Rowe v Kincumber Nautical Village Pty Ltd

1. [1]

   By Summons filed 12 October 2021, the plaintiff seeks leave to appeal and appeals against a decision of the Appeal Panel of the New South Wales Civil and Administrative Tribunal (“NCAT”).

2. [2]

   The plaintiff’s application is brought pursuant to s 83 of the Civil and Administrative Tribunal Act 2013 (“NCAT Act”) which provides:

A Procedural Curiosity

1. [3]

   In accordance with an earlier judgment of this Court, these proceedings are constituted as representative proceedings pursuant to Part 10 of the Civil Procedure Act 2005: Rowe v Kincumber Nautical Village Pty Ltd [2022] NSWSC 533. Orders have been granted which provide for an opt out procedure in accordance with ss 162, 175 and 176 of the Civil Procedure Act. Those orders were largely complied with prior to the oral hearing of this matter.

2. [4]

   The plaintiff therefore represents a group whose members comprise lessees or former lessees of sites in a residential community, more commonly known as a caravan park, operated by Kincumber Nautical Village Pty Ltd (“Kincumber”). In accordance with the Residential (Land Lease) Communities Act 2013 (“the RLLC Act”), each of the group members entered into a Site Agreement which included terms of the lease granted by Kincumber to the group member in exchange for the periodic payment of fees. The individual group members are referred to in the RLLC Act and the Site Agreements as “Home Owners” (and will be for convenience referred to here by that designation) and Kincumber is referred to as “the Operator”.

3. [5]

   Each of the group members brought individual proceedings in NCAT. Those proceedings were each dismissed by the Appeal Panel. But only the plaintiff lodged an appeal to the Court pursuant to s 83 of NCAT Act. The other group members have not exercised their statutory right of appeal in accordance with the NCAT Act. Accordingly, whilst this Court can make an order in these proceedings which affects the plaintiff’s proceedings in NCAT, it is doubtful that, in the absence of any appeal, it is open to this Court, because it is not seized of any jurisdiction, to make orders of the kind set out in s 83(3) of the NCAT Act, i.e., that it can ultimately make orders which have effect on proceedings in NCAT. However, whether such a situation arises depends upon the ultimate decision this Court makes. It is unnecessary at this stage to come to any firm view.

4. [6]

   Accordingly, I will proceed to determine the issue on the plaintiff’s appeal and then seek the assistance of counsel as to what orders ought be made, if necessary.

Site Agreement between Group Members and Kincumber

1. [7]

   The central question on this appeal is the meaning and effect of a clause in the Site Agreement which was in the following terms (“the Fee Increase Clause”):

2. [8]

   All but six of the Site Agreements also included the following:

3. [9]

   The Site Agreements included the following by way of explanation:

Kincumber’s Claimed Fee Increase

1. [10]

   On or around 16 November 2018, Kincumber sent each Home Owner a “Notice of Site Fee Increase” by which it increased the site fees payable by the Home Owners under their respective Site Agreements in accordance with the relevant Fee Increase Clause. The Notices were in similar terms but because some Site Agreements omitted paragraph 5 regarding the approach to rounding, and because the existing site fees differed, the fees increased by different dollar amounts.

2. [11]

   It is convenient to set out, by way of example, the relevant part of the Notice of Site Fee Increase received by one of the Home Owners. It was in these terms:

NCAT Proceedings

1. [12]

   On 15 October 2019, each Home Owner commenced separate proceedings in the Consumer and Commercial Division of NCAT claiming that Kincumber’s increase of the site fees was contrary to Part 6 Division 3 of the RLLC Act. In the proceedings, which were heard concurrently, each of the Home Owners sought similar orders under s 157 of the RLLC Act.

2. [13]

   On 3 September 2020, Senior Member Ross, having found that the Site Fee Increase clause contained more than one fixed method, made orders in favour of the Home Owners which restrained Kincumber from applying the Fee Increase Clause as set out in the Site Agreements and required the defendant to instead increase the site fees by “the fixed method which produces the lower or lowest increase in site fees”. The Senior Member did not identify what that method was but left it to be determined by Kincumber.

3. [14]

   On 16 September 2020, Kincumber filed a Notice of Appeal by which it sought orders setting aside the orders of Senior Member Ross. The defendant contended that the Senior Member made various errors relating to the interpretation of the RLLC Act and the Site Agreements’ compliance with that Act.

