News

News

By Jo Twible 10 Jan, 2018

Jo Twible           E:  jo@kjblaw.com.au


On 18 December 2017, the ACT Civil & Administrative Tribunal handed down its decision in relation to part of the dispute between The Pines Retirement Village and its residents.

There were 2 issues in dispute. The first is the budget for the 2017/2018 financial year. The 2nd is the amount of Recurrent Charges to be paid by the Residence for that year.  ACAT made a determination about the budget issue and is due to hear additional evidence regarding the Recurrent Charges issue in mid January 2018.

There are some bigger lessons for Operators to learn from The Pines decision. First and foremost, Operators need to prepare their budgets based on evidence and provide any evidence the Residents request to support the proposed expenditure. ACAT was extremely clear in its decision that Residents are entitled to information including copies of tax invoices or quotes.

The Pines decision took a requested budget the Operator sought to be approved of nearly $189,000 and reduced it to just over $99,000. This is extremely significant given the previous year's budget was $155,673.

Key determinations made in this decision regarding particular line items were as follows:

  1. an Operator should not expect to be able to fund its application to ACAT to get approval for the Budget and increases in Recurrent Charges from those Recurrent Charges. In this case, ACAT was very clear that a situation where it disapproved over half of the requested Budget as the proceedings were certainly not wholly in the interest of the residents (a requirement under section 260 (2) of the Retirement Villages Act 2012 . If the Operator had been wholly successful in having its proposed Budget approved, the door might remain open to then seek the inclusion of the Legal Fees in the Budget;
  2. cost to fix defects in the construction of the Retirement Village are not to be paid for from Recurrent Charges as they do not constitute capital maintenance;
  3. Where a Retirement Village is co-located with an Aged Care Facility, an Operator should seek a breakdown from its insurer as to which components of the insurance premium relate to the Village and which relate to the Aged Care Facility. Interestingly, where the insurer only provided a partial breakdown, ACAT utilised the breakdown provided and then apportioned the remaining premium and insurance brokerage fees on the basis of the comparative insured values of the Retirement Village and the Aged Care Facility.   Similarly, where there is only one water meter that services both facilities, the costs for connection to the network/supply charges are shared;
  4.  If the Land on which the Retirement Village is located also includes a component of vacant land which is not reasonably utilised by the Residents (regardless of what the Operator may say about the ability to use that area), the Operator should not include gardening cost to maintain that vacant land nor the proportional component of general rates for that area of land in the Retirement Village Budget;
  5. Separate line items for Repairs & Maintenance and Capital Maintenance cause some confusion, particularly where both are really Capital Maintenance under the legislation. Notwithstanding commenting to this effect, an allowance was made for Repairs & Maintenance separate to the Capital Maintenance line item. The amount allowed was $300 and appeared to be to cover the cost for replacing light bulbs.
  6.  Residents need to understand that capital maintenance can include replacing part of an overall capital item. In this situation, ACAT was clear that replacing an alarm number pad and door station formed part of the course of the maintenance of the overall capital item – the alarm system;
  7.  The amounts to be allocated in the Budget for a Village Manager may not reflect what is actually being paid for that Village Manager. In The Pines decision, Presidential Member McCarthy accepted that the Village, as a small Village, only required the Village Manager's services for a maximum of 4 hours per day. Insufficient evidence was provided regarding the appropriate rate to pay for the Village Manager. While ACAT clearly indicated that it was seeking appropriate evidence (such as a reference to an Award or details of what other Managers in other Villages were paid for their services), this evidence was not supplied. In the end ACAT determines an hourly rate, itself. Further, as no evidence was provided as to the requirement for all the amount of the superannuation guarantee to be paid, no allowance was made for it. This does not mean that Residents should take the view that superannuation guarantee requirements may be disregarded and are not payable from Recurrent Charges. Instead, it is a big warning sign to Operators that if they are seeking to have their Budget approved by ACAT, they need to provide appropriate evidence and references to the relevant legislation to substantiate the amount they are seeking to be included. Had the Operator provided that evidence then I am reasonably confident ACAT would have included an allowance for it in the Budget;
  8.  ACAT will also look at the quality of the services being provided and whether there is a more cost effective/better means of those services being provided. In The Pines decision, one of the tasks been undertaken by the Village Manager was bookkeeping activities. Evidence from the auditor was that much time was spent by the auditor in correcting errors in the bookkeeping and that these errors were in part because of the Operator being unwilling to obtain a full version (rather than a training version) of the software and that the Village Manager was unskilled in these activities. Interestingly, while it appears the hours allocated for the Village Manager was reduced, it does not appear that a corresponding allowance was made for having a third party bookkeeper undertake those activities;
  9. Much was made about the lack of provision of evidence to support the proposed Budget. Another expense that was disallowed was an amount for a relief Village Manager while the permanent Village Manager was on leave. While my view is that a relief Village Manager is not an unreasonable expense to include in a Budget, it needs to be backed up with evidence as to who that Relief Village Manager is likely to be, what arrangements are made for that person to be available and evidence as to what they are paid or to be paid for providing those services;
  10. Contingencies – ACAT drew attention to the provisions in the Regulations which specify how much may be included in a Budget for Contingencies.  Regulation 38 states where the Annual Budget is $200,000 or less, the maximum amount that may be allocated for contingencies is $1,000. Once the budget exceeds $200,000, the maximum amount for Contingencies is 0.5% of the total amount of the Annual Budget.

