Dolphin Lodge [2005] QBCCMCmr 723 (21 December 2005)

TAKE NOTICE that pursuant to an application made under the abovementioned Act by

I hereby order as follows-

1. that, failing an order of a court subsequent to 5^th April 2005, the applicant Maria Balacki owes to the body corporate the sum of $481.20 as ordered by the Southport Magistrates Court, and no further sum is due or owing by her for recoverable costs;
2. that since the applicant Maria Balacki has paid this sum to body corporate, then any amounts paid in excess of $481.20 should be reimbursed to her by the body corporate within 7 days of the date of this order;
3. that the applicant’s statement of account with the body corporate shall be corrected as soon as practicable at the direction of the body corporate, so that

a) any interest which has accrued in relation to a sum of the $1,324.36 wrongfully claimed by the body corporate is expunged; and
b) any penalty claimed as a result of late payments of body corporate levies which would have been covered by payments made by the applicant had not the wrongful claim for recovery costs been outstanding, be removed and credited to the applicant.

And I further order that if a competent court has made an order for costs subsequent to 5^th April 2005, then the parties hereto adhere to the interpretation of section 99 of the Body Corporate and Community Management ( Standard Module) Regulation 1997 as stated in the decision attached, and make such adjustments to the applicant’s statement of account with the body corporate accordingly, with any moneys to be reimbursed to the applicant being paid within 7 days of the date of this order, the whole as set out at 3a) and 3b) above.

STATEMENT OF ADJUDICATOR’S REASONS FOR DECISION - REF 0554-2005

"Dolphin Lodge" CTS 14161

THE APPLICATION

This is the application dated 6^th September 2005 and amended on 9^th September 2005 of Maria Balacki (the applicant), owner of Lot 3 for an order against the body corporate (the body corporate) that certain costs and charges debited to her be declared unlawful, and be withdrawn.

JURISDICTION

"Dolphin Lodge" Community Titles Scheme 14161 is a scheme under the Body Corporate and Community Management Act 1997 (the Act) and the Body Corporate and Community Management (Standard Module) Regulation 1997 (the Standard Module). There are eight lots in the scheme created under a building unit plan of subdivision

Section 276(1) of the Act provides that an adjudicator may make an order that is just and equitable in the circumstances (including a declaratory order) to resolve a dispute, in the context of a community titles scheme, about-

(a) a claimed or anticipated contravention of the Act or the community management statement; or

(b) the exercise of rights or powers, or the performance of duties, under the Act or the community management statement; or

(i) the engagement of a person as a body corporate manager or service contractor for a community titles scheme; or

(ii) the authorisation of a person as a letting agent for a community titles scheme.

An order may require a person to act, or prohibit a person from acting, in a way stated in the order (section 276(2)). An adjudicator's order may contain ancillary and consequential provisions the adjudicator considers necessary or appropriate (section 284(1)).

An adjudicator has no jurisdiction to administer or audit the accounts of a body corporate, although an adjudicator may make an order that an audit is carried out.

Submissions were invited from all lot owners in accordance with section 243(2)(b) of the Act, and from the body corporate committee ( the committee). Submissions were received only from the body corporate committee.

The undisputed facts are that the applicant fell into arrears with her body corporate contributions, so the body corporate took action for recovery in the Southport Magistrates Court, as Minor Debt Claim number 0050111/05. The application was filed on 10^th February 2005 claiming $2,166.00 in unpaid levies plus interest and "all recovery costs to 9^th February 2005" being $247.50 and a further $148.50 "for recovery costs associated with the judgment." It further claimed "all recovery costs from 10^th February 2005 to the date of the hearing" and "interest thereon at 9% pursuant to section 47 Supreme Court Act 1995 to the date of the hearing." The levies claimed related to the quarterly periods 1^st October 2003, 1^st January 2004, 1^st April 2004, 1^st July 2004, 1^st October 2004, 1^st January 2005 and a special levy of $1000 on 31^st January 2004. The applicant says that the body corporate subsequently obtained judgment for a sum not disclosed to her.

