Land and Environment Court (NSW)|1994-03-10|Before: Bannon J, Talbot J

RONALD ASHLEY WOODLANDS v. SUTHERLAND SHIRE COUNCIL [1994] NSWLEC 28 (10 March 1994)

Mr R.A. Woodlands (substituted applicant) as agent for Corella Christian Homes Limited ("the Corella Company") appealed to this Court in Class 2 proceedings against the deemed refusal by Sutherland Shire Council ("the Council") to approve a Strata Plan of Subdivision of a property situate at 22-24 Taronga Parade, Caringbah, known as the Hebron Retirement Village ("Hebron"). The power to approve such an application arises under s.40(4) of the Strata Titles Act, 1973 and the right of appeal to this Court is conferred by s.40(4) ibid. The Act sets out no criteria for the exercise of the discretion, but before me, it was accepted that the Court should exercise the discretion in accordance with the provisions of s.90 of the Environmental Planning and Assessment Act, 1979 ("the Act"). That is because the definitions of "development" in s.4(1) and of "subdivision" in s.4(2) of the Act have the effect of treating an application under s.40 of the Strata Titles Act, 1973 as a development application.

"(g) Given that the assets comprised in the Hebron Village are held on trust by Christian Enterprises and/or Corella Christian Homes on trust for the objects of the Corella Christian Homes Trust ... whether the grant of approval would amount to the court's approval of a breach of trust."

The Constitution of the Corella Trust (Exhibit 8) states:

"2. THE OBJECT of the Trust shall be limited to the promotion of the welfare of elderly persons who, because of infirmity or financial circumstances, or otherwise, are in need of assistance in their old age and to this end the Trust shall provide permanent accomodation [sic] for such persons."

This appears to be a valid charitable trust. Clause 48 of the Constitution is as follows:

"48. THE Trust shall be dissolved in the event of the membership being less than three persons or upon the vote of three-quarters of the members present at a General Meeting convened to consider such question. Upon dissolution, assets and funds on hand shall, after payment of all expenses and liabilities, be transferred to an Organisation or Fund as may be decided upon by a majority of the members present at a General Meeting but the Organisation or Fund decided upon must be an Organisation or Fund able to receive gifts which are deductible in terms of Section 78(1)(a) of the Income Tax and Social Services Contribution Assessment Act (illegible) 36/64."

Mr S.G.K. Werry, a trustee of the Corella Trust and also a director of the Corella Company, related that the subject land originally belonged to the Corella Trust, and was acquired in or about 1972. Without setting out all the annexures, it is convenient to set out paragraphs 1 to 23 inclusive of Mr Werry's statement (Exhibit D):

"1. My full name is Stanley Gordon Keith Werry. I reside at Cronulla and am a company director by occupation.

2. I am a director of the Applicant herein, Corella Christian Homes Limited (hereinafter called 'Corella'). Corella was incorporated on 16 November, 1981 to take over the assets of the Corella Christian Homes Trust (hereinafter referred to as 'the Corella Trust'). I have been a trustee of the Corella Trust or a director of Corella for approximately 28 years. Exhibited to me at the time of the signing of this Statement and marked 'SGKW 1' is a true copy of the Constitution of the Corella Trust. Also exhibited to me at the time of the signing of this Statement and marked 'SGKW 2' is a true copy of the Memorandum and Articles of Association of Corella.

3. The Corella Trust acquired the land, the subject of these proceedings, in or about 1972. When Corella was incorporated, the assets of the Corella Trust, of which the subject land formed part, were transferred to Corella. Annexed hereto and marked with the letter 'A' is a true copy of the Certificate of Title in respect of the subject land.

4. On 26 March, 1973 the trustees of the Corella Trust, of whom I was one, and the Director-General of Social Services entered into an agreement. A true copy of the agreement is annexed hereto and marked with the letter 'B' (hereinafter referred to as 'the Hebron Agreement'). I crave leave to refer to the Hebron Agreement.

