Lawsuit Erupts Between Springfield City Group and Aveo Group

Springfield City Group has initiated legal proceedings against retirement living provider Aveo Group, alleging a significant failure to meet development targets for a major seniors project valued at $1 billion.

The dispute revolves around an interlocutory injunction sought by Springfield City Group to prevent Aveo from engaging in an expert decision process related to the disagreement until a final court ruling is reached.

The issue stems from an ongoing retirement living project, where Aveo was contracted by Springfield City Group to develop a minimum of 2,500 aged care or retirement village units, collectively referred to as “Seniors Products,” between 2015 and 2030.

The project and agreement

According to court documents, Aveo Group initially entered into a development deed that laid out their commitment to following a rolling business plan. This plan mandated Aveo to provide regular updates on the project’s progress, with specific milestones to be reached on each anniversary starting from October 1, 2015.

The dispute between the two parties arose from two updated business plans that Aveo Group submitted in March and November 2022, both of which were not approved by Springfield City Group.

Clashing business plans

Springfield City Group argues that Aveo’s updated plans deviated significantly from the agreed requirements, making it highly unlikely that Aveo would be able to fulfil the minimum target of 2,500 seniors products within the stipulated time frame.

Aveo’s revised plan indicated the completion of only 562 Seniors Products by 2027, leaving a substantial 87.2 per cent of the project’s products to be completed within the final five years of the anticipated 15-year term.

Springfield City Group also highlighted clause 47 in the Aveo Termination Period that allowed Aveo to terminate the Development Deed if the number of completed products fell below 720 by 1 October 2025. 

Springfield City Group alleged that Aveo’s updated business plan was an indication of their intention to exercise this termination clause. They also pointed out that Aveo failed to include a proposed subdivision of a critical development site into staged lots, as stipulated in the agreement.

Legal proceedings and injunction

In response to the non-approval notices from Springfield City Group, Aveo notified them that they would be referring the matter to the Resolution Institute for dispute resolution. An expert was appointed to determine the outcome, in accordance with Aveo’s original agreement. 

However, Springfield City Group questioned whether Aveo’s updated business plan submissions qualified as legitimate business plans under the agreed development deed.

During the injunction hearing, Justice Thomas Bradley, presiding over the case, expressed concerns about potential inconsistencies in Aveo’s documents that might disqualify them as valid business plans. However, his ruling solely pertained to the injunction request and not the underlying claim. 

Impacts and future outlook

The solicitor for the SCG estimated that the expert process would cost them between $570,000 and $1 million, whilst Aveo countered with claims of incurring about $2.8 million in annual interest costs for the 96 completed but unsold Seniors Products.

Aveo’s acting head of development, George Petersen, reassured residents and stakeholders that the legal proceedings would not impact the operations or residents of the Springfield retirement community. Petersen emphasised Aveo’s commitment to the existing retirement community and its amenities, including a mix of serviced and independent living apartments.

Justice Bradley ultimately granted the interlocutory injunction, effectively halting Aveo’s progress in the export process until the resolution of Springfield City Group’s claim.  

As the court proceedings continue, both Springfield City Group and Aveo Group are eagerly awaiting a final resolution to this dispute that could have significant implications for the future of the $1 billion seniors project.

Published 11-July-2023