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Atkin, Bill --- "The Elderly, The Law and Accommodation Arrangements: Some Reflections From New Zealand" [2003] ElderLawRw 10; (2003) 2 Elder Law Review 33


Bill Atkin[1]


This article looks at various aspects of agreements that elderly people in New Zealand may enter into. In particular, it will look at agreements relating to accommodation, but many of the principles are not limited to such agreements. Special legislation on retirement villages is currently before the New Zealand Parliament and it contains some interesting features that will be commented upon. The umbrella legislative framework for rest homes and similar institutions has also recently been updated.

Apart from such legislation, the ordinary law of contract and equity governs arrangements that the elderly enter. One of the initial questions to be explored is that of contractual capacity. What are the consequences of a lack of capacity? Where a person lacks capacity, what provision is there for someone else to make decisions on that person’s behalf?


(a) The tests for incapacity

A fundamental question to be considered in assessing the effect of an agreement is that of capacity.[2] The issue is not limited to agreements entered into by the elderly but is especially pertinent to them. It breaks down into several other questions - what level of capacity is needed? What is the effect of incapacity? What other factors affecting capacity in the broadest sense can come into play?

Several key New Zealand cases have dealt with these issues. In Scott v Wise,[3] the Court of Appeal accepted that the law should recognise people’s differing capacities for different purposes. The High Court Judge had held that the standard for contractual capacity in the circumstances of the case was the same high one as is necessary for the making of a will. The Court of Appeal rejected this, holding that ‘[t]he law requires in a case such as this that a person entering into it is able to understand the nature of the transaction when it is explained to him. It follows that the capacity required is related to the transaction’.[4] Thus, the capacity needed to buy a loaf of bread is quite different from that required for a sophisticated commercial deal.

On the facts of the case, Mr Scott was aged 71 at the relevant time. Shortly after, he was diagnosed with dementia and became a protected person under the Mental Health Act 1969.[5] The transactions in question related to the establishment of a family trust with a sale and mortgage back of farm land. Mr Scott had an illegitimate daughter who had been adopted by strangers but with whom he had later in life developed quite a relationship. The proceedings challenging the family trust were really designed to keep alive the illegitimate daughter’s prospects of inheritance. A lot depended on which will was legally valid, a matter that need not delay us here. The High Court Judge held that there was a lack of capacity in these circumstances because ‘the transactions were of such tremendous significance that he needed to have drawn to his attention not only those whom he was benefiting but also those whom he was excluding’, viz the illegitimate daughter.[6]

The Court of Appeal was less impressed by this reasoning, because the transactions were not particularly unusual and did not denude Mr Scott completely of his property but actually left him with quite a few assets. It thought that a bare reading of the evidence suggested no lack of capacity. However, the existence of Mr Scott’s senile dementia could not be ignored. There was no conclusive evidence that he suffered from this at the date of the transactions. If he was supposed to be sane at the time, he would have to have gone down hill far too quickly given his condition several months later. The Court of Appeal accepted medical evidence that in effect read senile dementia back to the earlier point, with the result that there was a lack of capacity at the relevant time even on the lower standard adopted by the Court of Appeal.

(b) Effect of incapacity on third parties

What then is the effect of incapacity on third parties? If a third party has signed an agreement with someone who gives no indication of a disability and who may well have had legal advice, is the third party left high and dry? For some time in New Zealand, it was thought that the party lacking capacity could avoid the contract so long as the contract was objectively unfair. So, in Archer v Cutler[7] there was held to be unfairness because the price an elderly woman suffering from senile dementia received for the sale of some land was significantly below its true value. Further, she had not received independent legal advice nor she did have a complete grasp of the details of the transaction.

The approach in Archer v Cutler was effectively struck down by the Privy Council in O’Connor v Hart.[8] Mr O’Connor, a man in his 80s, was trustee of farm land that had been subject to a testamentary settlement on the death of his father back in 1911. On advice from the solicitors who had long looked after the trust, the property was eventually sold in 1977 to Mr Hart. There was no obvious sign that Mr O’Connor was mentally incapable, but a finding to this effect was made. The Privy Council held that the earlier New Zealand view was wrong:

Their Lordships have not been referred to any authority that a Court of equity would restrain a suit at law where there was no victimisation, no taking advantage of another’s weakness, and the sole allegation was contractual imbalance with no undertones of constructive fraud. It seems to their Lordships quite illogical to suppose that the Courts of common law would have held that a person of unsound mind, whose affliction was not apparent, was nevertheless free of his bargain if a contractual imbalance could be demonstrated which would have been of no avail to him in equity. Nor do their Lordships see a sufficient foundation in the authorities brought to their attention to support any such proposition. [9]

It was held that the person with incapacity could avoid a contract such as this only if the other party knew of the incapacity or it was a case of equitable fraud. Neither of these conditions existed on the facts.

