Linkins v Rinbac Pty Ltd [2010] NSWSC 1199 (21 October 2010)

Last Updated: 25 October 2010

NEW SOUTH WALES SUPREME COURT

CITATION:
Linkins v Rinbac Pty Ltd [2010] NSWSC 1199


JURISDICTION:


FILE NUMBER(S):
2010/44683

HEARING DATE(S):
14 October 2010

JUDGMENT DATE:
21 October 2010

PARTIES:
Roy Stephen Linkins (First Plaintiff/First Cross Defendant)
Christine Linkins (Second Plaintiff/Second Cross Defendant)
Rinbac Pty Limited ACN 059 356 491 (Defendant/Cross Claimant)

JUDGMENT OF:
Ball J

LOWER COURT JURISDICTION:
Not Applicable

LOWER COURT FILE NUMBER(S):
Not Applicable

LOWER COURT JUDICIAL OFFICER:
Not Applicable



COUNSEL:
J P Knackstredt (Plaintiffs/Cross Defendants)
G Lucarelli (Defendant/Cross Claimant)

SOLICITORS:
Fox & Staniland (Plaintiffs/Cross Defendants)
Landerer & Co (Defendant/Cross Claimant)


CATCHWORDS:
CONTRACT – interpretation – retirement village contact – where premises no longer operated as a retirement village – extent of obligations under villiage contract

LEGISLATION CITED:
Interpretation Act 1987 (NSW)
Retirement Villages Act 1999 (NSW)

CATEGORY:
Principal judgment

CASES CITED:
Toll (FGCT) Pty Limited v Alphapharm Pty Limited [2004] HCA 52; 219 CLR 165

TEXTS CITED:


DECISION:
1. A declaration that the complex known as Woolcott Court is no longer operating as a retirement village.
2. A declaration that, for so long as Woolcott Court is not being operated as a retirement village, the plaintiffs are not liable to make any payments under clause 6 of the lease dated 20 January 2000 between the plaintiffs and the defendant (as assignee) (“the Lease”).
3. A declaration that pursuant to the Lease, the first and second cross defendants are liable to pay the cross claimant all items of outgoings, expenses and costs that relate exclusively to the Premises (as defined in the Lease) including, without affecting the generality thereof, all rates, taxes, land tax (on a sole holding basis), insurance and owners corporation levies to the administration and sinking funds.
4. A declaration that the first and second cross defendants have breached the Lease by failing to pay the amount of $6,343.55 due and owing to the cross claimant as at 19 March 2010 and have failed to rectify the breach.
5. Judgment against the first and second cross defendants for $6,343.55.
6. Judgment against the first and second cross defendants for interest on $6,343.55 from 1 April 2010 to the date of judgment at the rate specified in clause 16 of the Lease.



JUDGMENT:

- 1 -

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION


BALL J

21 OCTOBER 2010

2010/44683 ROY STEPHEN LINKINS v RINBAC PTY LIMITED

JUDGMENT

1 In November 1999, the plaintiffs, Mr and Mrs Linkins, moved into a unit in Woolcott Court, which at that time was operated as a retirement village by Woolcott Village Pty Ltd. The building that comprised the village was the subject of a strata scheme. The units in the scheme were owned by Woolcott Village. At the time Mr and Mrs Linkins moved into Woolcott Court, they signed an agreement for lease and loan in respect of their unit. They also signed at the same time the actual lease and loan agreement. Under the terms of the loan agreement, Mr and Mrs Linkins made a non-interest bearing loan to Woolcott Village of $170,000. As is typical in the retirement village industry, that loan was discounted by an amount that varied according to the number of years Mr and Mrs Linkins remained at Woolcott Court and the discounted amount was repayable to them when they ceased to live there.

2 The term of the lease was the shorter of the period ending on 31 January 2047 and the period ending on the death of the later to survive of Mr and Mrs Linkins. The lease provided for a nominal rent of $12 per annum. Clause 6 of the lease provided that, in addition to rent, Mr and Mrs Linkins would pay monthly in advance the “Outgoings and Expenses in respect of Woolcott Court and facilities thereof in accordance with this clause”. The outgoings and expenses were initially fixed by cl 6 at $1,127 per calendar month. However, cl 6.2 of the lease defined them to mean:

“... all outgoings, costs and expenses which in the opinion of the Lessor have been or will be properly or reasonably incurred in respect of the conduct and management of Woolcott Court ...”

