Pacific Breeze Apartments [2009] QBCCMCmr 317 (26 August 2009)

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

I hereby order that, within 30 days, Larry Sutton, owner of lot 6 (applicant) must ensure that he has paid the body corporate for Pacific Breeze $7,763.48 in outstanding contributions and recovery costs. This amount is made up of the outstanding contribution of $1,913.48 for the period of 1 April 2009 to 30 September 2009 plus an amount of $5,850 payable as a debt pursuant to this order for costs reasonably incurred in recovering this and earlier outstanding contributions.

I further declare that the applicant does not owe any body corporate debts to the body corporate apart from the above contribution, although the applicant still owes any amounts outstanding in relation to enforcement warrant M12733 of 2008.

I further declare that there are no valid resolutions of the body corporate that authorise the commencement of any proceedings against the applicant, apart from the special resolution passed by the body corporate on 22 July 2009 and any resolutions passed pursuant to or subsequent to that resolution.

I further order that the application is otherwise dismissed.

Pacific Breeze Apartments Community Titles Scheme (Pacific Breeze) is a 7 lot scheme under the Body Corporate and Community Management Act (Act) and the Act’s Standard Module Regulation (Standard Module).

This is an application by Larry Sutton, owner of lot 6 (applicant) against the body corporate for Pacific Breeze (respondent). The applicant says that the body corporate is acting unreasonably and without authority in taking action against him to recover contributions and legal costs. The applicant sought declarations to this effect.

The submissions indicate that KBW Community Management Pty Ltd (KBW) was the body corporate manager for Pacific Breeze at all relevant times. Further, that the legal representative of the body corporate at all relevant times was Collect Success Levy Recovery Specialists, a division of Success Law Pty Ltd (Collect Success).

The applicant initially sought interim orders to stop the body corporate taking further legal action against him pending a final order regarding the body corporate’s authority to pursue this legal action. He submitted that Collect Success was taking legal action against him in the name of the body corporate. The core allegation of the applicant was that the body corporate had not authorised any legal action and that Collect Success was following instructions of KBW purportedly on behalf of the body corporate but made in excess of KBW’s authority.

It became apparent from the interim submissions that the body corporate had already obtained two judgments and enforcement writs against the applicant. I therefore declined to make any interim orders in relation to those matters. However, serious questions were raised about whether the body corporate would be acting contrary to the legislation in pursuing any new proceedings against the applicant so interim orders were made in that respect.

In attempting to finally resolve the dispute between the applicant and the body corporate I have considered it appropriate to take into account resolutions passed by the body corporate subsequent to the application being lodged and to make orders in relation to the amounts owed by the applicant based on calculations performed at the present time.

I note that the statutory provisions dealing with recovery of contributions in Queensland and New South Wales have recently been considered by respective appeal bodies in both states. These are the decisions of Body Corporate for Liberty v Alotier Pty Ltd & Ors (Liberty decision)[1] and Owners of Strata Plan 36131 v Dimitriou (Dimitriou decision).[2]

The main grounds in support of the application, provided on behalf of the applicant, were to the effect that:

The body corporate was given an opportunity to provide written submissions. The main submissions by the body corporate were to the effect that:

The above submissions were received through the legislated processes for inviting written submissions from the body corporate and any persons affected by a community titles scheme dispute (Act, 243). Even where the body corporate makes a submission, it is not unusual for a large proportion of owners to also make their own individual submission. Each person who makes a written submission is effectively joined to the proceedings and given a right of appeal (Act, 289). This overcomes any concern that the particular position advanced in the name of the body corporate only reflects the views of a couple of committee members.

The legislation does not provide for a formal hearing at which the various persons affected by the dispute can further argue their case. In some circumstances it is appropriate for an adjudicator to make a determination based solely on whatever written submissions have been provided.[3] However, an adjudicator will need to undertake appropriate investigations if there is insufficient material for the adjudicator to make an express finding on relevant matters.[4] In carrying out these investigations, the adjudicator must act as quickly and informally "as is consistent with a fair and proper consideration of the application" (Act, 269(3)(b)). Despite this need to act quickly and informally, a teleconference or a further round of written submissions may be necessary to allow relevant persons to respond to any significant information obtained in these investigations (Act, 269(3)(a)).

On 15 April 2009 I wrote to the parties asking for the body corporate to provide an itemisation of the recovery costs being claimed and for the applicant to specify which of those costs were considered to be unreasonable. I also put the parties on notice that I considered it appropriate to make an ancillary order requiring the applicant to pay any reasonable recovery costs. By letters of 23 April 2009 and 28 April 2009 the body corporate provided these details. On 15 May 2009 the applicant responded to the effect that further details were necessary to enable assessment of whether costs were reasonable or not, that the costs are unreasonable in proportion to the small amount of levies outstanding, and that the body corporate should bear its own costs of the present application given it chose to employ professional help in preparing its submissions.

On 2 June 2009 I wrote to the parties expressing some provisional views regarding the calculation of amounts owing and the determination of the principle legal matters in issue. These provisional views included:

By letter of 29 June 2009, unfortunately not received by this office until 22 July 2009, the body corporate responded to the effect that:

The applicant says that KBW and Collect Success took court proceedings against him on behalf of the body corporate but without the proper authority of the body corporate. In particular, the applicant argues that the recovery costs claimed are in an unreasonable amount, that the excessive amount of these recovery costs is contributing to his difficulties in paying his contributions, and that the body corporate is only "lining the pockets" of Collect Success by allowing recovery action to continue against him rather than accepting an instalment payment arrangement. The applicant also says that the body corporate acted unreasonably in allowing these proceedings to continue and not accepting an instalment payment arrangement for his overdue contributions.

