Hillsborough Heights Village Management Limited v Accident Rehabilitation and Compensation Insurance Corporation

IN THE DISTRICT COURT OF NEW ZEALAND WELLINGTON REGISTRY Decision NO 203 / 97 DCA 86/97 UNDER The Accident Rehabilitation and Compensation Insurance Act 1992 IN THE MATTER of an Appeal pursuant to Section 91 of the Act BETWEEN HILLSBOROUGH HEIGHTS VILLAGE MANAGEMENT LIMITED AND HIBISCUS COAST VILLAGE MANAGEMENT LIMITED Appellants AND ACCIDENT REHABILIATION AND COMPENSATION INSURANCE CORPORATION a body corporate duly constituted under the provisions of the said Act Respondent DECISION OF JUDGE M J BEATTIE The issue in this appeal is the determination of the correct premium classification description of the appellants for the purposes of section 101 and 103 of the ARCI Act 1992 for the years 1992 to 1995 inclusive. This appeal is being determined on the papers at the request and consent of the parties. 2 Background Facts In 1996 the Corporation began a process of assessing the premium classification units of employers from 1992 to 1995 and re-classifying those employers who, in the Corporation's opinion, were incorrectly classified for those years. Employers were requested to submit a description of their activities for those years to the Corporation for the purposes of that re-assessment. The appellants were two such employers so requested. The appellants are associated companies and are both wholly owned subsidiaries of Private Life Care of N Z LTD. In turn each of the appellants has an associated company with which each operates in tandem. They being Hillsborough Heights Village Limited and Hibiscus Coast Village Limited respectively. Those companies own and operate the retirement villages at Hillsborough Heights and Hibiscus Coast respectively. This appeal concerns the classifications of the two management companies associated with those two retirement villages. For the years 1992 - 94 both appellants used the industrial activity "Property Letting and Operating... Business of ... Class 42" and for 1995 they used the newly named classification unit "Residential Property Operators - 77110". On the basis of information provided by the appellants the Corporation re- assessed the appellants premium classification. For the years 1992 to 1994 inclusive the Corporation re-classified the appellant's industrial activities as "Domestic Services (including casual work at private residence) provision of - Class 3 43". For the year 1995 the Corporation re-assessed the unit classification as "accommodation for the aged - 87210". The Review Officer in his decision of 11 March 1997 upheld the Corporation's classifications. In this appeal the appellants contend their original classifications were correct. The Evidence The first evidence of the appellants activities came from Scott Conway, the Group Accountant for Private Life Care of NZ Ltd in a letter undated in August 1996 to the Corporation. That letter is as follows: "HILLSBOROUGH HEIGHTS VILLAGE MANAGEMENT LTD - P4763382E HILLSBOROUGH HEIGHTS VILLAGE LTD H4062681E HIBISCUS COAST VILLAGE MANAGEMENT LTD U4904193E HIBISCUS COAST VILLAGE LTD G4750288E I am writing in response to your letters dated 24 June 1996 regarding the ACC premium classifications used for the above companies. Firstly, let me apologise for the delay in reply. I had agreed with our General Manager, Villages, Ralph Stillwell that he would reply to your letters. Unfortunately he then caught pneumonia, and has been off work for several weeks and so was unable to do so. I spoke to you at the end of July in general terms about how our villages operate. I thought then that I would put in writing some of the key issues which we believe distinguish us from aged care facilities such as rest homes and geriatric hospitals. I will also address the reasons why we have used the classification units that we have in the pasts. 4 The two companies named above which do not have the word management in them are our marketing companies. Their entire payroll consists of three or four people whose job it is to show prospective residents around, and hopefully convince them to buy a unit or apartment in our village. We should perhaps have been using a sales/marketing classification unit for these two companies rather than using the retirement village code or its previous equivalent. The two companies named above which have the word management in them are the two companies that actually run the village. All our administrative, restaurant, cleaning maintenance and other operation al staff are paid through these companies. That is why in 1996 we used the retirement village operation classification unit. Prior to that there was no specific classification for retirement villages so we used the code for residential property operators as we believe that best described the kind of business we are in. Prior to that we had used code 42 - administration as we thought it to be the best available description at the time. During our telephone conversation you suggested we could have used the residential care for the aged classification. I think it is important to stress that while the hospitals that our group operates provide care for the aged, our villages provide accommodations not care. I think this point is perhaps fundamental to deciding which category we come under Unlike many