ZW2 Pty Ltd trading as Lake Munmorah Residential Resort v Welch

NCAT Appeal Panel|2019-06-25

Introduction

The respondents, Beverly and Brian Welch (residents) own a home located on a site operated by the appellant (operator) known as the Lake Munmorah Residential Resort.
On 30 September 2018 the residents commenced proceedings against the operator in the Tribunal. The residents complained that the operator had interfered with a proposed sale of the dwelling and had contravened the provisions of the Residential (Land Lease) Communities Act 2013 (NSW) (the Act).
On 29 March 2019, the Tribunal made the following orders (Decision): 1. ZW2 Pty Ltd trading as Lake Munmorah Residential Resort is not to interfere in the sale of the home belonging to Beverley Welch and Brian Welch and erected on site 114. 2. ZW2 Pty Ltd trading as Lake Munmorah Residential Resort is, on or before 14 April 2019 to pay Beverley Welch and Brian Welch the sum of $6671.71 being a refund of site fees for the period 21 June 2018 to 18 February 2019. 3. Site fees for site 114 are to abate from 19 February 2019 to the date of completion of a sale of the home on site 114. 4. ZW2 trading as Lake Munmorah Residential Resort is, before 14 April 2019 to pay to Beverley Welch and Brian Welch the sum of $7585.00 being compensation for interest gone on the balance proceeds of sale to 18 February 2019, and continuing from 19 February 2019 at a rate of $31.214 per day up until the date of completion of a sale of the home on site 114. 5. The applicant may at any time up until 30 June 2019 request the relisting of the application to quantify the amount of compensation payable pursuant to order 4, and to quantify any other losses arising from the respondent's interference in the sale of the home on site 114.
The Tribunal provided written reasons for decision (Reasons).
On 16 April 2019 the operator filed a Notice of Appeal. The appeal was filed within time.