5. The Corella Trust owned the land, the subject of these proceedings. Pursuant to the Hebron Agreement, the Commonwealth, through its agency, the Department of Social Security, agreed to supply financial assistance to the Corella Trust to erect accommodation for aged persons upon the subject land. The Director General [sic] ultimately advanced $270,167.00 toward the capital cost of erecting accommodation for aged persons on the subject land. The Corella Trust also made substantial payments to the capital cost of the said accommodation in addition to the land component, which as aforesaid was provided by the Corella Trust.

6. Between 1973 and 1974, the Corella Trust caused to be erected on the land accommodation in pursuance of the Hebron Agreement comprising 38 self-care units for aged persons. The development was carried out in three stages and in respect of each stage Sutherland Council gave planning consent as follows:

7. Each development was completed and since the date of completion, the land and premises have been used continuously for the accommodation of aged persons within a village style complex which has become known as 'Hebron' Village (hereinafter referred to as 'Hebron'). Upon completion of the complex, the Respondent issued a Certificate of Compliance under Section 317A of the Local Government Act to the builder, the late Gordon Craig.

8. The trustees of the Corella Trust and then later, the Board of Management of Corella, have exercised the responsibility for the day to day management of Hebron. Applications have been received from persons wishing to take up residence in Hebron and residents have been placed within the village as and when vacancies have permitted such placement.

9. When a new resident(s) has been invited to take up residence within Hebron he/she/they has/have been required to execute a standard form of Licence Agreement. A true copy of the standard form of Licence Agreement is annexed hereto and marked with the letter 'C'. I crave leave to refer to annexure 'C'. It will be immediately observed that the resident is granted a licence to occupy a unit within Hebron for such weekly fee as may be determined by the Board of Management of Corella from time to time. I also crave leave to refer, inter alia, to Home Rules 1, 2, 3, 4, 5 and 17.

10. Corella has no policy or constraint upon it to provide low cost accommodation for the aged. The licence fee has been fixed by Corella from time to time in the past. It was the previous Corella policy to keep the licence fee at a very modest level but there has never been any obligation upon it, so far as I am aware, for it so to do.

11. Corella was at all material times the registered proprietor of the following other properties;

(a) 17 self-care units located at 'Elim', 322 Willarong Road, Caringbah.

(b) 'Maranatha', which is presently comprised of 36 self-care units and located at 29 Corella Road, Kirrawee.

These properties have in recent years been transferred to Christian Enterprises Limited, of which I am also a director. In the late sixties and early seventies, the units at 'Elim' and 'Maranatha' were constructed by the Corella Trust with financial assistance from the Commonwealth on similar terms to that provided by the Commonwealth for 'Hebron'. Annexed hereto and marked with the letter 'D' is a true copy of the agreement between the Director-General of Social Services and the Trustee of the Corella Trust.

12. In 1991, I instructed Corella's Surveyor, Mr R.A. Woodlands, to seek consent from the Commonwealth to the Strata Title subdivision of the units at 'Elim'. After obtaining legal advice from the Australian Government Solicitor, the Commonwealth granted this consent on the proviso that 'Elim' continued to accommodate aged persons. A true copy of the formal consent of the Commonwealth to the Strata Title Subdivision is annexed hereto and marked with the letter 'E'.

13. The Strata Plan prepared by Mr Woodlands in respect of 'Elim' was subsequently approved by the Respondent and was registered at the Land Titles Office on 14 June, 1991. Since the registration of this Strata Plan, only one of the 17 self-care units formerly owned by Corella at 'Elim' has been sold and the residents of the remainder of those units are in occupation under Licence Agreements in the same or like form to the Licence Agreement annexed hereto and marked with the letter 'C'.

14. During 1993 I instructed Corella's solicitor, Mr G.J. Halpin, to request to be released from the terms of the Hebron Agreement and instructed Mr Woodlands to request permission for a Strata Title Subdivision of 'Maranatha'. On or about 21 July, 1993, I am advised and believe that Mr Halpin received a copy of the correspondence annexed hereto and marked 'F'.

