Rowe v Kincumber Nautical Village Pty Ltd

A Procedural Curiosity

1. In accordance with an earlier judgment of this Court, these proceedings are constituted as representative proceedings pursuant to Part 10 of the Civil Procedure Act 2005: Rowe v Kincumber Nautical Village Pty Ltd [2022] NSWSC 533. Orders have been granted which provide for an opt out procedure in accordance with ss 162, 175 and 176 of the Civil Procedure Act. Those orders were largely complied with prior to the oral hearing of this matter.
2. The plaintiff therefore represents a group whose members comprise lessees or former lessees of sites in a residential community, more commonly known as a caravan park, operated by Kincumber Nautical Village Pty Ltd ("Kincumber"). In accordance with the Residential (Land Lease) Communities Act 2013 ("the RLLC Act"), each of the group members entered into a Site Agreement which included terms of the lease granted by Kincumber to the group member in exchange for the periodic payment of fees. The individual group members are referred to in the RLLC Act and the Site Agreements as "Home Owners" (and will be for convenience referred to here by that designation) and Kincumber is referred to as "the Operator".
3. Each of the group members brought individual proceedings in NCAT. Those proceedings were each dismissed by the Appeal Panel. But only the plaintiff lodged an appeal to the Court pursuant to s 83 of NCAT Act. The other group members have not exercised their statutory right of appeal in accordance with the NCAT Act. Accordingly, whilst this Court can make an order in these proceedings which affects the plaintiff's proceedings in NCAT, it is doubtful that, in the absence of any appeal, it is open to this Court, because it is not seized of any jurisdiction, to make orders of the kind set out in s 83(3) of the NCAT Act, i.e., that it can ultimately make orders which have effect on proceedings in NCAT. However, whether such a situation arises depends upon the ultimate decision this Court makes. It is unnecessary at this stage to come to any firm view.
4. Accordingly, I will proceed to determine the issue on the plaintiff's appeal and then seek the assistance of counsel as to what orders ought be made, if necessary.

Site Agreement between Group Members and Kincumber

1. The central question on this appeal is the meaning and effect of a clause in the Site Agreement which was in the following terms ("the Fee Increase Clause"): "Site fees will be increased each year in November, irrespective of the commencement date of the Site Agreement. Where a previous site fee increase has not occurred, the site fee increase to apply will be the same that would have been applied had a previous increase occurred in accordance with this calculation. Site fees shall be increased by the sum of:- 1. Any positive change in the CPI; plus 2. 3.75%; plus 3. A proportional share of any increase in costs incurred by the Operator since the calculation of the last site fee increase calculation for the following:- - electricity and water (net of any amount that has been recouped from Home Owners); plus - gas; plus - communication; plus - insurance; plus - rates; plus - any other Government (Federal, State or Local) charges or taxes other than company tax. Plus 4. The effect of any change in the rate of GST or similar tax that is included in the site fees."
2. All but six of the Site Agreements also included the following: "5. The amount of increase resulting from the above calculation will be rounded up to the nearest dollar."
3. The Site Agreements included the following by way of explanation: "A proportional share means that the increase in these costs will be divided by 380 (the approximate number of occupied sites) divided by 52 (weeks in the year). Positive changes in the CPI means the increase in the Consumer Price Index - Sydney All Groups, (or any similar index that may replace it) that is greater than zero that has occurred between the June Quarter CPI and the preceding June Quarter CPI; Communication (costs) includes telephone, VoIP (Voice over Internet Protocol), Internet, Wi-Fi, TV services and distribution, and any other communication or data cost."