(c) Equitable fraud

Examples of equitable fraud are where there has been undue influence or an unconscionable bargain. In Scott v Wise (discussed above),[10] attempts to amend pleadings to include such pleas were refused because no evidence was presented to justify the claims. But unconscionable bargain was a secondary basis for refusing specific performance in Archer v Cutler,[11] even though the first basis no longer survives O’Connor v Hart. McMullin J set out the relevant conclusions as follows:

While I accept that the plaintiff had no knowledge of the defendant’s unsoundness of mind and has not been shown to have set out to take her at a disadvantage, he was aware of her advanced years and some manifestations of her eccentricity. I hold that these matters, together with the defendant’s lack of advice and her disadvantaged bargaining position brought about by her unsoundness of mind are such as to create such an inequality between the contracting parties that the bargain must be regarded as unconscionable particularly when the sale was made at a significant undervalue.

The difficulty with this analysis is that it echoes very closely the set of factors that led to the conclusion that the agreement was unfair (now rendered illegitimate by O’Connor v Hart). Whether the level of inequality and exploitation was really sufficient to constitute equitable fraud is doubtful but this is not the place to pursue further the precise elements of equitable defences.[12]

(d) The balance has shifted

The law just discussed attempts to draw a balance between the position of the elderly vulnerable contracting party and the third party contractor. For a while the balance was tipped in the elderly person’s favour, because the Court could examine the substantive impact of an agreement on the elderly person. That however cut across the traditional principles of freedom of contract and caveat emptor, and prejudiced the innocent third party.

The balance has since been struck in favour of the third party at the expense of the vulnerable person. It could well be argued that this is appropriate in the interests of certainty. Only if the third party is in some way to blame, for example has exploited the other person’s vulnerability, can the agreement be challenged. Yet, this leaves the elderly person open to being ripped off. While a grossly unfair agreement may point to some improper advantage, it will not necessarily do so. The innocent third party might well walk away with a real bargain.

(e) Capacity and accommodation providers

How does all this relate to the provision of accommodation for the elderly? Providers of rest homes, retirement villages, and other forms of residence will have to conduct their affairs in the light of specific legislation to be discussed later. In addition, the ordinary rules of contract, in so far as they are not modified by legislation, will apply to agreements made with the elderly. Any provider who deals with an elderly person who ostensibly looks frail should be aware that, even under O’Connor v Hart, a contract may be set aside, because a Court might well determine that there was knowledge of incapacity.

Most providers are likely to have well scrutinised and standard arrangements that stand the test of time. Nevertheless, they would surely be wise to check out whether there is someone appointed to act on behalf of the elderly person (discussed in the next section), or otherwise should insist that the elderly person has independent legal advice.

If the elderly person is not so obviously frail, experience suggests that that person may nevertheless lack contractual capacity. Although the law is softer on a third party without knowledge of such incapacity, a provider of accommodation for the elderly should be skilled and professional enough not to leap too readily to conclusions and should make appropriate inquiries. A conservative approach to contract formation is often going to be a sensible path.


The problem of a person’s capacity to enter a contract is avoided if someone else can fulfil this function. The elderly may suffer from serious mental incapacities such as Alzheimer’s disease or they may simply be getting older and frailer and less able to make wise and sensible decisions.

In many jurisdictions, there are various legal procedures which enable one person to act on behalf of another. In New Zealand there has long been legislation under which a Court could appoint a property administrator. The Aged and In firm Persons Protection Act 1912 was updated following the passage of the Protection of Personal and Property Rights Act 1988. This Act transferred jurisdiction from the High Court to the Family Court, and contains the important principles of least restrictive intervention and encouragement of independence.

Apart from offering mechanisms for dealing with property, the Act does the same for personal issues and provides for enduring powers of attorney. There is also inherent jurisdiction vested in the High Court for both personal and property matters,[13] but this jurisdiction is now very rarely resorted to, given the advent of modern legislation. The 1988 Act therefore represents the principal source of law in New Zealand on proxy decisions making.

Under the 1988 Act, the main ways in which agreements or arrangements may be made on behalf of an elderly are as follows:

court order
appointment of a welfare guardian
appointment of a property manager
appointment of an attorney under an enduring power of attorney.

(a) Court orders

The Family Court can make a range of orders affecting the personal lives of people lacking capacity, including the elderly. These orders range widely from health decisions to the appointment of legal representatives. The basic jurisdictional test is found in s 6. The question is whether the person:

(a)Lacks, wholly or partly, the capacity to understand the nature, and to foresee the consequences, of decisions in respect of matters relating to his or her personal care and welfare; or
(b)Has the capacity to understand the nature, and to foresee the consequences, of decisions in respect of matters relating to his or her personal care and welfare, but wholly lacks the capacity to communicate decisions in respect of such matters.

Furthermore, sub-s 3 states:

The fact that the person in respect of whom the application is made for the exercise of the Court’s jurisdiction has made or is intending to make any decision that a person exercising ordinary prudence would not have made or would not make given the same circumstances is not in itself sufficient ground for the exercise of that jurisdiction by the Court.

Two orders are of special interest in this article. First, the Court can make orders with respect to small amounts of property or income without going to the extent of placing the property under full formal management.[14] A person can be appointed to administer such property or income so long the item of property does not exceed $2000 in value or the income $20,000 per annum. Thus, if an elderly person was receiving New Zealand superannuation from the State or income from a trust or some other kind of retirement fund, the money could be put in the hands of a trusted person to administer on the elderly person’s behalf. If a sizeable portion of the money is to cover accommodation, for example in an old people’s home, then there is unlikely to be much left over to worry about.

