Walker & Ors v Hampshire

Hearing

1. At the hearing, the documents upon which the parties relied were identified and admitted as evidence: Exhibit A Applicants' documents, received on 22 July 2022 Exhibit B Applicants' documents, received on 3 August 2022 Exhibit C Applicants' documents, received on 1 September 2022
2. As there was no cross-examination, the Tribunal proceeded to hear closing submissions, following the usual sequence of applicant then respondent then applicant in reply was followed so each party had an opportunity to speak in support of their case and to respond to the other party's case.

Statutory provisions

1. Any increase in site fees by notice is governed by s 67 of the Act which is quoted below: (1) This section applies to a site agreement that provides for the increase of the site fees by notice (otherwise than by a fixed method). (2) An increase in the site fees is not payable unless the fees are increased in accordance with this section. (3) The site fees must not be increased except by notice in writing given to all the home owners in the same community at the same time under site agreements to which this section applies. (4) The notice must - (a) specify the amount of the increased site fees, and (b) specify the day (the effective day) on and from which the increased site fees are payable, and (c) include an explanation for the increase, and (d) include such other information as may be prescribed by the regulations, and (e) be in the approved form (if any). (5) The day specified as the effective day must not be earlier than 60 days after the day on which the notice was given. (6) Site fees must not be increased more than once in any 12-month period under this section. This is calculated by reference to the day from which the increased site fees are payable. (7) Increases under this section in site fees payable by home owners in the same community under site agreements to which this section applies must take effect on the same day (and not on different days). (8) A notice under this section may be cancelled. (9) A later notice may provide for a lesser increase than that specified in an earlier notice under this section. A later notice has effect instead of the earlier notice and takes effect from the date on which the earlier notice was to take effect. (10) If the site fees payable under a site agreement are increased under this section, the terms of the agreement are varied accordingly. (11) If a person becomes a home owner after a notice has been given under this section to other home owners in the community but before the date the increase takes effect - (a) the operator must notify the home owner of the notice and its contents and effect, and (b) the increase applies as if the notice had been given to the home owner at the same time as it was given to other home owners.
2. Part 6 of the Act contains a requirement for mediation in s 69: (1) This section applies if site fees are increased by notice (otherwise than by a fixed method). However, this section does not apply to an increase in site fees objected to solely on the ground that the increase is substantially excessive when compared with increases for similar residential sites in the community. (2) An objection to an increase in site fees on the ground that the increase is excessive may be made by lodging an application for mediation under Division 2 of Part 12 signed by at least 25% (or a lower percentage prescribed by the regulations) of the home owners who received the notice within the first 30 days of the notice period, and not otherwise. (3) Home owners may nominate a representative or representatives under section 146 for the purposes of the mediation of the objection. However, the nomination must be made in accordance with the prescribed procedure if the regulations so provide. (4) The parties to the mediation must use reasonable endeavours to participate in and finalise mediation before the effective day for the fee increase. (5) A home owner may opt out of the mediation, and agree to pay the increase, but only if the home owner follows the process set out in the regulations. (6) The fact that one or more home owners opt out of the mediation, after an application for mediation is made, does not prevent the continuation of the mediation in respect of the remaining home owners. (7) The regulations may make provision for or with respect to the mediation of objections to increases in site fees.
3. Division 5 in Part 6, from s 70 to s 75, deals with applications to the Tribunal relating to an increase in site fees by notice, with s 71 dealing with an application following a failed mediation. That section is set out below: (1) One or more affected home owners may apply to the Tribunal for an order under section 73 if - (a) the home owners object to the increase in site fees, and (b) an application for mediation of the objection was made in accordance with section 69, and (c) mediation was unsuccessful. (2) The application must be made on behalf of all the affected home owners (other than those who opt out of the application) by one or more of them appointed as the representative or representatives by the participating home owners. (3) The application must be made within 14 days after the date on which the mediation failed. (4) The application must be accompanied by a notice from the mediator stating mediation failed on the date specified by the mediator.
4. An application based on the site fees being excessive compared to other residential sites is governed by s 72 which is not relevant in this instance. The orders which can be made in relation to an application under either s 71 or s 72 are set out in s 73, which is in the following terms: (1) The Tribunal may, on application under section 71 or 72, make any of the following orders - (a) an order declaring that an increase in site fees is excessive, (b) an order reducing the amount of the increase by a specified amount, (c) an order setting aside the increase, (d) an order that the site fees must not exceed a specified amount or specified amounts, either - (i) from a specified day, not being earlier than the day from which the increased site fees were payable, or (ii) during a specified period, (e) an order confirming the increase on the conditions (if any) that the Tribunal considers appropriate, (f) any ancillary order that the Tribunal, in the circumstances, thinks appropriate. (2) The Tribunal may make orders applying to individual participating home owners, groups of participating home owners or all participating home owners. (3) An order applies to all affected home owners in the community (other than those who opt out), unless the Tribunal is satisfied there is a strong reason for making separate orders for different home owners or groups of home owners. (4) The Tribunal cannot make an order that would result in an increase lower than that needed to cover any actual or projected increase (established to the satisfaction of the Tribunal) in the outgoings and operating expenses for the community since the previous increase (if any) in site fees for the community.
5. A non-exhaustive list of the matters which may be considered by the Tribunal is set out in s 74: (1) The Tribunal may have regard to any or all of the following factors when deciding whether to make an order under section 73 - (a) the frequency and amount of past increases in site fees for the community, (b) any actual or projected increase in the outgoings and operating expenses for the community as provided by the operator since the previous increase (if any) in site fees for the community, (c) any repairs or improvements to the community - (i) carried out by the operator since the previous increase (if any), or (ii) planned by the operator for the period covered by the increase being reviewed, (d) the general condition of the community including its common areas, (e) the range and average level of site fees within the community, (f) the value of the land comprising the community, as determined by the Valuer-General, (g) the value of any improvements to the community (including common areas) paid for or carried out by home owners, (h) any explanation for the increase provided by the operator by notice in writing to the affected home owners, (i) variations in the Consumer Price Index (All Groups Index) for Sydney, (j) whether the increase is fair and equitable in the operation of the community, (k) any other matters prescribed by the regulations. (2) The regulations may require the Tribunal to disregard any specified matters (not being a matter referred to in subsection (1)), in any specified circumstances, when deciding whether to make an order under section 73.