Kincumber's Claimed Fee Increase

1. On or around 16 November 2018, Kincumber sent each Home Owner a "Notice of Site Fee Increase" by which it increased the site fees payable by the Home Owners under their respective Site Agreements in accordance with the relevant Fee Increase Clause. The Notices were in similar terms but because some Site Agreements omitted paragraph 5 regarding the approach to rounding, and because the existing site fees differed, the fees increased by different dollar amounts.
2. It is convenient to set out, by way of example, the relevant part of the Notice of Site Fee Increase received by one of the Home Owners. It was in these terms: "How the site fees have been calculated: We have applied the fixed calculation set out in your site agreement. Please see below for detailed information on how the increased site fees have been calculated. 1. The CPI applied is 2.2% being Sydney All Groups - 12 months to June; $4.42 2. 3.75% of your Site Fee; $7.54 3. A proportional share of increased costs divided by 380: $0.47 4. The amounting resulting from the calculation has been rounded up to the nearest dollar. Your Current Site Fee is: $201 The CPI Amount is: $4.42 The Amount resulting from the Fixed Calculation is: $7.54 The Proportional Share is: $0.47 Rounding up amount is: $0.57 The New Site Fee payable from 30/11/[2018] is: $214 weekly

NCAT Proceedings

1. On 15 October 2019, each Home Owner commenced separate proceedings in the Consumer and Commercial Division of NCAT claiming that Kincumber's increase of the site fees was contrary to Part 6 Division 3 of the RLLC Act. In the proceedings, which were heard concurrently, each of the Home Owners sought similar orders under s 157 of the RLLC Act.
2. On 3 September 2020, Senior Member Ross, having found that the Site Fee Increase clause contained more than one fixed method, made orders in favour of the Home Owners which restrained Kincumber from applying the Fee Increase Clause as set out in the Site Agreements and required the defendant to instead increase the site fees by "the fixed method which produces the lower or lowest increase in site fees". The Senior Member did not identify what that method was but left it to be determined by Kincumber.
3. On 16 September 2020, Kincumber filed a Notice of Appeal by which it sought orders setting aside the orders of Senior Member Ross. The defendant contended that the Senior Member made various errors relating to the interpretation of the RLLC Act and the Site Agreements' compliance with that Act.
4. Kincumber's appeal was heard by the Appeal Panel on 25 March 2021, and on 14 September 2021, it was allowed. The reasons of the Appeal Panel are to be found at Kincumber Nautical Village Pty Ltd v Morris [2021] NSWCATAP 275.

The Decision of the Appeal Panel

1. The principal issue on the appeal as identified by the Appeal Panel was whether the Fee Increase Clause complied with ss 65 and 66 of the RLLC Act. Section 66(2) provides: "A site agreement must not provide that the site fees may be increased by more than one fixed method. If more than one method is specified, the method that results in the lower or lowest increase of site fees is the applicable method."
2. The Home Owners submitted that the method provided for in the Fee Increase Clause was not "one fixed method" because it comprised multiple component parts which were themselves not fixed amounts. They said the Senior Member was right to make the orders she did.
3. Kincumber argued that if each of the component calculations is each itself "fixed", then a formula adding those components together must also be "fixed". It relied on Rizzi v Grazcos Co-operative Ltd (1981) 153 CLR 669; [1981] HCA 37 to support its submission that, by using the term "fixed calculation" in s 65(2)(a)(ii) of the RLLC Act, the legislation only requires site agreements to prescribe a standard by the application of which a site fee can be calculated or ascertained definitely.
4. The Appeal Panel noted that the RLLC Act does not define the term, "fixed method". It accepted Kincumber's arguments and said: "[39] … In providing for a site fee increase in accordance with a fixed calculation it is not the amount of the increase which is relevant but whether the method for calculating the increase allows a home owner at the time they enter into this site agreement to know with certainty how an increase is to be calculated and that the method of increase will not vary from year to year. In our view there is no bar on such a calculation comprising a formula containing multiple integers or components. … [41] In our view, the fact that the site fee increase clause in the site agreements the subject of these proceedings contains a number of components or integers is irrelevant, so long as the calculation is 'fixed', that is, is definitely ascertainable. The clause in question provides a calculation from which the site fee increase in any given year can be calculated or ascertained definitely and is 'a fixed calculation' and therefore 'a fixed method' for increasing site fees. …"
5. The Appeal Panel rejected the Home Owners' arguments that the term was confined by the example "fixed calculations" provided in s 65(2)(a)(ii) of the RLLC Act and the standard form site agreement set out in Schedule 1 to the Residential (Land Lease) Communities Regulation 2015 ("the RLLC Regulation").
6. The Appeal Panel took the view that, properly construed, the Fee Increase Clause was "a fixed method" for increasing site fees which could not be challenged because of the operation of s 66(7) of the RLLC Act. The Appeal Panel said: "the Tribunal [meaning the Senior Member] lacked jurisdiction to determine the applications [in the way she did]".