Secondly, the Family Court can make an order ‘that the person shall enter, attend at, or leave an institution’ (other than a psychiatric institution).[15] This means for example that an order could be made that a person enters a rest home. The institution concerned is not bound by such an order unless it is a party to the proceedings,[16] which effectively means that the institution must consent. The Court can also make an order that the person be provided with ‘living arrangements’ as specified in the order.[17] These various powers enable the Court to institutionalise people, shift them from one institution to another, and move them from an institution into the community.

As an example, where it appeared that a rest home was not properly looking after its residents, the Court ordered their removal to another home. [18] Judge Mather said:

The inescapable conclusion, having heard the evidence on behalf of [the trust running the rest home], is that it is an organisation in crisis, with a siege mentality, perceiving itself to be persecuted by forces intent on its destruction...there was also considerable evidence, which I found troubling, that various degrees of coercion were applied to residents to stay, or express a wish to stay, and latterly impediments raised to their being shown alternative accommodation. [19]

Fifteen psycho-geriatric patients were ordered to be moved to other institutions and unenforceable recommendations were made with respect to two other patients over whom the Court did not have jurisdiction. It follows from all this that any agreement about institutional care entered into on behalf of a person will be subject to the overriding powers of the Court, although this point is not explicitly made in the legislation.

The full impact of the Court’s powers over a person’s living arrangements has been the subject of some dispute. Some orders have contained powers of restraint and seclusion.[20] However, the Law Commission has taken the view that serious doubt exists as to whether the 1988 Act confers coercive powers.[21] The Law Commission went on to recommend that the Act be changed to permit the Court to direct that a person may be subjected to physical restrictions but that the direction ‘must be expressed with such particularity as the circumstances permit and must record the purpose for which the direction is given’.[22] The intention is that such directions would not frequently be given.

Whether the Law Commission’s assessment of the current law is correct is open to some doubt. Section 10(1 )(d) - providing for orders about institutionalisation - is, on the face of it, very clear. The Court may make an order that ‘the person shall enter, attend at, or leave an institution’. How can this be consistent with the person’s failing to comply with the order? It is coercive. Again, an order under s 10(1)(e) - providing the person with living arrangements - makes little sense unless it can be enforced.

The leading case is the somewhat opaque decision of the High Court in In the matter of A, where it is stated that ‘[i]t is not in dispute that under section 10(1 )(e) of the Act the Court has power to order that a person be provided with living arrangements of the kind specified in the order’. [23] The Family Court order which the High Court upheld contained the words ‘including the use by the Centre of such reasonable restraints on the patient as are necessary in the patient’s welfare and interests, and for the safety of others, both within and outside the K Centre complex’. In other words, the High Court accepted that a person could be restrained in the manner ordered. The judgment in that case also referred to an application to add the words ‘including seclusion’[24] . It is not clear what happened to that application but it is noteworthy that the High Court did not express any reservations about such a provision.

Under s 10(4), the Court may make supplementary orders and give additional directions ‘as may be necessary or expedient to give effect, or better effect, to the personal order’. In Re R [a protected person],[25] Judge Inglis QC accepted that there was jurisdiction under s 10(4) to grant what was in effect a restraining order on a caregiver (in the end he declined to do so on the facts). Surely therefore, a Court should be able to make an order or give directions with respect to the restraint of the protected person.

All this implies, it is suggested, that the Court has wide powers which operate alongside but independently of agreements entered into for the accommodation of an elderly person.

(b) Appointment of Welfare Guardians

The Family Court has power to appoint someone to make personal decisions on behalf of another person.[26] Such a welfare guardian can be given ongoing powers which bypasses the need to go back to the Court for specific orders every time. On the other hand, the appointment of a welfare guardian is a fairly drastic step and if a one-off Court order is all that is needed, then the Court will not make the guardianship appointment. This happened in a case where an elderly woman’s primary needs related to accommodation and a Court order placing her in a rest home sufficed.[27]

In any event, the jurisdiction to appoint a welfare guardian is narrower than that allowing the Court to make specific orders. Section 12(2) states:

A Court shall not make an order [appointing a welfare guardian] unless it is satisfied—

(a)That the person in respect of whom the application is made wholly lacks the capacity to make or to communicate decisions relating to any particular aspect or particular aspects of the personal care and welfare of that person; and
(b)That the appointment of a welfare guardian is the only satisfactory way to ensure that appropriate decisions are made relating to that particular aspect or those particular aspects of the personal care and welfare of that person.

While this provision says ‘wholly lacks the capacity’, this does not require the person to lack capacity for every purpose but only with respect to the particular area of the person’s life for which the guardianship orders are being sought.[28] It is not therefore necessary to show that the person is in a coma or a vegetative state. The order appointing a welfare guardian should however refer quite specifically to the powers that are conferred on the guardian and may therefore relate to limited aspects of the person’s life.