Jurisdiction

1. It is clear, from the site agreements provided, that the subject site is a residential community, as defined in s 4 of the Residential (Land Lease) Communities Act 2013 (NSW) and references in these reasons to the Act should be read as a reference to that Act unless otherwise indicated.
2. The application was lodged within 14 days of a letter from NSW Fair Trading which expressed the view that the respondent had declined medication. As a result, the Tribunal has jurisdiction to hear and determine this application.

Applicants' evidence

1. Exhibit A contained, for each of the 22 affected residents, (1) an authority for Ms Walker and Ms Nicoll to represent them, (2) a site fee increase notice dated 1 June 2022, (3) a draft agreement to apply if an alternative offer contained in that site increase notice was accepted, and (4) a copy of the relevant residential site agreement.
2. As the site fee increase notices were each in the same form, the wording of the body of the notices given to the applicants is set out below. The only differences in the 22 notices provided are underlined. NOTIFICATION OF INCREASE IN SITE RENT IN ACCORDANCE WITH SECTION 67 OF THE RESIDENTIAL (LAND LEASE) COMMUNITIES ACT 2013 Due to the impact of COVD-19 upon our community, we decided to defer issuing the rent increase notice which was due to be issued and come into effect in July 2021. With the recent removal of health restrictions, we considered that it is now appropriate to increase rents. In accordance with the abovementioned section of the Act notice is hereby given that an increase in your rent site AP *** shall apply from Sunday the 7th August 2022. The site rent is increase by $11.23 from $137.00 to $148.23 per week. We include, without limitation, the following explanation for the increase: 1. Since rent increase notices were last issued in the 7th June 2021, the costs of operating the village have generally increased in line with CPI, with some exceptions that have been in excess of CPI such as electricity, insurance, council fees and payroll costs. 2. The CPI (Sydney All Groups) used in determining the previous increase was 118.0 for the March 2020 quarter. This index number has increased to 123.7 for the most recent quarter of March 2022. This represents an increase of 5.37%. 3. The rent you are currently paying is less than the prevailing rent of $148.23 that other residents in the village are paying. The Company appreciates that, as our residents generally rely on fixed incomes, affordability of rent and certainty about future rent levels are issues of importance for residents. Accordingly, our preference remains to negotiate agreements with residents for stated rent increase over a number of years. Accordingly, we are prepared to defer $7.49 of the increase and agree to rent increases of $3.74 plus CPI for each of the next two years. In the event that you wish to take up this offer, please sign the attached agreement and return it to the office. We will then countersign it and provide you with a copy together with a replacement notice increasing your rent to $140.74 as of the 7th of August 2022.
3. By way of summary, the site fee increase notice raised the site fee from either $120, $123, $127 or $137 to $148.23 in each case. The previous site fee, which applied from 7 June 2021, and the site fee shown in the notice to apply from 7 August 2022, are set out in Appendix 1.
4. As can be seen from the last paragraph quoted above, each notice included an offer to spread the increase over three years with an additional CPI increase for each of the next two years. In other words, one third of the amount of the proposed increase would apply from 1 June 2022, another third plus the CPI increase would apply from each of 1 June 2023 and 1 June 2024. The practical effect of that offer, if accepted, would be: (1) the same site fee would apply to all residents from 1 June 2024, (2) a CPI increase would apply, in addition, on 1 June 2023 and 1 June 2024, (3) there would be no CPI increase added on 1 June 2022.