15. The size, style and age of the units at 'Maranatha' and 'Elim' are similar to those at 'Hebron'. The only significant difference is that the units at 'Maranatha' have flat, iron roofs while the units at 'Elim' and 'Hebron' have tiled roofs.

16. On 4 August, 1993 Corella's solicitor wrote a letter to the Commonwealth Department of Health, Housing, Local Government and Community Services, a true copy of which is annexed hereto and marked with the letter 'G'.

17. Later in August, 1993 I am advised and believe that Mr Halpin received a copy of the undated correspondence annexed hereto and marked 'H'.

18. As previously stated, I have been associated with the management of the Corella Trust and Corella for approximately 28 years. During the course of that management, I and other trustees and directors have given all our time on a voluntary basis and without reward so as to further the charitable objects of the Corella Trust and Corella. During those years, Corella has through the efforts of the directors and other voluntary helpers caused the assets of Corella to grow such that the management of the activities of Corella requires very considerable devotion of time and effort. In circumstances where in recent years the members of the original Board of Management have retired, and where the affairs of Corella have become complex, it has been the current Board of Management decision to rationalise the affairs of Corella. One form of rationalisation has been to convert the title of the villages owned and operated by Corella to Strata Title under the provisions of the Strata Titles Act, 1974 and then to sell individual units to aged persons.

19. I have been associated for over 30 years with Christian Enterprises Limited (C.E.) and more recently with S.T.W.S. Pty Limited (S.T.W.S.), the latter company being wholly owned by C.E., working on the same voluntary basis in furtherance of the charitable objects of both of these companies as I have for the Corella Trust and Corella. Over this period, C.E. and S.T.W.S. have erected self-care villages for aged persons without Commonwealth assistance at the following properties:

(a) 'Salem', Cnr Railway Parade and Buller Street, Jannali.

(f) 'Beulah Place', 448 Port Hacking Road, Caringbah.

All of these villages have been subdivided under the Strata Titles Act. Approval for the Strata Plan for Salem was granted by the Land and Environment Court. The units at 'Amana', 'Shammah' and 'Bethany' were following their construction occupied by aged persons under Licence Agreements in the same or like form to annexure 'C'.

20. There have been a number of advantages flowing from the Strata Title subdivision of these villages.

21. Some of the advantages to C.E. and S.T.W.S. have been to pass control and management of the villages in question to the residents. This reduced the need for the directors of C.E. and S.T.W.S. to be involved with the ongoing management and maintenance of the village in question. The decision to convert the titles of its villages to Strata Title will allow Corella to recoup some of its investment in the properties in question, such that the monies received from the sale of units can then be devoted to the pursuit of other charitable objects of Corella which do not necessarily involve the devotion of so much personal time and effort by the Corella directors.

22. The decision to strata title the retirement villages, as previously stated will also lead to considerable benefits to the residents of the villages where the changes have taken place. Under the terms of the standard agreements previously referred to, residents never had any legal say in the management of their own estate. The occupancy right was purely in the nature of a licence and each resident had no legal entitlement to participate in the running of the villages in which he or she was resident in any respect.

With the conversion to Strata Title and the sale of the unit, the resident becomes a unit holder and is entitled to participate in the management of the strata scheme. In my experience, C.E. and S.T.W.S. have had no difficulty selling units once a village was brought under the provisions of the Strata Titles Act, and the purchasers of the units in question seem to be perfectly satisfied with their interest. In my opinion, the owner of a unit in a strata scheme has a greater security of tenure than a resident who is a mere licensee.

If Hebron is converted to Strata Title and individual units are sold, Corella would be precluded from demolishing any of the existing units and/or erecting additional units within the village without the consent of the proprietors of the units so sold.

It has also been my experience that many elderly people who have owned their own home reach a time when their home exceeds their immediate and future needs for space and accommodation. The responsibility of maintaining a large home and garden becomes so onerous that they look for alternate accommodation. Where the family home has been sold, unless given the opportunity to reinvest the sale proceeds, an elderly person taking up residence in Hebron and paying a licence fee, will inevitably face the prospect of losing some or all of his or her pension, as he or she cannot meet the asset test guidelines laid down by the Commonwealth Department of Social Security. Where there is an opportunity to purchase a unit in a village, the residence is ignored in the assets test and the resident is able to retain the full pension.

