Kingfisher [2004] QBCCMCmr 19 (12 January 2004)

Last Updated: 30 September 2005

REFERENCE: 0378-2003

ORDER OF AN ADJUDICATOR

MADE UNDER PART 9 OF CHAPTER 6

BODY CORPORATE AND COMMUNITY MANAGEMENT ACT 1997

Number of Scheme:	1345
Name of Scheme:	Kingfisher
Address of Scheme:	281 The Esplanade CAIRNS QLD 4870

TAKE NOTICE that pursuant to an application made under the abovementioned Act by Lindsay Jorgensen & Anne Ames, the Owner(s) of lot 7

I hereby order that, in relation to the levies due from Lindsay Jorgensen and Anne Ames, the owners of lot 7 (applicants) on 1 May 2001, 1 September 2001, 1 September 2002 and 1 March 2003: 1. the discounts lost by the applicants by late payment of these levies are to be credited to the applicants as the late payments were due to levy notices being sent to the wrong address; 2. any penalties imposed or discounts lost by the applicants due to the body corporate applying subsequent levy payments to offset the above legal costs or discounts are also to be credited to the applicants; and 3. the body corporate cannot claim its legal costs in seeking payment of these levies as a debt payable by the applicants.

STATEMENT OF ADJUDICATOR’S REASONS FOR DECISION - REF 0378-2003

"Kingfisher" CTS 1345

Application

Kingfisher Community Titles Scheme (Kingfisher) is a 18 lot scheme under the Body Corporate and Community Management Act (Act) and the Act’s Standard Module Regulation (Standard Module). The scheme is designed for residential purposes.

This application is by Lindsay Jorgensen and Anne Ames, the owners of lot 7 (applicants) seeking orders against the body corporate for the scheme (respondent). The applicants claim that they only paid levies late because the body corporate sent the levy notices to the wrong address. As a result, the applicants claim that they should be entitled to the timely payment discount for these levies. The applicants also claim that the body corporate should not be entitled to claim payment of legal fees incurred in seeking payment of the applicants’ outstanding levies.

Background

Kingfisher grants owners who pay levies on time a discount on the amount of that levy. There are specific legislative requirements for payment of levies. One requirement is that the body corporate must give the owner of each lot written notice of the contribution payable (levy notice) thirty days before the levy is due. This levy notice must include details of the amount, the date due, and any discount for payment by the date due (Standard Module, 94). The initial cause of the present dispute is that the body corporate manager, Cairns Strata Management (CSM), sent the applicants’ levy notices to the wrong address.

CSM became the body corporate manager of Kingfisher in January 2001. Prior to CSM becoming the body corporate manager, Property North (PM) was the body corporate manager.

I am satisfied from the submissions that PM originally sent communications to the applicants’ unit, that being the address listed on the body corporate roll. Upon request by the applicants, PM began to send correspondence to their preferred address of PO Box 903 Cairns. However, PM did not update the body corporate roll to this preferred address.

When CSM took over the body corporate management it began sending correspondence to the applicants’ unit, being the address still listed on the body corporate roll. The applicants subsequently sent an email to PM stating "It would seem that my instructions to send mail to PO Box 903 have gone unactioned. As you are aware I live in PNG and do not spend a lot of time at the Kingfisher unit." On receipt of this email, PM should have been aware that the applicants were referring to PO Box 903 Cairns according to the previous instructions. However, PM was no longer the body corporate manager at the time this email was received and PM therefore forwarded the above email to CSM. CSM read this email without the benefit of reviewing the earlier instructions and without clarifying the address with the applicants. Based on this email CSM assumed that PO Box 903 referred to a Papua New Guinea post office box rather than a Cairns post office box and amended the body corporate roll to state the applicants preferred address as being PO Box 903 Port Moresby. While it is possible to see how CSM came to this assumption, the assumption was unfortunately incorrect.

All correspondence subsequent to June 2001 was sent by CSM to PO Box 903 Port Moresby. The applicants did not receive this correspondence and did not have any contact with CSM for approximately 18 months. In this time, a number of the applicants’ levy payments became overdue. Eventually, in January 2001, CSM checked their records and located the applicants’ email address. Contact was made through this email address.

On 23 January 2003, at the applicants’ request, CSM sent details of the outstanding levies to PO Box 903 Cairns. The applicants picked up these details on 25 January 2003. On 26 January 2003 the applicants sent an email to CSM claiming they should be entitled to the discounted levies as they would have paid the invoices on time if they had been sent to the correct address. The applicants requested copies of the original invoices that would show the amount of the discounted levies but CSM was initially unable to provide this information.

The dispute over whether the applicants were entitled to the discounts continued for several weeks but the body corporate did not disclose the actual amount of the discount until 31 March 2003. On 31 March 2003 the body corporate’s lawyer emailed the applicants advising the discounts totalled $514,72 and stating, "We are considering your contention that you should only have to pay the discounted amounts of the levies and will be advising our client and reverting to you in due course. However, in the meantime, there is no reason why you should not pay the undisputed amount of $5,272.48 to our client within 7 days". The applicants paid this undisputed amount the following day.