One of the leading decisions on welfare guardians involved the residential arrangements for a numbers of people with severe intellectual handicaps, but it is also relevant to the elderly. In the matter of A[29] concerned patients at a psychopaedic hospital. The relevant order had placed these people in the hospital and gave the welfare guardian power ‘to consent to the continued placement’ in the hospital. It was argued that this meant that the welfare guardian could withhold consent with the object, for example, of the person’s being located elsewhere in the community.

The High Court rejected this. Ellis and Doogue JJ took the view that the power given to the welfare guardian did not include a power to cease placement at the hospital and consent to a placement elsewhere. ‘A specific positive authority does not and cannot authorise some other course in conflict with the very order of the Court’.[30] This rather narrow construction meant that on occasions the parties would have to return to court every time a change in residence was contemplated.

The latter case took a restrictive view of what a welfare guardian could do on behalf of another person. While to a certain extent it turned on the terminology in the particular order appointing the welfare guardian, it is also illustrative of a paternalistic mindset with respect to residential arrangements. This might well be justified in some instances but it might also be very constraining. The real protection for the person should be in the original decision to appoint a welfare guardian, selecting the right person and monitoring the exercise of the proxy powers.

(c) Appointment of property manager

The Family Court has power to appoint a person as the manager of a person’s property.[31] Provision also exists to enable a person to approach a trustee corporation to take over the administration of that person’s property. The trustee corporation can accept such a task without a Court order but must file the application with a court.

The basic test for determining whether a manager should be appointed by the Family Court is that the owner of the property ‘lacks wholly or partly the competence to manage his or her own affairs in relation to his or her property’.[32] On the face of it, this is potentially a very broad test, but the Court has a discretion whether or not to grant an order and will not do so unless it is the least restrictive form of intervention.

A couple of illustrations will suffice. In Re G,[33] the person had a psychiatric illness which led him to obsessively buy books on nutrition and gardening, along with food processing gadgets, all necessary for his health, so he believed. For example, he had 1200 books of the kind mentioned. The result was that he was unable to pay other regular bills. The issue came to a head because he was about to inherit $40 000. The Judge took the view that there was jurisdiction in this situation and that an order should be granted. His reasoning was as follows:

One approach to problems such as this is to say that people should be free to spend their own money as they see fit. Many people could be described as ‘spendthrifts’ and spend money unwisely. That in itself would not be sufficient criteria to invoke the jurisdiction of the legislation. The significant difference in this case is the psychiatric background that D has, and coupled with the past history of his financial dealings. The past is only relevant when considering D’s likely future conduct. There is no medical evidence before me to suggest that his situation has changed for the better, or indeed for the worst. However, in having listened to him, I am satisfied that he is still focused on acquiring a substantial number of books, and other items which are unnecessary, without a full appreciation of any likely benefit that he is to receive by such expenditure. By making such an expenditure he will adversely affect his own financial security which is about to be enhanced by reason of the inheritance he is to receive. [34]

A second case exemplifies rather well the interplay of various actions that may be taken with respect to property. Re MJM[35] concerned a seventy-eight year old wealthy woman who was an alcoholic who went through serious drinking phases which affected her health and her competence. The evidence on her ability to function during periods of abstinence varied. The woman was living in a rest home but wanted to return to live in her own home. Judge Somerville accepted that the woman could not return to an independent lifestyle, but he did not think that this was a situation where someone should be appointed her welfare guardian. It was sufficient that an order be made under s 10(1)(d) that she live in an institution.

The Judge then went on to consider the broader financial aspects of the situation:

Requiring [the woman] to live in a supervised rest home will not be sufficient by itself, however. Earlier this year she spent some time in a rest home...but she became unmanageable because of her ability to access cash which she used to purchase alcohol. It is obvious, therefore, that she must be prevented from having access to cash. It was suggested by the applicant that there was no alternative to the appointment of a property manager with control over all of her property but, after giving the matter some thought, I am of the view that the appointment of a property manager cannot be avoided but I consider that person does not require control of the whole of [the woman’s] property; only her income and savings. [36]

As this quote illustrates, the powers given to a manager can be tailored to the particular situation. The First Schedule of the Act sets out a comprehensive list of powers of managers, including spending money for the person and the person’s family, carrying on the person’s trade or business, improving, repairing and maintaining property, and selling and otherwise dealing with property subject to certain conditions. Clearly, a property manager will be able to enter a wide variety of contracts on behalf of the person concerned. But the Court must specify which of these powers a particular manager is to possess and may add other powers and restrictions.

(d) Property management and third parties

One of the key issues is how property management affects third parties. To what extent can third parties rely on agreements entered into by managers? To what extent are transactions entered into by the person under management valid? The Act lays down rules on these matters and, on casting an eye over case law, they do not in practice appear to have given rise to many problems.

The underlying principle is that the manager acts in place of the person concerned who will generally not have power to override a manager’s decisions or to enter into transactions independently. There are however inevitably exceptions to this neat picture. What for example if a manager goes beyond the powers defined by the Court? What if the person concerned appears to be perfectly capable and does a deal with an unwitting third party?