23. Although Corella is moving, and has moved, to Strata Title retirement villages under its control and management, the occupancy of existing residents occupying a unit pursuant to a licence agreement, has never been disturbed. This observation also applies to C.E. and S.T.W.S."

In the absence of Statutory provision to the contrary, or of a cy-pres scheme, or of the effect of periods of limitation, it may be loosely said, of charitable trusts, once a trust always a trust. Smith v Kerr (1902) 1 Ch. 774; Jacobs Law of Trusts in Australia (5th ed.) paragraph 1072. Whatever the effect of the transfer of Hebron from the Corella Trust to the Corella Company may be, it still appears to me to be the subject of the original charitable trust, notwithstanding the terms of Clause 48 of the Corella Trust Constitution. The Corella Company may well be a public benevolent institution, a matter considered by me in Nungera Co-operative Society Ltd v Maclean Shire Council (1991) 73 LGRA 178, 182, but there is no need to rule upon that question. The Memorandum and Articles of Association of the Corella Company are contained in Exhibit 10. Even if the limitation on the duration of the Corella Trust contained in Clause 48 of the Constitution be otherwise effective, the Clause appears to be void as offending against the rule against perpetuities Pettit on Equity and the Law of Trusts 3rd ed. pp.164, 165. Gibson v South-American Stores (Gath & Chaves) Ltd. (1950) 1 Ch.177, 187 and 202 Evershed MR.

In my opinion, this Court is not concerned to consider the due administration of the Corella Trust either by the original trustees or the Corella Company. Firstly, the Court does not possess an Equity jurisdiction in Class 2 proceedings, to trace trust property. Secondly, the Court has no standing in such proceedings to enforce a trust. Thirdly, the proper party to protect and enforce a charitable trust is the Attorney-General, who is not a party to these proceedings. While I do not believe that the Court should take upon itself any investigation into the affairs of the trust, Mr Werry assured me that there is no scheme in hand to conduct Hebron other than as a retirement village for the elderly, if this application be granted. The Corella Trust Constitution (Exhibit 8) does not require the subject property to be conducted as a retirement village. It could be sold and the money reinvested in other permanent accommodation for the aged. Clause 35 of the Constitution indicates that Hebron Village is simply an asset of the Corella Trust. There is no requirement that the Corella Trust's funds be dedicated for use in that property.

The second line of attack upon the application, raised in the Statement of Issues, arises from the circumstance that considerable public funds were granted by the Commonwealth as set out in paragraph 5 of Mr Werry's statement, towards the cost of building Hebron. (See also Annexure D thereto.) This money was granted, it would appear, in consequence of s.7 of the Aged Persons Homes Act, 1954 (Cth.) upon the terms and conditions set out in the agreement dated 26 March 1973 between the Director-General of Social Services and the then trustees of The Corella Christian Homes Trust. It is to be noted that the advance is not limited to provision of accommodation for elderly persons who are in need of assistance, but simply for use permanently for the accommodation of aged persons. The Act contains little in the way of detailed provision as to the use of grants. The grant was repaid without interest in 1993. By letter dated 21 July 1993, Annex F to Mr Werry's statement, the Commonwealth indicated that upon repayment of the capital moneys and in consideration of the Corella Company undertaking to continue to provide accommodation for the aged in the units, the Commonwealth would release the organisation from its obligations to the Commonwealth in respect of the "Hebron" self contained units. In reply, Annex 6, the Corella Company's solicitor stated:

"Whilst my client intends to continue to provide self-care accomodation [sic] for the residents currently in occupation of 'Hebron' and is happy to give any undertaking so to do, it reserves its right to sell the units as they become vacant in the future."

