Latest Queensland Court of Appeal decision on retirement villages
By Julie McStay21 Oct 2009
On 9 October 2009, the Queensland Court of Appeal delivered its decision in Williams v Carlyle Villages Pty Ltd. The court considered whether the Retirement Villages Act 1999 (Qld) (Act) conferred a ‘right to reside’ on a resident that continued after the resident’s lawful termination of his lease which would give that resident an entitlement to share in any capital gain even though the residence contract made no provision to do so. The case provides a timely reminder to retirement village scheme operators to review their residence contracts to ensure they contain all of the minimum requirements of the Act and that any negotiated terms are explicit and unambiguous.
Williams entered into a contract with Carlyle Villages to lease a unit in a retirement village and paid an ingoing contribution. He later terminated the lease and was repaid his ingoing contribution less termination charges.
The operator contracted with a third party to re-lease the unit. Under this lease the new resident paid a higher ingoing contribution. Williams claimed that the provisions of the Act conferred on him a statutory right to reside in the unit which survived his termination of the lease and which gave him an entitlement to the whole of the proceeds of the sale of that right to reside; namely the ingoing contribution that the operator received when it re-leased the unit to another person.
Williams made this claim despite the fact that neither the original contract nor the public information document (PID) made provision for him to retain a right to reside or to share in any capital gain. The trial judge rejected Mr Williams claim, finding he was not entitled to the new resident’s ingoing contribution or to share in any capital gain. Mr Williams appealed but the Court of Appeal found in favour of the operator.
The Court of Appeal decision
The main issue considered by the Court of Appeal was whether the Act conferred on Williams any statutory right to reside in the unit which survived termination of the lease or which would have entitled him to be paid the incoming resident’s ingoing contribution.
Judge Fraser gives an interesting commentary of the relevant sections of the Act, none of which were found to confer on Mr Williams either a ‘right to reside’ or any subsequent rights to share in the profits of sale. The Judge made the following observations:
- Section 45 provides that a scheme operator must ensure that each residence contract contains certain details, including the resident's right to resell the right to reside, but does not confer any right to reside on the resident. Any ‘right to reside’ will be determined by the terms of the contract between the parties.
- Section 52 allows a resident to terminate their right to reside upon one month’s written notice to the scheme operator. Williams did this and brought an end to his right to reside in the unit. His rights to a payment after that time were dependent on the rights conferred by the contract.
- William’s argument that the Act conferred a statutory right to reside in the unit which in turn meant he was entitled to the proceeds of the sale of the unit is irreconcilable with the definition of ‘exit entitlement’ under section 16 of the Act because ‘exit entitlement’ is defined as the amount that the scheme operator may be liable to pay a former resident ‘under a residence contract’.
Why is the decision important for operators?
Although the arguments raised by Williams were described by the Court of Appeal as ‘extreme’ and to ‘offend common sense’, the case provides a timely reminder to operators to review their residence contracts to ensure that they include all of the matters prescribed by the Act and to ensure that all other terms agreed with the resident are recorded in a clear and unambiguous way.
Hynes Legal has specialist experience in drafting residence contracts for not-for-profit and for profit retirement village operators. If you need help in undertaking a review of your contracts, please contact us.