THE LAUREL SPRINGS INVESTIGATION
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FINANCIAL INVESTIGATION
SUMMARY OF FINDINGS

Financial Investigation - Summary of Findings

The scheme operators of the Laurel Springs Retirement Village, Lusping Pty Ltd, have mismanaged the village finances, and deceived and defrauded residents, as follows:

1. Identity of scheme operators of Laurel Springs Retirement Village

Brian Anthony McGuiness and Lance Robert Taylor are the two directors of Lusping Pty Ltd, the company named as the Operator on the Certificate of Registration of the Laurel Springs Retirement Village, and therefore are the scheme operators of the village

2. Identity of developers of extension to Laurel Springs Retirement Village

The scheme operators are the directors of Lusping Pty Ltd, the company named as the developer for approval of applications for Material Change of Use and Operational Works for an extension to the Laurel Springs Retirement Village, and therefore are the developers of that extension.

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 by more than the increase in CPI. Specifically, they increased the monthly General Services Fees 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.

4. Ignored QCAT Appeal Tribunal declaration 2020

In Golding v Lusping Pty Ltd No 2 [2020] QCATA, the QCAT Appeal Tribunal made a declaration that the increases in fees, referred to immediately above, were and are unlawful. Despite this, the scheme operators continue to invoice residents for fees that were unlawfully increased. Furthermore, the scheme operators encouraged residents to vote for a resolution to accept the unlawfully increased fees at the 2020 AGM.

5. Unlawfully increased General Services budget 2019-2020

The scheme operators unjustifiably and unlawfully increased the General Services budget by 31% in 2019-2020, including a 46% increase in the manager's salary; this is an offence under section 102A of the Retirement Villages Act. Also, they gave false and misleading answers to questions about it; this is an offence under section 86 of the Retirement Villages Act. Furthermore, the scheme operators encouraged residents to vote for a resolution to accept the unlawfully increased budgets at the 2019 AGM.

6. Misused Maintenance Reserve Fund (MRF) contributions 2017-2018

The scheme operators unlawfully increased the monthly Maintenance Reserve Fund contributions by 50% in 2017-2018, to cover a shortfall in the General Services budget. This defacto increase in General Services Fees is a breach of clause 3.1.3 of the Residence Contract and Service Agreement. Furthermore, the misuse of the Maintenance Reserve Fund is an offence under sections 97 and 100 of the Retirement Villages Act.

7. Misused Capital Replacement Fund (CRF) 2017-2018

In 2017-2018, the scheme operators misused funds from the Capital Replacement Fund to refurbish units. This is an offence under section 91 of the Retirement Villages Act. Furthermore, 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 Financial Statements at the 2018 AGM.

8.Misused Capital Replacement Fund (CRF) 2019-2020

In 2019-2020, the scheme operators misused funds from the Capital Replacement Fund to replace a concrete driveway that they had damaged in their role as developers of the extension to the village. Also, they misused funds to install rock walls, an "entry statement", that is not a capital replacement item. These are offences under section 91 of the Retirement Villages Act. Furthermore, the scheme operators encouraged residents to vote for a resolution to accept the Financial Statements at the 2020 AGM.

9. Knowingly Included false information in Financial Statements 2019-2020

The scheme operators knowingly included false information, that all 92 of the units in Laurel Springs were completed, in the "Notes to Financial Statements" for the 2019-2020 Financial Statements. This falsely implies that all 15 of the new leasehold units were completed, whereas only four new units are completed and only two occupied. Furthermore, the scheme operators encouraged residents to vote for a resolution to accept the Financial Statements at the 2020 AGM. In my opinion, this is an offence of fraud under the Queensland Criminal Code.

10. Improperly conducted voting procedures at AGM's 2019 and 2020

The voting for financial resolutions at the Laurel Springs Annual General Meetings has been improperly conducted, so as to allow the scheme operators to avoid answering questions about the Laurel Springs finances. Furthermore, the responses they gave to residents were evasive, false and misleading.

