Patricia Isobel Gold v the Proprietors - Units Plan [1992] ACTSC 102; (1992) 110 FLR 356 (16 October 1992)

SUPREME COURT OF THE ACT

PATRICIA ISOBEL GOLD v. THE PROPRIETORS - UNITS PLAN NO. 52
No. SCA 71 of 1992
Number of pages - 18
Real Property - Costs
[1992] ACTSC 102; (1992) 110 FLR 356

COURT

IN THE SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY
Higgins J.(1)

CATCHWORDS

Real Property - Strata Titles - Unit Title - Body Corporate - Appeal from Magistrate.

Real Property - Strata Titles - Unit Title - Body Corporate - Corporation to act through committee - Meeting of committee - Appointment of managing agents - Whether valid contributions by members of the corporation - Unpaid levy contributions - Validity of notice.

Real Property - Strata Titles - Unit Title - Articles - Resolution - Amendment of Articles imposing liability for interest on outstanding fees - Whether valid.

Costs - Legal fees - Claim for reimbursement - Costs of recovery of outstanding levy contributions - Unit titles Act 1970 - s.48 - Recovery of expenditure arising from fault.

Costs - Legal Practitioners Act 1970 - Right to taxation - s.110A - Right to itemised statement - Taxation by Registrar.

Costs - Discretionary factors - Appropriate jurisdiction.

Unit Titles Act 1970,(ACT), ss.29, 34, 38(5), 48, 57,

Small Claims Act 1974 (ACT), s.29

Legal Practitioners' Act 1970 (ACT), ss.110A, 111, 116, 119

Magistrates' Court (Civil Jurisdiction) Act 1982 (ACT), s.245

"Law of Costs" - Oliver, p 23

HEARING

CANBERRA
16:10:1992

Counsel for the Appellant: Mr R Lawton

Instructing solicitors: Messrs Meyer Boettcher and

Clapham

Counsel for the Respondent: Mr R Crowe

Instructing solicitors: Messrs Gallens Crowley and
Chamberlain

ORDER

The Court orders that:
1. Leave to amend the Notice of Appeal be refused.

2. The appeal be upheld.

3. The summary judgment entered in the Magistrates Court on 24 February 1992 be varied to $2,134.00.

DECISION

HIGGINS J. This is an appeal from a decision of Magistrate Dingwall given on February 1992. The respondent had sued the appellant for $3,970.60.

2. The respondent sued as a body corporate established pursuant to s.29 of the Unit Titles Act (ACT) 1970 ("UTA"). The appellant is a member of the body corporate and the proprietor of Unit 20, one of a number of units the proprietors of which form the membership of the body corporate. The units are situated at Kingston Mews, 8 Giles Street, Griffith in this Territory.

3. On 26 November 1991, the respondent applied for summary judgment before Magistrate Dingwall.

4. The claim, as particularised by the respondent, was for -

. $2,134.00 for outstanding levy contributions due to the
respondent from the appellant;
. $1,836.60 for "expenditure incurred by the plaintiff by reason of
the defendant's wilful or negligent act or omission by failing to
pay a previous levy contribution". The expense was said to be
for legal fees incurred in pursuing that claim;
. $807.83 for interest on the outstanding levy contribution.

5. Magistrate Dingwall observed that the previous claim for contribution had been decided in the Small Claims Court.

6. He noted that the sum of $1,836.60 represented legal costs incurred in those proceedings and questioned whether there was any right to recover such costs under the Small Claims Act (ACT) 1974 ("SCA"). The matter was adjourned to enable the parties to consider that question.

7. On 3 December 1991 it was made clear to the Court that the respondent claimed entitlement to those costs by virtue of s.48 (UTA). In the bench record of the Small Claims Court proceedings was a note of an order expressed as "Judgment for the plaintiff with costs to be taxed". Magistrate Dingwall questioned whether there had been power to make such an order. In any event, no costs were ever taxed. The respondent accepted that the previous Small Claims Court proceedings had not resulted in any order for legal costs. Certainly, the costs claimed in the proceedings before Magistrate Dingwall had not been the subject of any such order.

8. The matter came on for a substantive hearing on 24 February 1992. The respondent then, by amendment, reduced its claim for interest to $788.80.