Under s 44, every decision by the manager has effect as if it had been made by the person concerned and as if that person had full capacity. The third party can therefore enforce a contract against the manager and need not be concerned whether the person for whom the manager was acting agreed with the manager’s actions. The contract will stand or fall like any other contract according to the usual rules of the law of contract.

However, the manager must disclose that the contract is made in the capacity of manager and, if this is not done, the manager can be personally liable under the contract.[37] A manager may also be personally liable if there is bad faith or negligence. It follows therefore that, if a manager acts beyond the scope of the management order and thus prima facie has not acted with reasonable care, the manager will be personally liable to complete the contract or, if the contract is challengeable, the manager would be personally liable for any loss that the third party suffers. A similar result should follow if the Court reviews a manager’s decision and decides to reverse what the manager has done. The person under management or, with leave of the Court, any other person may seek a review of a management decision and the Court’s order has ‘effect according to its tenor.[38]

By s 53(1) of the Act, the person subject to management is incapable of dealing with any of the property subject to management. However, there are exceptions. For example, in the interests of encouraging the person to have some independence, the manager may allow the person to have control of some of the property.[39] Also, the Court may grant leave if a particular transaction is for the person’s benefit and the person understands it adequately. Presumably, the latter would arise only where the manager is unwilling to go along with the transaction and thus it will be rare where the Court is called upon. These rules are designed to deal with significant property transactions.

The person under management is entitled to enter a contract for necessaries, which allows for grocery shopping and the like, but would not allow for the purchase of a car. The purchase of liquor, especially if the person under management is an alcoholic as in one of the examples above, is hardly a necessary, but it is difficult to imagine that the trader could be forced to take the liquor back. Yet, any transaction entered into outside the exceptions provided for in the Act can be avoided by the person under management or the manager. The manager usually has twenty-eight days in which to avoid the contract if requested to do so by the third party. If a contract is avoided, that is not the end of the matter because the Court can grant orders adjusting the rights of the parties and providing for restitution.

(e) Enduring Powers of Attorney

Enduring powers of attorney (powers that operate beyond the onset of the donor’s mental incapacity) were first legislated for in New Zealand with the passage of the Protection of Personal and Property Rights Act 1988.[40] There are two kinds of enduring power - those that relate to property and those that relate to personal care and welfare, the latter operating only when the donor becomes mentally incapable.

The test of capacity for granting or revoking an enduring power is lighter than that which applies to the granting of Court orders under the 1988 Act. Thus, a person may be capable of revoking an enduring property power, following which the Court may place the person under property management.[41] Whether or not the power is revoked, a Court order under the Act dealing with personal or property matters will override the attorney’s actions.[42] A power of attorney relating to property may take a number of forms. It may be of a general nature, giving the attorney full authority to deal with the donor’s property as a whole, or it may be specific, limiting the extent of the property subject to the power or limiting the scope of the authority. By and large, most powers will likely be of a broad kind, so that an attorney can enter into deals relating to housing and accommodation as the donor’s agent.

Some concern has been expressed about the risk of abuse that enduring powers expose donors to.[43] The Court has power to revoke an enduring power, primarily where the donor’s best interests are not being promoted,[44] but may also decide that the attorney is not a suitable person to act in that role, or that the power was obtained by undue influence or fraud. The Act is not explicit on the point, but presumably deals entered into by the attorney with a third party will stand or fall according to the ordinary rules of contract and equity. An innocent third party will therefore not be troubled by subsequent disputes over the attorney’s appointment. If the attorney has defrauded the donor in the course of such a deal, then any remedy would be determined as between the donor (or the donor’s representative) and the attorney.

The Court may however review the particular decisions that an attorney has made.[45] As with reviews of property managers’ decisions, the Court may ‘make such order as it thinks fit’ which ‘shall have effect according to its tenor’. The exact implications of this provision have yet to be tested. Those cases where review has been sought have tended to be ones where questions have been raised about actions benefiting the attorney.[46] If an attorney has entered into a contract that is not in the donor’s best interests, can the Court make an order cancelling the contract? Will such an order be binding ‘according to its tenor’ on the third party? There are no express limitations on the orders that the Court can make, but it is suggested that an order is unlikely to be made to the detriment of an innocent third party. The attorney may be called upon to account to the donor or to remedy any loss suffered by the third party.


With the ageing population, one of the significant lifestyle changes for the elderly population is acquiring accommodation in a retirement village. In New Zealand, of people over the age of sixty-five, four per cent live in retirement villages but the legal and financial protections for such people have been very uneven. It is reported that some elderly people have been ‘subject to unfair charging and management practices’, including their exclusion from decision-making and difficulties when they come to leave a village.[47] Contracts are said to be often vague, and in particular are unclear about what fees have to be paid.[48] Given the vulnerability of elderly people, it is all the more important for public policy to address their needs and ensure appropriate protections.

(a) What is a retirement village?

In New Zealand, there is legislation currently before Parliament that puts in place a new regulatory regime.[49] The notion of a ‘retirement village’ is given an extended meaning, but essentially it relates to the provision of more than one self-contained residence, whether an apartment or a stand alone house, intended ‘predominantly for persons in their retirement...and their spouses or partners’.[50] The nature of the right to occupy is not relevant - it may be freehold or leasehold or some other form. An ordinary block of flats will not be a retirement village unless it has facilities (for example, a common dining hall or medical centre) which go beyond those usually provided in apartment buildings. Significantly, old people’s homes, rest homes and geriatric hospitals are excluded, as are boarding houses, guest houses and hostels.