On 6^th May 2005, the body corporate lodged an application for enforcement . The Enforcement Hearing was set for 28^th June 2005. The applicant paid $100 on 20^th May 2005 and $150 on 17^th June 2005 towards the debt. On 28^th June 2005 a representative of Body Corporate Choice ( the body corporate manager) appeared in court and subsequently on the same day charged the body corporate $231 for her time at $70 per hour plus GST, an expense which has been passed on to the applicant.

The applicant says that on 28^th June 2005, she attended court and left with the body corporate manager who advised her that " the payout figure" was "$2,512.06 to wipe the slate clean and a lesson learnt." The applicant on that day sold some shares belonging to her daughter in order to pay the debt owed by her to the body corporate. She paid in full the sum of $2,512.06 which the body corporate acknowledges having received on 7^th July 2005. The sum of $2,512.06 as calculated by the body corporate manager included levies charged to 31^st March 2005, " legal costs" of $685.50, and "interest charged" of $210.56.

However, on 22^nd July 2005, the body corporate wrote to the applicant claiming that $971.86 was still outstanding exclusive of the quarterly levy due on 1^st July 2005. The $971.86 is calculated as the levy due on 1^st April 2005, and legal costs of $1,093.36 less the sum of $685.50 paid by the applicant on 28^th June 2005, plus costs of $231 for the appearance of the body corporate manager in court.

The applicant says that the body corporate has added legal fees and the body corporate manager’s costs to the amount of the court order. The applicant says that the body corporate has no authority to add on these costs to the court order, and that they keep appearing on subsequent levy notices. The applicant requests this office to check the body corporate accounts in respect of her financial statement.

In its submissions, the body corporate, via its chaiman Paul Doody ( Mr Doody), says that it believes it has acted properly and that the legal costs were part of the judgment obtained.

On 7^th December 2005, I asked Mr Doody to provide me with a copy of the judgment referred to in his submissions. On 19^th December 2005, the body corporate manager provided me with a copy of the judgment claim 0050111/05 in the Southport Registry of the Magistrates Court. The judgment, dated 5^th April 2005, is for "$2,858.51 including $211.31 interest to today and $481.20 costs."

The applicant made a reply. On 9^th September 2005, she received a Final Notice stating that body corporate levies for 1^st April 2005, and 1^st July 2005 were due, as well as "balance of legal costs as per letter 22.7.05 for $407.86 " and "costs of court appearance by the body corporate manager" at $231. The outstanding debt claimed of $1,019.86 is accruing interest on a daily basis.

DETERMINATION

The determination of this application hinges on a fundamental issue and that is whether the body corporate has the authority to recover debt recovery costs.

The statement of claim filed by the body corporate’s lawyers in the Southport Registry states –

arranged by the body corporate on behalf of the lot owner

There is no general authority in the legislation to allow a body corporate to reimburse itself for legal fees, debt collection agency fees or any other costs incurred in the collection of the debt. Whilst "recovery costs" are not defined in the legislation, it has been held on many occasions by this office, that solicitors’ fees and debt collection agency fees are not, without more, fees "reasonably incurred". Reasonable recovery costs are those which a court might order. In the Magistrates, District and Supreme Courts, if costs are awarded, which is always at the discretion of the magistrate or judge, they are awarded in accordance with the relevant court "scale of costs." They are not generally, the fully recoverable costs of a successful suitor.

In matter 0706-2004 Glenone CTS 2957, the adjudicator said -

"In a previous adjudication (no. 458 of 1997), I made the following observation related to one of the issues now in dispute; namely the inclusion of recovery costs on the applicant’s contribution account.

.....Payment and recovery of contributions is dealt with in section 99 of the Standard Module. That section provides that outstanding contributions etc, are recovered as a debt.

In my view, legal costs do not become an amount payable by an owner in arrears, until the body corporate has in fact obtained judgment for the amount of the arrears, together with an order as to costs. If it were otherwise, then there would be no check on the ability of a body corporate to increase an owner’s contribution by amounts that the body corporate considered outstanding. This would be unreasonable. To avoid this scenario, there must be an order for payment of the body corporate’s legal costs, before such costs can be added to an owner’s contribution account. ...