9. The claim, as amended, was supported by an affidavit of Gregory Frank Steinwedel sworn 15 November 1991.

10. Mr Steinwedel deposed that he was the proprietor of Canberra Units Plan Services ("CUPS"). That firm manages various bodies corporate. CUPS was appointed manager of the respondent on 11 March 1991. That was said to have been pursuant to s.57 (UTA). One of the functions of CUPS was to recover outstanding contributions from unit holders.

11. On or about 1 July 1991, CUPS delivered a notice to the appellant. It purported to be delivered pursuant to s.38 (UTA). It claimed payment, by 31 July 1991, of levy contributions for years commencing 1/7/88 ($484.00), 1/7/89 ($506.00), 1/7/90 ($539.00), 1/7/91 ($605.00). It also claimed $1,836.60 for past legal costs incurred in recovering previously outstanding contributions. That claim purported to be pursuant to s.48 (UTA). Interest on the outstanding sums accrued to 1/7/91 ($583.20) was also claimed. That claim was alleged by Mr Steinwedel in his affidavit to be made pursuant to article 6 of the Articles of the respondent.

12. Mr Steinwedel also referred in that affidavit to the previous Small Claims Court proceedings in which earlier outstanding contributions had been sued for and recovered. He recited that, on 21 August 1987, Magistrate Ward had entered judgment for the respondent for previous contributions then unpaid. The appellant paid the sum ordered to be paid. On 1 October 1987, the respondent received a bill from its solicitors in the sum of $1,836.60. That memorandum of fees related to their services in pursuing the recovery of those previous contributions.

13. There was an earlier notice dated 6 October 1987 which had purported, pursuant to s.48 (UTA), to demand payment from the appellant of that sum of $1,836.60. Another notice, dated 23 September 1991, claimed outstanding levy contributions and interest due thereon up to 30 June 1988.

14. Mr Steinwedel deposed to a belief that there was no defence to the claim.

15. There was also an affidavit from a Ms Louisa Metherall. That concerned the appointment of CUPS and the request to CUPS to recover contributions from the appellant. There had been a previous manager with some overlapping membership called J and M Body Corporate Management ("J and M").

16. It seems there had been a meeting of the committee of the body corporate sometime before 16 June 1986. That committee was the body appointed under s.34 (UTA). It was later asserted that it had recommended that J and M be appointed managing agents. The appellant was a member of the committee. Her recollection was that a majority of the committee was not in favour of J and M's appointment. Nevertheless, the Chairman of the Committee, she alleges, wrote to unit holders and either directly or indirectly asserted the contrary. As a result, she claims, J and M were appointed as manager by resolution of an Annual General Meeting held on 16 June 1986. She considered that decision to be wrong and procured by wrongful conduct.

17. The appellant resolved thereafter not to pay levy contributions in order to draw attention to this issue. She felt that J and M had been unlawfully or, at least, improperly appointed. However, even when the outstanding contributions were claimed, the appellant, in the Small Claims Court proceedings before Magistrate Ward in 1987, asked for no relief based on any alleged illegality. It was submitted to Magistrate Dingwall, in these proceedings, that the appellant had failed to raise that issue only by mistake. She had, at the time, been appearing for herself. Before Magistrate Dingwall, she was legally represented and the issue was raised.

18. Magistrate Dingwall decided, adversely to the appellant, that the validity of J and M's appointment and, subsequently, that of CUPS as its successor, was legally irrelevant to the right of the body corporate to impose liability for contributions and to give notice under s.38(5)(UTA) requiring payment.

19. Section 38(5) provides

"The corporation (in this case, the respondent) shall cause
notice of each determination made under subsection (1) of this
section to be given to its members and shall, in the notice given
to a member, specify the amount payable by him in
respect of his unit and the time within which, and the manner in
which, that amount is payable."

20. That sub-section does not require delivery of that notice in any particular manner or by any particular person. If J and M or CUPS had not been properly appointed, it could be argued that the body corporate was not entitled to pay them a fee, (although I am not persuaded that they would be so precluded) but that possibility cannot affect the validity of the notice required to be given under s.38(5). I should add that the notice did not purport to be signed or given by J and M or by CUPS, it was given under the seal of and by the body corporate itself. It had followed a resolution of the respondent body corporate passed by a general meeting of it, apparently valid in form. Unless forbidden by a general meeting, there would be no reason why the committee could not have approved the giving of such a notice (see s.34 (UTA)).

21. It follows that, insofar as Mr Lawton submits that the claim for outstanding levy contributions should fail because CUPS was not properly authorised by the respondent body corporate to act as its agent, I reject that submission.