5. Exhibit B is the applicants' next day response to the Tribunal's 29 July 2022 letter. This letter contends that there should only be a CPI increase of 5.1% and suggested that services had been diminished in the following respects: * Office hours cut to only 2 hours per week for residents to remit payment of fees & any enquiries; * conditions of roads within the village deteriorating to a point that they are hazardous to walk on. As 75% of the village is without footpaths, one needs to walk on the roads to the mailbox, visit other residents & drop recycling off. This is hazardous and there was an Enduring order made some 8-10 years ago, to have the roads maintained to a safe standard, this has not been complied with at any time. * FOGO - We are lucky to have this service in our village, however, whilst on trial through the Council it worked, then when that trial ceased, FOGO was taken away. [FOGO = Food Organics and Garden Organics = Green Bin] * As there have not been any improvements to our village since the commencement of [the respondent], we feel that the increase put into us. Is not in any way justified.
6. Exhibit C set out the orders sought, referring to s 73 and s 74 of the Act, and suggested a 4.4% CPI increase. That page was followed by a two-page submission ( summarised below), and copies of the applicants' 1 April 2021 site fee increase notice. Those notices, which increased their site rent by $14.85 from $108.15 to $123.00 in each case, from 7 June 2021, included the following explanation for that increase: 1) Site rents have not been increased since 14 December 2017. It is necessary for us to increase rents to keep pace with prevailing market conditions and increases in the costs of providing services and amenities as well as the value of the land and facilities available to residents in return for their site rent. 2) Current sit rents in the village range from $95.45 to $140.40 per week primarily reflecting when individual home owners purchased their home. Prior to this increase, the 39 residents who moved into the village after 30 June 2017 have been paying $135.00 per week or more. Increase notices issued to residents today will see the disparities in rent paid by residents decrease. 3) Electricity costs have increased significantly more than inflation since the previous rent increase. As a consequence, the cost of electricity used to service the common facilities has increased considerably. 4) The legislative changes that resulted in the removal of the service availability charge previously paid by residents has resulted in us bearing the entire cost of providing and maintaining the embedded electricity network. 5) Costs of operating the village have increased at a rate considerably in excess [of] the increase in CPI. These include council & water rates, maintenance costs, and garbage collection & disposal costs.
7. Also included in Exhibit C were 21 statutory declarations: 20 were from named affected residents, one was from Mr Douglas, the partner of Ms Clifton, and there was no statutory declaration from Ms Walsh.
8. Topics were common to many of those statutory declarations were the condition of the roads, a lack of maintenance of the gardens, and reduced office hours.

Respondent's evidence

1. The respondent did not provide any evidence.

Applicants' submissions

1. In the written submission, within Exhibit C, it was suggested that the respondent, as the operator, had to provide an explanation for the increase in the notice and that there were matters within s 74 which were only known to the respondent. The percentage increase was noted and was said to be "well above the CPI March quarter of 4.4%". There was also a submission that electricity costs decreased between July 21 and July 2022 but there is no supporting evidence for that proposition.
2. Oral submissions contended that the respondent had not provided any documents to justify the increase which was said to be excessive because of the decrease in office hours, to two hours a week, and the condition of the roads.
3. In submissions in reply, the applicants contended that what Mr Black said in his submissions could and should have been provided to them in writing. It was submitted that the applicants had completed with the requirements of NSW Fair Trading and the Tribunal but there had bene no such compliance by the respondent.