In my opinion, the Council has no role to enforce any undertaking or understanding between the trustee and the Commonwealth. It is not a party to the agreement of 26 March 1973 between the Commonwealth and the then trustees of the Corella Trust. Even if the Commonwealth was imprudent in not obtaining security for any undertaking given, the Council has no status to enforce the arrangement, assuming there is any threatened breach. The Commonwealth is not a party to these proceedings. Its remedies, if they exist, are to be obtained in some other Court.

A further argument addressed turned upon the "donation" to the Corella Trust made by each resident in consideration of being granted a licence to occupy a unit. The donation ranged from as little as $5,500.00 for a single person to $15,000.00 for a two bedroom unit for married persons. Each licensee has been required to sign a licence agreement in a standard form as in Exhibit 11. The licence requires the licensee to pay such fee as is determined by the trustees or the Board of the Corella Company from time to time. The fee used to be $12.00 for a single and $16.00 for a double per week, but in September 1992 it was increased to $20.00 per week for a single occupant and $34.00 for a married couple. This evoked an application being made to the Residential Tenancy Tribunal to determine the fee. Before the Tribunal a document was produced (Exhibit 18), which showed that the real cost of providing accommodation was in the vicinity of $81.00 to $119.00 per week. The Corella Company has not sought to charge this amount, but the residents fear it may do so in the future.

Mr A. Malcolm, one of the Board directors of the Corella Company, became very concerned that the Corella villages were being operated as an "instrument for wealth creation". He objected to the use of moneys obtained from licence fees for capital purposes and not only for maintenance. Mr Malcolm, who gave evidence before me, decided to resign, and his letter of resignation, dated 20 July 1992, is Exhibit 15. Obviously Mr Malcolm was a sincere and dedicated friend of the aged who gave considerable service on a voluntary basis. Mr Werry, who has also given much voluntary service, had other views. As stated previously, this Court does not exercise jurisdiction at the instance of the Attorney-General to protect charities. It may well be that in spite of the terms of the licence agreements, the residents have an equitable right to remain in possession so long as they pay their licence fees. Again, this is not a matter to be decided in Class 2 proceedings.

Mr Hale's next point related to the provisions of the New South Wales Statute, the Retirement Villages Act, 1989 ("the RV Act"). The Hebron village clearly falls within the definition of "retirement village" in s.3. The RV Act contains detailed provisions concerning the rights of residents, and for the determination of disputes before the Residential Tenancies Tribunal and the term "residential tenancy agreement" as defined in s.3 of the Residential Tenancies Act, 1987 is wide enough to include the licences granted to the residents of Hebron. The RV Act confers important rights upon the residents of residential villages. Mr Hale submitted, and I accept, that it is open to this Court in considering this application, to take into account those rights and the moneys paid by the present residents, pursuant to s.90(1)(d), (q) and (r) of the Act. That is, I will not assume any rights to interfere with the workings of a charitable trust, nor to enforce a contract with the Commonwealth, but the Court will consider this application in the light of the premises "Hebron" being a retirement village, and the consequences which the grant of this application might have in relation thereto.

Mr Hale also pressed me with the Council's need to have in its Local Government Area a stock of low cost housing for the aged, and pointed to evidence from the Council's officer, Miss S. Schwarz, as to the small stock available. This was all somewhat strange. The Council enjoys power under the Local Government Act, 1993 to make provision for housing, but the evidence did not establish that the Council had spent one plastic cent upon this worthy object. Mr Hale said the Council wished to have a condition that it have some say in the administration of Hebron, but this seems to assume that the property of the Corella Trust in its own land is to be subjected to some form of supervision by a Council which so far as the evidence goes neither owns nor helps in providing housing for the aged in its own area. Changing the title of the land to strata title does not in itself affect the stock of low cost housing in the Local Government area.