Notice of Appeal and history of dispute

The residents wanted to sell their home which they had owned for many years. They had previously carried out work to their home and there were issues concerning whether or not the work complied with various local government and building regulations.
The evidence shows that they were in discussions with two prospective purchasers. The first were Mr and Mrs Thompson. The second were Mr and Mrs Denis.
On sale of a home, a purchaser is required to take an assignment of an existing agreement or enter into a new agreement with the operator in order to occupy the site on which the home is located. In the present case, the operator had included terms in the proposed new agreement with the prospective purchasers (Mr and Mrs Thompson) to the effect that the home and work previously carried out by the residents be brought into compliance with relevant local government and building regulations. The Tribunal concluded that the conduct of the operator, in insisting a prospective purchaser bring the home into compliance with various local government and building regulations was conduct constituting interference with the sale of the residents' home in contravention of s 107 of the Act. Consequently, the Tribunal made the orders, including orders for compensation, set out above.
The grounds of appeal were in the following terms: The appeal covers both facts and questions of law and the reasons are attached and cannot be summarised briefly. The decision in relation to: 1. The rights and duty of an Operator of a Residential Park where there has been a breach involving the Local Government Act 1933 (sic) and 2. The duty of an applicant to mitigate loss, and 3. The directions which the Tribunal should impose to ensure a sale of a home is conducted properly where an order is made for compensation while the home is on the market All involve important questions of law which the Appellant submits have not been correctly addressed by the Tribunal.
The operator also sought leave to appeal and said the decision was not fair and equitable or was against the weight of evidence. In this regard, the operator said that conduct constituting interference in a sale within the meaning of the Act did not include inserting into a proposed new agreement a condition that required the prospective purchaser to bring the home into compliance with local government and building regulations unless the condition was unreasonable. The operator also said that there was evidence before the Tribunal that the house was overpriced and this was the reason why the house could not be sold.
The parties filed documents and written submissions in support of their respective positions. They also made oral submissions at the hearing of the appeal. At the hearing, the appellant was represented by Mr L Lees, director. The respondents were represented by Mr P Smyth, solicitor.
The appellant's submissions can be summarised as follows.
First, the appellant says that disclosing to a prospective purchaser the fact of non-compliance with relevant local government regulations and requiring compliance with those regulations as part of a new site agreement with that purchaser is not conduct amounting to interference within the meaning of s 107 unless the requirements in the new agreement are unreasonable. The appellant says it was both reasonable and necessary for the operator to require the prospective purchaser to comply with these obligations and to advise the purchaser of these matters. There are no express words in the section which would mean it should be construed in a different manner. Consequently, there has been no contravention of the section.
Secondly, even if the conduct could constitute a contravention of s 107, it is clear from the evidence of the prospective purchasers, the Thompsons, that the requirement to sign the agreement was not the cause of the sale not proceeding. Rather, the operator says the evidence shows the Thompsons withdrew from the sale as they did not like the operator's staff and did not wish to live in a facility managed by the operator. Here the operator relies on the oral evidence of the residents in the transcript (appellant's bundle [AB]) p 81.2, the oral evidence of Ms Nakkan (the residents' agent) at AB p 107.2, the oral evidence of Ms Cork at AB p 127.2, and the email of one of the prospective purchasers, Vicki Thompson at AB p 168.
We note in respect of the email from Ms Thompson, that she was not otherwise called as a witness by the residents nor did the operator seek to cross-examine her about her statement.
Thirdly, the operator says the residents failed to mitigate the loss and damage. The operator asserts there is a duty on the Tribunal to determine the issue of mitigation said to arise under s 157(4) of the Act. The mitigation submission is put forward in a number of ways. The operator asserts that the sale price for the property was overpriced and that the residents took no reasonable steps to affect an alternative sale. The operator also submits that the residents could have assigned their existing agreement to the prospective purchaser in order to facilitate the sale rather than have the prospective purchaser proceed by way of a new agreement. Lastly, the operator says the residents could have taken steps to comply with council requirements and obtain approval.
In relation to this last matter, it was agreed at the hearing of the appeal that all necessary documents had been submitted to Council and there was no issue of ongoing non-compliance.
Fourthly, the operator submitted that the orders were not fair and reasonable. Here the operator referred to its duty to provide a disclosure statement to a prospective purchaser. Also, the operator reiterated its submissions about the failure of the residents to rectify the matters of non-compliance and/or submit relevant documents to the Council for approval so as to avoid these problems and facilitate the sale.
In reply, the residents said that the conduct in insisting upon a new agreement with a prospective purchaser containing terms requiring carrying work in order to comply with local council regulations was conduct which amounted to interference within the terms of s 107 of the Act. In this regard the residents say there was no evidence to support a view that the operator had otherwise required compliance at a time prior to being notified of the residents' intention to sell.
In terms of relevant breach, the residents refer to the operator's email of 8 May 2018 (AB p 172) which stated: I would emphasise that in a manufactured home resort we have to ensure that all council requirements and the Local Government (Manufactured Home Estates, Caravan Parks, Camping Grounds and Movable Dwellings) Regulation 2005 are adhered to or we are unable to finalise a new Lease Agreement until they have been met.
Thereafter, the email set out various works which were required.
The residents also said that, in any event, it was the operator and not the residents that had the obligation to provide documents to the Council under the relevant legislation.
In response to the submission that the requirement to sign the new agreement was not the cause of the sale to the Thompsons not proceeding, the residents refer to the email of 8 May 2018 and submitted: The correspondence advised that following an inspection of site 114 by the [operator] there's non-compliance identified and the operator won't enter into a new agreement with the prospective purchaser until the list of breaches are rectified.
The residents then referred to oral evidence from Ms Nakkan, at AB 102, where she said to the following effect: They (the Thompsons) knew about possible non-compliance issues, I'd made them aware of all of that. I advise them it was in negotiations with Adrian was looking to rectify things and that it would be the Welch's would be responsible [and the park office] Deborah and Kyle sort of said well it's non-compliance is going to be your issue, this is what you have to do.
The residents' submissions did not pursue these matters further, the residents then dealing with the topic of who had the obligation to provide "the Notice of Completion" to the Council.
In relation to the issue of mitigation, the residents refer to the fact that they approached NSW Fair Trading to obtain advice, get their property on the market and were in negotiations with the second prospective purchasers, Mr and Mrs Denis.
Lastly, the residents say that the findings of the Tribunal were open to it on the evidence and no relevant error has been shown.
In making these submissions, the respondent accepted that a prospective purchaser may be liable to do any necessary work to bring the premises into compliance with relevant local government regulations.
At the conclusion of the hearing of the appeal, the Appeal Panel determined it should obtain submissions concerning what orders should be made if the Tribunal found there was a contravention but determined that the original orders 2 - 4 should be set aside. Directions were made in this regard and the parties subsequently filed further written submissions.