In considering whether it is just and equitable in the circumstances to grant the relief sought it appears relevant to review the circumstances in which the recovery actions were commenced including the extent to which the applicant was in arrears in his contributions at the time, the reasonableness of recovery costs incurred and claimed, and the reasonableness of the body corporate in refusing to accept an instalment payment plan.

If the applicant does in fact owe the body corporate outstanding contributions and recovery costs then, in order to finally resolve the dispute between the applicant and the body corporate, it appears appropriate that I make orders specifying the amount of contributions and recovery costs outstanding and requiring the applicant pay those amounts.

A preliminary issue also arises as to whether this is the appropriate jurisdiction to determine the present application. This is particularly as the background to this dispute is complicated by two court proceedings brought by the body corporate prior to the present application being lodged and by the applicant seeking an order to stop any further court proceedings on the basis the body corporate had not authorised those proceedings.

This dispute is between an owner and the body corporate (Act, 227(1)(b)). It is about the exercise of rights or powers under the Act to the extent it relates to the financial management of the body corporate (Act 150, 150(2)(b), 150(2)(d), Standard Module 141, 145). It also relates to alleged contraventions of the Act in terms of whether persons have purported to act on behalf of the body corporate in excess of their authority or whether the body corporate itself has acted unreasonably (Act 94, 100, 119, Standard Module 42). On its face, it is clearly a dispute within the context of a community titles scheme and of a nature intended to be dealt with by processes under Chapter 6 of the Act (Act 228, 229(3)).

Because the dispute relates to recovery of outstanding contributions, there is some controversy regarding whether the dispute should be dealt with as a Chapter 6 proceeding or as part of a debt recovery action in a court of competent jurisdiction. It is noted that the body corporate has already taken two debt recovery actions against the applicant in the Magistrates Court. This appears to be based upon the preliminary view of McMurdo P in Independent Finance Group Pty Ltd v Mytan Pty Ltd,[5] and referred to in Body Corporate of the Lang Business v Green,[6] that "It would be surprising if, in the absence of the clearest words, the inherent jurisdiction of the Supreme Court was diminished by Chapter 6". However, following James v Body Corporate for Aarons (Aarons decisions)[7] and Penberg Pty Ltd v Body Corporate for Market Town Community Title Scheme (Market Town decision)[8] it seems clear that if a dispute falls within the terms of Chapter 6 then, prior to any application to a court, an application would need to be made for the Commissioner or an adjudicator to dismiss the matter on the basis that it should be dealt within a court or tribunal of competent jurisdiction (Act 250(2), 270(1)(b)). Relevant statements from these decisions are:

“The jurisdiction of a superior court can only be excluded, it is well recognised, by the clearest expression of legislative intent. Whether s184[9] achieves the exclusion of the jurisdiction of this court in relation to disputes to which the section applies has not previously been decided. The question received some attention in Independent Finance Group Pty Ltd v Mytan Pty Ltd & Anor ... Atkinson J expressed the view that the adjudicator had exclusive jurisdiction to deal with disputes under chapter 6. On the other hand, Thomas JA, while acknowledging that the legislature had "deliberately established a mechanism for the resolution of community title scheme disputes" nonetheless considered that there remained a concurrent jurisdiction in the Supreme Court, although the court would be reluctant to restrain a party from exercising its rights in the manner envisaged by the legislation. McMurdo P expressed a "preliminary view", that "it would be surprising if in the absence of the clearest words, the inherent jurisdiction of the Supreme Court was diminished by chapter 6"...The heading to s184, "Exclusivity of dispute resolution provisions" is part of the Act, and part of the provision itself. It indicates, plainly enough, an intention to confer jurisdiction in dispute resolution in accordance with the provisions of chapter 6, excluding other fora. The wording of the section itself is unusual: rather than providing for exclusive jurisdiction in so many words, s184(2) speaks in terms of "the only remedy" being the order of an adjudicator or that of a District Court on appeal on a question of law. But those words "the only remedy" are not ambiguous; it is difficult to see what meaning they can have other than that in the circumstances to which s184(2) applies, the only manner in which the dispute itself can be resolved is by the means prescribed: the adjudicator's order or that of the District Court on appeal.”[10];

“This was plainly a dispute in respect of which an adjudicator may make an order under Ch 6 within the meaning of s184.[11] It was, at the very least, both a dispute between the body corporate and the owner of a lot included in the scheme and a dispute between the body corporate and a letting agent for the scheme. ... S184 does not speak in terms, specifically, of jurisdiction to hear and decide but in terms of providing a remedy. However I think its plain intention is that the adjudicator is to have exclusive jurisdiction to make orders of the kind which the Act prescribes, relevantly in s223[12] and s227,[13] in disputes of the kind to which s182 refers, subject to any statutory exception or limitation” [14] (And subject, possibly, to the power of the Commissioner to terminate that jurisdiction under s201(2))[15];

“it is well established law that the mechanism prescribed for resolving disputes under the Act is pursuant to Chapter 6 thereof and in particular s 229 of the Act provides for the “Exclusivity of dispute resolution provisions” to be followed in the determination of such a dispute ... until such time as the dispute resolution process is completed pursuant to the relevant sections contained in Chapter 6 of the Act in respect of such a dispute, the jurisdiction of “... a court or tribunal of competent jurisdiction” is not enlivened”[16].