retirement complexes we have no resthome or hospital as part of the operation. In fact there should perhaps be two retirement village classifications; one for those with resthome/hospital facilities and one for those without. We have no specialist medical equipment available. We have no medical staff of any description, except for one nurse who is available during the day, and on call at night if an emergency arises. We have no facilities for those requiring on going geriatric care. Our villages are for active retired people. Quite often people have to move out of our village and into a resthome because they have become to frail for us to cope with. 5 Rather than providing nurses, bedpans and spongebaths we provide a bowling green, swimming pool and workshop. We have two types of accommodation available in our villages; - two bedroom units and serviced apartments. The units are just like any other two houses development where a number of people chose to live together in close proximity but quite independently. The only additional benefits of living in one of our villages are the extra security, the companionship of other retired people and the availability of the facilities such as the bowling green and swimming pool. The serviced apartments are smaller and provide additional services such as cleaning and meals are provided at the village restaurant (and it is a restaurant not just a dining room). Accordingly they pay a higher body corporate fee. So as you can see we are very different from the traditional operations of resthomes and geriatric hospitals. That is why we wish to be classified more along the lines of a hotel operation than an aged care operation. As I have emphasised above we provide accommodation and security rather than care. We can't look after a person requiring specialised care any better than a hotel can. Indeed many hotels have better and more extensively equipped medical facilities than we have. I trust these points that I have outlined will assist you as you address the whole issue of classifying various types of facility. I don't know if you travel to Auckland very often, but if you do, and would like to visit one of our villages to get a better feel for the type of operation that it is, I would be happy to arrange it for you." At the review hearing the appellants made written submissions and were represented by Mr Conway and Mr Stillwell a Director of Private Life Care and its General Manager. Those submissions in effect contain further evidence and were as follows: 6 "1995 Reclassification We believe that through a lack of understanding of the nature of our operation, ACC has incorrectly classified us as providing Residential Care for the Aged, lumping us into the same premium bracket as geriatric hospitals and resthomes. We believe it would be more accurate to group us with such activities as motels, hotels, or residential property letting. We are distinguishable from aged care facilities for the following reasons:- (1) Except for one nurse (for 300 people) who is on call for emergency, we don't provide nursing care. Apart from a stethoscope and a blood pressure monitor, we don't have any medical equipment. (2 ) Unlike a hospital or resthomes, our residents don't just pay a weekly fee to stay in the room allocated to them. They actually choose an available unit or apartment and then purchase it for some considerable amount ($125,000- 230,000). It is theirs. They own it, and can sell it should they choose to do so. The weekly fee residents pay is not for the accommodation, but for such services as grounds maintenance, management staff, meals (should they so desire), cleaning, and body corporate charges such as rates. The company uses these charges to operate and maintain the village, just as any landlord of say, an apartment block would. (3) It is not uncommon for our residents to have to move to a resthome because they required aged care which we can't provide. (4 ) We provide accommodation, not care, and believe it is discriminatory to categorise us as providing aged care just because our residents are 55 years old or more. If the same structure existed but our residents were aged 25 - 40 there would be no suggestion by ACC that we provided aged care. So where is the cut-off? 7 (5) Our villages provide amenities such a bowling green, swimming pool, croquet lawn, carpentry workshop and putting green; - hardly facilities usually associated with elderly people requiring "aged care." (6) Our village is marketed as lifestyle village for active retired people. Our residents purchase units because of the companionship of having lots of other people of a similar age around, and the security of living within our complex. They don't come because they need or want a certain level of care as they know we don't provide it. 1992 - 1994 Reclassification For reasons similar to those outlined on Sheet 1 (particularly point 2), we believe our use of class 42, "Property - Letting and Operating" was justified. It certainly stands up to more scrutiny than ACC's suggested alternative "Other Private and Government Services", which seems to be a bit of a fuzzy catch all. There are several descriptions in the ACC premiums book which relate to residential property so we can't see why ACC should find it necessary to resort to the class they suggest. Surely this