Consideration

The issues raised in this appeal include: 1. the construction of the Act and what conduct constitutes interference within the meaning of s 107, which is a question of law; 2. whether the conduct complained of caused the loss and damage, which is a question for which leave is required; and 3. whether the orders made by the Tribunal were appropriate, these matters being mixed questions of fact and law.
Section 107 provides that an operator must not cause or permit any interference with, or any attempt to interfere with a homeowner's right to sell a home. Subsection 107(2) provides an inclusive definition of what constitutes interference.
Section 115 of the Act provides the Tribunal may make orders in connection with disputes relating to a sale including: 1. an order preventing interference with the sale of the home (s 115(2)(d)); 2. an order that the operator pay compensation where there has been interference by the operator with the sale (whether by action or inaction) or the operator refuses to enter into a new site agreement without reasonable grounds (s115(2)(f)(i) and (ii)).
The effect of these sections is to create a statutory cause of action to claim compensation if there is contravening conduct within the meaning of s 107. In our view, in order to be entitled to compensation, an owner must establish the following: 1. that an operator has caused or permitted interference with or has attempted to interfere with a homeowner's right to sell; and 2. that the conduct of the operator has caused relevant loss and damage.
The Act does not provide how compensation is to be calculated. However, in our view the amount of compensation to be awarded is that which is reasonable to place the claimant, so far as money can, in the position they would have been in but for the contravention. In this regard, compensation must be assessed by reference to the contravening conduct in the manner set out by the High Court in cases such as Wardley Australia Ltd v Western Australia [1992] HCA 55; (1992] 175 CLR 514 at [13].
It is in this context that this appeal must be determined.
The appellant contended that, on its proper construction, interference within the meaning of s 107 of the Act did not occur merely because the operator included in a proposed new agreement with the purchaser a requirement for the purchaser to carry out works to bring the home and site into compliance with any requirement under the Local Government Act 1993 (NSW) (LG Act). This, the appellant submitted, was so whether or not the issue of non-compliance had been raised by the operator prior to a homeowner seeking to sell their property. Rather, the appellant contends that the conduct of inserting a term in a new agreement could only be found to constitute interference within the meaning of s 107 of the Act if that term was unreasonable..
We do not agree.
The definitions of interference in s 107(2) are inclusive. That subsection says: (2) Without limiting subsection (1): (a) interference with a home owner's right includes hindering the exercise of the right, and (b) interference with a home owner's right to sell a home includes unreasonably restricting prospective home owners from inspecting the home or any common area of the community, and (c) interference includes making false or misleading statements about the community that affect or may affect either right, and (d) interference includes taking any action to require the home owner to comply with any requirement made by or under the Local Government Act 1993 after becoming aware that the home owner is seeking to sell his or her home (unless the matter has been the subject of previous action).
It is clear that interference arises under subs 107(2)(d) when action is taken by an operator to require a homeowner to comply with requirements under the LG Act with such action is only taken after becoming aware that the homeowner is seeking to sell his or her home.
Interference of the type contemplated by this subsection could occur where an operator expressly requires a homeowner to carry out repairs or, for example where the operator indicates that it will not consent to an assignment of an existing site agreement (such assignment being permissible under s 45 of the Act) until such time as relevant work is carried out.
However, where there is a sale of a home, it is not necessary for the existing site agreement to be assigned. Rather, a prospective purchaser may request the operator to enter into a new site agreement, which the operator is required to do as provided in s 109 of the Act.
There is no reason to conclude that indirect action, namely including a provision requiring work to be carried out as a condition of entering into a new site agreement would not similarly constitute interference. In this regard, the vice the legislator is intending to prevent is an operator taking steps to compel a homeowner to carry out work as a condition of allowing a sale.
This is not to suggest that disclosure obligations of the operator need not be met concerning advising a purchaser about compliance of the site and home with relevant local government and other regulations. However, it seems to us a contravention can occur where the effect of the conduct is to require compliance as a condition of approving any assignment or entering into a new site agreement.
In the present case, the Tribunal found that a term was inserted in the proposed new site agreement with the Thompsons requiring the works to be carried out. That term is condition 52 - Regulatory Compliance (AB 29). The Tribunal found that the issue of compliance had not been raised with the residents prior to them advising the operator they intended to sell their home. The Tribunal rejected a submission that earlier correspondence about the general non-compliance of unidentified homes within the resort constituted "previous action" by the Act.
