THE LAUREL SPRINGS INVESTIGATION
FOR ACCESS TO DOCUMENTS RELATING TO THE INVESTIGATION OF
THE LAUREL SPRINGS RETIREMENT VILLAGE
PLEASE SELECT FROM THE LINKS BELOW
FINANCIAL INVESTIGATION
DETAILS OF FINDINGS
Details of Findings
3. Unlawfully increased General Services Fees (GSF) 2011 to 2020
18. Defrauded residents who bought new unit - structure unfit for purpose, and unconscionable exit terms
19. Deceived residents - renaming of Village to Resort

3. Unlawfully increased General Services Fees (GSF) 2011 to 2020

Since taking over the Laurel Springs Retirement Village in 2011, the scheme operators unlawfully increased the monthly General Services Fees (GSF) by more than the increase in CPI. Specifically, they increased the monthly GSF by more than 4 times the increase in CPI in 2015-2016, and 3 times the increase in CPI in 2018-2019. This is a breach of clause 3.1.3 of the Residence Contract and Service Agreement, and an offence under sections 103 and 106 of the Retirement Villages Act. Furthermore, at the 2017 AGM, the scheme operators falsely told the residents that the Act allowed them to do it, and encouraged residents to vote for a resolution to accept the unlawfully increased fees.

3.1 The Residence Contract

3.1.1 According to clause 3.1.3 of the Residence Contract, the GSF must be worked out to increase with the quarterly increase in CPI:

Evidence Document D6.3 - 01.

3.1.2 To check for compliance with clause 3.1.3 of the Residence Contract, it is necessary to firstly determine the quarters to be used for calculation of C2 and C1 used in the above formula. Because the CPI data for any quarter is published 28 days after the end of the quarter, the last published CPI data at the end of a quarter is that for the previous quarter. Therefore, At the end of June 2018, C2 is the CPI for the March quarter of 2018, and C1 is the CPI for the December quarter of 2017.

3.1.3 The Queensland Government has published their official web page for the Consumer Price Index (All Groups) for the City of Brisbane. According to that document, the Consumer Price Index (All Groups) for the City of Brisbane for the March quarter of 2018 was 112.4, and for the December quarter of 2017 was 112.3; refer to attachment A003. This is an increase of 0.09 %; i.e., 100 x ((112.4 – 112.3) / 112.3).

3.1.4 Because the scheme operators increase their fees annually instead of quarterly, and because the change from the December quarter of 2017 to the March quarter of 2018 was not representative of the average quarterly increase during that period, it is reasonable to also consider the yearly increase in CPI.

3.1.5 The Queensland Government re-published the official ABS report for Consumer Price Index, June quarter 2018 for Brisbane. According to that document, the Consumer Price Index for Brisbane increased by 0.4 % from the March quarter of 2018 to the June quarter of 2018, with a yearly increase of 1.7%:

Evidence Document D6.3 - 03.

3.1.6 The difficulty in comparing the increase in CPI, for a single quarter with that for a whole year, demonstrates the need for consistency between the time period specified in the Residence Contract and that actually used by the scheme operators when calculating increases in fees.

3.1.7 Nowhere in the PID or the Residence Contract is there any statement that the increase in GSF could or would be increased by any amount greater than the CPI increase.

3.1.8 According to RECITALS f(c) on page 2 of the Residence, the terms and conditions of the agreement must be strictly complied with:

Evidence Document D6.3 - 01.

3.1.9 It is reasonable to assume that this applies to the scheme operators as well as the residents. This means that the GSF must be increased quarterly by the same percentage as the CPI increase, and not by any greater amount.

3.1.10 At paragraph [51] in their initial decision of 10 September 2020, in the precedent case of Golding v Lusping Pty Ltd No 1 [2020] QCATA (APL340-19), the Appeal Tribunal made the following finding of law:

Evidence Document D6.3 - 14

3.1.11 The clauses in the Residence Contract,t for each resident who bought a freehold-title unit before 1 February 2019, are identical to those in the contract in the precedent case of Golding v Lusping Pty Ltd No 2 [2020] QCATA (QCAT APL340-19). The finding of law, by the Appeal Tribunal in the precedent case, should therefore apply to all of those residents.