On 14 May 2003, the body corporate’s lawyer emailed the applicants stating, "I’m instructed that the Body Corporate will not allow the discounts because, notwithstanding any other events in the past :- 1. You were duly served with a notice of the contributions on 23 January 2003 by post at your correct address. 2. You did not pay the contributions until 1 April 2003, ie, after the 30 day period within which payment must be made to obtain the discounts". The applicants dispute this decision by the body corporate to refuse them the discount and have brought this application.

Submissions

The applicants’ main submissions were to the effect that:

• They should not lose the benefit of the discount because CSM addressed their levy notices incorrectly and the notices were not received by the applicants;
• They paid the levies the day after being advised of the discounted amount owing;
• CSM has admitted they had contact details for the applicant in their archives and the chairperson had knowledge of the applicants PNG business and could have obtained their details from the PNG phone book or the internet; and
• They should not be charged legal fees as the failure to pay was the fault of CSM and the amount claimed for legal fees is disproportionate to the amount claimed to be owing.

The body corporate’s main submissions were to the effect that:

•	The applicants should have known that they were not receiving correspondence and that levies would be outstanding and should have notified CSM that they were not receiving correspondence;
•	It was reasonable to assume that PO Box 903 was located in Port Moresby rather than Cairns given that the applicants spent a lot of time in Port Moresby; and
•	The body corporate does not consider the applicants should be entitled to the discount.

Decision

Decision not to allow discount

A body corporate may allow a discount to owners for timely payment of levies (Standard Module, 97). At least 30 days before a levy is due the body corporate must give the owner a levy notice that sets out the amount of the levy, the date payment is due, and the amount of any discount for timely payment (Standard Module, 96).

Even if payments are made late, the body corporate may allow the discount if it is satisfied that there are special reasons for allowing the discount (Standard Module, 96(6)^[1]). The body corporate must act reasonably in determining whether it will allow the discount according to this provision (Act, 94(2)).

Given that the applicants were not provided with levy notices, it seems unreasonable for the body corporate to refuse to allow the applicants the timely payment discount. It was the fault of the body corporate managers acting on behalf of the body corporate that the applicants did not receive the levy notices. I accept the applicants’ statement that they would have paid the levies on time if they had been given the notices. Further, the applicants did pay the outstanding levies the day after the body corporate’s lawyer provided them with details of the discounted amount and the undisputed levy arrears owing. In these circumstances, it is unreasonable for the body corporate to deny the applicants the benefit of the timely payment discount.

There is some merit in the argument by the body corporate that the applicants should have expected to receive levy notices and should have contacted the body corporate about failure to receive those notices. However, the majority of the fault lies with PM failing to update the body corporate roll and CSM then making an incorrect assumption as to the applicants’ address. It is possible to understand how CSM came to this assumption but CSM did have information that allowed it to contact the applicants to confirm the address. CSM did not make any effort to contact the applicants by alternative means for a period of 18 months. In light of this, the failure of the applicants to chase up levy notices is not sufficient reason to refuse to allow them the discount.

The body corporate also claims that the applicants were given details of the outstanding levies on 23 January 2003 but payment was not received until 1 April 2003, well outside the date required for a discount, even for the levy that was current at the time. However, the email from the body corporate’s lawyer to the applicants on 31 March 2003 clearly indicates that, at that date, the parties were in genuine dispute over whether the discount was payable. Further, this email also indicates that the discount date for the current levy was extended for all owners to 31 March 2003 due to the late issue of levy notices for that payment. The applicants paid the undisputed levies sought on the day immediately following this email. It is therefore unreasonable for the body corporate to claim that the applicants delayed in making payment of the outstanding levies even after being given details of the payments due.

Payment of legal expenses

The body corporate is seeking to recover from the applicant the legal costs incurred in engaging solicitors.

The body corporate may consider that it acted reasonably in engaging a solicitor and incurring significant legal costs in pursuing payment of the outstanding amounts. The reasonableness of engaging a solicitor is supported by a review of the correspondence sent by the applicants to the body corporate manager. Some of this correspondence appears inappropriate and overly aggressive and it was obviously beneficial for the body corporate to engage a solicitor to communicate with the applicants on its behalf.

However, the applicants have shown the amount claimed by the body corporate was not properly owing. Further, the applicants paid the discounted amount due the day after being advised of that amount. Therefore, the body corporate has no reasonable basis to claim its legal costs as a debt payable by the applicants.

Discounts lost due to refusal to pay disputed amounts

It is normally preferable for an owner to pay the body corporate any disputed amounts and subsequently seek reimbursement of the disputed amount. This avoids the disputed amounts being compounded by lost discounts if payments for a particular levy are applied by the body corporate towards the outstanding amounts and the levy itself remains partially unpaid (Standard Module, 99).

However, I am required to make an order that is just and equitable in the circumstances to resolve the dispute (Act, 276). As the applicants have succeeded in their claim, the applicants should not suffer any penalty or lost discount because of the body corporate allocating subsequent levy payments towards amounts wrongly claimed to be owing. I will therefore order that any penalties or lost discounts incurred in this manner be reversed.

Order

For these reasons, I make the order above.

^[1] Previously, Standard Module, 99(5).