22. His Worship's conclusion that such a proposition is unarguable is plainly correct.

23. The challenge to his Worship's conclusion was raised by way of an application for leave to add an additional ground of appeal raising the issue. The respondent contended that leave to amend should be refused by reason of the plain unarguability of that proposed ground of appeal.

24. I agree with that submission.

25. Leave is refused so to amend the Notice of Appeal.

26. His Worship had referred to a resolution passed by an Annual General Meeting of the respondent on 16 June 1986. That resolution purported to amend the Articles of the respondent so as to enable interest to be claimed by it from members who owed money to it. Due to conflicting evidence as to whether the proposed amendment had been supported by 24 unit holders or 23 unit holders, his Worship decided that it was arguable that the resolution imposing liability for interest on outstanding contributions was ineffectual. There was no other source claimed for that liability. Accordingly, his Worship declined to enter summary judgment in respect of the claim for interest.

27. That decision is not the subject of this appeal.

28. The ground of appeal now relied on by the appellant challenges the claim by the respondent for reimbursement of legal fees expended by it in recovering from the appellant the outstanding levy contributions sued for in 1987. It may be noted that, due to the engagement of solicitors, the body corporate in fact expended a greater sum of money to recover the contributions than the value of those outstanding contributions in money terms. No doubt, had the proceedings continued in the Magistrates Court or had the respondent, like the appellant, appeared without a solicitor or other paid agent in the Small Claims Court, that expense would not have been incurred.

29. Before Magistrate Dingwall, Mr Lawton, for the appellant, rested his case on two submissions. The first was that s.48 (UTA) did not support the claim for reimbursement of the legal costs incurred. The second submission was that the appellant had a right to have the costs taxed pursuant to the provisions of the Legal Practitioners' Act 1970 (ACT) ("LPA").

30. Of course, there are many situations in which a person might seek to be reimbursed by a third party for legal fees which that person has incurred. Not all of those situations will result in an enforceable order for costs against that third party. A commonly occurring situation is where a mortgagor or borrower agrees, under a Memorandum of Mortgage or loan agreement, to pay the legal fees of the Mortgagee or lender in relation to the transaction. If the fees were unreasonably high then only the client, the mortgagee or lender, up to 1986, could have required the solicitor to submit those fees for taxation. That client, secure in the knowledge that the mortgagor or borrower had agreed to pay, might well have chosen not to exercise that right.

31. In 1986, s.110A was inserted into the LPA. The proposed payee of such legal fees was empowered to request the solicitor for the other party to provide an itemised statement of the costs and disbursements presented for payment by that proposed payee. That solicitor was required to comply with that request within three months of receipt of it or to refund any amount paid by the non-client party.

32. If the request be complied with, any proceedings then being taken (whether by the solicitor or not) to recover the sum of the legal fees so demanded, are stayed for one month. The commencement of any such proceedings, if not already commenced, is prohibited for one month after the giving of that statement.

33. After delivery of the statement, the non-client party, pursuant to s.111, must, within that month, give notice to the Registrar of this Court, to the solicitor and to the client concerned, that taxation of those fees is required. Under s.118 (LPA), the recovery proceedings, if any have been commenced, are then further stayed until the Registrar taxes the fees and certifies the sum due pursuant to s.116 (LPA). Otherwise the stay expires. If the non-client party is found to have over-paid the solicitor, the excess is refundable by the solicitor to the non-client party (see s.119 (LPA)). Special, but similar, provision is made for legal fees sought by mortgagees from mortgagors and by lessors from lessees (see s.119A (LPA)).

34. However, a party is not entitled to give a notice under s.111(1)(LPA) if, having received an itemised statement, he or she (or it) suffers judgment to be entered in proceedings for the recovery of that sum.

35. In this case there has not, to date, been a request by the appellant for an itemised statement of the costs and disbursements now sought to be recovered.

36. On 23 September 1991, Messrs Gallens Crowley and Chamberlain, solicitors for the respondent, forwarded to the appellant a demand for the $1,836.60 referred to. They enclosed a copy, not only of the demand notice under s.38 (UTA) but also a copy of the memorandum of costs and disbursements which had been rendered to the respondent by Messrs Mallesons Stephen Jaques, the solicitors for the respondent at that time. That memorandum, of course, details the fees now sought to be recovered. Whether it is sufficiently detailed to be an "itemised statement of the costs and disbursements" within the meaning of s.110A (LPA) does not arise for decision.