Proceedings in this Court

1. In the Summons, under the heading "Ground of Appeal", the plaintiff who is a Home Owner claims that the "Appeal Panel erred in law in its construction of the RLLC Act". The Summons then includes the following: "11 The NCAT Appeal Panel should have held that: a. Section 65 permits only one of a 'fixed amount' increase or a 'fixed calculation' increase and does not permit both a "fixed amount" increase and a 'fixed calculation' increase; b. Item 1 in the site fee increase term providing for increase by a positive change in the CPI was a 'fixed calculation'; c. Item 2 in the site fee increase term providing for a 3.75% increase was a 'fixed amount', being the amount that was 3.75% of the previous site fee; d. Item 3 in the site fee increase term providing for a proportional share of any increase in costs incurred by the operator was not a 'fixed' calculation' because the costs involved: were not objectively ascertained or ascertainable; remained within the subjective control of the defendant; and were subject to fluctuation or variation as a consequence of business decisions taken by the defendant from time to time and changes in Federal, State or Local government taxes and charges from time to time; and e. The site fee increase term impermissibly provided for more than one fixed method in breach of s 66(2) of the RLLC Act."
2. As noted at [2] above, an appeal to this Court is required to be "… on a question of law". At the hearing of the proceedings in this Court, counsel for the Home Owners identified the question of law in this way: "Whether a site fee increase term which does not operate with an objective standard can be a fixed calculation within the meaning of s 65 of the [RLLC] Act."
3. Counsel said that this question directly challenged the correctness of the second sentence of [41] of the judgment of the Appeal Panel. It is principally addressed to the ground set out in Ground 11(d).
4. Counsel for the plaintiff in oral submissions conceded that he could not pursue Ground 11(c) in the Summons because Item 2 in the Fee Increase Clause was a fixed calculation and not a "fixed amount". The plaintiff accepted in oral submissions, subject to his other arguments, that each of the Items in the Fee Increase Clause are themselves "fixed calculations", and that it could not be said that the Fee Increase Clause impermissibly comprises of multiple "fixed methods", one of which requires an increase by a "fixed amount" and the others requiring increases by multiple "fixed calculations". Grounds 11(a) and (e) therefore fall away as a consequence of the plaintiff's concession in relation to Ground 11(c).
5. Counsel made it plain as well that he accepted the finding of the Appeal Panel that a "fixed calculation" as that phrase is used could be constituted by a number of integers, subject to further matters discussed later. Ground 11(b) therefore falls away.
6. Although before the single Member of NCAT the Home Owners claimed that the Fee Increase Clause was an unfair term under the relevant provisions of the Competition and Consumer Act 2010 (Cth) Sch 2 - Australian Consumer Law, no such claim was raised in this Court.