Finally, ACAT made it very clear how it interpreted the provisions of section 166 of the Retirement Villages Act 2012 . Section 166 states the Operator commits an offence if it spends money received for a Recurrent Charges and does not spend that money in accordance with the approved annual budget (or an approved annual budget as amended under section 167). While ACAT acknowledged that there is an exception in section 166 which states that the offence provision does not apply if the spending is a change in spending between items in the approved annual budget and does not reduce the level of services the Retirement Village provides and does not cause a total spending provided for by the approved annual budget to be exceeded. When items in a Budget are allocated for particular things, for example cleaning, Presidential Member McCarthy expressed the view that it is difficult to see how the exemption in section 166 (3) could apply without reducing the level of cleaning services. In the Presidential Member's view, the nature of the Budget providing "buckets" of money for different expenditure is such that there is unlikely to be many circumstances where the exemption would apply.

This decision brings home that an Operator is not free to set whatever Budget it likes. Residents have significant power to refuse to agree to a Budget and to expect the Operator to provide sufficient information regarding the anticipated expenditure, based on evidence, to enable the Residents to make a fully informed decision. There are many good Operators in Canberra who provide the appropriate levels of transparency to their Residents. For those who do not, this decision should put the Operator on notice that they need to start doing so. Importantly, just because an Operator does not get their Budget approved, does not mean that they can reduce the Services provided to the Residents. With the legislation requiring the Operator to meet any shortfall in the Budget against actual expenditure (with some limited exemptions), the outcome of The Pines decision is at those Operators could find themselves forced into a position of having to provide the evidence, seeking a formal amendment to the Budget, or foot the bill themselves.

By Brendan Goodger 15 Dec, 2017
By Andrew Freer 06 Nov, 2017
Andrew Freer          E:  andrew@kjblaw.com.au

One of the key steps in estate planning is making a superannuation Death Benefit Nomination. These nominations can be used to direct where superannuation death benefits are paid after death.  Only certain nominations are allowed. For example, nominations can be in favour of spouses, partners, children, and those in an interdependent relationship. Nominations can’t be made directly in favour of parents, siblings or friends. A nominations can be made to direct the superannuation death benefit into a person’s estate.  It is this concept that can often cause confusion.

 Superannuation providers use varying terminology when making provision for a superannuation death benefit to be directed into a person’s estate. Each fund will generally have their own version of form to be used.

 Where a member wishes to direct their superannuation to their estate, the form can variously use the terms, ‘my Estate’, ‘my Executor’ or ‘my Legal Personal Representative’. Where the term, ‘my Legal Personal Representative’ is used, this is a reference to the person who will act in the role as your legal personal representative/executor under the terms of your Will, or in the absence of a valid Will, as the administrator of the estate. It is not a reference to your lawyer.