The clause then sets out a substantial non-exhaustive list of the costs that were to be included in the expression “Outgoings and Expenses”. The list included the cost of providing food and all meal services, insurance, rates, taxes, charges and assessments payable to governmental authorities and various costs relating to the common areas – such as cleaning, water, gas, electricity and heating – and general administrative costs including staff salaries and maintenance costs.

3 “Woolcott Court” was defined in cl 1.2 of the lease to mean:

“The building known as “WOOLCOTT COURT” ... and containing 30 Strata residential units and 1 manager’s unit together with the Common Property and Common Areas, all having been designed for use as a retirement village”.

4 Somewhat curiously, the expression “out goings” is defined in cl 1.13 to mean the “outgoings, expenses and costs as referred to in cl 6.2 hereof.” The expression “out goings”, however, itself is never used (at least in that form) in the lease.

5 Clause 24 draws a distinction between “occupancies charges”, “care charges” and “other charges” payable under cl 6 and provides for a reduction in some of those charges in the event that the Lessee leaves the unit or another occupant of the unit leaves the unit or dies.

6 At the end of the lease is an unnumbered paragraph which provides:

“Where an item of outgoing, expense or cost relates exclusively to the Premises, then the Lessee shall pay one hundred (100) per cent thereof and without affecting the generality thereof rates, taxes, land tax (on a sole holding basis), insurance and Owner’s Corporation levies to the Administration and sinking Funds.”

“Premises” is defined in cl 1.5 of the lease to mean the unit occupied by Mr and Mrs Linkins which is said to extend to and include the inner surface of walls, windows and external doors, the upper surface of floors and the under surface of ceilings and to include the furniture, fittings and contents set out in the Inventory (as defined in the Lease).

7 The unnumbered clause follows directly after a series of clauses, ending with cl 30.29, which set out what are said to be “rules and regulations of Woolcott Court”. Clause 30.29 itself simply provides:

“In these rules and regulations “resident” shall include any licensee, any spouse or other occupant of a unit in Woolcott Court whether or not signatory to a sublease or lease.”

8 Within two years after Mr and Mrs Linkins moved into Woolcott Court, Woolcott Village got into financial difficulties and was placed in administration. Ultimately, it was wound up. The defendant has bought a substantial number of the units in Woolcott Court, but by no means all of them.

9 As a consequence of what has happened, Woolcott Court is no longer run as a retirement village and Mr and Mrs Linkins have lost their loan of $170,000.

10 There is no issue between the parties that both Mr and Mrs Linkins and Rinbac are bound by the terms of the lease signed by Mr and Mrs Linkins. The question that has been raised in these proceedings is what amounts Rinbac is now entitled to charge Mr and Mrs Linkins pursuant to that lease. Mr and Mrs Linkins concede that they are obliged to continue to pay rent at the rate of $12 per year. Rinbac now concedes that it is not entitled to charge any amount pursuant to cl 6 of the lease – at least on what it says is the proper interpretation of that clause. However, it says that it is entitled to charge Mr and Mrs Linkins for costs and expenses it incurs which relate specifically to the unit occupied by Mr and Mrs Linkins – such as body corporate levies and council and water rates. It says that that entitlement arises under the unnumbered clause at the end of the lease to which I have referred. Mr and Mrs Linkins deny that entitlement. Essentially, they say that that clause simply gives content to cl 6 and does not impose an additional obligation on them.

11 Before dealing with parties’ respective contentions, I should say something about two matters. The first is the relevant regulatory framework. The second is the operation of the lease now that Woolcott Court has ceased to function as a retirement village.

12 Retirement villages are governed by the Retirement Villages Act 1999. Section 11 of that Act relevantly provides that the Act extends to apply to and in respect of:

“(a) a retired person who continues to occupy residential premises in a former retirement village that was a retirement village when the retired person took up residence in the premises ...”

“Former retirement village” is, unsurprisingly, defined in s 11(6) of the Act to mean a complex that was previously but is no longer a retirement village. There can be no doubt that Woolcott Court is a former retirement village; and there seems little doubt that Mr and Mrs Linkins are retired – certainly, that is how Mr Linkins described himself in his affidavit. Consequently, the Act continues to apply in respect of Mr and Mrs Linkins occupation of their unit in Woolcott Court.