4. [15]

   Kincumber’s appeal was heard by the Appeal Panel on 25 March 2021, and on 14 September 2021, it was allowed. The reasons of the Appeal Panel are to be found at Kincumber Nautical Village Pty Ltd v Morris [2021] NSWCATAP 275.

The Decision of the Appeal Panel

1. [16]

   The principal issue on the appeal as identified by the Appeal Panel was whether the Fee Increase Clause complied with ss 65 and 66 of the RLLC Act. Section 66(2) provides:

2. [17]

   The Home Owners submitted that the method provided for in the Fee Increase Clause was not “one fixed method” because it comprised multiple component parts which were themselves not fixed amounts. They said the Senior Member was right to make the orders she did.

3. [18]

   Kincumber argued that if each of the component calculations is each itself “fixed”, then a formula adding those components together must also be “fixed”. It relied on Rizzi v Grazcos Co-operative Ltd (1981) 153 CLR 669; [1981] HCA 37 to support its submission that, by using the term “fixed calculation” in s 65(2)(a)(ii) of the RLLC Act, the legislation only requires site agreements to prescribe a standard by the application of which a site fee can be calculated or ascertained definitely.

4. [19]

   The Appeal Panel noted that the RLLC Act does not define the term, “fixed method”. It accepted Kincumber’s arguments and said:

5. [20]

   The Appeal Panel rejected the Home Owners’ arguments that the term was confined by the example “fixed calculations” provided in s 65(2)(a)(ii) of the RLLC Act and the standard form site agreement set out in Schedule 1 to the Residential (Land Lease) Communities Regulation 2015 (“the RLLC Regulation”).

6. [21]

   The Appeal Panel took the view that, properly construed, the Fee Increase Clause was “a fixed method” for increasing site fees which could not be challenged because of the operation of s 66(7) of the RLLC Act. The Appeal Panel said: “the Tribunal [meaning the Senior Member] lacked jurisdiction to determine the applications [in the way she did]”.

Proceedings in this Court

1. [22]

   In the Summons, under the heading “Ground of Appeal”, the plaintiff who is a Home Owner claims that the “Appeal Panel erred in law in its construction of the RLLC Act”. The Summons then includes the following:

2. [23]

   As noted at [2] above, an appeal to this Court is required to be “… on a question of law”. At the hearing of the proceedings in this Court, counsel for the Home Owners identified the question of law in this way:

3. [24]

   Counsel said that this question directly challenged the correctness of the second sentence of [41] of the judgment of the Appeal Panel. It is principally addressed to the ground set out in Ground 11(d).

4. [25]

   Counsel for the plaintiff in oral submissions conceded that he could not pursue Ground 11(c) in the Summons because Item 2 in the Fee Increase Clause was a fixed calculation and not a “fixed amount”. The plaintiff accepted in oral submissions, subject to his other arguments, that each of the Items in the Fee Increase Clause are themselves “fixed calculations”, and that it could not be said that the Fee Increase Clause impermissibly comprises of multiple “fixed methods”, one of which requires an increase by a “fixed amount” and the others requiring increases by multiple “fixed calculations”. Grounds 11(a) and (e) therefore fall away as a consequence of the plaintiff’s concession in relation to Ground 11(c).

5. [26]

   Counsel made it plain as well that he accepted the finding of the Appeal Panel that a “fixed calculation” as that phrase is used could be constituted by a number of integers, subject to further matters discussed later. Ground 11(b) therefore falls away.

6. [27]

   Although before the single Member of NCAT the Home Owners claimed that the Fee Increase Clause was an unfair term under the relevant provisions of the Competition and Consumer Act 2010 (Cth) Sch 2 - Australian Consumer Law, no such claim was raised in this Court.

The Residential (Land Lease) Communities Act 2013

1. [28]

   It is necessary at this stage to set out in greater detail the provisions of the RLLC Act.

2. [29]

   The RLLC Act applies to “communities” and “site agreements” as those terms are defined in the Act: ss 5–8. An operator is required to ensure that a site agreement is in writing at the commencement of the agreement: s 26(1).

