Breaking New Ground: Supreme Court Terminates Hollywood Retirement Village Scheme

The recent case of HN Asset Pty Ltd v Commissioner for Consumer Protection[1] marks the first instance where the Supreme Court has decided to terminate a retirement village scheme in Western Australia. 

The decision concerns Hollywood Retirement Village and three parcels of land in Nedlands (Land). HN Asset Pty Ltd, an entity within the Hesperia group, is the first plaintiff and owns Lot 101, used as the village and Lot 103, which is vacant land earmarked for development. Retirement Care Australia (Hollywood) Pty Ltd, an entity within the ASX listed aged care operator Regis Healthcare, is the second plaintiff and owns Lot 102, used as an aged care facility.

A Memorial is registered against the Land under section 15 of the Retirement Villages Act 1992 (WA) (RV Act). The Memorial notifies others that the Land is, or is intended to be, used as a retirement village and is subject to a statutory charge securing payment of exit entitlements to the retirement village residents. The plaintiffs intend to redevelop the Land and seek to cancel the retirement village scheme and remove the Memorial.

This case follows from the landmark decision of the Retirement Care Australia (Hollywood) Pty Ltd v Commissioner for Consumer Protection[2] where it was determined that notwithstanding the Land being subdivided, a memorial cannot be removed over part of the Land. 

Relief Sought

The plaintiffs sought:

• Supreme Court approval to terminate the retirement village scheme as required by section 22 of the RV Act; and
• a declaration that the Land is no longer subject to a statutory charge securing repayment of money to residents.

Facts

At the time of proceedings, 36 residents occupied the Village:

• 31 under short-term residency agreements terminable on one month’s notice; and
• 5 under long-term residency agreements entered into between 1983 and 2005.

Only one long-term resident paid an entry contribution, which was repaid to the resident in May 2022. All but one resident has entered into transition deeds with the village operator. The transition deeds provide for:

• consent to terminate the scheme and remove the Memorial; and
• tenure over current residences under the Residential Tenancies Act 1987 (WA) instead of the RV Act; and
• an indemnity from the first plaintiff in favour of the residents against costs, losses, or damages caused by termination by the first plaintiff exercising a right to terminate the tenancy agreement under the Residential Tenancies Act which is not available under the RV Act or changes to facilities and amenities that the first plaintiff would not have had a right to make under the RV Act.

Neither the residents nor the Commissioner for Consumer Protection opposed the cancellation of the scheme or the removal of the Memorial.

The Scheme

The Court's approval is required to cancel the retirement village scheme under section 22(1) of the RV Act. Section 22(3) allows the Court to make necessary orders to protect existing residents' interests. The Court considered:

• Whether the Land is subject to a statutory charge.
• Differences in residents' rights if the scheme is terminated.
• Impact on capital value and future use of the land.
• Benefits or detriments to residents from the proposed future use.
• Residents' attitude towards the termination.
• Impact on the administering body if approval is not granted.

Statutory Charge

All entry contributions that would give rise to a statutory charge have been repaid.

Rights of Residents

Cancelling the scheme means residents will no longer benefit from the RV Act and the Fair Trading (Retirement Villages Code) Regulations 2022 (WA). However, the transition deeds and indemnity compensate for the differences in rights, ensuring residents are not worse off.

Capital Value

The residency agreements do not allow residents to share in any increase in capital value, so this factor was not relevant.

Benefits or Detriments of Future Use

The plaintiff intends to redevelop the Land only once the long-term residents vacate. This could be detrimental to short-term residents, but Justice Archer found the detriment limited due to the temporary nature of existing short-term arrangements.

Attitude of Residents

Each transition deed included consent to terminate the scheme and remove the Memorial. Residents were offered independent legal and medical advice at the administering body's expense. This ensured residents' consent was free of influence and given with full capacity.

Decision

Justice Archer was satisfied that none of the existing residents would be adversely affected by the termination and approved the scheme's termination.

The Memorial

The primary purpose of a memorial is to notify others that the land is used as a retirement village and is subject to a statutory charge. Section 15(8) of the RV Act allows for the cancellation of a memorial upon application to the Registrar of Titles where the application satisfies the Registrar that the land is no longer used, or proposed to be used, as a retirement village. Justice Archer declared there are no statutory charges on the Land, assisting in any application to the Registrar.

Key Takeaways

This case provides valuable insight into the factors the Supreme Court considers when deciding to cancel a retirement village scheme. The Court must be satisfied that existing residents will not be worse off under new arrangements. While terminating a scheme with residents still occupying a village is likely to incur time and costs, this decision shows it is possible under the right circumstances.

This article was written by Olivia Bamess, Solicitor | Property, Planning + Environment.

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[1] [2024] WASC 358

[2] [2013] WASC 219