13 Section 24 of the Retirement Villages Act provides that the operator of a retirement village must not permit a prospective resident to occupy residential premises in the village unless the resident has entered into at least one of a residence contract or a service contract. “Residence contract” is defined in s 4 of the Act to mean “a contract that gives rise to a residence right” – that is, a right to occupy residential premises in a retirement village – and “services contract” is defined to mean “a contract under which a resident of a retirement village is provided with general services or optional services in the village”. A note to s 24 makes it clear that a residence contract and a service contract may be contained in a single document. A residence contract and a service contract are each defined to be a “village contract”. It follows that the lease entered into by Mr and Mrs Linkins was at the time it was entered into and remains a village contract for the purposes of the Act.

14 Section 104 of the Act states that a village contract may provide that any recurrent charges payable under it may be varied in accordance with a fixed formula or otherwise. Subsequent sections place limits on the right to increase a charge that is determined otherwise than in accordance with a fixed formula above the consumer price index. Nothing turns on those sections in this case. “Recurrent charge” is defined in s 4 to mean “any amount (including rent) payable under a village contract, on a recurrent basis, by a resident of a retirement village”. A note to that definition provides:

“Levies payable under a community land scheme or a strata scheme are not recurrent charges (because they are not payable under a village contract).”

15 Mr Lucarelli, who appeared for Rinbac, placed some emphasis on the note to the definition of “recurrent charge” in support of a submission that cl 6 of the lease was concerned with recurrent charges within the meaning of the Act and the paragraph at the end of the lease was concerned with other types of charge – such as strata scheme levies – that did not fall within the definition of “recurrent charge”. I do not accept this submission. The note can be taken into account in interpreting the Act: see Interpretation Act 1987 s 34. The note may be correct where the resident is the owner of the relevant unit. However, it is difficult to see why the note is correct where the relevant village contract takes the form of a lease. In that case, the strata levies are payable by the lessor. If the lessor seeks to recover those levies from the lessee, then it is difficult to see why those charges do not fall within the definition of “recurrent charge”.

16 The second point to make as a preliminary observation is that a number of the provisions of the lease are no longer appropriate to the current circumstances. The rules and regulations of Woolcott Court, which are set out in cl 30, are an obvious example. As I have indicated, the parties now agree that the same is true of cl 6. Despite that, as I have said, the parties have proceeded on the basis that the lease remains in force. The task of the court in those circumstances is to interpret the terms of the lease that remain operative.

17 Essentially, the plaintiff’s case is that the clause at the end of the lease has no operation independently of cl 6. Both are concerned with recurrent charges payable under the village contract. The clause at the end of the lease is simply a mechanical provision which makes it clear that where a particular recurrent charge relates exclusively to a particular unit, then the occupant of that unit should be liable for that charge. But the obligation to pay the charge must be found in cl 6, not in the unnumbered clause. Since cl 6 no longer has any application, the unnumbered clause does not either.

18 Mr Knackstredt, who appeared for Mr and Mrs Linkins, points to various matters that he submitted supported the conclusion of the previous paragraph. One was the location of the clause – coming, as it did, at the end of the clauses dealing with the rules and regulations of Woolcott Court. In his submission, the clause should be treated as part of those rules and regulations. Other matters that he pointed to were the similarity in the wording of cl 6.2 and the unnumbered clause and the fact that cl 6.2 expressly says that it is concerned with all outgoings, costs and expenses reasonably incurred in respect of the conduct and management of Woolcott Court. Given that, there was nothing covered in the unnumbered clause that was not covered in cl 6.2. Moreover, insofar as the unnumbered clause referred to Owners Corporation levies, it made no sense since those levies necessarily related to the whole building and not to individual units. Finally, Mr Knackstredt submitted that the context was important. At the time the lease was entered into it was a village contract which, in accordance with the Retirement Villages Act, set out in cl 6 how the recurrent charges payable in accordance with that Act were to be calculated. The parties must have intended that those charges would only be payable for so long as the facility continued to be operated as a retirement village.

19 I do not accept the plaintiffs’ submissions.

20 The unnumbered clause needs to be interpreted in the context of the agreement as a whole and in the context in which the agreement as a whole was intended to operate: see Toll (FGCT) Pty Limited v Alphapharm Pty Limited [2004] HCA 52; 219 CLR 165.