(b) Principal regulatory rules

Under the proposed legislation, operators must have their retirement villages registered through the Registrar of Companies. They will be subject to the oversight of a statutory supervisor and the Retirement Commissioner will have broad responsibilities to monitor the operation of the legislation, to give the relevant Minister advice on matters relating to retirement villages and to play an educational role with respect to them. A code of practice, covering minimum standards of staffing, safety, maintenance and similar matters, is to be established and become effective after ministerial approval.

The Bill also sets out a code of residents’ rights. While each operator must prepare a code for each village, it has to reflect certain rights set out in sch 3, examples being rights to ‘to be treated with courtesy’ and ‘not to be exploited’, rights to services and benefits promised in the occupation rights agreement, to relevant information, to consultation and to the speedy resolution of disputes.

A dispute resolution system is put in place for disputes between a resident or former resident and the operator of the retirement village, and also for disputes between residents over occupation rights. An operator must have an independent disputes panel, although this can be set up by a group of operators or an umbrella association. The panel is given a fair bit of leeway in handling a dispute but is required to conduct a hearing to receive the parties and other relevant evidence. The panel’s decisions are binding, although they are subject to judicial review, and the ordinary courts have jurisdiction to deal with any offences under the statute and to grant injunctions to prevent breach of various provisions in the statute.

(c) Occupation agreements

Of special interest for the purposes of this article are provisions relating to residency agreements in retirement villages.[51] An ‘occupation right agreement’ must conform to certain features laid down in the legislation. An agreement must be in line with the code of practice and the code of residents’ rights and must contain information about these codes. The matters specified are:

safety and personal security
fire protection and emergency management
shifting of people within the village
meeting between residents and the operator
maintenance and upgrading
the termination of an agreement
communication to those with English as a second language or with limited ability to communicate, and
consultation over any proposed change of ownership of the village, or over any changes to the services and benefits provided.

A novel feature is the need to provide a ‘cooling-off’ period during which a resident can back out of an agreement without giving any reason. This must be done within fifteen working days of signing the agreement,[52] but where the residence was still under construction and ‘is not finished to the point of practical completion within six months after the proposed date of completion’, notice of cancellation can be given at any time after the six-month period. If in the meantime before a resident cancels an agreement, the person has caused any damage to the unit or the village operator has incurred any costs for services provided, then ‘reasonable compensation’ is to be paid.

Another provision added by the parliamentary select committee enables a person to cancel an agreement at any time within three years if the agreement was entered into in breach of the Act. The resident is entitled to a refund of all payments, although the retirement village operator can seek relief from the court from this stringent provision.

Before an agreement is signed, the operator must disclose essential information about the village - its ownership, management, conditions and costs of residency, etc - as well as the code of practice, the code of residents’ rights and a copy of the agreement. Deposits and other payments made before the agreement has been finally settled must be held either by the statutory supervisor for the village (if there is one) or by a specially chosen lawyer. If a person decides to pull out of the agreement, the person is entitled to request a refund of the deposit and all similar payments which must be paid within ten working days.

(d) Regulation rather than the free market

The Retirement Villages Bill 2001 represents a firm regulatory approach to the accommodation requirements of the elderly. It eschews other options such as self-regulation or education campaigns, although elements of both of these can co-exist within the statutory framework. The assumption is made that, at least for housing which is one of the most important needs of the elderly, ordinary free market and freedom of contract principles must not predominate alone. The ability to get out of a contract, perhaps merely because of emotional hesitations, recognises the potential for exploitation of the elderly, whether by business, family or professional advisors.

A bit like minors’ contracts,[53] these particular contracts by the elderly are treated out of the ordinary.


(a) Former regulations

Old people’s homes were until recently governed by regulations made under the Health Act 1956.[54] A home was defined as premises where at least three people 65 or over, unrelated to the householder, paid for their lodgings and at least one meal a day. The premises were ones that were ‘or purported to be, conducted principally for aged-frail persons’ but were distinguished from hospitals.[55] The Regulations required homes to be licensed and set out minimum standards of accommodation. The Ministry of Health had powers of inspection. There were no provisions dealing with agreements to enter or leave a home.

The licensee had to keep a register of residents, including information about when a resident left. A licence could be declined or not renewed for a variety of reasons, including where a ‘resident has been ill- treated or neglected in a manner likely to cause suffering or has been kept in an environment that is injurious to the resident’s mental or physical health’.[56] The overall tone of these Regulations is paternalistic, with a focus not so much on the personal interests of the elderly residents, as on the material resources.