The Residential (Land Lease) Communities Act 2013

1. It is necessary at this stage to set out in greater detail the provisions of the RLLC Act.
2. The RLLC Act applies to "communities" and "site agreements" as those terms are defined in the Act: ss 5-8. An operator is required to ensure that a site agreement is in writing at the commencement of the agreement: s 26(1).
3. Site agreements must, among other things, identify the residential site by its number and its dimensions and must "comply with any requirements prescribed by the regulations (including as to the content or form of the agreement)": s 26(2). If a site agreement does not comply with a requirement of s 26(2), the operator is guilty of an offence: s 26(3).
4. The RLLC Regulation by Schedule 1 prescribes a standard form of site agreement pursuant to s 27 of the RLLC Act. Site agreements must be in the standard form (but may contain additional terms) and are taken to include the terms of the standard form to the extent they are not included in the site agreement: ss 27(3). Any additional terms must not contravene the RLLC Act and must not be inconsistent with the terms prescribed in the standard form: s 28(1). The relevant part of the standard form is extracted below at [36].
5. A home owner or operator may apply to NCAT for an order declaring a specified term void or not void or an order varying the terms of a site agreement: s 29. I note that no such application was made in this matter.
6. Sections 65 and 66 provide the following: "65 How site fees may be increased (1) Site fees payable under a site agreement can be increased only if the increase is made in accordance with this Division. (2) A site agreement may provide that site fees payable under it may be increased in accordance with either of the following procedures - (a) at specified intervals (or on specified dates) by a fixed method, which may be either - (i) by fixed amounts, or (ii) by a fixed calculation (for example, in proportion to variations in the Consumer Price Index or in the age pension), (b) by notice (otherwise than by a fixed method). 66 Increase of site fees by fixed method (1) This section applies to a site agreement that provides for the increase of the site fees by a fixed method. (2) A site agreement must not provide that the site fees may be increased by more than one fixed method. If more than one method is specified, the method that results in the lower or lowest increase of site fees is the applicable method. (3) The operator must not increase (or attempt to increase) the site fees that are to be increased according to a fixed method otherwise than in accordance with that method and this section. Maximum penalty - 50 penalty units. … (7) The terms of a site agreement fixing the method of future increases of site fees cannot be challenged under this Act. However - (a) the terms of the agreement may be varied if the parties enter into a written agreement to do so, and (b) this subsection does not affect any right that the home owner has, apart from this Act and the Civil and Administrative Tribunal Act 2013, to challenge any of the terms. Note - A home owner may be able to take action over unfair contract terms under the Australian Consumer Law of the Commonwealth. …"
7. NCAT had jurisdiction to determine the plaintiff's claim, including in relation to the effect of s 66(7) of the RLLC Act, because of s 156(1) of the RLLC Act, which provides: "A home owner, former home owner or operator of a community may apply to the Tribunal for determination of any of the following - (a) a dispute relating to a right or obligation under this Act, (b) a dispute arising from, or relating to, a site agreement or collateral agreement, (c) any other matter that may be determined by the Tribunal under this Act."
8. NCAT was empowered to make orders by s 157(1) of the RLLC Act, which provides: "The Tribunal may, on application by a party to a dispute or other matter before the Tribunal, or in any proceedings under this Act, make one or more of the following orders - (a) an order that restrains an action in breach of this Act or a site agreement or collateral agreement, (b) an order that requires a person to comply with an obligation under this Act or a site agreement or collateral agreement, (c) an order that relieves a party to a site agreement or collateral agreement from the obligation to comply with a provision of the agreement, (d) an order for the payment of an amount of money, … (j) an order for anything else necessary or desirable to resolve a dispute."

The Standard Form Site Agreement

1. As noted above, Schedule 1 to the RLLC Regulation provides a standard form site agreement. It contains a site fee increase clause in the following terms: "Site fee increases We may increase your site fees as follows (select only ONE option): □ Fixed method: Your site fees will be increased (select only ONE option): □ in proportion to variations in the CPI □ by $______ □ by _____% □ by _____% of the increase to the single / couple (cross out whichever is not applicable) age pension, each time the pension increases Note: □ Notice (non-fixed) method: If your site fee increases are linked to increases in the age pension, your site fees will increase ONLY by the percentage of the age pension increase specified above. We may propose an increase to your site fees from time to time (no more than once in any 12-month period). □ other (specify) We are required to give you, and all other home owners not on fixed method increases, at least 60 days' written notice of the proposed increase with an explanation for the increase. Note: We may cancel or reduce the proposed increase by a later notice that takes effect on the same day as the original notice. The methods listed above are negotiable. If 25% or more of affected home owners oppose the proposed increase the dispute will go to compulsory mediation and, if that fails, to the Tribunal to decide what the site fees should be." The first increase will be on: / / For any method other than increases linked to the age pension, after the first increase, increases will occur every: ___ months / years (cross out whichever is not applicable) We are required to give you at least 14 days' written notice of any increase using this method. This fixed method will apply for (select only ONE option): □ the duration of your occupancy □ years - after which the "Notice (non-fixed) method" will apply, unless another fixed method or a new site agreement is agreed between you and us.