Where an owner fails to pay their contributions, section 145 of the Standard Module specifically provides for the recovery by the body corporate of contributions, penalties, and recovery costs from the owner. This section provides:

(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—

(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.

(3) A liability to pay a body corporate debt in relation to a lot is enforceable jointly and severally against each of the following persons—

(b) a person (including a mortgagee in possession) who becomes an owner of the lot before the debt is paid.

(4) If there are 2 or more co-owners of a lot, the co-owners are jointly and severally liable to pay a body corporate debt in relation to the lot.

(5) If an owner is liable for a contribution or a contribution instalment, and a penalty, an amount paid by the owner must be paid—

(6) If the body corporate is satisfied there are special reasons for allowing a discount of a contribution, or waiving a penalty or liability for recovery costs, the body corporate may allow the discount, or waive the penalty or costs in whole or part.

The use of the terms "proceeding" and "recover as a debt" in this section of the regulation raise some uncertainty about whether it was the intention of the drafters of this regulation that the body corporate could only recover these amounts by taking debt recovery action in a court of law. If it were not for the James and Market Town decisions, it is easy to see how the terms "proceeding" and "recover as a debt" could have led to the conclusion that overdue contributions should be recovered in the courts rather than by an application under Chapter 6 of the Act. This is particularly so given most schemes were previously regulated under the Building Units and Group Titles Act 1980, of which section 32 specified that "A contribution levied in respect of a lot ... may be recovered, as a debt, by the body corporate in any court of competent jurisdiction". However, even if it were concluded that these terms required recovery by court action, it would still appear to be necessary for the body corporate to make a Chapter 6 application prior to taking any court action. Section 150 of the Act grants power for the Governor in Council to make regulations setting out the financial management arrangements applying to a community titles scheme. However, it does not appear to authorise the making of any regulations that alter the exclusive jurisdiction established by Chapter 6 of the Act. Given the clear statements by the Court of Appeal, Supreme Court and District Court in the James and Market Town decisions, it is difficult to see how any wording in section 145 of the Standard Module could remove the need for dispute resolution processes under Chapter 6 of the Act to be completed before any jurisdiction in a court of law is enlivened. As referred to by the High Court in Morton v Union Steamship Co of New Zealand Ltd,[17] "A power expressed in such terms to make regulations enables the Governor-General in Council to make regulations incidental to the administration of the Act. Regulations may be adopted for the more effective administration of the provisions actually contained in the Act, but not regulations which vary or depart from the positive provisions made by the Act or regulations which go outside the field of operation which the Act marks out for itself". To the extent that there is conflict between the Act and the regulations as to whether an application for payment of contributions should be made by a Chapter 6 proceeding or by a debt recovery action in a court of law it would appear that the Act must take precedence.[18] In particular, the statutory instrument should be interpreted not to exceed powers conferred by the authorising law.[19]

However, I have ultimately come to the conclusion that there is no conflict between the Standard Module and the Act by the use of the words "proceeding" and "as a debt" in section 145. This is on the basis that those phrases are used in a general sense, do not deprive an adjudicator of the power to make orders requiring owners to pay outstanding contributions and recovery costs, and do not limit recovery of contributions and recovery costs to where the body corporate has brought an action for debt in a court of record.

With regard to the term "proceeding", the ordinary legal meaning of the word would indicate a legal action commenced in a court.[20] However, the Acts Interpretation Act defines "proceeding" broadly to mean "a legal or other action or proceeding".[21] The use of the words "legal or other" indicate a broad meaning that would include a proceeding under Chapter 6 of the Act following from the lodgement of an application for adjudication. In particular, section 259(6) of the Act refers to "an adjudication" as being a "proceeding". The reference to a "prescribed chapter 6 proceeding" in section 42 of the Standard Module also appears to contemplate "proceeding" as meaning something broader then a legal proceeding in a court. Otherwise, there would be no need for a definition specified as inclusive of enforcement proceedings as those enforcement proceedings are the only proceedings under Chapter 6 that are in a court.

Also, the interpretation of the phase "as a debt" was considered recently by the Commercial and Consumer Tribunal in the Liberty decision. Unfortunately for present purposes, the adjudicator had taken the view that the recovery costs disputed in that application should be assessed by a court and had already ordered "that the Body Corporate for Liberty is not entitled to recover the amounts of $998.84 and $257.40 charged to Alotier Pty Ltd, the Owner of Lot 2985, on 17 September and 12 October 2007 for legal fees, unless and until those costs are determined by a court of competent jurisdiction to be recovery costs reasonably incurred".[22] Therefore, in the Liberty decision, the recovery costs could only be sought in a court of competent jurisdiction and it was unnecessary for the Commercial and Consumer Tribunal to decide whether, as a general principle, these costs could be recovered by order of an adjudicator.[23] However, the Liberty decision is relevant in that it refers to Queensland Building Services Authority v Beatty (Beatty decision)[24] where the District Court considered questions about the appropriate forum for determination of the existence or otherwise of a debt under section 71 of the Queensland Building Services Authority Act 1991 (QBSAA).