Top

3.2 The breach of contract

3.2.1 In 2018-2019, the scheme operators increased the general services fees by an amount greater than that stipulated in clause 3.1.3 of the Residence Contract.

3.2.2 According to tax invoices for June 2018 and November 2018, the GSF for singles was increased from $154.27 +GST to $163.36 +GST in the 2018-2019 financial year:

Evidence Document D6.3 - 13

3.2.3 According to page 2 of the Budget for 2018-2019, the GSF for singles was increased from $154.30 + GST per unit per month in 2017-2018 to $164.00 + GST per unit per month in 2018-2019, and from $195.20 + GST per unit per month in 2017-2018 to $207.00 + GST for doubles:

Evidence Document D6.3 - 04

3.2.4 The “Single Grandfather 5 %” refers to a statement made by the scheme operators during the 2017 AGM that, instead of immediately increasing the rate for existing single residents to the rate for all new residents (single and double), their fees would be increased by a minimum of 5 % per year until they were equal to the new rate. This “Single Grandfather 5 %” is also referred to as a post-script on the first page of the Budget for 2018- 2019:

Note Grandfather clause on existing single fees at 2017 Minimum 5% increase per year Now $187.30. New singles after 1 July 2017 will be at 228.20 Rate (plus GST) all will be one rate regardless of single or double 2019 new GF rate is 197 plus GST

Evidence Document D6.3 - 04

Note that, according to the first line in the above, the 5 % is the minimum increase per year for existing singles. The “Single Grandfather 5 %” was not referred to in the original Minutes of the 2017 AGM but, after this was raised by a resident at the 2018 AGM, the 2017 minutes have now been amended to include this on page 2 of the Minutes of the 2018 AGM:

Evidence Document D6.3 - 12

3.2.5 Based on the budget figures, the increase in GSF in 2018-2019 for singles was 6.3% [100 x ($164.00 - $154.30)/ $154.30], and for doubles it was 6.0% [100 x ($207.00 - $195.20)/ $195.20].

3.2.6 These increases in GSF, for singles and doubles, are more than three times the yearly 1.7% increase in CPI for the relevant period..

3.2.7 I used Microsoft Excel to calculate the cumulative amount of excess fees paid by the residents. Refer to Evidence Document D6.3 - 05.

3.2.8 The increase in General Services Fees, greater than the increase in CPI, is a breach of the Residence Contract.

3.2.9 I used Microsoft Excel to produce tables and charts to show the long-term cumulative effect of increases in GSF greater than the increase in CPI. Refer to Evidence Document D6.3 - 06

For original sources of data, refer to refer to Evidence Document D6.3 - 07 and D6.3 - 08. The following chart shows the increases in GSF for singles:

Evidence Document D6.3 - 06

3.2.10 It is necessary to set a datum point i.e., a time reference point for decisions about calculation of future fees and any refunds. I set the datum point to be 30 June 2018 because the increase in GSF, of three times greater than CPI, was applied from 1 July 2018. This datum point was accepted by the Appeal Tribunal in the precedent case, and is reflected in Order 4 in Golding v Lusping Pty Ltd No 2 [2020] QCATA. Refer to Evidence Document D6.4 - 01.

Top

3.3 The contravention of Retirement Villages Act

3.3.1 In 2018-2019, the scheme operators increased the general services fees by an amount greater than that worked out in the Residence Contract and Service Agreement and allowed for in the Retirement Villages Act. According to s103 and s106 of the Retirement Villages Act 1999, this is an offence:

Top

3.4 The scheme operators deceptive conduct

3.4.1 During the 2017 AGM, the scheme operators falsely told the residents that the fee increases, of a minimum of 5% under the "grandfather clause, was allowed under the RVA:

Evidence Document D6.3 - 09

3.4.2. In their response to my questions, on 16 October 2018, the scheme operators contradicted their statement referred to above:

Evidence Document D6.3 - 10

Top

This web site is owned, designed and maintained by Paul Henry Golding of Nambour, QLD, Australia. © 2007-2021