21 I do not think that the clause can be seen as part of cl 30.29, since its subject matter is completely different from the subject matter of that clause and, indeed, from all of the provisions of cl 30. Although it is unnumbered, it must be treated as an independent clause designed to address a different issue from those addressed by cl 30.

22 In my opinion, the distinction between amounts payable under cl 6 and amounts payable under the unnumbered clause is that those payable under cl 6 relate to common costs associated with the provision of services that form part of or are connected with the retirement village provided by the lessor whereas the costs which are the subject of the unnumbered clause are those that relate exclusively to the unit which is the subject of the lease.

23 I do not accept Mr Knackstredt’s submission that Owners Corporation levies relate to the whole building. They relate to each individual unit. The fact that Woolcott Village originally owned all the units does not alter the position. Woolcott Village was still liable to pay a precise amount in respect of Owners Corporation levies that related exclusively to the unit occupied by Mr and Mr Linkins; and it is that amount that it was entitled to recover under the unnumbered clause. Similarly, the fact that Woolcott Village issued a single invoice for amounts covered by cl 6 and other amounts does not mean that the amounts properly payable under the unnumbered clause were, in fact, payable under cl 6. Nor can that fact govern the way in which the unnumbered clause is to be interpreted.

24 Clause 6.2.3 specifically provides that the “Outgoings and Expenses” payable under cl 6 include “all rates, taxes, charges and assessments, if any, payable to any government, local government or statutory authority ...”. But I do not think that those charges are the same as the “rates, taxes, land tax” referred to in the unnumbered clause. Rather, I think that cl 6.2.3 should be read as being concerned with charges (if any) imposed in respect of the complex as a whole rather than in respect of individual units.

25 One difficulty with the plaintiffs’ interpretation of the unnumbered clause is that, on their interpretation, it appears to have no work to do since, on that interpretation, all amounts are already dealt with in cl 6. To say that the unnumbered clause makes it clear that expenses that relate solely to a particular unit should be borne by the residents of that unit seems to me to amount to a statement that the unnumbered clause simply states the obvious. Why the draftsperson thought that it was necessary to add the clause if that is what it does is unclear.

26 In addition, it is clear that cl 6 does not deal with all the charges relating to Mr and Mrs Linkins’ occupancy of their unit. For example, cl 8.7 provides:

“The Lessee will pay all charges, for electricity separately metered to and consumed in or on the Premises, for any telephone service connected to the Premises and all other charges and impositions imposed by any public utility or authority for the supply of any service separate supplied and metered to the Premises. The Lessor may at its own discretion specify whether the Premises are to be separately metered.”

Like cl 8.7, the unnumbered clause deals with various expenses that are not covered by cl 6.

27 Finally, I do not think that the context in which the lease was entered into means that the court should reach a different conclusion concerning the operation of the unnumbered clause. There can be no doubt that Mr and Mrs Linkins entered into a village contact in the form of a lease which they expected would give them various entitlements for which they would have to pay in accordance with cl 6. It is extremely unfortunate that they have lost their $170,000 and they no longer have available to them the services that they expected to receive; and there can be no question that they should not have to pay for those services. However, part of the context in which the lease must be interpreted is one where there was at least a possibility that Woolcott Court would not continue to operate as a retirement village but the lease would continue – as in fact has happened. In circumstances where that was a possibility, I do not think that it can be inferred that the parties must have intended that all of the charges set out in the lease would only continue for so long as the Woolcott Court remained a retirement village. That point is made clear by the fact that the rent, although it is nominal, was also part of the recurrent charges within the meaning of the Retirement Villages Act, but there is no suggestion that that amount is no longer payable because Woolcott Court has ceased to operate as a retirement village.

28 In their summons, Mr and Mrs Linkins sought a declaration that Woolcott Court is no longer operating as a retirement village and a declaration that, for so long as Woolcott Court is not being operated as a retirement village, the plaintiffs are not liable to make any payments under cl 6 of the lease dated 20 January 2000. In my opinion, it is appropriate to make those declarations. Otherwise, there should be declarations and orders in terms of paragraphs 1 to 4 of the cross-summons.

29 I will hear the parties in relation to costs.

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LAST UPDATED:
21 October 2010