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11 November 2009  
 
Retirement Village Alert
Conclusion to the Jomal Case
Background
The Tribunal
Supreme Court Decision
Court of Appeal
Summary and Conclusion
 
Conclusion to the Jomal Case
In previous Alerts, we have discussed the long running dispute between residents of the Sunnymeade Park Retirement Village and the operator, Jomal Pty Ltd which has become known as the Jomal Case.

This dispute ended with a decision of the Queensland Court of Appeal in favour of the operator. The Court unanimously concluded that residence contracts can include provisions which make residents liable for maintaining, repairing and replacing capital items.
Background
The dispute began approximately two years ago when the residents claimed that they could not be made responsible for the cost of replacing sacrificial anodes in hot water systems located in, or attached to, their retirement village units. They argued that the hot water systems were a capital item and the cost of repairing and maintaining those items should be paid from the maintenance reserve fund (MRF).

However, the residence contracts they had entered into with the operator contained terms which made the residents personally liable for the maintenance, repair or replacement of items in or attached to their units. The operator relied on these terms and the definition of capital items in the Retirement Villages Act 1999 (Act) to argue that the residents should pay for the cost of replacing the anodes in the hot water systems.
The Tribunal

The Tribunal adopted the view that the consumer protection objects of the Retirement Villages Act prevent operators from entering into contracts with residents in which the resident agrees to take on the cost of repairs of items in or attached to their unit which are owned by the operator.

The Tribunal also relied on the provisions of the Act relating to the Capital Replacement Fund and Maintenance Reserve Fund to support an amended definition of the term "Capital Items" in the Act's dictionary. The Tribunal concluded that when the Act was passed, parliament intended that the definition should be read with the additional words highlighted below added to it:

"all buildings and structures located in the retirement village and owned by the scheme operator including the communal facilities, amenities and accommodation units, other than items installed by a resident removable by the resident at the termination of a residence contract that, under the residence contract are to be maintained, repaired and replaced by the resident."

The Tribunal's decision called into question the validity of terms commonly found in residence contracts throughout Queensland. It also had the potential to put the financial obligations for one resident’s failure to maintain their unit on all residents through the Maintenance Reserve Fund.
Supreme Court Decision
The operator's application for a Judicial Review by the Supreme Court was successful and on 6 February 2009, Justice Douglas quashed the decision of the Tribunal.

The Court found that there was no basis for the definition of "Capital Items" to be altered in the way suggested by the Tribunal. This meant that a retirement village's capital items do not include items which the residents agree in their residence contract to maintain and repair.

The Court also decided that the Act cannot be read to prevent the operator and resident from agreeing that the resident will pay the costs of maintaining, repairing and replacing certain capital items. Therefore residence contracts can include terms which make the resident solely responsible for the repair, maintenance and replacement of items within their unit which are owned by the operator.

This meant that the operator was not required to pay the costs of repairing the hot water systems from the MRF.
Court of Appeal
The residents appealed against that decision to the Court of Appeal and all three judges setting in the Court agreed with the decision of Justice Douglas.

The Court examined the objects of the Act and observed that consumer protection is just one of the objects. It found that provisions in the Act should not to be interpreted so that they further this one object to the exclusion of others including the need to encourage the continued growth and viability of the retirement village industry.

Justice Applegarth did not accept the residents' argument that allowing terms to be included in the residence contract which make the resident solely responsible for the maintenance, repair and replacement of items belonging to the operator would benefit operators more than residents. He noted that residents may prefer to accept liability for the maintenance and repair of items in their unit over which they have some control rather than be obliged to make higher contributions to the MRF to pay for the maintenance and repair of all such items in the village over which they have no control.

He concluded that "a construction of the Act that does not preclude informed residents voluntarily entering into such contractual arrangements is to be preferred as it permits informed and prudent prospective residents to enter arrangements which they perceive to be in their best interests, and scheme operators to offer such arrangements if there is a demand for them amongst consumers."
Summary and Conclusion

The Court of Appeal decision has balanced the objects of the Act that promote consumer protection and the continued growth and viability of the retirement village industry to find that operators and residents are free to enter into contracts that make residents liable for the maintenance and replacement of items within their unit.

This ends a long period of uncertainty for the industry but does not obviate the need to ensure that residence contracts and PIDs are properly drafted and comply in all respects with the Act.

Brian Herd
CARNE REIDY HERD LAWYERS

Joanne O'Brien
CARNE REIDY HERD LAWYERS
Brisbane Office Rockhampton Office  
Level 10, 193 North Quay, Level 6, 34 East Street E:  enquiry@crhlaw.com.au
Brisbane QLD 4000 Rockhampton QLD 4700 W: www.crhlaw.com.au
T: 0011 61 7 3236 2900 T: 0011 61 7 4921 2775
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