"Since the making of this order, section 99 has been amended to be more specific, quote:

(1) If a contribution or contribution instalment is not paid by the date for payment, the body corporate may recover each of the following amounts as a debt

(c) any costs ("recovery costs") reasonably incurred by the body corporate in recovering the amount.

(2) If the amount of a contribution or contribution instalment has been outstanding for 2 years, the body corporate must, within 2 months from the end of the 2 year period, start proceedings to recover the amount. ...

"Not only does the section now direct a body corporate when it must commence proceedings to recover outstanding contributions, but as well, indicates specifically the items or arrears which the body corporate can in fact recover; namely the outstanding contributions, any penalty imposed thereon and recovery costs reasonably incurred by the body corporate. Finally, but relevantly, the amount claimed must be recovered as a debt. ....."

I have no jurisdiction to interfere with the order made by the Magistrate on 5^th April 2005, wherein costs of $481.20 were awarded. I do not know to what those recovery costs relate. The claim for costs was $396. ($247.50 + $148.50 ). I note that the invoice dated 20^th July 2005 from Robbins Watson solicitors for the body corporate, includes disbursements of $213.36, some of which, eg. Minor Debt filing fee, were certainly incurred before the date of the court order on 5^th April 2005.

The body corporate is responsible for when and if it engages professional assistance and cannot assume that such costs will, as of right, be passed on to a lot owner, even if that lot owner has withheld contributions deliberately. There is no legal principle which enables an entity, as an aggrieved party, to pass on its lawyer’s bill to a party with whom it is in dispute, and there is no authority given to the body corporate by the legislation, to have greater powers than a Magistrate or District Court judge.

I am concerned that this matter should be finalised as quickly as possible, noting that from the time I requested a copy of the court order, to the receipt of that order, 12 days had elapsed. I order that only those costs for which there is a court order in place are recoverable costs. The only court order shown to me, and upon which I am advised the body corporate relies, is the order of 5^th April 2005 in which the sum of $481.20 is payable. Only the sum of $481.20 is to be paid by the applicant to the body corporate with regard to recoverable costs, unless there is a subsequent court order in respect of specific recoverable costs claimed. If the body corporate manager’s fee of $231 is part of that $481.20, then it is payable but otherwise not, unless it has been subsequently specifically ordered by a court. I do not believe that this is the case.

I therefore order that from the sum claimed for legal fees and costs of $1,324.36 ($1093.36 plus $231.00), only the sum of $481.20 is payable by the applicant in accordance with the order of the Magistrate made on 5^th April 2005. Any other sums paid by the applicant in respect of legal costs, debt recovery costs and fees should be reimbursed to her within 7 days of the date of this order. ( I note that the applicant paid $100 on 19^th July 2005 but that may have been towards payment of continuing levies.) Further I order that the applicant’s statement of account with the body corporate should be amended as soon as practicable at the direction of the body corporate, so that any interest which has accrued in relation to the sum of the balance claimed, is expunged. The body corporate should prepare and forward to the applicant a corrected account for the payment of levies and receipt of moneys, removing interest where, if the sums claimed for costs had not been made, then interest would not be due.

Therefore, unless there has been a subsequent order for costs in a court, and on the understanding that the applicant has paid $685.50 legal costs, the sum of $204.30 ($685.50 - $481.20) should be reimbursed to the applicant, and the sum of $638.86 ($407.86 + $231.00) which sum at the date of the applicant’s reply she had not paid, be credited to her account, with any interest accrued thereon.

Should these figures need adjusting because there is has been a subsequent court order, or the applicant has made further payments, I rely on the parties to be able to make such adjustments in accordance with the interpretation of section 99 of the Standard Module as set out herein.

Number of Scheme:	14161
Name of Scheme:	Dolphin Lodge
Address of Scheme:	4 First Avenue BURLEIGH HEADS QLD 4220

Queensland Body Corporate and Community Management Commissioner - Adjudicators Orders

Dolphin Lodge [2005] QBCCMCmr 723 (21 December 2005)