The Tribunal identified the evidence on which these findings were made and no error is established in respect of these findings.
Consequently, the Tribunal was correct to conclude that interference had occurred.
The Tribunal had power to make a restraining order to prevent interference: s 115(2)(d). The interference identified in the reasons was the provision of a proposed new site agreement including the term to which we have referred above. It seems to us that order was properly made although the form of order lacks precision and needs to be read in the context of the reasons.
However, in order to make an award for compensation, it was necessary for the Tribunal to consider whether the contravening conduct caused the loss and damage claimed. In this regard, the assertion by the residents was that they lost the sale to the Thompson because clause 52 was inserted in the proposed new site agreement.
At [17] of the Reasons, the Tribunal said: The Tribunal accepts that, but for the Operator's insistence on including a requirement for the first purchasers to address the non-compliance issues, the first purchasers would on the balance of probabilities have proceeded to purchase the home. In addition, it is clear that the second purchasers withdrew because they did not have time to wait for the compliance issues to be resolved and needed the certainty of purchasing a home without those issues. Had the first purchasers not withdrawn, the sale would on the balance of probabilities have been settled on or about 20 June 2018. The [residence] would have been free to vacate the property and invest the proceeds of sale. …
In our view these conclusions were not supported by the evidence before the Tribunal.
The Thompsons evidence, as recorded by the Tribunal in its reasons at [12(18)] was as follows: … we weren't concerned about following council regulations but the way this message was continually told to us was very patronising and there'd be no discussion on the subject."
As noted above, the Thompsons were not called by the residents and did not give oral evidence. The evidence they provided was by way of an email marked "to whom it may concern" dated 14 August 2018 (AB 168 - 170), also reflected in a statutory declaration made by Ms Vicki Thompson on 24 November 2018. They were not required for cross examination by the operator.
However, it is relevant to note what was said by the Thompsons in their email (and statutory declaration) after the passage quoted in the Reasons. The email continued: YOU WILL DO IT! When looking from the backyard along the fence line at the neighbouring homes & sighting several garden sheds was obviously going to run into lots of expense for many residents! We were made to feel very uncomfortable with Debbie and Kylie's condescending & patronising attitude. Things were going to be THEIR way OR NO WAY… No discussions invited! Retirement living is SUPPOSED to be enjoyable, calm and relaxing … After leaving this meeting Robert and his and I walked about 50 m away from the office & I said to him "I don't think I want to live here anymore!! His reply?? Nor do I! We were absolutely gutted to think our plans for a happy relaxing retirement had been shot to pieces by 2 very power hungry women who would be better off finding employment in an institution where people don't have any rights & couldn't fight back!
The email then recorded that the Thompsons did not regard those managing the resort as good managers and did not wish to be involved in a business in which the two identified women had that role.
This evidence supports a conclusion that the reason for the Thompsons not proceeding was that they did not like the management staff of the operator, not than that they were withdrawing because they were required to sign an agreement including clause 52. To the contrary, the evidence suggests the Thompsons were happy to carry out any works in order to comply with council requirements.
That is, the evidence does not support the conclusion that the conduct identified as interference in contravention of s 107 caused the sale to fall through.
This view is supported by the evidence of the residents' agent, Ms Nakkan. In addition to the paragraphs we set out above, the Ms Nakkan said in oral evidence at AB p 102 continued: So they were fine with that [referring to the matters of non-compliance and the need to comply], they knew all about that. The reason that they decided not to proceed was following a meeting they had with Deborah and Kylie they said that they felt they were bullied, they said they felt like they were naughty schoolchildren. They said that the women had just sort of said, "Well, it's non-compliance is going to be your issue, this is what you have to do.", And they said they felt very much like they were just sort of - they said they were pushy. And they said after they left both of them decided that if these were the people running the village then they don't think that they want to live there at all.
Again, the evidence of Ms Nakkan is that the Thompsons withdrew from the sale because they did not like the personnel employed by the operator.
It was not submitted by the residents in this appeal that this conduct, whether categorised as rude or unprofessional, constituted interference under s 107. There was certainly no suggestion in this appeal that any personal conduct of the operator's employees was designed to frustrate the sale.
In short, the evidence supports the view that the Thompsons liked the physical features of the resort, were happy to carry out any necessary work require to comply with Council Regulation but decided not to proceed because they had formed the view that they did not wish to enter contractual relations with the operator because of its employees.