(b) New regulations

From 1 April 2003, the Regulations just discussed were repealed and the principal source of law is the Health and Disability Services (Safety) Act 2001. This Act is designed to bring together the wide gamut of services in the health and disability sector, including residential care such as geriatric hospitals and rest homes. The Minister may issue notices setting out the standards governing the provision of health and disability services. These notices are treated the same as statutory regulations, which means that they can be vetted by the Regulations Review Select Committee of Parliament. The section setting out the content of such standards is drafted in current fashionable mumbo jumbo with reference to ‘outcomes’ and ‘providers’ but little reference to patients and residents.[57]

With respect to hospitals and rest homes, the standards must specify minimum numbers of nursing staff and their qualifications. The Act requires official certification of those who provide these services. There are powers given to independent ‘auditors’ to check the conditions of places where these services are provided and people authorised by the Ministry of Health can inspect such places, including the physical premises, the equipment, documentation etc. Where standards are not met or where services are being provided ‘in an unsafe or insanitary manner’, the Director-General of Health can order the place to cease operating or to be closed.[58]

A key definition in the new Act is that of ‘rest home care’ in section 6:

(1) This subsection applies to services that—

(a) are residential care provided for the care or support of, or to promote the independence of, people who are frail (whether because of their age or for some other reason); and

(b) neither include nor are provided together with geriatric services.

(2) In this Act, rest home care means services to which subsection (1) applies that are provided for three or more people unrelated by blood or marriage (or a relationship in the nature of marriage) to the person providing the services—

(a) in premises held out by the person providing the services as being principally a residence for people who are frail because of their age; and

(b) in consideration of payment (whether made or to be made, and whether by the Crown, the people for whom the services are provided, or any other person).

This section has many echoes of the old definition in the Old People’s Homes Regulations 1987 but, while it is aimed at the elderly, it is not limited by any particular age. It obliquely refers to some kind of agreement between the rest home and the resident in its reference to payment. More significantly, the patronising tone is mollified a little by the reference to the promotion of residents’ independence. Presumably this means that systems should be in place so that, where possible, an elderly person is able to make independent decisions.

(c) Contrasting rest homes and retirement villages

In comparing the law on rest homes with that proposed for retirement villages, a stark contrast emerges. The latter addresses issues far more from the point of view of the elderly person. The special provisions on occupation agreements, codes of residents’ rights and dispute resolution procedures are nowhere to be found in the rules on rest homes or in the Health and Disability Services (Safety) Act 2001. Yet the degree of vulnerability for the so-called ‘frail’ elderly is likely to be even greater than for residents of retirement villages. Good systems ensuring high standards of accommodation and care are fine, but the possibility of exploitation remains and should be tackled.


In general, elderly people in New Zealand are subject to the law of contract just like any other adult. The chances of their being duped are real and the safeguards against exploitation are the same equitable ones that apply generally, such as the law on undue influence and unconscionable bargains. An agent, such as an enduring attorney or a Court-appointed manager, may act on behalf of the elderly person. Overriding all this are the powers vested in the Family Court under the Protection of Personal and Property Rights Act 1988 to grant orders tailored to specific situations.

In addition, there are statutory regimes to cover rest homes, hospitals and retirement villages. The legislation currently before Parliament on retirement villages contains a beguiling provision allowing an elderly person to back-track out of an agreement within a specified time, and has other provisions designed to protect the interests of the elderly. Such an approach is not found in other contexts.


1. Articles/ Books/ Reports

Burrows, J, Finn, J and Todd, S, Law of Contract in New Zealand (2002).

Carney, T, ‘Abuse of Enduring Powers of Attorney – Lessons from the Australian Tribunal Experiment?’ (1999) 18 NZULR 481.

Law Commission Report 80, Protections Some Disadvantaged People May Need (2002).

2. Case Law

Archer v Cutler [1980] 1 NZLR 386.

Hansen v Blaikie (Unreported Christchurch District Court, PPPR 28/97, 28 October 1997).

In the matter of A [1996] NZFLR 359, 369.

In the matter of G [1994] NZFLR 445.

New Zealand Guardian Trust v Young [1991] NZFLR 282.

O’Connor v Hart [1983] NZLR 280.

R v Her Majesty’s Attorney-General for England and Wales (Privy Council Appeal No 61 of 2002, 17 March 2003).

Re B (seclusion) (1993) 11 FRNZ 174.

Re F [2000] NZFLR 220.

Re G [2000] NZFLR 139.

Re L [2001] NZFLR 310.

Re M (Unreported Christchurch Family Court, PPPR 009/1/00, 27 March 2001).

Re MJM (Unreported Christchurch Family Court, PPPR 19/00, 15 Nov 2000).

Re R [a protected person] (1993) 10 FRNZ 224.

Re Tindall [2000] NZFLR 373.

Re W [1994] 3 NZLR 600.

Scott v Wise [1986] 2 NZLR 484.

3. Legislation

Aged and Infirm Persons Protection Act 1912 Health Act 1956

Health and Disability Services (Safety) Act 2001

Mental Health (Compulsory Assessment and Treatment) Act 1992

Minors’ Con tracts Act 1969

Protection of Personal and Property Rights Act 1988.

Retirement Villages Bill 2001.

The Old People’s Homes Regulations 1987.

4. Other Sources

Explanatory Note, Retirement Villages Bill 2001.

New Zealand, Parliamentary Debates, 2002, 598 NZ 14666 (Dr Hutchison MP).