As discussed in the Beatty decision, section 71 of the QBSAA allowed the Queensland Building Services Authority to recover the amount of any payment under the insurance scheme "as a debt" from the person through whose fault the claim arose. The phase "as a debt" in this context was not taken to mean that the amount was an incontestable debt or even that the amount could only be recovered by debt recovery action in a court of law. Rather it was taken to mean that, upon certain facts being established, the Queensland Building Tribunal could make a finding that the amount or part of the amount is a "debt owing". It should be noted that, similar to Chapter 6 under the Body Corporate and Community Management Act 1997, the QBSAA provided an option for the tribunal to order that the application not be dealt with further if it was more appropriate for it to be dealt with in a court of law. However, the District Court concluded that the QBSAA gave the tribunal the power to make determinations as to the existence or otherwise of the debt and the words "as a debt" were not construed to require any application to be by way of a debt recovery action in a court of law.

I have therefore concluded that the use of the words "as a debt" do not require the body corporate to make a claim in a court of record or avoid the need for the body corporate to first lodge an application under the exclusive jurisdiction established by Chapter 6 of the Act. If I am wrong and the intention is that the body corporate seek recovery in a court, either directly or following a section 250(2) or 270(1)(b) dismissal, then the Liberty decision has raised a practical barrier to a body corporate doing this. This is because the Liberty decision found that a claim of recovery costs is not an incontestable or deemed debt but is a claim in an unliquidated amount.[25] The logical consequence of this is that the body corporate would need to pass a special resolution to authorise a court proceeding seeking recovery costs as an unliquidated amount (Act, 312). It seems absurd that, following the Liberty decision and the James decisions, the standard approach for seeking contributions and recovery costs would need to involve the lodgement of an application under Chapter 6, the dismissal of that application by the commissioner or an adjudicator on the basis the recovery as a debt should be determined by a court of competent jurisdiction, and then the commencement of a court action after the passing of a special resolution authorising the claim for recovery costs as an unliquidated amount.[26] It also seems difficult to imagine that that the legislature, in proposing arrangements for resolving disputes in a community titles scheme context in an efficient and effective way,[27] would implement a system involving a duplication of proceedings between the chapter 6 procedures and separate court proceedings. For example, by requiring a body corporate having to take action in a court of law to recover contributions but having those court proceedings needing to be put on hold while the owner in question seeks to challenge, by way of a Chapter 6 application, the validity of the meetings or resolutions that set the contributions in question.

An adjudicator has jurisdiction to make an order requiring payment of money[28] and that order can be enforced as if it was a judgment of the Magistrates’ Court even if it exceeds the monetary limit of the Magistrates Court (Act, 286). The intention of the legislature appears to be to give the adjudicator appropriate powers to order payment of contributions and recovery costs but allow the adjudicator to dismiss the application for determination by a court if the adjudicator is satisfied that is appropriate (Act 276, 286, 270(1)(b)). An adjudicator has no general power to order costs for an application.[29] However, section 145 of the Standard Module would appear to grant the body corporate a separate right to claim its costs as part of the substantive relief sought.[30] An adjudicator would therefore be granting substantive relief under section 276 rather than making an ancillary order for costs in favour of the successful party. Further, this intention to give the adjudicator powers to order payment of amounts owing in the context of a community titles scheme appears to apply even if the amount concerned would be in a monetary amount otherwise applicable to an action in the Supreme Court.[31]

I have therefore come to the conclusion that the words "as a debt" in section 145 of the Standard Module are of a general nature, perhaps only indicative that the amounts can be found to be a debt owing, potentially without the need for the applicant to prove those amounts if the claim is uncontested. Further, that unlike the more specific phrase "as a debt in a court of competent jurisdiction", the phrase "as a debt" does not refer specifically to the taking of an action for a fixed sum of money in a court of law.[32] Rather, an adjudicator can make an order setting the amount of recovery costs payable and it is at the time of making that order that the recovery costs will be a liquidated debt owed by the applicant to the body corporate.[33]

I have formed the view that the present application falls within the terms of sections 227, 228 and 229 of the Act and should be dealt with under Chapter 6 of the Act. I am satisfied that section 276 provides me with the power to make any necessary orders, including orders requiring payment of outstanding contributions and recovery costs. Further, that any order requiring payment of contributions or recovery costs will be enforceable as if it were a judgment of the Magistrates Court (Act, 286).[34]

Submissions on behalf of the body corporate indicate the body corporate has some reservations about the jurisdiction of an adjudicator to order payment of contributions and recovery costs. However, these submissions seek an urgent determination of the application and do not seek the application be dismissed on the basis it is appropriate for determination by a court. I consider that there is some basis to dismiss the application for determination by a court given some particular complications raised by the orders sought, the unsettled state of the law as reflected in recent decisions, and the previous court applications regarding similar matters. However, the substantive questions appear relatively straightforward to the extent that they relate to the validity of proceedings that sought contributions, the validity of the appointment of Collect Success, the reasonableness of recovery costs, and the amount of contributions actually owed. I accept that the substantive issues raised are within the jurisdiction of an adjudicator to determine and I do not consider the additional delay and costs that would result from this dismissal to be in the interests of either party. I therefore will not dismiss the dispute under section 270(1)(b) of the Act.

