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Elder law, statutory charges and retirement villages

Laina accepted an urgent brief from the NSW Bar Pro Bono Scheme to act for an elderly couple with dementia who were at risk of losing their ingoing contributions to a retirement village in Goyal v West. The operator was insolvent and receivers had been appointed to sell the property on which the retirement village had operated. A court order was needed to effect the sale pursuant to the Retirement Villages Act 1999 (NSW) (the Act).

The court was also required to determine the order in which the proceeds of sale were to be distributed. Under the Act, unregistered statutory charges secured against the land upon which the retirement village operated, were created at the time that each resident entered into a village contract which granted them a licence to occupy a unit in the retirement village in return for an ingoing contribution. The receiver of the first mortgagee contended that the statutory charges created under the Act ranked in chronological order of creation with the registered and unregistered mortgages. If this construction was accepted then this meant that half of the former occupants would not receive a refund of their ingoing contributions. Laina put forward a competing construction. She contended that irrespective of when the statutory charges were created, all of the former occupants ranked ahead of the registered mortgagee and the unregistered second mortgage of the Catholic Church. She said that this arose from a literal construction of s 182G and was consistent with the purpose of the Act. One of the other former occupants who stood to lose their ingoing contribution also adopted the submissions of Laina. The other former occupants were agnostic.

In the first judicial consideration of s 182G of the Act, Ward CJ in Equity of the Supreme Court accepted the submissions of Laina and found that all of the unregistered statutory charges rank ahead of registered and unregistered mortgages. This judgment is of universal application and will be very unpopular with all financiers of retirement villages. While the statutory charges are not registered, the certificate of title will note that the property is being used as a retirement village. This outcome is consistent with ppl the purpose and intention of the Act which is beneficial legislation enacted, for the protection of vulnerable residents and former occupants of retirement villages.

An article on the case published in the Law Society Journal can be downloaded here.