Respondent's submissions

1. Mr Black suggested it was not enough for the applicants to say the rent was too high and that the photos submitted in the applicants' case did not indicate the general condition of the site, claiming that those photos showed that roads were being repaired. He referred to what he maintained was said by the member who presided at the directions hearing that was held on 23 August 2022.
2. There were submissions made as to differential rents in the village and the number of sites, but the respondent has not provided any evidence of those matters. It was said that the respondent was seeking to equalise rents and offered to do that in a staged manner but that offer was rejected.
3. It was suggested that the respondent did not receive anything from NSW Fair Trading in relation to the application for mediation. Further, that NSW Fair Trading said the identity of the applicants for mediation was confidential, but no evidence was provided in support of that proposition. After the applicants' submissions in reply, Mr Black said he did not attend mediation because NSW Fair Trading did not provide a list of the applicants which suggested made it impossible when there are different rents, and the names of the applicants were not known.

Consideration

1. There are two aspects of the evidence in these proceedings that warrant clarification: first, the status of the unchallenged evidence in the applicants' case; secondly, the absence of any evidence from the respondent.
2. As to the evidence provided in support of the applicants' case, the High Court's decision in Precision Plastics Pty Ltd v Demir [1975] HCA 27 suggests that evidence which is not inherently incredible, and which is not challenged, ought to be accepted.
3. In relation to the absence of evidence in the respondent's case, there is no obligation on the respondent to submit any evidence because the applicant bears the onus of proof. However, the position when a party fails to submit any documents in support of its case, or fails to lead evidence from a relevant witness, is that such a failure cannot fill gaps in the other party's case but does create a situation where a finding or inference may be drawn more comfortably or with greater confidence: Jagatramka v Wollongong Coal Ltd [2021] NSWCA 61 at [49]; Australian Securities and Investments Commission v Hellicar [2012] HCA 17 at [232].
4. When considered by way of analogy to a pair of scales, evenly balanced at the outset of the hearing, if the applicant leads some evidence, that moves the scales in favour of the applicant then, if the respondent leads no evidence, the result may be that the scales are not tipped in favour of the respondent.
5. Lawyers sometimes refer to the legal burden of proof, which never changes because it always remains with the party that has the onus of proof, and the evidential burden of proof, which may shift during the hearing and create a situation where there will be a finding in favour of the party bearing the onus of proof unless the other party leads some evidence.
6. In the circumstances of this case, the applicants claim the site fee increase was excessive. They bear the onus of proof.
7. When determining whether the applicants have proved their case, s 74 of the Act sets out matters which may be considered. They are each considered below, by reference to the evidence that has been placed before the Tribunal.

The frequency and amounts of past increases in site fees

1. The only available evidence is that the applicants' site fees were increased from $108.15 to $123.00, with effect from 7 June 2021, and that those site fees had not been increased since 14 December 2017. That involved an increase of 13.7%. The Consumer Price Index (All Groups Index) for Sydney increased from the December 2017 figure of 113.3 to the June 2021 figure of 119.4, which gives an increase of 5.4%.

Any actual or projected increase in the outgoings and operating expenses for the community as provided by the operator since the previous increase (if any) in site fees for the community

1. There is no evidence as to outgoings and expenses. That is information within the possession of the respondent, not the applicants. There is only a general form of wording in the notice to the effect that some operating costs have increased by more than the CPI.

Any repairs or improvements, either carried out or planned

1. There is no evidence of repairs or improvements. Again, this is a matter within the knowledge of the respondent. The applicants' evidence of a lack of repairs was not challenged.

The general condition of the community including its common areas

1. Evidence from the applicants' witnesses was critical of the general condition of the community and that evidence was neither contested nor contradicted by other evidence. Importantly, there is no evidence of any change in the general condition that might provide support for an increase in the weekly site fee.

The range and average level of site fees

1. Although Mr Black made some general submissions about the range of site fees, to the effect that they varied according to when the resident commenced living in the village, there was no evidence on that point. As a result, the Tribunal is left with no explanation as to why, prior to 1 June 2022, some of the affected residents were paying a weekly site fee of $120, while others were paying $123, $127, and $137.
2. A close consideration of the site agreements in Exhibit A reveals initial weekly site fees ranging from $55 in a site agreement dated 10 May 2000 to $123 in a site agreement dated 30 June 2017. There is no evidence to show any difference due a matter such as lot size or location, and no explanation why new residents are not charged the same weekly site fee as other residents.
3. While it is understandable that the respondent may wish to have all residents paying the same weekly site fee of $148.23, the effect of seeking to achieve that goal is that the increase is, to the nearest percentage point: 24% for a person paying $120, 21% for a person paying $123, 17% for a person paying $127, and 8 % for a person paying $137.