 We have seen situations where superannuation members have completed their superannuation Death Benefit Nomination Form by naming their lawyer in the mistaken understanding that they are identifying their Legal Personal Representative. This has the unintended consequence of making the lawyer the recipient of their superannuation death benefit, as opposed to the person’s estate. It is important to be clear on the significant consequences that this misunderstanding can have.

 Please do not hesitate to contact our office if you need any clarification or advice in relation to the making of a superannuation Death Benefit Nomination.

Andrew Freer          E:  andrew@kjblaw.com.au
By Philippa Webb 20 Sep, 2017

Philippa Webb          E: philippa@kjblaw.com.au

If you are not purchasing a property by yourself, you will be given the option to purchase the property as joint tenants or tenants in common. This also applies where two or more people take an estate or interest in land, by way of lease, mortgage, transfer, application or charge. This article will focus on what it means if you purchase a property as joint tenants or tenants in common.

If you purchase a property as joint tenants and one joint tenant passes away the interest of the deceased joint tenant automatically passes to the surviving joint tenant. If the property is purchased as tenants in common and one tenant dies then the deceased’s share passes according to the terms of the deceased’s Will (if they have a Will) and not automatically to the other tenant.  Tenants in common can hold their interests in equal shares or unequal shares, for example 60/40 or 90/10.

Have you thought about what would happen if you separated from your de facto partner or spouse and you owned properties as joint tenants? If you are separated from the other joint tenant, would you still want your share to go to the surviving joint tenant in the unfortunate event you were to pass away? A situation may occur where you have separated, however you have not commenced proceedings seeking a property settlement under the Family Law Act 1975 (Cth) or you have not formalised your property settlement – let’s call it a “period of limbo.”

In this period of limbo if you own your property as joint tenants and you were to pass away, your share of the property would automatically pass to the surviving joint tenant. As you have separated you may no longer want your share of the property to go to the surviving joint tenant. It may be that you want to sever the joint tenancy, so that you can have a say about who your share of the property passes to. For example, you may want your share of the property to pass to your children, as opposed to your share automatically passing to your estranged spouse or former partner (the other joint tenant).

We can assist you to sever the joint tenancy. Once the transfer to sever the joint tenancy is registered by Land Titles then the interest will be held as tenants in common. There are different processes in each state to sever the joint tenancy. We can assist you to sever the joint tenancy of a property in the ACT and NSW. Please feel free to telephone our office to arrange an appointment to discuss the process of severing the joint tenancy. We also have experienced solicitors who can assist you with your estate planning, Wills and family law matters.  

Philippa Webb          E: philippa@kjblaw.com.au

By Brendan Goodger 10 Nov, 2016

All at KJB Law congratulate Allan Bedford on a wonderful legal career and convey our very best wishes on his retirement from KJB Law as of 30 June 2016.

Allan has practised as a solicitor in the Australian Capital Territory for 42 years. After completing degrees in Law & Arts at ANU, Allan was admitted as a legal practitioner in 1975. Initially Allan worked as an employed solicitor for 4 years with Phillips & Co, before joining the late Ken Johnston in 1979. In 1981 Ken and Allan established the partnership Ken Johnston Bedford & Co. Allan remained a principal with the firm when Ken Johnston retired in 2000 and, together with Andrew Freer, the transition to KJB Law occurred.

Allan is highly regarded as an ethical, hardworking and competent business and commercial lawyer in the Territory. He has in the past, and continues, to contribute to various Law Society Committees and is well regarded by his work colleagues, fellow practitioners and clients alike.

Away from the office, Allan has contributed to many volunteer organisations. In addition to that ongoing volunteer commitment, Allan is looking forward to furthering his bushwalking, photography and travel interests. He has committed to further hours of practice to justify the ownership of a brand new Taylor guitar - a retirement gift from the firm.

The firm looks forward to the continuing relationship with Allan and again congratulate him on a wonderful career.