should only used if there is no other possibility." Further evidence has now been adduced for the purposes of this appeal, such evidence being that Mr Silk another Director of each appellant in an affidavit. Mr Silk stated that parts of the evidence previously given were incorrect and that a finding by the Review Officer on page 13 of his decision set out below was incorrect because it was based on incorrect information previously supplied. "Clearly there is a distinction there between the Hillsborough Heights Village Lid and Hibiscus Coast Village Lid (being the two companies involved in the marketing of the units for sale) and the management companies under consideration, the former selling some form of accommodation to the aged with the latter providing certain domestic services for the aged." 8 "It is also established that the residents purchased an apartment or unit from a separate marketing company to that involved in the provision of services to the residents which is the management company. These services are clearly of a domestic nature". Mr Silk in his affidavit there upon sets out, inter alia, what the appellants contend to be the correct evidence on these matters. The reality is that Mr Silk's evidence simply assists in clarifying the different roles and functions of each duo of companies in relation to the two retirement village complexes and I do not consider the Review Officer's findings to be inconsistent with what Mr Silk is now stating. His evidence, (paraphrased) is as follows. The Hillsborough Heights Retirement Village and the Hibiscus Coast Retirement Village are owned respectively by Hillsborough Heights Village Ltd and Hibiscus Coast Village Ltd. Each leases and manages residential units and serviced apartments. Individual leases are issued pursuant to a prospectus. The majority of the lessors obligations under each lease are carried out by the respective management companies - the present appellants - who are appointed as agents for the village owning companies. This agency arrangement is recorded as a specific term of each lease and is stated in the prospectus. Clause 11.1 of the Standard Lease states as follows: "The Lessor will construct, maintain and keep in good order repair and condition (including the responsibility for fair wear and tear) the interior and exterior of the village centre and of all the buildings, structures and improvements comprising the land and buildings structures from time to time existing on that land including all 9 plant fittings, fixtures, equipment and appliances and will conduct, manage and operate the village as a high quality retirement village during the term of this lease and will pay the operating expenses of the village not otherwise payable by the lessee as herein provided or payable by all the responsibilities of any lessee or other occupant of part of the village." 11.5 talks of the lessor's obligations of maintenance of all common facilities. It was because of these matters that the management companies were established. Exhibit E to Mr Silk's affidavit sets out a list of the various job descriptions of the staff employed by the two management companies. The number in brackets is the number of full time equivalent staff employed in that position at each village. "MANAGER (1) The Village Manager is responsible for the co-ordinating and controlling of all facets of the Village, ensuring its successful and cost effective operation. Other overriding responsibilities include the monitoring of financial performance, budget preparation, efficient use and management of staff and cost control. Responsible for maintaining and improving Village Policies and Procedures. OFFICE MANAGER (1) Responsible for the accounting function including point of sale, debtors, creditors, wages & PAYE, as well as providing bi-monthly financial statements. Supervises receptionist and assists village manager in a wide range of administrative tasks. RECEPTIONISTS (1.5) 10 Receptionists are responsible for the daily operation of the front counter, including telephone duties, bookings for restaurant, hairdresser, doctors, processing residents accounts, postal sales, preparation of banking monies, accepting and recording of all maintenance requests. Assists in the preparation of monthly account reconciliations as requested by the Office Manager and ensures the prompt and efficient friendly operation of reception desk at all times. NURSES (2) The Nurses provide supervisory support and assistance to residents by ensuring that the necessary social and medical support is available to residents through local and national agencies. Nurses assist doctors who visit the Village weekly and act as practice nurses. Village nurses monitor the 24 hour Emergency Call System, assess needs of residents and arrange access to such external health support as is required to enable residents to maintain their independence. Ensures ongoing education to promote ways and means of providing healthy, active lifestyles, as well as assisting in the arranging of social and recreational activities with the Village. They are also responsible for staff rosters and duties of community cleaners. CLEANERS (3.5) To ensure a high standard of housekeeping, cleanliness and hygiene is achieved in all areas, both public and private. To implement the cleaning schedules and