1. The Site Agreements signed in this case are generally in the standard form prescribed by the RLLC Regulation. They also contain additional terms.
2. Under the heading "Site Fee Increases", the checkbox for "Notice (non-fixed method)" is crossed out. Below that, the checkbox for "Fixed Method" is ticked. The first four checkboxes below the chapeau which reads "Your site fees will be increase (select only ONE option)" are then crossed out. The checkbox labelled "Other" is ticked, and below it is the Fee Increase Clause extracted at [7] above.

Plaintiff's Submissions

1. The plaintiff submits the Appeal Panel was wrong in law to interpret s 66 as it did. He says that although the RLLC Act does not define "fixed calculation", the examples given in s 65(2)(a)(ii), i.e., "in proportion to variations in the Consumer Price Index or in the age pension", "assist in ascertaining the meaning" of that term. He submits that, properly construed, the RLLC Act only permits "fixed calculations" that have the effect of increasing site fees by reference to a proportion of the variation of external factors which are objectively determined, such as the Consumer Price Index and the age pension.
2. The plaintiff submits that paragraph 3 of the Fee Increase Clause, which provides that site fees will be increased by a proportion of any increase in costs incurred by the defendant, is not a "fixed calculation" because "any increase in costs" is not definitely ascertainable "with reference to an objective base" and instead relies on "a number of variables, some of which are in the hands of the [defendant]".

Kincumber's Submissions

1. Kincumber submits that the Appeal Panel made no error of law in coming to the decision it did because it properly followed orthodox principles of statutory construction in applying the terms of the statute to the circumstances of this case.
2. The defendant says the plaintiff's argument described at [40] above was not raised before the Appeal Panel and that, in those circumstances leave should be refused in respect of it. Furthermore, the defendant submits, the argument goes to a finding of fact determined initially by Senior Member Ross and cannot form part of this appeal. Finally, the defendant submits, in any event, the argument is wrong factually and legally.

