the form it was immediately prior to 17 November 2014). Further pursuant to RVA part 3 5 any special resolution in this matter must be made according to the Act and that the special resolution of Tuesday 24 October 2017 is not legally valid and would be unjust, unconscionable, harsh and oppressive, RAV s 54(1)(a) and (b).
The Tribunal's refusal of the original order which Mr Murphy applied for was the subject of an internal appeal. Order 4 of the Appeal Panel's orders directed the Operator to take all reasonable steps to ensure residents complied with the rules relating to carparking not as amended by the special resolution passed by the residents in meeting on 17 November 2014.
The Tribunal accepts that nothing in the earlier proceedings precluded the Operator from taking steps pursuant to section 51 of the RV Act to amend the village rules, including visitor carparking rules, provided this were done by a valid resolution. The Appeal Panel overturned the Tribunal's original refusal to make the visitor car parking order which Mr Murphy had applied for related to the validity of the amendment which the Tribunal had regard to in making its findings.
There is no evidence that the Operator has breached the Appeal Panel's direction, and even if there were the case, it could not be the subject of renewal proceedings. Further, the Tribunal accepts the Operator's submission that the order which Mr Murphy has applied for relates to matters which were not the subject of the order sought to be renewed.
Accordingly, the Tribunal declines to make the order Mr Murphy applies for.

Murphy v The Trustees of Catholic Aged Care Sydney

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Judgment (17 paragraphs)

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Legislation Cited (9)

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