I do have some concerns about the capacity of adjudicators to deal with a large number of applications seeking contributions and recovery costs, particularly if any significant time is needed for the adjudicator to investigate claims raised by the parties or the correctness of the amounts claimed (Act, 269). In particular, in the absence of any scale setting reasonable costs, it is obviously time consuming for an adjudicator to make a detailed review of recovery costs claimed by a body corporate to determine whether or not those costs are "reasonably incurred" in recovering a contribution (Standard Module, 145). However, it also does not appear practicable to dismiss such applications for determination by a court. The conclusion in the Liberty decision that claimed recovery costs are an unliquidated amount means the body corporate would not be able to proceed to court without first holding a general meeting to adopt a special resolution authorising the court proceedings. This could impose significant costs and delays that could make it uneconomical for the body corporate to take action and allow owners collectively holding a 25% interest in the scheme to frustrate court action.

The main factual background does not appear to be strongly contested. From the submissions, titles office searches, and further information provided by the parties I am satisfied that:

I further accept that, from September 2007 to the present, KBW and Collect Success have made various demands on the applicant for payment of contributions as well as claimed recovery costs, and that the applicant has made a number of requests for extra time to pay. Further, that the applicant has paid some amounts but some contributions remain owing.

In particular, further information provided recently on behalf of the body corporate and the applicant satisfies me that:

Based on the failure of the body corporate to provide any minutes of meeting showing otherwise, I am satisfied that there was no discussion of the engagement of Collect Success or the commencement of legal proceedings against the applicant at a formal body corporate meeting apart from:

The purported engagement of Collect Success on behalf of the body corporate to seek outstanding contributions from the applicant was by KBW, as a non-voting committee member, on 24 August 2007. KBW has indicated that it relied on by-law 20 as authority to engage Collect Success for this purpose. A registered notification of change of by-laws recorded on 7 October 1992 shows that this by-law 20 for Pacific Breeze reads:

20. ARREARS OF MAINTENANCE CONTRIBUTIONS. The Committee will institute legal proceeding against any proprietor whose levies are three months in arrears unless arrangements have been made for deferred payment which have been agreed in writing by the Committee.

Even if by-law 20 is valid, it purports to require the committee to institute legal proceedings against any owner whose levies are three months in arrears. To the extent that a discretion to appoint legal representatives may be implied, the committee would still have needed to pass a resolution appointing the legal representative as a body corporate cannot delegate its decision making powers to a body corporate manager (Act, 97).[35] Particularly as it seems likely the anticipated cost of engaging Collect Success would have exceeded the “relevant limit for committee spending” of $875 that applied at the relevant time under the Standard Module Regulation 1997, KBW had no unilateral authority to engage Collect Success on behalf of the body corporate.
In any event, I consider that by-law 20 is invalid as it does not relate to allowable matters for by-laws as specified in section 169 of the Act.[36] In this respect, amounts owed to the body corporate do not appear to fall within the definition of "body corporate assets" in section 11 of the Act.[37] Therefore, KBW could not rely on this by-law as a standing authorisation by owners for it to authorise Collect Success to commence legal action on the body corporate’s behalf. Instead, KBW should have asked the committee to consider appropriate action.[38]

Given the above problems with by-law 20 and the lack of any resolution at the relevant time, I am therefore satisfied that KBW acted in excess of its authority in initially engaging Collect Success. Further, at the relevant time, the body corporate had not passed any resolution that validly authorised Collect Success to take legal proceedings against the applicant on its behalf.

The subsequent court judgments against the applicant and the subsequent ratification of the engagement of Collect Success have made the initial unauthorised action of KBW irrelevant.

Once judgment has been entered, it is implicit within the judgment that the relevant amounts were owed and that the action by the body corporate was properly authorised. It was a matter for the applicant to allege any irregularity in the Magistrates Court proceedings and nothing can be raised in this present application that would cast doubt on the regularity of the judgments issued by the Magistrates Court.[39] I am therefore not prepared to order that the body corporate had no authority to commence the claim for $3,148.02 on 17 March 2008 or the claim for $6,122.22 on 15 October 2008.

Further, the absence of any resolution authorising the engagement of a debt recovery agent does not mean the body corporate is not liable to pay that debt recovery agent.[40] The body corporate may be legally bound to make that payment and can take steps to ratify that expenditure.[41] The body corporate has now passed a special resolution to authorise and ratify the engagement of Collect Success to take all action and provide all services taken for and provided to the body corporate at a total cost of $14,467.92 up to 26 June 2009. Further, to engage Collect Success to perform further work from 27 June 2009 up to a total value of $4,500, and an additional amount of $2,553 if the committee determines a bailiff sale should proceed.

However, because the proceedings were originally commenced without authority and the applicant has concerns about other proceedings being commenced without authority, I am prepared to declare that there are no resolutions of the body corporate that authorise the commencement of any additional legal proceedings against the applicant.

A body corporate is required to act reasonably in carrying out its functions, including in making or not making a decision (Act 94(2), 100(5)). Further, an adjudicator may make an order that is just and equitable to resolve a dispute, including to decide whether or not to declare a resolution purportedly passed to be void or to give effect to a motion that was not passed (Act 276, Schedule 5 – Items 8, 10).