The value of the land

1. There is no evidence in relation to this factor.

The value of any improvements

1. There is no evidence in relation to this factor.

Any explanation for the increase provided by the operator in the notice

1. The explanation given in the letters dated 1 June 2022 may be summarised as (1) some costs have gone up by more than the CPI, (2) the CPI had increased by 5.37%, and (3) other residents were paying $148.23.

Variations in the Consumer Price Index (All Groups Index) for Sydney

1. When the 1 April 2021 notice was issued, the most recent figure for the Consumer Price Index (All Groups Index) for Sydney was the March 2021 figure of 118.5. When the 1 June 2022 notice was issued, the most recent index for that figure was the March 2022 figure of 123.7 which is a 4.4% increase. If the June 2020 figure is used, on the basis that the site fee increase was not to apply until 7 August 2022, the increase becomes 6%.
2. It is noted that the 1 June 2022 notice was issued two months after the anniversary of the 1 April 2021 notice, which is consistent with the suggestion in the latter notice that the increase has been deferred.

Whether the increase is fair and equitable in the operation of the community

1. Although the evidence is limited, it is discernible that the respondent has an objective of increasing the site fees of the affected resident so that either this year, or alternatively two years from now, all residents are paying the same site fee.
2. It is an understandable that people pay the same amount for the same facilities, service, and benefits. However, if an operator wishes to achieve the goal of having no difference in the site fee payable, then it only needs to charge new residents the same site fee as the existing residents.
3. If there are some residents who are paying $148.23 from 7 August 2022, in accordance with the 1 June 2022 site fee notice they received, that would suggest that some incoming residents have been charged more than existing residents. The respondent is therefore seeking to bring other residents up to that level by imposing significant site fee increases of 8%, 17%, 21% and 24% on some residents, at a time when the CPI has only increased by 6%.

Any other matters prescribed by the regulations

1. There are no such matters.

Conclusion

1. Is the site fee increase excessive? In this instance, that depends on the CPI figures. While it could be suggested that an increase of 8% is not excessive when compared to a CPI increase of 6%, the Tribunal is comfortably satisfied that increases of 17%, 21% and 24% are excessive and that the evidence does not warrant any increase beyond that suggested by the CPI.
2. The lack of evidence from the respondent has had the result that the applicants' case, based on the site fee increases exceeding the CPI, has not been displaced. If the respondent wished to impose an increase greater than the CPI increase, it should have led evidence to justify that increase. That should not be taken to mean there was an onus of proof on the respondent rather, that there was no adequate case from the respondent to counter that of the applicants. Indeed, the evidence from the applicants' witnesses suggested the quality of services had diminished rather than improved.

Discretion

1. Since 73 of the Act commences with the words "The Tribunal may …", it is clear the Tribunal has a discretion which must be exercised.
2. The Tribunal is satisfied that, while there is an understandable goal of having a single site fee, its discretion should not be exercised in favour of the respondent when the difference in site fees has arisen because new residents have been charged more than the existing residents. It is clear, from the 2022 site fee increase notices, the respondent seeks to achieve it goal by imposing higher increases on those currently paying less than $148.23. Another way to achieve the same goal is to charge lower increases on those who are already paying that amount.
3. It is convenient to here note that the Tribunal did make calculations of the respondent's alternative, which was designed to achieve a single site fee in 2024 instead of 2022, assuming the CPI continued to increase by 6%.
4. While that produced moderate results for 2022, it produced higher percentage increases in 2023 and 2024. The maximum increase reduced from 24% to 14%.
5. Simply stated, the Tribunal is satisfied that its discretion should be exercised in favour of the applicants by making an order, under s 73(1)(c)(i) of the Act, that the site fee for the affected residents should not exceed a specified amount, being the amount of the site fee payable from 7 June 2021 increased by 6%, with those amounts being payable from 7 August 2022.

Orders

1. For the reasons set out above, the following orders are made: 1. From 7 August 2022, the site fee payable for the affected residents, whose names appear in the first column in Appendix 1, should not exceed the amount shown under the heading "Revised site fee", in the final column of that appendix. Appendix_1 (17751, docx)

I hereby certify that this is a true and accurate record of the reasons for decision of the Civil and Administrative Tribunal of New South Wales. Registrar

Amendments 04 September 2023 - Formatting amendments. 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: 04 September 2023