The further submission by Mr Hale in his written submissions in reply to the applicant's written submissions, and further written submissions, drew the Court's attention to the provisions of s.90(1)(d) of the Act, and again to the general needs of the area for a stock of low cost housing. He referred to State Environmental Planning Policy No.10 and to the decision of the Court of Appeal in North Sydney Municipal Council v Lycenko & Associates Pty Ltd (1988) 67 LGRA 247. Of course SEPP 10 does not apply to the Sutherland Council area, it not being an area listed in Schedule 1 thereto. Mr Hale is correct, I believe, in submitting that the Court should take into consideration the availability of low cost housing in the Local Government area. However, it does not follow that the granting of this application will affect that situation. Stratification on its own, goes to title, not use. There appears to be no reason why the owners could not sell Hebron now, for the highest price obtainable, and invest the proceeds elsewhere for the provision of permanent accommodation for persons in need of assistance in their old age. While s.90(1)(d) of the Act is one consideration to be taken into account, other considerations such as those mentioned in s.90(1)(q) and (r) are also to be considered. The applicant's property is not dedicated to the needs of the Sutherland area for low cost housing. The rights of ownership of property and the lack of any offer of compensation to the owners, if their land is circumscribed as the Council wishes, should also be considered.

This Court accepts that in considering the application it should take into account the present status of Hebron as a retirement village, and should seek to impose conditions on any approval to safeguard, so far as is reasonable, the position of the residents and the needs of the Local Government area.

The Village is so built and arranged that it is suitable for strata subdivision. To approve a strata plan does not appear to me to be inconsistent with the status of Hebron as a retirement village, nor with the terms of the Corella Trust. There is nothing in the objectives of the Corella Trust to prevent it applying equally to land the subject of a strata plan, or land which is not so subject. Mr Malcolm's fears of profit making are not for this Court to decide. Building units, selling them and utilisation of the moneys obtained, to build more units, does not appear to me to be inconsistent with the objectives of the Corella Trust nor with the housing needs of the Local Government area, for elderly persons.

My conclusion is that the application should be granted but subject to conditions to safeguard the incumbent residents. A well grounded fear that a class distinction could arise between licensees and strata owners, the latter seeking higher licence fees and more embellishment, may be met by providing a condition that a trustee be appointed in respect to each licensed unit to attend Board meetings of the Body Corporate and vote on behalf of the units which are licensed and not sold to strata owners. Such trustee could be appointed by agreement, or elected by the licensees. Further conditions that the premises be conducted in accordance with the RV Act and with the provisions of the Retirement Village Industry Code of Practice Regulation, 1989 published in the Government Gazette No.99 of 6 October 1989 and made pursuant to the Fair Trading Act, 1987 (NSW) appear appropriate. I do not believe it to be appropriate that the Council intervene in the management of the Corella Company, nor that the residents dictate to the company the form of property ownership used in managing Hebron village. However, I believe it appropriate that provision be made to safeguard their present status and to give them a proper voice in determining appropriate licence fees.

Although Mr P. Tomasetti, of Counsel for the applicant, sought an order for costs, I consider the Council was right to bring to the Court's attention the social and economic effects of the proposal. Bauer Holdings Pty Ltd and another v Sydney City Council (1981) 48 LGRA 356. It is to be hoped that the efforts of well intentioned persons conducting the Corella Company will not be frustrated, and that the security and well being of the residents of Hebron be not compromised. I am not inclined to make an order as to costs, other than the order previously made that the Council pay the costs occasioned by the further amendment of its statement of issues.

The matter is stood over for seven (7) days for the parties to bring in short minutes containing appropriate conditions of consent, which are agreed or which do not go beyond the matters outlined above. Exhibits are to be returned. At Counsel's request, the question of costs is reserved, but the awarding of costs is not normal in Class 2 proceedings.

I HEREBY CERTIFY THAT THIS AND THE PRECEDING 16 PAGES ARE A TRUE AND ACCURATE COPY OF THE REASONS FOR JUDGMENT HEREIN OF THE HONOURABLE MR JUSTICE BANNON.

RONALD ASHLEY WOODLANDS v. SUTHERLAND SHIRE COUNCIL [1994] NSWLEC 28 (10 March 1994)

At a glance

Court

Decision date

Before

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Judgment (57 paragraphs)

RONALD ASHLEY WOODLANDS v. SUTHERLAND SHIRE COUNCIL [1994] NSWLEC 28 (10 March 1994)