day-to-day management of their respective areas. CHEF (1)/ASSISTANT CHEF (1) To operate an efficient and cost effective Kitchen and Restaurant and contribute to the overall wellbeing of all those eating in the Restaurant by providing healthy, nutritious meals that are interesting and varied. To plan and implement menus to meet all set standards of content, meal cost, quality quantity and service. To manage the food budgets, staffing levels and rostering. KITCHEN ASSISTANT (2) 11 To assist in food preparation, serving or meals, general kitchen and utensils cleaning, and other related tasks as directed by the chef or assistant chef. HOSTESS (2) Assist with the smooth running of the restaurant. General waitressing duties, clearing tables and assisting residents as required. MAINTENANCE STAFF (4) To assist in all aspects of the maintenance of buildings and plant, grounds and gardens to ensure an efficient and cost effective village maintenance service. To prepare annual programmes for Repetitive Maintenance Projects, Planned Maintenance and Grounds Maintenance and ensure they are implemented and reviewed on an ongoing basis. To ensure that the Maintenance Request System is used correctly and that the correct follow up procedure with residents is adhered to. When contractors are required for specific jobs ensure work is supervised to ensure quality results and all regulations are followed. Maintain all areas of the village to ensure they are kept in a hygienic condition especially around the pools and rubbish areas. Ensure company vehicles and plant are kept in good condition and that machinery and equipment is used correctly." It is the appellant's contention that this analysis establishes that the major function of the appellants is to provide property management and related services and not domestic services. In addition to Exhibit E a comprehensive brochure of the villages operation was produced. From that brochure it can be established that the concept is to provide a lifestyle and facilities which enhance and enrich individual independence, dignity and freedom. Residents have the privacy of their own home and security offered by a caring community for the rest of their life. 12 An objective is the creation and management of the most prestigious residential village in Australasia while meeting the needs of senior adults in an economically viable way. Emphasis is placed upon care, support, service and personal security. THE LAW Section 103 of the ARCI Act 1992 provides: 103. Classification of industries ---(1) Employers and earners who are not employees shall be classified into industry classes defined in regulations made under this Act for the purposes of setting premiums payable under sections 101 and 102 of this Act. (2) Premiums set under sections 101 and 102 of this Act shall be determined for each industry class defined under subsection (1) of this section. (3) Subject to this Act, the Corporation shall decide which classification of industry is appropriate in relation to any employer or earner who has earnings other than as an employee by whom a premium is payable. (4) ... The relevant regulations in respect of the Appellant's classifications were: 1992: Accident Rehabilitation and Compensation Insurance (Employment Premiums) Regulations 1992 (1992/ 153). 1993: Accident Rehabilitation and Compensation Insurance (Employment Premiums) Regulations (No.2) 1992. 1994: Accident Rehabilitation and Compensation Insurance (Employment Premiums) Regulations 1993. 13 1995: Accident Rehabilitation and Compensation Insurance (Employment Premiums) Regulations 1994. Under clause 2 of the 1992 (No. 2) and 1993 Regulations "industrial activity" means: the industry, trade, business, profession, or undertaking of an employer or a person who has earnings other than as an employee, as determined by the nature of the goods or services produced or rendered by that employer or person who has earned other than as an employee; or if no goods or services are produced or rendered, is determined by the nature of the employment. Under clause 2 of the 1994 Regulations, "classification unit" has the same meaning as the meaning of "industrial activity" in the earlier Regulations. Clause 3(b) of the 1992, 1992 (Nos. 2) and 1993 Regulations provides: Except as provided in Regulations 4 and 6 of these Regulations, employees shall be also classified according to the description of the industrial activity, as set out in the Schedule of these Regulations, which most accurately describes their employer's classification unit, or where, because of the nature of the employee's work within a particular description of an industrial activity of an employer, more than one division is prescribed in relation to that particular description, shall be classified in the division within that description which is appropriate to the nature of their work" Clause 3(b) of the 1994 Regulations is the same as above, except it refers to "classification unit" rather than "industrial activity". It is clear from the provisions of section 103(3) that it is for the Corporation to determine which classification of industry is appropriate in relation to any employer and not for the employer. It is not evident on the papers as to how the appellants came to be the initial determiner of their classification and as to 14 why this