By Brendan Goodger 10 Nov, 2016

KJB Law is proud to announce the appointment of   Erin Bedford   and   Mark Tigwell   as Principals of the firm, and we welcome them both into the KJB Law family.

By Andrew Freer 10 Nov, 2016

In times of bereavement it is often distressing for members of the deceased’s family to address the issues surrounding the wishes of the deceased. It can also be difficult to try and understand the specific language used in the administration of an estate even when you aren’t trying to cope with the loss of a loved one. To help you better understand this sometimes confusing process we have prepared a short series called ‘10 Things You May Not Know About Estate Administration’.

Andrew Freer             E:   andrew@kjblaw.com.au


Part 4 - Passing Accounts

A legal personal representative has a general duty to keep accounts and render them to beneficiaries when called on to do so. In addition, section 58 of the   Administration and Probate Act 1929   (ACT) identifies that the rules may require a legal personal representative to prepare, have examined and have accounts passed by the Court in certain circumstances.

In most cases, a legal personal representative will be able to comply with his or her general duty to account (whether or not a demand has been made) and satisfy beneficiaries by providing an itemised list of:

  • assets transferred;
  • assets realised and still held;
  • funds received from all sources;
  • payments for estate liabilities, distributions & money retained; and
  • provision for liabilities not yet paid.

What are Accounts?

Accounts are:

  • a written record of the legal personal representative's dealing with the estate assets showing, in broad terms, itemised detail of assets transferred to beneficiaries, assets realised or retained; funds received from all sources, payments for estate liabilities, liabilities incurred but not yet paid, distributions to beneficiaries and money retained and re-invested; and
  • the original supporting documents, that is, receipts, statements and invoices.

The passing of accounts involves a process akin to an audit by a Registrar of the court to determine both whether payments have been made and if so, whether they are proper. A legal personal representative is required to file and pass formal accounts when:

  • ordered to do so on the application of a beneficiary or the court of its own motion;
  • an executor wishes to claim commission and cannot reach agreement with affected beneficiaries;
  • an executor desires to obtain a release but beneficiaries are unwilling to give one.

What do accounts look like?

There is no standard format for accounting in an informal way.  The key is to inform beneficiaries adequately.  Often accounts will be by letter from the executor's solicitor.  The frequency, form and detail will depend on the make-up of assets in the estate and how complex the estate administration has been. Informal yet sufficiently detailed accounts will frequently both satisfy beneficiaries and fulfil the executor's duty to account.

If you are unsure whether you are keeping appropriate records, or are concerned that a legal personal representative is not keeping you properly updated on status of an estate, please contact the team at KJB Law on 6281 0999 to discuss.

 

Andrew Freer           E:   andrew@kjblaw.com.au


By Andrew Freer 10 Nov, 2016

In times of bereavement it is often distressing for members of the deceased’s family to address the issues surrounding the wishes of the deceased. It can also be difficult to try and understand the specific language used in the administration of an estate even when you aren’t trying to cope with the loss of a loved one. To help you better understand this sometimes confusing process we have prepared a short series called ‘10 Things You May Not Know About Estate Administration’.

Andrew Freer             E:   andrew@kjblaw.com.au


Part 3 – Commission

What is it?

Section 70 of the   Administration and Probate Act 1929   (ACT) allows the court to award commission to a legal personal representative, or a trustee of a trust established under a will, out of the estate assets for their "pains and trouble" that is just. "Pains" is regarded as the responsibility, anxiety and worry; "trouble" is the work done.

How do I get it?

It is necessary for a legal personal representative to claim commission – it won’t just be given to them. The amount of commission is always at the discretion of the Court, and its usual practice is to award commission within commonly adopted parameters.

Conduct such as breaches of trust and failure to act promptly in the administration of the estate may limit, or even defeat, what would otherwise be an appropriate claim for commission.

On the other hand, unnecessary complaints or accusations by beneficiaries against a legal personal representative who is performing their duties in a proper way can be a factor operating in favour of the legal personal representative in the award of commission.

