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Court of Appeal decides Jomal case

By Julie McStay27 Oct 2009

On 27 October 2009, the Queensland Court of Appeal handed down its much anticipated decision in Jomal regarding repair and maintenance of items in retirement villages. In a decision that will be welcomed by retirement village operators, the Court of Appeal unanimously found in favour of the operators that the residents were liable for the expenses.

The original dispute revolved around whether residents of the village were obliged to meet the cost of replacing the anodes in water heaters which were owned by the scheme operator but were fixtures within the accommodation units. The residents argued the costs should be paid out of the maintenance reserve fund (MRF). The Commercial and Consumer Tribunal (Tribunal) decided in favour of the residents. On application to the Supreme Court, the judge found that the Tribunal was incorrect and reversed the decision finding in favour of the operator. The Judge stated that nothing in the Retirement Villages Act 1999 (Qld) (the Act) or in parliamentary debate on the Act suggested that residents and owners could not agree that residents should be responsible for the maintenance, repair and replacement of nominated capital items.

The principal issue on appeal was whether the Act prohibits operators and residents entering contracts under which residents are personally liable to maintain items of a capital nature which are owned by the operator. The residence contract in question required the residents to maintain and repair or replace fixtures in and on the accommodation unit. It also stated that nothing required the operator to maintain or replace anything that was the responsibility of the resident.

The residents argued on appeal that:

  • the items were of a capital nature;
  • the Supreme Court decision was not in keeping with the Act’s object of consumer protection;
  • residents could not make an informed decision about whether to enter an agreement to be responsible for repairs and maintenance, when such costs were unpredictable;
  • if residents were required to pay for such capital costs, the MRF and the capital reserve fund (CRF) would have 'little to do', since the operation of these funds would be limited to plant, machinery, equipment and certain village infrastructure; and
  • if the view expressed by the Supreme Court judge was upheld this could lead to operators offering contracts to residents which seek to impose responsibility on these residents to replace buildings and structures.

In response to these arguments, the Court of Appeal found that:

  • The definition of 'capital items' in the Act expressly contemplates agreements to maintain items of a capital nature which are owned by the operator. The definition includes all buildings and structures in the retirement village owned by the operator, 'other than items that, under the residence contract, are to be maintained, repaired and replaced by the resident'.
  • The Act has two objects which must be balanced: consumer protection and encouraging continued growth and viability in the retirement village industry. Allowing residents and operators to reach such agreements actually promotes consumer choice and allows consumers to determine their preferred option.
  • It is the responsibility of the consumer to be sufficiently informed to enable them to determine whether an arrangement is in their best interests. A decision to choose the unpredictable option of being responsible for repairs or the more predictable option of contributing to the MRF was theirs to make. In some cases, the consumer may have the benefit of low repair costs and reduced contributions to the MRF. In other cases, the regular periodic contributions to the MRF may permit operators to encourage growth of their village.
  • Nothing in the Act or in the contract required the replacement of appliances in units to be paid for by the operator or be paid out of the MRF or CRF.
  • It would be unlikely that residents would voluntarily assume obligations requiring them to replace buildings and structures.
  • The decision of the Supreme Court judge should be upheld.

The residents relied heavily in their arguments on the proposition that the relevant provisions in the Act should be interpreted in a way that favoured the resident and promoted 'consumer protection'. The Court of Appeal stated that while the Act aimed to achieve a balance between consumer protection and the growth and viability of the retirement village industry that it was not their role to interpret the Act in a way which was inconsistent with its express provisions. Consequently the court was not prepared to make a finding in favour of the residents which removed their contractual obligations.