determination was not questioned at the time it was proffered. The file indicates that associated companies similarly made their own determination which have also been re-assessed but which are not the subject of this appeal. It may well be that the Corporation lacked the resources but such is speculation and it is not an issue that it is the right of the Corporation to decide the appropriate classification unit. CLASSIFICATION FOR 1992 - 1994 Having regard to the facts as I have recorded them I find that I cannot accept that the appellant's own classification of its activities as being "Property Letting and Operating, Business Of" as being correct. The two management companies did not engage in the letting or operating of their residential units or serviced apartments. That is the function of the associated company. The management company is merely the agent of the lessor company and performs the services which provide and maintain the various lifestyle facilities which are offered as part of the retirement village concept. I agree with counsel for the respondent's submission that the job description of the various employees as contained in Exhibit E from Mr Silk's affidavit can be described as domestic services; these including cleaning, nursing care, cooking, maintaining grounds and buildings, hostess and reception. The association with "property letting and operating" is tenuous to say the least and it has not been suggested by the appellant that there is any other classification which might be more appropriate than that which the Corporation has determined other than the one that they are promoting. A key component of the classification as submitted by the appellants is "property letting". No such activity is part of its description and whilst some of 15 its activities may be said to come within the description "property operating", the absence of the former is fatal to its "appropriateness" for the purposes of section 103(3) of the Act. I find the description to be conjuctive rather than disjunctive. I find that the classification "domestic services" is more appropriate for the appellants activities. The classification system prior to 1995 was based on the New Zealand Standard Industrial Classification systems (NZSIC) and under that system domestic services include: . Domestic service in private households such as housekeepers, cooks and laundresses. . Chauffeur, domestic service . House minding, cleaning and security . Domestic service, private, indoor and outdoor. I agree with the submission of counsel for the respondent that that description encompasses the activities listed by the appellants as set out in Exhibit E of Mr Silk's affidavit and that the description domestic services is the appropriate classification. Accordingly I rule that the decision of the Review Officer be upheld. 1995 CLASSIFICATION The appellants' classifications were "residential property operators". The employer premium regulations were changed in 1994 and new categories were established. A new classification system was based on the Australian and New Zealand Standard Industrial Classification (ANZSIC) system. Under that system residential property operators are described as "Units mainly engaged in 16 renting or leasing their own or leased residential properties (including space in such properties) or dwellings (other than holiday houses or flats) to others". Primary activities Apartments (except holiday apartments) renting or leasing Buildings renting or leasing Flats (except holiday flats) renting or leasing Houses (except holiday houses) renting or leasing I have already found that it is not the activity of the appellants to be engaged in the renting or leasing of their own or leased residential properties. The appellants are the management companies. Their prime role is to carry out the services which the village owning companies state are part of their objectives and concepts and which in large part they are contractually obligated to provide to the residents. The Corporation contends that the classification unit "Accommodation for the Aged" is the appropriate classification. The ANZSIC system describes this category as: "units mainly engaged in providing long term care, accommodation or homes for senior citizens where nursing or medical care is not provided as a major service. Primary Activities Accommodation for the aged Residential Care for the aged operation operation" Again in relation to the classification for 1995 no further alternative classification has been submitted by either party as being possibly appropriate 17 and it therefore falls to be determined which of the competing claims is the more appropriate. Having regard to the facts and the findings that I have previously made I have little difficulty in holding that the classification made by the Corporation is the more appropriate classification unit for the 1995 year. It is noted that a new classification "Retirement Villages" has been included from 1996. The appellants accept that classification, the description of which is virtually identical to "Accommodation for the Aged." Accordingly the Review Officer's decision for the 1995 year is similarly upheld. For the foregoing reasons this appeal is dismissed. DATED at WELLINGTON on this 29th day of September 1997 M J Beattie District Court Judge Hillsbor.doc(gm)