[1] Reader in Law, Victoria University of Wellington.

[2] The leading New Zealand text on this and other issues is J Burrows, J Finn and S Todd Law of Contract in New Zealand (2002).

[3] [1986] 2 NZLR 484.

[4] Ibid 491.

[5] That Act has been replaced by the Mental Health (Compulsory Assessment and Treatment) Act 1992 and the Part of the Act which dealt with property matters is now found in the Protection of Personal and Property Rights Act 1988.

[6] Scott v Wise [1986] 2NZLR 484, 490.

[7] [1980] 1 NZLR 386.

[8] [1985] UKPC 17; [1985] 1 NZLR 159. The Court of Appeal had earlier followed Archer v Cutler: O’Connor v Hart [1983] NZLR 280, where the contract between Mr O’Connor and Mr Hart was rescinded. In a further judgment, the Court of Appeal dealt with the consequences of rescission: [1984] 1 NZLR 754. There had been an unusually long gap between Mr Hart’s taking possession of the farm and completing payment. The Court of Appeal granted Mr Hart compensation for improvements that he had made but held that the O’Connor trust was entitled to the significant increase in the value of the property due to inflation. This decision became academic after the successful appeal to the Privy Council.

[9] Ibid 171.

[10] [1986] 2 NZLR 484, 494.

[11] [1980] 1 NZLR 386, 404.

[12] The latest judgment on this is the Privy Council decision in ‘R’ v Her Majesty’s Attorney-General for England and Wales (Privy Council Appeal No 61 of 2002, 17 March 2003) but this involved an SAS soldier rather than an elderly person.

[13] Re W [1994] 3 NZLR 600.

[14] Protection of Personal and Property Rights Act 1988 s 11.

[15] Protection of Personal and Property Rights Act 1988 s 10(1)(d).

[16] Protection of Personal and Property Rights Act 1988 s 10(2).

[17] Protection of Personal and Property Rights Act 1988 s 10(1 )(e).

[18] Re L [2001] NZFLR 310. Contrast Re F [2000] NZFLR 220 where the Court was asked the shift three brothers out of a rest home into a community based house. The main reason for denying the request was that the three brothers wanted to stay together and it was hard to determine whether community based vare was the best approach for all three.

[19] Paras [80], [84].

[20] Eg Re B (seclusion) (1993) 11 FRNZ 174.

[21] Law Commission Report 80 Protections Some Disadvantaged People May Need (2002).

[22] Ibid para 30.

[23] [1996] NZFLR 359, 369.

[24] Ibid 374.

[25] (1993) 10 FRNZ 224.

[26] Protection of Personal and Property Rights Act 1988 ss 12 and 18-23.27 New Zealand Guardian Trust v Young [1991] NZFLR 282.

[28] In the matter of G [1994] NZFLR 445.

[29] [1996] NZFLR 359.

[30] Ibid 375.

[31] Protection of Personal and Property Rights Act 1988 pts III-V.

[32] Protection of Personal and Property Rights Act 1988 s 25.

[33] [2000] NZFLR 139.

[34] Ibid 143-144.

[35] Unreported Christchurch Family Court PPPR 19/00, 15 Nov 2000.

[36] Re MJM, unreported Christchurch Family Court PPPR 19/00, 15 Nov 2000, 5-6.

[37] Protection of Personal and Property Rights Act 1988 s 49.

[38] Protection of Personal and Property Rights Act 1988 s 89.39 Protection of Personal and Property Rights Act 1988 s 36(2).

[40] Protection of Personal and Property Rights Act 1988 pt IX.

[41] Re M (Unreported Christchurch Family Court, PPPR 009/1/00, 27 March 2001).

[42] Protection of Personal and Property Rights Act 1988 s 100.

[43] See, eg, T Carney ‘Abuse of Enduring Powers of Attorney – Lessons from the Australian Tribunal Experiment?’ (1999) 18 NZULR 481.

[44] Protection of Personal and Property Rights Act 1988 ss 105, 106.

[45] Protection of Personal and Property Rights Act 1988 s 103.

[46] Eg, Re Tindall [2000] NZFLR 373; Hansen v Blaikie (Unreported Christchurch District Court, PPPR 28/97, 28 October 1997).

[47] Explanatory Note, Retirement Villages Bill 2001.

[48] New Zealand, Parliamentary Debates, 2002, 598 NZ 14666 (Dr Hutchison MP).

[49] Retirement Villages Bill 2001.

[50] Retirement Villages Bill 2001 cl 6.

[51] See Retirement Villages Bill 2001 cls 26-29A, 34, sch 2.

[52] The parliamentary select committee increased this from ten to fifteen days.

[53] In New Zealand, see the Minors’ Contracts Act 1969 under which contracts entered into by persons under eighteen are, subject to a court order to the contrary, generally unenforceable against the minor.

[54] The Old People’s Homes Regulations 1987.

[55] Health Act 1956 reg 2, s 120A(4).

[56] Reg 22.

[57] Health and Disability Services (Safety) Act 2001 s 21.

[58] Health and Disability Services (Safety) Act 2001 ss 48, 49.

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