3. [30]

   Site agreements must, among other things, identify the residential site by its number and its dimensions and must “comply with any requirements prescribed by the regulations (including as to the content or form of the agreement)”: s 26(2). If a site agreement does not comply with a requirement of s 26(2), the operator is guilty of an offence: s 26(3).

4. [31]

   The RLLC Regulation by Schedule 1 prescribes a standard form of site agreement pursuant to s 27 of the RLLC Act. Site agreements must be in the standard form (but may contain additional terms) and are taken to include the terms of the standard form to the extent they are not included in the site agreement: ss 27(3). Any additional terms must not contravene the RLLC Act and must not be inconsistent with the terms prescribed in the standard form: s 28(1). The relevant part of the standard form is extracted below at [36].

5. [32]

   A home owner or operator may apply to NCAT for an order declaring a specified term void or not void or an order varying the terms of a site agreement: s 29. I note that no such application was made in this matter.

6. [33]

   Sections 65 and 66 provide the following:

7. [34]

   NCAT had jurisdiction to determine the plaintiff’s claim, including in relation to the effect of s 66(7) of the RLLC Act, because of s 156(1) of the RLLC Act, which provides:

8. [35]

   NCAT was empowered to make orders by s 157(1) of the RLLC Act, which provides:

The Standard Form Site Agreement

1. [36]

   As noted above, Schedule 1 to the RLLC Regulation provides a standard form site agreement. It contains a site fee increase clause in the following terms:

2. [37]

   The Site Agreements signed in this case are generally in the standard form prescribed by the RLLC Regulation. They also contain additional terms.

3. [38]

   Under the heading “Site Fee Increases”, the checkbox for “Notice (non-fixed method)” is crossed out. Below that, the checkbox for “Fixed Method” is ticked. The first four checkboxes below the chapeau which reads “Your site fees will be increase (select only ONE option)” are then crossed out. The checkbox labelled “Other” is ticked, and below it is the Fee Increase Clause extracted at [7] above.

Submissions in this Court

1. [39]

   The plaintiff submits the Appeal Panel was wrong in law to interpret s 66 as it did. He says that although the RLLC Act does not define “fixed calculation”, the examples given in s 65(2)(a)(ii), i.e., “in proportion to variations in the Consumer Price Index or in the age pension”, “assist in ascertaining the meaning” of that term. He submits that, properly construed, the RLLC Act only permits “fixed calculations” that have the effect of increasing site fees by reference to a proportion of the variation of external factors which are objectively determined, such as the Consumer Price Index and the age pension.

2. [40]

   The plaintiff submits that paragraph 3 of the Fee Increase Clause, which provides that site fees will be increased by a proportion of any increase in costs incurred by the defendant, is not a “fixed calculation” because “any increase in costs” is not definitely ascertainable “with reference to an objective base” and instead relies on “a number of variables, some of which are in the hands of the [defendant]”.

3. [41]

   Kincumber submits that the Appeal Panel made no error of law in coming to the decision it did because it properly followed orthodox principles of statutory construction in applying the terms of the statute to the circumstances of this case.

4. [42]

   The defendant says the plaintiff’s argument described at [40] above was not raised before the Appeal Panel and that, in those circumstances leave should be refused in respect of it. Furthermore, the defendant submits, the argument goes to a finding of fact determined initially by Senior Member Ross and cannot form part of this appeal. Finally, the defendant submits, in any event, the argument is wrong factually and legally.

Discernment

1. [43]

   The plaintiff’s claim depends on whether the Fee Increase Clause constitutes “a fixed method” within the meaning of s 65 and, if it is, whether the Site Agreements comply with s 66(2) of the RLLC Act. Those matters, in turn, depend on a proper interpretation of those provisions.

2. [44]

   The parties refer in their submissions to well-known High Court authority for principles of statutory interpretation. The plaintiff relies on SZTAL v Minister for Immigration and Border Protection (2017) 262 CLR 362; [2017] HCA 34, in which Kiefel CJ, Nettle and Gordon JJ said at [14]:

3. [45]

   I will keep this approach in mind as I turn to determine this matter.