11. Failed to obtain Quantity Surveyor Reports 2011 to 2017

The scheme operators knowingly failed to obtain any Quantity Surveyor reports for the Maintenance Reserve Fund or the Capital Replacement Fund, from when they took over Laurel Springs in 2011 until April 2017. A full report is required every three years, and an update is required annually. These failures are offences under sections 98 and 92 of the Retirement Villages Act.

12. Deceived residents - forged Financial Statements 2014 to 2018

The scheme operators devised an elaborate plan to prevent residents from knowing that Ms Henkelman, known to residents only as the village manager, was actually one of the scheme operators. A scheme operator used white-out to delete the name and signature of Vicki Elizabeth Henkelman from copies of the financial statements given to residents from 2013 to 2018 inclusive. Whether or not a current scheme operator was the person whose hand forged the documents is not known, but they were all knowingly involved in other acts performed for the purpose of this deception of the residents.

13. Deceived residents - sale of Manager's Residence

At the 2017 AGM, the scheme operators encouraged residents to vote to allow the manager to reside in her own home instead of living on-site in the manager’s residence. The residents were told only that this was for personal reasons, and did not disclose to residents their intention to sell the unit. In July 2018, the scheme operators sold a lease for the manager’s residence to a new resident for $242,000, forever depriving residents of the benefit of having a resident manager. The scheme operators received a significant financial benefit from the sale of the village asset.

14. Knowingly Included false information in Village Comparison Document

The scheme operators knowingly included false information in the Village Comparison Document for the Laurel Springs Retirement Village, published on their web site on 1 February and 10 June 2019, and provided to prospective residents. They falsely stated that there had been no increase in the General Services Fees in 2018-2019, and no increase in the Maintenance Reserve Fund contributions in 2017-2018. This is an offence under section 74 and 86 of the Retirement Villages Act.

15. Defrauded resident who bought Manager's Residence - false information in Village Comparison Document

The scheme operators defrauded an elderly resident who bought the lease for the manager’s residence referred to in paragraph 6.13 above, by knowingly including the false information, referred to above, in the Village Comparison Document for Laurel Springs.

16. Defrauded resident who bought Manager's Residence - enforced exorbitant resale price

In 2019, the scheme operators further defrauded the elderly resident referred to above, by refusing to allow the resident to re-sell the unit for the price she paid for it. The scheme operators required the resident to offer the unit for sale at a price of $290,000, this is $48,000 more than the she had paid them. The resident does not receive any part of any capital gain, but continues to pay monthly fees until the unit is sold, and the exit fee increases with time.

17. Defrauded residents who bought new unit - false information in Village Comparison Document

The scheme operators defrauded the elderly residents who bought the lease for a new unit in an extension to the village, by knowing that they had included the false information in the Village Comparison Document referred to above.

18. Defrauded residents who bought new unit - structure unfit for purpose, and unconscionable exit terms

The scheme operators further defrauded the elderly residents referred to above by selling to them the lease while knowing that, in their role as the developers of the extension of Laurel Springs, they had failed to ensure that the retaining wall, that supports the filled land on which the unit was built, was structurally sound and fit for purpose. The scheme operators knowingly failed to ensure that the wall was constructed in accordance with the approved plans, and failed to comply with relevant essential conditions of approval of the operational works; they failed to ensure that the construction was properly supervised and certified by a geotechnical engineer.

As a consequence, the retaining wall has failed, causing major damage to the unit, making it unsafe to live in. In addition, the scheme operators failed to ensure that the design of a safety fence on top of the wall was fit for purpose and the fence properly constructed, making it useless as a safety fence.

The scheme operators refused to allow the two elderly residents to rescind the lease, and allowed them to exit only on unconscionable terms that were of significant financial disadvantage to the residents.

19. Deceived residents - renaming of Village to Resort

In 2020, without any consultation with the residents or any formal process, the scheme operators renamed the Laurel Springs Retirement Village to Laurel Springs Retirement Resort. This deliberate renaming is evident from the sign on the new "Entry Statement" at the entrance to the village, the references to it in the Quantity Surveyor Reports dated June 2020, and the Laurel Springs Facebook page. In response to a question about the sign from Sonia, at the 2020 AGM, the village manager falsely claimed that the renaming was an error of the sign-writer. This misleading and deceptive conduct is a contravention of s86 of the Retirement Villages Act.

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