Individual owners who vote at a general meeting are not under any statutory obligation to act reasonably or to provide any reasons why they voted in a particular manner. However, section 94 provides a statutory obligation that the body corporate act reasonably in making a decision. This statutory requirement is only satisfied if the ultimate decision is objectively reasonable.[42]

Reasonableness is a question of fact. The objective test requires a balancing of factors in all the circumstances according to the ordinary meaning of the term ‘reasonable’.[43] The question is not whether the decision was the "correct" one but whether it is objectively reasonable.[44]

If the applicant establishes that these actions taken on behalf of the body corporate were objectively unreasonable then the decision by the body corporate to ratify these actions may also be unreasonable or ineffective.[45]

The applicant argues that the recovery costs claimed are in an unreasonable amount, that the excessive amount of these recovery costs is contributing to his difficulties in paying his contributions, and that the body corporate is only "lining the pockets" of Collect Success by allowing recovery action to continue against him rather than accepting an instalment payment arrangement. The applicant also says that the body corporate acted unreasonably in allowing these proceedings to continue and not accepting an instalment payment arrangement for his overdue contributions. Specifically, it is alleged that additional recovery costs were continually being added to the amount the body corporate was claiming from him and that the continual legal action resulting in a continually increased amount owing resulted in an inability for him to fund the payment of his debt.

The body corporate has responded with copies of emails indicating the applicant was regularly updated on the amount claimed by the body corporate and that he promised to pay those amounts but failed to honour these promises. However, I note that an amount claimed by the body corporate as owing by the applicant is not necessarily the same as the amount the applicant legally owes the body corporate. In particular, I note that the applicant considered Collect Success acted in a misleading manner when the body corporate obtained judgment against the applicant for $1,845.52 but Collect Success requested payment of over $4,000 to prevent further action. Specifically, the applicant has submitted that the spending of over $8,000 in legal fees to recover $3,321.50 in levies is excessive. Further, that details of how the legal fees were made up have never been provided to the applicant and that these amounts have simply been dollar amounts added to his levy notices.

Based on the Liberty decision, amounts sought by a body corporate as recovery costs are unliquidated amounts.[46] The amount of recovery costs claimed is not incontestable and is not a deemed statutory debt.[47] The amount of recovery costs payable would need to be fixed by agreement between the body corporate and the owner or fixed by a legally enforceable order. Further, even when costs are ‘recovered’ by being incorporated in a judgment, the amount cannot be included in the body corporate’s financial records as a body corporate debt[48]

However, the Liberty decision also acknowledged that compliance with the legislative procedures for financial management of community titles schemes is not an easy interpretative exercise.[49] Even if recovery costs claimed by the body corporate were not due and payable at the time claimed, the applicant had overdue contributions that he had not paid. It was not objectively unreasonable for the body corporate to take action to pursue payment of these contributions and to ask for recovery costs at the same time. In particular, I note that the body corporate manager had made requests for payment prior to Collect Success being engaged and that no recovery costs were claimed prior to this engagement. Further, there are no claims of lost discounts or penalty interest resulting from the body corporate setting off payments against unliquidated recovery cost claims instead of outstanding contributions.

I also do not consider there is much merit in the argument that the initial recovery costs claimed were proportionally too great for the quantum of contributions in dispute. I note that even if only $1 in contributions is owed then the body corporate is expected to start proceedings to recover the amount within two years and two months (Standard Module, 145(2)). The first Magistrates Court action appears to have been to pursue the applicant for overdue contributions of slightly less than $2,000, with recovery costs claimed by the body corporate being less than $2,000. The second Magistrates Court action appears to have been to pursue the applicant for overdue contributions of in excess of $3,000, with recovery costs claimed by the body corporate being less than $3,000.[50] I am not satisfied that there is any disproportion of the contributions owed and recovery costs sought that would make the actions of the body corporate in taking or ratifying this legal action objectively unreasonable.

There is a greater disproportion in respect of the present application where the respondent owes $1,913.48 in outstanding contributions but the body corporate is claiming $10,153.75 in recovery costs. However, it was the applicant who lodged the present application and it is not objectively unreasonable for the body corporate to defend this application and claim its costs of doing so as related to its attempts to recover contributions from the applicant. If the costs claimed by the body corporate are excessive then the body corporate is less likely to obtain an order for those costs as being costs reasonably incurred in recovering contributions. However, the disproportion in the claim does not make it objectively unreasonable for the body corporate to defend the application.

The remaining argument by the applicant appears to be that the body corporate acted unreasonably in failing to accept payment of outstanding contributions by way of instalments rather than take legal action. The applicant may have been in a better position to pursue this argument if he had actually paid whatever he could by regular instalments and was able to demonstrate that these instalments would have addressed his arrears in contributions within a reasonable period of time.[51] The applicant has not provided evidence that he diligently pursued an instalment plan at the time or challenged the failure of the 22 January 2008 annual general meeting to approve his request. As things stand, there is substantial evidence that the applicant fell substantially in arrears and continually failed to make payments that have been promised. There is no evidence provided by the applicant in the present application that satisfies me that the body corporate acted unreasonably in failing to adopt an instalment payment plan.

The legislation seeks to balance the rights of individuals with the responsibility for self management as an inherent aspect of community titles schemes (Act, 4(a)). A body corporate, acting reasonably, will normally have some scope to decide whether to allow an owner to pay overdue contributions in instalments, whether to engage lawyers, and whether to take legal action. The applicant has failed to establish any circumstances that satisfy me that actions taken on behalf of the body corporate were outside the bounds of what is objectively reasonable.

