Apr 04, 2023

Class action dropped as retirement living giant cleared of contract wrongdoing

Class action dropped as retirement living giant cleared of contract wrongdoing

Six years after it began, a class action against retirement village operator Aveo Group has settled for $11 million in an anti-climactic fashion – far less than the $500 million the plaintiffs could have potentially been awarded.

Aveo Group welcomed Levitt Robinson’s class action withdrawal and their acknowledgement that the Aveo Way contract is both lawful and did not cause Aveo residents to suffer any loss.

“While both parties have agreed that the introduction of the Aveo Way contract was lawful and in accordance with industry standards, Aveo has agreed to pay $11 million in full and final settlement to bring this matter to a conclusion after six years of needless legal action. This settlement is without admission of liability by Aveo and remains subject to Court approval,” Aveo Group said in a statement.

The Aveo Way was introduced to provide many benefits we knew were important to residents at the stage in life they move into our communities. It has proven to be hugely popular with our residents, and we will continue to implement the Aveo Way, along with similar contracts.

Aveo has vigorously defended the class action since it was filed in 2017, and we are relieved to have this chapter behind us. Importantly, Aveo hopes that the conclusion of the class action will provide closure and certainty for our employees and the residents of our communities.”

The saga began in 2017 when Fairfax Media and Four Corners ran a joint investigation into Aveo’s “questionable business” practices. They alleged the operator used misleading marketing, advertising and property sales to turn profits at the expense of retirees.

They also claimed Aveo “churned” out residents to meet yearly changeover quotas that would bring in money through exit fees and house sales, and that its Aveo Way contract was not fair or legal.

Under the contract, there was a deferred management fee of 35% on the purchase price while all capital gains would go to Aveo – but they would have to wear any loss, too. There were also high exit fees, with some up to 40% of a property’s value. 

The investigation said the contracts were “complex and draconian” and that owners or residents could easily be forced to sell and move homes in certain circumstances, such as a partner’s death.

Law firm Levitt Robinson quickly brought together a class action as it claimed residents were losing money under the contract when they sold on a leasehold. It alleged misleading, deceptive and unconscionable conduct by Aveo Group.

But now, six years later, the result has not provided any meaningful outcome according to DSL Law Principal, Danielle Lim, who specialises in the retirement sector.

“I cannot see any benefit from this class action,” Ms Lim said.

“It has left a trail of affected residents, misplaced distrust and huge amounts of legal fees. By Levitt Robinson’s own admission, Aveo did not do the wrong thing and it would be unlikely that a Court would say otherwise.

“If we are looking for a positive, it is that the class action has caused the sector to stop, examine itself and take steps to ensure that it is meeting best practice. It ‘raised the bar’.”

Although Aveo Group has since updated and simplified its retirement village contracts, Ms Lim said there is a chance the retirement sector may not be able to shake the negative publicity.

“There is a lingering impact on the retirement sector that seems to be reinforced by the media on a regular basis,” she said. 

“It is unfortunate because there are so many acts of pure kindness by village staff every single day. I am baffled as to why we don’t seem to see those things in the media.”

For residents who participated in the class action, the $11 million will not stretch far as it just covers legal and administrative costs, and it remains to be seen if there will be any personal benefit.

When it first began, the class action against Aveo featured 6,200 residents. 2,500 opted out before the trial began in what was the first sign of doubt creeping in. 

Justice Anderson was steadfast in their belief the class action was not strong, and just six days into the 25-day Federal Court trial, Levitt Robinson conceded it did not have grounds for the case

“The fact that someone makes a profit doesn’t mean that someone else has an entitlement to that profit. You have to demonstrate loss,” Justice Anderson told the plaintiff.

In a regretful statement signed by Stewart A Levitt, they acknowledged defeat:

Levitt Robinson has today withdrawn the class action proceedings against Aveo. 

Levitt Robinson acknowledges that the introduction and implementation by Aveo and its related entities of Aveo Way contracts were lawful, in accordance with industry standards and that we are now satisfied that the Federal Court is not likely to find that its introduction has caused current or former residents of Aveo to suffer any loss. 

We express regret for any distress or anxiety which Aveo residents and staff have experienced as a result of or incidental to the Aveo class action litigation. 

In light of the result, Ms Lim assured retirees to not take the outcome out of context. She said this was a specific case featuring one retirement living provider and it’s necessary to have all the facts when entering a legally binding contract.

“There is no blanket conclusion that can be reached because it applies to a very specific factual circumstance relating to one operator,” Ms Lim said.

“Residents can and should go into every significant transaction with all the facts – retirement village contracts are no exception.  

“I strongly recommend that all retirees considering entering into a retirement village contract seek independent legal and financial advice from experts who work in and understand the industry.”

HelloCare reached out to the Aveo Group but did not receive a comment in time for publication.

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