In Goyal v West  NSWSC 526, Ward CJ in Eq found that the return of ingoing contributions made by residents and former occupants of Retirement Villages in New South Wales should rank ahead of the repayment of secured debt in a receivership, in almost all circumstances.
The case is the first judicial consideration of Part 10A of the Retirement Villages Act 1999 (NSW) (Act). Part 10A of the Act was inserted in 2010 to assist with protecting the ingoing contributions of residents and former occupants of retirement villages.
The Plaintiff, a receiver, sought to sell the property and assets of the operator of the Retirement Village in question. The proceeds of sale were insufficient to reimburse all its creditors, which included financiers as well as, importantly, the former occupants of the Retirement Village. All were party to the proceedings.
The receiver argued that all creditors and former occupants alike should be reimbursed, in priority order based on the time each security was created, including by reference to the statutory charges of the residents or former occupants. A statutory charge in favour of a resident is created by virtue of the Act, on the date that resident enters into a ‘village contract’ to which Part 10A applies. Relevantly, the operator of the Retirement Village had granted both registered and unregistered security to different financiers, after the creation of some of the residents’ statutory charges, but before others. In the circumstances, the orders sought would have resulted in some, but not all, of the former occupants being reimbursed their ingoing contributions.
The fourth and fifth defendants were husband and wife, both former occupants of the nursing home and both afflicted by dementia. They had both entered into a ‘village contract’ after the financiers had been granted security. The Court appointed their daughter as a tutor in the proceedings and it was argued on their behalf that, considering the purpose and context behind Part 10A, a proper construction of s 182G ranks the entitlements of all the former occupants of the Retirement Village equally and, importantly, ahead of the interests of other secured creditors. It was put forward that this position arises on the literal interpretation of s 182G. It was also submitted that the clear intention of the legislature was that the indefeasibility provisions of the Real Property Act 1900 (NSW) were to be overridden by the charges created under Part 10A of the Act in certain circumstances, with reference to the decision of the High Court in South-Eastern Drainage Board (SA) v Savings Bank of South Australia (1939) 62 CLR 603.
The Court determined that s 182G of the Act did operate to protect the ingoing contribution of all residents ahead of the secured creditors, such that all former occupants in the proceedings were repaid their ingoing contribution.
Sarah Danne appeared for the fourth and fifth defendants, led by Laina Chan.
Click here to view the profile of Sarah Danne