Any initial failure of the body corporate to properly authorise legal proceedings against the applicant has now been rectified and the applicant has failed to establish that the body corporate acted unreasonably in a legal sense in ratifying those proceedings. However, the applicant has expressed concern about further unauthorised action being taken against him in the body corporate’s name. The earlier appointment of Collect Success without proper authorisation provides some basis for the concern that other unauthorised actions may be commenced. Further, it has become apparent in the course of this dispute that, contrary to the Liberty decision, amounts representing unliquidated recovery costs and judgments including recovery costs are being claimed from the applicant as ‘contribution arrears’.[52] It is also obvious that the applicant does owe some contribution arrears and that the body corporate will be entitled to an order for some further recovery costs. To finally resolve the dispute it therefore appears appropriate to make declarations as to what contributions and recovery costs are owed by the applicant and order that he pay those amounts.

The amount claimed by the body corporate as contribution arrears and recovery costs, as at 29 June 2009 was around $16,000. This claim can be broken down into:

3(d) Further costs relating to enforcement and to responding to the adjudicator’s provisional views expressed in the present application

On 2 June 2009 I wrote to both parties indicating a provisional view that the only contribution currently outstanding was $1,913.48 for the period 1 April 2009 to 30 September 2009.

The body corporate provided further information indicating that this contribution was still outstanding. In further information provided on 1 July 2009 and 10 August 2009 the applicant has not disputed that he currently owes $1,913.48 in contributions. In fact, the applicant has indicated that he is generally in agreement with the provisional views expressed in the letter of 2 June 2009.

I therefore conclude that only contribution currently outstanding for the applicant is $1,913.48 for the period 1 April 2009 to 30 September 2009.

Levy statements provided by the body corporate indicate that the body corporate views contributions or amounts included in the Magistrates Court judgments to also be "contribution amounts" owed by the applicant. However, I have come to the view that judgment debts and amounts included in enforcement warrants are not "contributions" for the purposes of the Standard Module, even if the judgment is based upon contributions that were owed to the body corporate.

This view is based on the general rule that, once a judgment is entered, the original cause of action merges with the judgment.[53] Following this general rule would mean that the body corporate has no continuing right to seek payment of the contributions in question once a judgment for those contributions has been entered. Rather, the only right of the body corporate would be to seek enforcement of the judgment.[54] The requirement to pay the contribution amount has been discharged by operation of law[55] and the only obligation of the owner is to satisfy that judgment.

I note submissions from the body corporate regarding the possibility of a construction that avoids the general principle of the cause of action merging in the judgment. I do not consider that Chapter 7 of the Standard Module evidences such an intention. In particular, this chapter allows the body corporate to set contributions and adopt penalty interest of up to 2.5% per month. I would expect this provision to contain specific words if there was an intention for this right to continue in addition to, or instead of, section 48 of the Supreme Court Act that allows interest upon a judgement at 10% per annum.

By letter of 29 June 2009, the body corporate indicated that $4,053.99 remained outstanding on Enforcement Warrant M12733/08 and that part of this outstanding sum represented contribution amounts owed by the applicant.

By email of 10 August 2009, the applicant has indicated that there is now only about $1,000 left owing in relation to this judgment.

Regardless of whether this judgment is based on outstanding contributions or recovery costs, the judgment is res judicata and no further orders can be made in this respect. The applicant is obviously under a legal obligation to pay whatever amount is outstanding with respect to this judgment along with any enforcement costs claimed under the UCPR. However, consistent with the above, these judgment debts are not contributions" or "contribution arrears".[56]

I take the view that legal expenses are the kind of expenses that would be “costs reasonably incurred in recovering contributions”.[57] Section 145 of the Standard Module gives the body corporate a substantive right to recover its costs of engaging lawyers to assist in the recovery of contributions provided that those costs are “reasonably incurred”.[58]

For the body corporate to establish that recovery costs are “reasonably incurred” it will need to provide evidence in that respect.[59] With reference to matters considered relevant in the Dimitriou decision, I consider that the requirement for costs to be “reasonably incurred” may include consideration of matters such as the reasonableness of the rates charged, the relevance and reasonableness of the work done, the conduct of the body corporate in providing a reasonable opportunity for an owner to redress arrears before incurring significant costs, and the proportionality of costs incurred to the amount owed.[60]

In this instance, there is no evidence that Collect Success was engaged by the body corporate under anything but normal commercial arrangements. The body corporate has provided copies of invoices that itemise the costs charged by Collect Success. The applicant has been given an opportunity to review these invoices and provide evidence that some of the work was unnecessary or that the body corporate could have obtained similar work at a cheaper rate. Subject to my comments below, I am generally satisfied that the claimed costs were reasonably incurred by way of being at reasonable rates under an arms length agreement.[61]

I note that the body corporate initially sought recovery costs of $4,777.26. I reviewed these costs and determined they were made up of:

In its response to my letter of 2 June 2009, the body corporate sought additional costs as follows:

The body corporate successfully obtained judgment in the Magistrates Court against the applicants for $6,122.22 on 15 October 2008. This judgment appears to have included some recovery costs that were claimed by the body corporate. However, the body corporate is seeking a further $379.51. Based on the invoice provided, these further costs were all incurred after the initial claim was lodged. The invoice indicates the costs were primarily the costs of obtaining default judgment.

I was initially of the view that all costs in relation to the second Magistrates Court judgment would be more appropriate to be dealt with by the Magistrates Court. However, the body corporate has argued that, to finalise the dispute, it is appropriate I make orders finalising the costs recoverable in relation to this claim. The applicant has also made submissions indicating a preference that I make orders that finalise all aspects of the dispute.