A legacy to the legal personal representative in lieu of commission, or in recognition of their services as executor (whether stated expressly or inferred from the will), if accepted, will normally result in no award of commission to the legal personal representative. However, a legacy to the legal personal representative without reference to them acting as legal personal representative will usually not be a bar to an award of commission. Depending on the amount of the legacy and the size of the estate, it may be a factor considered by the Court in reducing the ultimate award. Also, a gift of a share, or even the whole, of the residuary estate to the legal personal representative does not of itself prevent an award of commission.

A legal personal representative is entitled to reimbursement out of the estate for out of pocket expenses incurred in the performance of their duties, such as for postage and telephone expenses. These amounts are in addition to commission.

By Consent?

There is nothing to prevent a legal personal representative and affected beneficiaries (who are fully informed) from agreeing to payment of an amount for commission without any order or other sanction of the court. The affected beneficiaries are those who would bear any part of the burden of the commission payment. Ordinarily this would not include legatees. Commission is regarded as a testamentary expense and is ordinarily paid out of residue.

By Court Approval?

If such an agreement can’t be reached though, to claim commission the legal personal representative must file and pass accounts with the Court. Ordinarily the legal personal representative claims commission at the same time as they seek the passing of accounts.

How Much Commission?

In short, how much is in the discretion of the Court. In NSW the usual practice of the Court is to allow commission by applying different percentage rates to each component of the accounts - assets realised, assets transferred in specie and income collected. Another thing to consider is that the ATO considers commission paid to an executor to be assessable income of the executor personally.

If you think you may be entitled to commission, or want to ensure there is appropriate provision made for your legal personal representative in your will, the team at KJB Law can help. Please contact us on 6281 0999 to discuss.

 

Andrew Freer           E:   andrew@kjblaw.com.au


By Andrew Freer 10 Nov, 2016

In times of bereavement it is often distressing for members of the deceased’s family to address the issues surrounding the wishes of the deceased. It can also be difficult to try and understand the specific language used in the administration of an estate even when you aren’t trying to cope with the loss of a loved one. To help you better understand this sometimes confusing process we have prepared a short series called ‘10 Things You May Not Know About Estate Administration’.

Andrew Freer             E:   andrew@kjblaw.com.au


Part 2 – Ademption

What is ademption?

Ademption is a legal concept that applies to gifts of specific property made under a will. For example, leaving a gift of a specific identified painting to a friend in your will. If during your life you dispose of that specific property – either by sale or otherwise - so that at the date of your death it is no longer yours to dispose of, that specific gift is taken to have “adeemed”. Where this happens, the beneficiary gets nothing.

If the subject matter of the gift was intentionally sold by the will maker between the date of the will and the date of death, the beneficiary of the adeemed gift is usually not entitled to the proceeds of its sale.

The general rule of ademption though only applies to specific gifts – it does not apply to a gift of the whole estate or to a gift of residue.

Does intention matter?

The intention of the testator in making the disposal is generally not relevant. Thus an ademption will occur where there is a "forced" disposal such as by a transfer under a pre‑existing buy-sell provision in a shareholders or partnership agreement, a writ of execution, order of the Family Court or mortgagee sale.

Can I get around it?

An exception to the general rule of ademption exists where it can be shown that the property ceased to be part of the testator's estate because of the unauthorised action of an agent or by an unlawful act unknown to the testator.

Disposal of an asset as a result of theft, fraud, breach of fiduciary duty or similar misconduct may be capable of being set aside under general equitable principles. Setting aside the transaction may result in the asset being restored to the estate. In such a case the question of ademption, as such, would not arise: having been restored to the estate, the property could then pass under the will as if it were owned by the deceased at the time of death, subject to the liability of the property for debts, funeral and testamentary expenses.

In NSW, section 22 of the   Powers of Attorney Act 2003   (NSW) sets out that beneficiaries of property disposed of before death by an attorney under a power of attorney retain certain rights and the general rule as to ademption can be displaced in certain circumstances. There is no equivalent provision in the ACT however. There is a therefore a fundamental difference between the position in NSW and the ACT.