4. [46]

   In Pine Needles Village Pty Ltd v Residential Tribunal of NSW [2000] NSWSC 144, Grove J considered whether a rent increase term complied with the predecessor to ss 65 and 66 of the RLLC Act, namely s 53 of the Residential Parks Act 1998. The impugned term in that case permitted a landlord to increase rent annually “at the Landlords discretion… upwards to an amount commensurate to prevailing Market Value”. “Market Value” was to be “determined by the assessment of rents being paid for comparable premises in the locality or similar locality”. Grove J said this at [11]:

5. [47]

   That term may be distinguished from the Fee Increase Clause in this case because each component of the clause may be definitely ascertained by reference to objectively determinable inputs. The first component of the Fee Increase Clause is the Consumer Price Index (“CPI”) increase. This component requires a calculation to be made by reference to the differences of the CPI – Sydney All Groups Index between two dates which are 12 months apart. The second component is a percentage of the existing site fee (3.75%) which may be determined by inputting the existing site fee, which is known to the relevant Home Owner.

6. [48]

   Similarly, that part of the Fee Increase Clause, which is the subject of attack in this Court, undoubtedly requires examination of the defendant’s business and financial records, in order to ascertain the difference in annual costs for the included services and to identify the proportional share of any increase in costs incurred by the Operator, including the effect of any change in the rate of GST.

7. [49]

   None of those elements involves the defendant exercising any discretion. For that reason, they are each capable of being ascertained with precision. The submission that the Operator has the discretion to choose the supplier of the services is, with respect, beside the point. The clause addresses the annual difference in cost and requires the Home Owners to pay their proportionate share. The annual difference is an ascertainable figure by reference to charged costs. I reject the plaintiff’s argument that the Fee Increase Clause is not a fixed calculation because the integers are not definitely ascertainable on an objective basis.

8. [50]

   At its essence, the plaintiff’s remaining argument, recounted at [39] above, is that the meaning of “a fixed calculation” in s 65(2)(a)(ii) ought be limited by, first, the example given in that subsection (“in proportion to variations in the Consumer Price Index or in the age pension”) and, secondly, the terms of the standard form site agreement contained in Sch 1 to the RLLC Regulation.

9. [51]

   I reject the suggestion that the only fixed calculations for increasing site fees which may be allowed are those which increase site fees in proportion to variations in the Consumer Price Index or in the age pension. The text of s 65(2)(a)(ii) is clear in that those terms are only included as examples.

10. [52]

    For the same reason, I reject the suggestion that the use of the term “or” within the example provided in s 65(2)(a)(ii) means that a fixed calculation may only involve one and not multiple inputs. In any event, in oral submissions, the plaintiff’s counsel effectively did not press this argument.

11. [53]

    I reject the submission that the terms of ss 65 and 66 should be limited by reference to the terms of the standard form site agreement contained in the RLLC Regulation. The terms of a statute are not to be construed by reference to regulations made under that statute: Plaintiff M47/2012 v Director-General of Security (2012) 251 CLR 1; [2012] HCA 46 at [56]; Mine Subsidence Board v Wambo Coal Pty Ltd [2007] NSWCA 137 at [41].

12. [54]

    For those reasons, in my view, the Fee Increase Clause is “a fixed calculation” and the Site Agreements provide for only “one fixed method”, in compliance with s 66(2) of the RLLC Act.

13. [55]

    I agree with the conclusions reached by the Appeal Panel and its reasons for them. It follows that the appeal must be dismissed.

Leave to Appeal

1. [56]

   The plaintiff submits leave should be granted because the case affects 52 Site Agreements, raises a question of principle about the proper interpretation of the RLLC Act and is a matter of general public importance.

2. [57]

   The defendant says that leave should be refused because the appeal has no merit.

3. [58]

   I would grant leave to appeal on all grounds, given the general public importance of this case.

Orders

1. [59]

   I make the following orders:

   1. (1)

      Grant leave to appeal from the decision of the Appeal Panel of the New South Wales Civil and Administrative Tribunal in matter number 2020/371060;

   2. (2)

      Dismiss the appeal of the plaintiff;

   3. (3)

      Order the plaintiff to pay the defendant’s costs;

   4. (4)

      Direct counsel for each party to provide short minutes of order with respect to the disposition of the proceedings with respect to the remaining group members to the Chambers of Garling J by 10 November 2022;

   5. (5)

      The Court will make orders in Chambers unless submissions are required;

   6. (6)

      Liberty to apply.