Aveo comes out on top in class action settlement

Australia’s largest retirement living operator, Aveo Group, has survived what could have been an industry-shaking class action lawsuit after the plaintiff conceded it had no case just six days into the trial.

Law firm Levitt Robinson first launched the class action in 2017 when a joint investigation by Four Corners and Fairfax Media exposed allegedly unfair contracts that caused Aveo residents to lose money when selling their homes. 

That investigation won a Walkley Award for Best Investigative Journalism.

They alleged that Aveo misled clients through marketing, advertising and complex contracts while charging exorbitant exit fees when a resident died or left the village. Had the class action been successful, the estimated claim could have been anywhere between $160 million and $500 million.

Instead, Aveo Group settled for $11 million, which will essentially cover the cost of legal and administrative fees.

In a statement, Aveo said it was relieved to have this chapter behind them.

Aveo welcomes Levitt Robinson’s withdrawal of its class action proceedings against Aveo after acknowledging that the Aveo Way contract is lawful and that the Federal Court was unlikely to have found that it caused Aveo residents to suffer any loss. 

Levitt Robinson has expressed regret for the distress and anxiety caused to Aveo residents because of the class action. 

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.

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. 

Aveo thanks its legal team, led by Arnold Bloch Leibler.

Levitt Robinson’s own statement expressed regret for any distress or anxiety caused:

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. 

It was a sudden yet uneventful finish to a court case that threatened to upheave the retirement living sector.

At the core of it were “questionable business” practices alleged by the media who claimed Aveo Group had yearly turnover quotas to meet and the “complex and draconian” Aveo Way contract supported this.

But in court, there was no proof of wrongdoing for the operator. Justice Anderson saw no reason to doubt the contracts, which featured a deferred management fee of 35% on the purchase price. All capital gains, or losses, would belong to Aveo Group.

“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 said.

Perhaps the biggest challenge for Levitt Robinson was the complexity of the situation. 

The Aveo Way contract replaced hundreds of other contracts that featured numerous variations. There was inconsistency as Aveo had acquired other villages and contracts from other operators and changes were still being implemented.

DSL Law Principal, Danielle Lim, said the result is positive for the retirement living industry, although the media’s impact may be long-lasting.

“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.”

The negative media exposure reportedly led to a 30% decrease in retirement village sales prior to COVID-19, the equivalent of $3 billion lost to the entire sector. Aveo itself was purchased by Brookfield Property Partners after its share prices slumped dramatically.

The result also provides little meaningful closure for roughly 4,500 residents who participated in the class action. With the $11 million settlement covering fees, at best, they could receive $1500 on average for their troubles.

“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’.”

In a statement released after the court case, Aveo Group shared its relief at the end of a drawn-out journey so it could also “provide closure and certainty for our employees and the residents of our communities”.

Hello Leaders contacted Aveo Group but did not receive a comment in time for publication.