Where this situation arises, a beneficiary may have several courses available to overcome an apparent ademption of a specific gift, including:

  • applying for construction or administration proceedings on the basis of misdescription of the item subject of the specific gift, or change in name or form of that property;
  • seeking to set aside the disposal on the basis that it was done so on a tortious or fraudulent basis; and
  • asserting that the disposal was made by an attorney or financial manager (in NSW but not in the ACT).

The action to be taken by the person seeking to overcome the apparent ademption in the above circumstances essentially entails proceedings for construction of the will. If you are unsure how this principle may apply to your will, or are a beneficiary who is concerned that a gift to you may have adeemed, please contact the team at KJB Law on 6281 0999 to discuss.

Andrew Freer           E:   andrew@kjblaw.com.au


By Andrew Freer 10 Nov, 2016

In times of bereavement it is often distressing for members of the deceased’s family to address the issues surrounding the wishes of the deceased. It can also be difficult to try and understand the specific language used in the administration of an estate even when you aren’t trying to cope with the loss of a loved one. To help you better understand this sometimes confusing process we have prepared a short series called ‘10 Things You May Not Know About Estate Administration’.

Andrew Freer             E:   andrew@kjblaw.com.au


Part 1 – What right do you have to inspect and copy a will of a deceased person?

It is not uncommon for family members, beneficiaries or eligible family provision applicants to be interested in obtaining a copy of the will of a deceased person. As an interested person you may wish to find out what entitlements you have under the will of the deceased. You may want information to enable them to decide whether to make a family provision claim. You may simply be trying to determine the identity of the executor and the beneficiaries. Alternatively, you may wish to find out when a will was made to assist in deciding whether to apply for a grant of another will, or challenge the validity of a will.

But what is the legal position?

In the first instance you should make a direct request to the person who actually has possession or control of the will.  Section 126 of the   Administration and Probate Act 1929   (ACT) sets out who is entitled to inspect will of deceased person. It provides that a person who has possession or control of a deceased person's will must, on request in writing by an interested person, allow the interested person to inspect, or be given copies of, the will or any copies of the will in the person's possession or control. The legislation contains a definition of who is an interested person.

The obligation to allow inspection and copying extends to both the actual custodian as well as any person whose instructions or permission would be required, such as the executor named in the will.

If a copy is not forthcoming following a direct request though, rule 3111 of the   Court Procedures Rules 2006 (ACT)   gives the ACT Supreme Court the power to issue a subpoena to a person to produce a will or document.  To obtain this though you need to make an application to the ACT Supreme Court.  Not just anyone can make the application - you must first have standing to apply. This stops just anyone applying to see a copy of a will, and restricts it to only those who actually have a legitimate interest. Interested persons who have standing to seek a copy of the will or document can include:

  • the spouse, parent or issue of the deceased;
  • anyone named as a beneficiary in the will, or an earlier will;
  • anyone who would be entitled to share in the estate if the deceased died intestate;
  • an attorney of the deceased under an enduring power of attorney; and
  • a creditor of the deceased.

Making an application to the ACT Supreme Court is a significant step though and should not be undertaken lightly. If you are having difficulty obtaining a copy of a will, or aren’t sure whether you should agree to a request for a copy, the team at KJB Law can help.

 

Andrew Freer           E:   andrew@kjblaw.com.au


More Posts

News

By Jo Twible 10 Jan, 2018

Jo Twible           E:  jo@kjblaw.com.au


On 18 December 2017, the ACT Civil & Administrative Tribunal handed down its decision in relation to part of the dispute between The Pines Retirement Village and its residents.

There were 2 issues in dispute. The first is the budget for the 2017/2018 financial year. The 2nd is the amount of Recurrent Charges to be paid by the Residence for that year.  ACAT made a determination about the budget issue and is due to hear additional evidence regarding the Recurrent Charges issue in mid January 2018.

There are some bigger lessons for Operators to learn from The Pines decision. First and foremost, Operators need to prepare their budgets based on evidence and provide any evidence the Residents request to support the proposed expenditure. ACAT was extremely clear in its decision that Residents are entitled to information including copies of tax invoices or quotes.