Discernment

1. The plaintiff's claim depends on whether the Fee Increase Clause constitutes "a fixed method" within the meaning of s 65 and, if it is, whether the Site Agreements comply with s 66(2) of the RLLC Act. Those matters, in turn, depend on a proper interpretation of those provisions.
2. The parties refer in their submissions to well-known High Court authority for principles of statutory interpretation. The plaintiff relies on SZTAL v Minister for Immigration and Border Protection (2017) 262 CLR 362; [2017] HCA 34, in which Kiefel CJ, Nettle and Gordon JJ said at [14]: "Plainly, the starting point for the ascertainment of the meaning of a statutory provision is the text of the statute whilst, at the same time, regard is had to its context and purpose."
3. I will keep this approach in mind as I turn to determine this matter.
4. In Pine Needles Village Pty Ltd v Residential Tribunal of NSW [2000] NSWSC 144, Grove J considered whether a rent increase term complied with the predecessor to ss 65 and 66 of the RLLC Act, namely s 53 of the Residential Parks Act 1998. The impugned term in that case permitted a landlord to increase rent annually "at the Landlords discretion… upwards to an amount commensurate to prevailing Market Value". "Market Value" was to be "determined by the assessment of rents being paid for comparable premises in the locality or similar locality". Grove J said this at [11]: "'An amount commensurate with prevailing market value' is a statement of outcome in distinction from a method of calculation. Relevant dictionary references define 'calculate' in terms of reckoning and computation, and 'method' to procedure for attaining an object, which is to be distinguished from the object itself. I am unpersuaded that the tribunal erred in law in holding that cl28 did not set out a method for calculating increases in rent as required by s53(6). The conclusion of the tribunal is consistent with expressed aims of certainty touched upon in parliamentary debate during the passage of the legislation but it is not necessary to turn to such sources in order to resolve any ambiguity or construe the statutory language."
5. That term may be distinguished from the Fee Increase Clause in this case because each component of the clause may be definitely ascertained by reference to objectively determinable inputs. The first component of the Fee Increase Clause is the Consumer Price Index ("CPI") increase. This component requires a calculation to be made by reference to the differences of the CPI - Sydney All Groups Index between two dates which are 12 months apart. The second component is a percentage of the existing site fee (3.75%) which may be determined by inputting the existing site fee, which is known to the relevant Home Owner.
6. Similarly, that part of the Fee Increase Clause, which is the subject of attack in this Court, undoubtedly requires examination of the defendant's business and financial records, in order to ascertain the difference in annual costs for the included services and to identify the proportional share of any increase in costs incurred by the Operator, including the effect of any change in the rate of GST.
7. None of those elements involves the defendant exercising any discretion. For that reason, they are each capable of being ascertained with precision. The submission that the Operator has the discretion to choose the supplier of the services is, with respect, beside the point. The clause addresses the annual difference in cost and requires the Home Owners to pay their proportionate share. The annual difference is an ascertainable figure by reference to charged costs. I reject the plaintiff's argument that the Fee Increase Clause is not a fixed calculation because the integers are not definitely ascertainable on an objective basis.
8. At its essence, the plaintiff's remaining argument, recounted at [39] above, is that the meaning of "a fixed calculation" in s 65(2)(a)(ii) ought be limited by, first, the example given in that subsection ("in proportion to variations in the Consumer Price Index or in the age pension") and, secondly, the terms of the standard form site agreement contained in Sch 1 to the RLLC Regulation.
9. I reject the suggestion that the only fixed calculations for increasing site fees which may be allowed are those which increase site fees in proportion to variations in the Consumer Price Index or in the age pension. The text of s 65(2)(a)(ii) is clear in that those terms are only included as examples.
10. For the same reason, I reject the suggestion that the use of the term "or" within the example provided in s 65(2)(a)(ii) means that a fixed calculation may only involve one and not multiple inputs. In any event, in oral submissions, the plaintiff's counsel effectively did not press this argument.
11. I reject the submission that the terms of ss 65 and 66 should be limited by reference to the terms of the standard form site agreement contained in the RLLC Regulation. The terms of a statute are not to be construed by reference to regulations made under that statute: Plaintiff M47/2012 v Director-General of Security (2012) 251 CLR 1; [2012] HCA 46 at [56]; Mine Subsidence Board v Wambo Coal Pty Ltd [2007] NSWCA 137 at [41].
12. For those reasons, in my view, the Fee Increase Clause is "a fixed calculation" and the Site Agreements provide for only "one fixed method", in compliance with s 66(2) of the RLLC Act.
13. I agree with the conclusions reached by the Appeal Panel and its reasons for them. It follows that the appeal must be dismissed.

Leave to Appeal

1. The plaintiff submits leave should be granted because the case affects 52 Site Agreements, raises a question of principle about the proper interpretation of the RLLC Act and is a matter of general public importance.
2. The defendant says that leave should be refused because the appeal has no merit.
3. I would grant leave to appeal on all grounds, given the general public importance of this case.

Orders

1. I make the following orders: 1. Grant leave to appeal from the decision of the Appeal Panel of the New South Wales Civil and Administrative Tribunal in matter number 2020/371060; 2. Dismiss the appeal of the plaintiff; 3. Order the plaintiff to pay the defendant's costs; 4. Direct counsel for each party to provide short minutes of order with respect to the disposition of the proceedings with respect to the remaining group members to the Chambers of Garling J by 10 November 2022; 5. The Court will make orders in Chambers unless submissions are required; 6. Liberty to apply.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 27 October 2022