Finally, there was evidence from Ms Deborah Cork, the employee of the operator who spoke with the Thompsons, to the effect that Ms Thompson said "there's too many rules and [Ms Thompson] didn't want to live in the park with the rules": see transcript AB page 127.2. Again, this evidence supports the view that the Thompsons did not wish to live in a resort managed by the operator and had reasons for not proceeding unrelated to the requirement to sign a new site agreement which included cl 52.
In our view it follows that the Tribunal was in error in concluding the identified interference caused the Thompsons to withdraw from the purchase.
In respect of this ground of challenge, leave to appeal was sought. Having regard to the principle stated in Collins v Urban [2014] NSWCATAP 17 and the facts outlined above we are satisfied the operator may have suffered a substantial miscarriage of justice because the Decision was not fair and equitable or was against the weight of evidence and that leave to appeal should be granted. We are also satisfied for the reasons stated above that the appeal on this ground should be allowed and the application for compensation and rent abatement orders should be dismissed.
While there was a second purchaser, the Denises, to which the Tribunal made reference, again the evidence does not support a view that they withdrew from any potential sale because of the inclusion of clause 52. Rather, the evidence records: 1. The residents and the Denises were still in the discussion stage regarding offers. The Denises had not yet met with the operator's representative concerning the terms of any site agreement: Ms Nakkan Transcript AB 108.8-9; 2. the Denises were aware of the compliance issues and advised the agent on 27 July 2018 that they require any compliance issues to be rectified if they were to put an offer and proceed with the purchase: Respondents Bundle RB p32.6; 3. The Denises withdrew on 16 October 2018 because they were aware of the Tribunal proceedings the subject of this appeal, that had been commenced on 30 September 2018 and were, in October 2018, unresolved.
On the issue of withdrawal, the evidence of Ms Nakkan indicates the Denises had been told by the operator's representative that "they couldn't proceed whilst the Tribunal hearing was still pending" and that "nothing could happen with [the residents'] property if they wanted to purchase it while the Tribunal hearing was still pending": Ms Nakkan Transcript AB 108.7. However, there was contradictory evidence from Mr Howard Cork to the effect that he advised the Denises of the fact of the proceedings but denied saying any sale could not proceed. Further, Mr Cork said that insofar as he was aware, the residents were moving to rectify any defects: Mr Cork Transcript AB 131.5. Mr Cork was not cross-examined on this aspect of his evidence and it does not appear the Denises were called to give oral evidence.
The evidence also demonstrates that the Denises wanted to finalise negotiations within a period of two weeks and did not wish to delay their purchase of a new property. The Denises required the residents to carry out any work necessary to obtain compliance, not because of insistence of any clause in a proposed new site agreement, but rather because they required the residents as vendors to make good any defects.
In these circumstances, the evidence does not support a conclusion that the Denises withdrew from the sale because of any requirement by the operator that they sign a new site agreement requiring any works to be carried out or that the operator was otherwise insisting on them doing so.
It follows from the above that the Tribunal was in error to conclude that the identified conduct of the operator said constitute interference within the meaning of s 107 of the Act caused either the Thompsons or the Denises to withdraw from the sale.
In the absence of proof of causation, in our view the Tribunal should have dismissed the claim for compensation.
In light of the view we have reached, it is unnecessary to deal with the orders made by the Tribunal for compensation and abatement of rent.
We have some doubt that an order to abate rent could be made, it being noted that s 115 does not include such an order making power although s 157(c) or (j) might permit such an order if that later section of the Act applies to this dispute.
We also have some doubt that the Tribunal made appropriate orders for compensation. Usually, if a sale is lost on the property is resold, the award for compensation would be the difference in value. Any entitlement to interest of the type awarded by the Tribunal would need to take account of the fact the residents could have mitigated the lost by renting the property pending further sale. The orders made appeared to be of unlimited duration, and do not assess compensation on a once and for all basis.
Despite these doubts, we do not propose to deal with this aspect further.

Orders

The Appeal Panel makes the following orders: 1. Leave to appeal is granted and the appeal is allowed. 2. Order 1 (renumbered to Order 2 in the amended orders), preventing the appellant from interfering in any proposed sale by requiring a prospective purchaser to sign an agreement including a clause to the effect of cl 52 identified in these reasons, is affirmed. 3. Orders 2 to 5 (renumbered in the amended orders as 4 to 6) are set aside. 4. The application for compensation and rent abatement is dismissed.

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 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: 17 October 2019

At a glance

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Decision date

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Judgment (5 paragraphs)

Parties

Legislation Cited (2)

Cases Cited (2)

Cited By (2)