The Pines decision took a requested budget the Operator sought to be approved of nearly $189,000 and reduced it to just over $99,000. This is extremely significant given the previous year's budget was $155,673.

Key determinations made in this decision regarding particular line items were as follows:

  1. an Operator should not expect to be able to fund its application to ACAT to get approval for the Budget and increases in Recurrent Charges from those Recurrent Charges. In this case, ACAT was very clear that a situation where it disapproved over half of the requested Budget as the proceedings were certainly not wholly in the interest of the residents (a requirement under section 260 (2) of the Retirement Villages Act 2012 . If the Operator had been wholly successful in having its proposed Budget approved, the door might remain open to then seek the inclusion of the Legal Fees in the Budget;
  2. cost to fix defects in the construction of the Retirement Village are not to be paid for from Recurrent Charges as they do not constitute capital maintenance;
  3. Where a Retirement Village is co-located with an Aged Care Facility, an Operator should seek a breakdown from its insurer as to which components of the insurance premium relate to the Village and which relate to the Aged Care Facility. Interestingly, where the insurer only provided a partial breakdown, ACAT utilised the breakdown provided and then apportioned the remaining premium and insurance brokerage fees on the basis of the comparative insured values of the Retirement Village and the Aged Care Facility.   Similarly, where there is only one water meter that services both facilities, the costs for connection to the network/supply charges are shared;
  4.  If the Land on which the Retirement Village is located also includes a component of vacant land which is not reasonably utilised by the Residents (regardless of what the Operator may say about the ability to use that area), the Operator should not include gardening cost to maintain that vacant land nor the proportional component of general rates for that area of land in the Retirement Village Budget;
  5. Separate line items for Repairs & Maintenance and Capital Maintenance cause some confusion, particularly where both are really Capital Maintenance under the legislation. Notwithstanding commenting to this effect, an allowance was made for Repairs & Maintenance separate to the Capital Maintenance line item. The amount allowed was $300 and appeared to be to cover the cost for replacing light bulbs.
  6.  Residents need to understand that capital maintenance can include replacing part of an overall capital item. In this situation, ACAT was clear that replacing an alarm number pad and door station formed part of the course of the maintenance of the overall capital item – the alarm system;
  7.  The amounts to be allocated in the Budget for a Village Manager may not reflect what is actually being paid for that Village Manager. In The Pines decision, Presidential Member McCarthy accepted that the Village, as a small Village, only required the Village Manager's services for a maximum of 4 hours per day. Insufficient evidence was provided regarding the appropriate rate to pay for the Village Manager. While ACAT clearly indicated that it was seeking appropriate evidence (such as a reference to an Award or details of what other Managers in other Villages were paid for their services), this evidence was not supplied. In the end ACAT determines an hourly rate, itself. Further, as no evidence was provided as to the requirement for all the amount of the superannuation guarantee to be paid, no allowance was made for it. This does not mean that Residents should take the view that superannuation guarantee requirements may be disregarded and are not payable from Recurrent Charges. Instead, it is a big warning sign to Operators that if they are seeking to have their Budget approved by ACAT, they need to provide appropriate evidence and references to the relevant legislation to substantiate the amount they are seeking to be included. Had the Operator provided that evidence then I am reasonably confident ACAT would have included an allowance for it in the Budget;
  8.  ACAT will also look at the quality of the services being provided and whether there is a more cost effective/better means of those services being provided. In The Pines decision, one of the tasks been undertaken by the Village Manager was bookkeeping activities. Evidence from the auditor was that much time was spent by the auditor in correcting errors in the bookkeeping and that these errors were in part because of the Operator being unwilling to obtain a full version (rather than a training version) of the software and that the Village Manager was unskilled in these activities. Interestingly, while it appears the hours allocated for the Village Manager was reduced, it does not appear that a corresponding allowance was made for having a third party bookkeeper undertake those activities;
  9. Much was made about the lack of provision of evidence to support the proposed Budget. Another expense that was disallowed was an amount for a relief Village Manager while the permanent Village Manager was on leave. While my view is that a relief Village Manager is not an unreasonable expense to include in a Budget, it needs to be backed up with evidence as to who that Relief Village Manager is likely to be, what arrangements are made for that person to be available and evidence as to what they are paid or to be paid for providing those services;
  10. Contingencies – ACAT drew attention to the provisions in the Regulations which specify how much may be included in a Budget for Contingencies.  Regulation 38 states where the Annual Budget is $200,000 or less, the maximum amount that may be allocated for contingencies is $1,000. Once the budget exceeds $200,000, the maximum amount for Contingencies is 0.5% of the total amount of the Annual Budget.

