By Laina Chan -
Snapshot
- The recent judgment in Goyal v West [2021] NSWSC 526, marks the first judicial consideration of s 182G of the Retirement Villages Act 1999 (NSW).
- The Court found that all of the unregistered statutory charges ranked ahead of registered and unregistered mortgages.
- This outcome is consistent with the beneficial purpose and intention of the Act for the protection of vulnerable residents and former occupants of retirement villages.
In Goyal v West [2021] NSWSC 526, receivers, appointed by the registered first mortgagee, had entered a contract for sale of property on which a retirement village had operated (‘the Property’). The operator of the retirement village was insolvent, and the receiver had applied for an order for sale pursuant to s 182F of the Retirement Villages Act 1999 (NSW) (‘the Act’). Joined to the proceedings were the former occupants of the retirement village, beneficiaries of statutory charges created under the Act to protect their ingoing contributions, the Catholic Diocese of Maitland – the beneficiary of an unregistered second mortgage (‘the Church Mortgage’) and an unsecured creditor. The contract for sale for the Property was contingent upon the order.
The dilemma
The proceeds of sale of the Property were insufficient to reimburse all the parties to the proceedings. It was the position of the receiver that only half of the former occupants ought to be repaid their ingoing contributions (‘the First Group’). The second group, whose statutory charges were created after the mortgages (‘the Second Group’) included the fourth and fifth defendants, an elderly couple with dementia who are impecunious and were unable to obtain legal representation to protect their interests. Two weeks prior to the hearing of the application, Ward CJ in Equity referred the matter for urgent assistant to the New South Wales Bar Pro Bono Scheme and the writer accepted the brief.
The key issue in the proceedings
The key issue for the Court was whether on the proper construction of ss 182F and 182G of the Act, the proposed order of distribution of the proceeds of sale should be made (at [53]).
The receivers said that a proper construction of s 182G of the Act meant that the proceeds of sales had to be distributed in the order in which the statutory charges and the mortgages were created. That is, the proceeds of sale would be distributed to the First Group, the first mortgagee, the Church Mortgage, the Second Group, and the unsecured creditor. The writer and her learned junior, Sarah Danne, put forward a competing construction based upon the literal words of s 182G, on behalf of the fourth and fifth defendants. They said that all the former occupants ranked ahead of the mortgagees. The third defendant adopted this construction. The First Group were ‘largely agnostic to the construction argument since, on either side’s construction, their statutory charges will be discharged …’ at [9].