37. His Worship was prepared to assume that the appellant's right to have those costs taxed remained alive. That is, of course, arguable (see, for example, Oliver, "Law of Costs" p.23). However, it is not a defence to the claim for payment. Nor, in the absence of a request pursuant to s.110A(1) (LPA), is the continued existence of a right to request taxation a ground for a stay of proceedings. I agree with his Worship that such a contention was and is unarguable.

38. The other matter urged by Mr Lawton before his Worship related to the question as to whether the costs in question were recoverable from the appellant by the respondent in the first place. His Worship accepted that s.48 (UTA) legally entitled the respondent so to recover them. I turn to consider that issue.

39. Section 48 provides as follows

"Where a corporation has incurred any expenditure or
performed any repairs, work or act that it was required or
authorized by its articles or by or under this Act or any other
law in force in the Territory to perform, the expenditure,
repairs, work or act having been rendered necessary by reason of
any wilful or negligent act or omission on the part of, or breach
of any provision of its articles by, a member of the corporation,
the amount of that expenditure or any money expended by it in
performing the repairs, work or act is recoverable by it from the
member as a debt."

40. This is not a case, of course, where the appellant had agreed to pay the respondent's legal costs of recovery of levy contributions unpaid. Nor, for this purpose, can it be assumed that the Articles of the respondent impose any such obligation.

41. A court, having discretion to award costs, may refuse to award costs to a successful party if it seems just and equitable to do so. The respondent's contention is that, if it sued for contributions and recovered them but was refused costs on such a discretionary basis, it could nevertheless recover those costs (assuming the quantum to have been reasonable and the representation necessary) by virtue of making a demand under s.48 (UTA). It would follow, also, that such costs would be recoverable even if the body corporate had persuaded a unit holder to agree to a judgment on terms that there be no order as to costs in a case such as the present.

42. In the present case, the respondent consented to its claim for contributions being heard in the Small Claims Court. In doing so, it became subject to s.29 (SCA). The effect of that section is that the Small Claims Court is not empowered to make an order for payment of any but a limited amount of the respondent's legal costs in proceedings before it. Undoubtedly, the appellant accepted the transfer of the matter to the Small Claims Court in order that her liability for costs would be so limited.

43. Had the matter remained in the Magistrates Court in which the respondent had commenced the proceedings, s.245 Magistrates' Court (Civil Jurisdiction) Act 1982 (ACT) would have permitted, but not required, an award of costs greater than that usually allowable. Costs could have been allowed on scale or on a solicitor-client basis. Had the proceedings been commenced in this Court a wide discretion as to costs could have been exercised. In an appropriate case, a full indemnity for all reasonably incurred costs could have been ordered. If it was considered appropriate, a lesser award, even a refusal of costs entirely, could have been ordered.

44. The usual case to which s.48 (UTA) is directed is where damage is caused to common property by the wilful or negligent act of a unit holder or of a person for whose acts the unit holder is liable. In those cases, s.48 does not create such a liability, it merely provides a means by which such a liability may be enforced. It simplifies enforcement by deeming the quantum of the liability to be a debt due from the member rather than an unliquidated claim.

45. I do not see why a liability for legal costs incurred by the respondent should be in any different position than any other expense which it incurs. In the absence of express agreement, a liability imposed under its Articles or a Court order, there is no antecedent liability by reference to which the respondent could recover its solicitors costs from the appellant. Section 48 is not intended, in my view, to create such an antecedent liability. Nor do I believe it does so.

46. It may, of course, be objected that a unit holder who has created by her own wrong-headed act a liability for the body corporate, should recompense the body corporate for that expense. I agree. However, the extent of that liability is another matter. A unit holder who carelessly damages common property, for example, ought not to be liable to a greater extent than a similarly careless citizen not a unit holder.

47. In this case, the body corporate could have created a liability for the costs of recovery of outstanding contributions by proceeding in the Magistrates Court and persuading that Court to order costs. It chose not to. It ought not to be able to avoid the consequences of that decision by using s.48.

48. In my opinion, s.48 does not permit the recovery of the costs in question.

49. Accordingly, I uphold the appeal. I vary the summary judgment entered by the learned Magistrate by reducing the amount of that judgment to $2,134.00.

50. I will hear the parties as to costs.