Finally, ACAT made it very clear how it interpreted the provisions of section 166 of the Retirement Villages Act 2012 . Section 166 states the Operator commits an offence if it spends money received for a Recurrent Charges and does not spend that money in accordance with the approved annual budget (or an approved annual budget as amended under section 167). While ACAT acknowledged that there is an exception in section 166 which states that the offence provision does not apply if the spending is a change in spending between items in the approved annual budget and does not reduce the level of services the Retirement Village provides and does not cause a total spending provided for by the approved annual budget to be exceeded. When items in a Budget are allocated for particular things, for example cleaning, Presidential Member McCarthy expressed the view that it is difficult to see how the exemption in section 166 (3) could apply without reducing the level of cleaning services. In the Presidential Member's view, the nature of the Budget providing "buckets" of money for different expenditure is such that there is unlikely to be many circumstances where the exemption would apply.

This decision brings home that an Operator is not free to set whatever Budget it likes. Residents have significant power to refuse to agree to a Budget and to expect the Operator to provide sufficient information regarding the anticipated expenditure, based on evidence, to enable the Residents to make a fully informed decision. There are many good Operators in Canberra who provide the appropriate levels of transparency to their Residents. For those who do not, this decision should put the Operator on notice that they need to start doing so. Importantly, just because an Operator does not get their Budget approved, does not mean that they can reduce the Services provided to the Residents. With the legislation requiring the Operator to meet any shortfall in the Budget against actual expenditure (with some limited exemptions), the outcome of The Pines decision is at those Operators could find themselves forced into a position of having to provide the evidence, seeking a formal amendment to the Budget, or foot the bill themselves.

By Brendan Goodger 15 Dec, 2017
By Andrew Freer 06 Nov, 2017
Andrew Freer          E:  andrew@kjblaw.com.au

One of the key steps in estate planning is making a superannuation Death Benefit Nomination. These nominations can be used to direct where superannuation death benefits are paid after death.  Only certain nominations are allowed. For example, nominations can be in favour of spouses, partners, children, and those in an interdependent relationship. Nominations can’t be made directly in favour of parents, siblings or friends. A nominations can be made to direct the superannuation death benefit into a person’s estate.  It is this concept that can often cause confusion.

 Superannuation providers use varying terminology when making provision for a superannuation death benefit to be directed into a person’s estate. Each fund will generally have their own version of form to be used.

 Where a member wishes to direct their superannuation to their estate, the form can variously use the terms, ‘my Estate’, ‘my Executor’ or ‘my Legal Personal Representative’. Where the term, ‘my Legal Personal Representative’ is used, this is a reference to the person who will act in the role as your legal personal representative/executor under the terms of your Will, or in the absence of a valid Will, as the administrator of the estate. It is not a reference to your lawyer.

 We have seen situations where superannuation members have completed their superannuation Death Benefit Nomination Form by naming their lawyer in the mistaken understanding that they are identifying their Legal Personal Representative. This has the unintended consequence of making the lawyer the recipient of their superannuation death benefit, as opposed to the person’s estate. It is important to be clear on the significant consequences that this misunderstanding can have.

 Please do not hesitate to contact our office if you need any clarification or advice in relation to the making of a superannuation Death Benefit Nomination.

Andrew Freer          E:  andrew@kjblaw.com.au
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