Provided they are reasonably incurred, the costs involved in pursuing a claim or obtaining default judgment are incurred in recovering a contribution and of the type that the body corporate can recover under section 145(1)(c) of the Standard Module.

To avoid an unreasonable proliferation of proceedings it would have been preferable if all the recovery costs related to the Second Magistrates Court Claim could have been assessed as part of the Second Magistrates Court Claim itself.[62] However, given the body corporate was seeking a default judgment it would be understandable if only scale costs were sought at that time.

It should be noted that any scale costs awarded must be credited in respect of any costs granted as a substantive right under section 145 of the Standard Module.[63] The body corporate was requested to provide details of the scale costs awarded by phone calls from this office on 19 August and 24 August and by a facsimile of 25 August 2009. However, as no information was provided I am prepared to assume a rough figure based on the standard costs under the UCPR. I will therefore assume the body corporate was awarded $725 for the issue and service of the claim and $170 for obtaining default judgment.[64]

Obviously there are difficulties in establishing the extent or proportion to which costs listed in the invoice for $379.51 would have been included in any scale costs allowed by the Magistrates Court. Ultimately it is not practicable to make all the relevant enquiries when such a small amount is in dispute as the cost of making those enquiries and allowing the parties to respond would overwhelm the actual amount in dispute. I have therefore decided that I should simply place a broad figure on the amount of costs the body corporate should be able to recover in this respect. This recognises that this is an informal jurisdiction in which an adjudicator must act as quickly and with little formality as is proper, that an assessment of costs "reasonably incurred" is not an exact science, and that both parties can benefit from a final resolution of the dispute based on whatever information is currently available. In all the circumstances I have decided that I should allow the body corporate the amount of $200 in respect of its claimed work relating to pursuing this second Magistrates Court Claim. This is based on a review of the description of work in the invoice and a decision to credit $170 in respect of likely scale costs awarded for default judgment and around $10 in respect of the extent to which scale costs may have already compensated the body corporate for the minimal invoiced work relating to the receipt of the affidavit of service.

Recovery costs are defined in section 145 as "any costs reasonably incurred by the body corporate in recovering the amount". The term "the amount" appears to refer to the amount of a contribution, and probably also to the amount of any outstanding penalties or agreed existing recovery costs.

I am of the view that costs in enforcement of judgments are not "recovery costs" under Section 145 of the Module. Any amounts of contributions, penalties or recovery costs that the body corporate was entitled to would have merged in the judgment such that the body corporate no longer has a cause of action to seek payment of those amounts under section 145 of the Standard Module.[65] Because the body corporate is then incurring costs in enforcing a judgment rather then recovering contributions section 145 does not operate to give the body corporate a special right to recover those enforcement costs.

The body corporate has submitted that the entitlement to recovery costs under section 145 exists where recovery is of the "amount" which has not been paid. It is submitted that it is irrelevant whether the outstanding amount is characterised as a judgment debt or a contribution as it is still the same amount that is outstanding. Some support for the argument can be derived from the assumption by Hodgson JA in the Dimitriou decision that a body corporate could seek liberty to apply in the same proceedings in the event that substantial expenses were incurred in enforcing the judgment.[66]

I do not accept this argument. The plain words of the section indicate that the special and independent right of recovery provided by section 145 of the Standard Module only applies where the “amount“ can be characterised as ‘a contribution’, ‘a penalty for a contribution’, or ‘reasonable costs of recovering a contribution’. If the intention of the legislature was otherwise clear it may have been possible to stretch the meaning of the word “amount” a further level of abstraction to mean ‘an amount of any judgment debt primarily based upon the amount of an outstanding contribution’. However, I am not satisfied of any intention in this regard. Chapter 7 of the Standard Module appears to be directed at regulating the financial accounts, budgets, and contributions related to a community titles scheme. These arrangements obviously include the addition of penalties and recovery costs in relation to contribution amounts shown in the books of the body corporate. There is nothing to indicate that the special right to recovery costs in relation a contribution extends to an independent cause of action for the costs of enforcing payment of an ensuing judgment debt. Rather, it appears that section 145 of the Standard Module has no further application once the cause of action has merged in the judgment debt such that the body corporate is no longer seeking the “contribution”.[67] In particular, the legislation would operate inconsistently if a body corporate was able to impose penalties for late payment on judgment debts in addition to, or instead of, interest under the Supreme Court Act. There would also be strange results if a body corporate sold its judgment debts at a discounted rate to a debt collection agency and any unsatisfied contribution amounts resulting from this discount were still seen to be payable.

I therefore will not allow the body corporate to recover pursuant to section 145 of the Standard Module any costs related to the enforcement of judgments. If the body corporate wishes to recover costs in relation to the enforcement of judgments then the body corporate may wish to do so according to Chapter 19 of the Uniform Civil Procedure Rules. A determination of costs for enforcement proceedings under the Uniform Civil Procedure Rules is not a matter that I consider to be within the jurisdiction of this office or within the power of an adjudicator to determine (Act 228, 276). In short, there is nothing in the Standard Module that gives the body corporate any right to recover its costs of enforcing a judgment so the body corporate is left to a claim of scale costs under the Uniform Civil Procedure Rules. Such claim has no nexus with rights, obligations or powers under the Body Corporate and Community Management Act upon which exclusive jurisdiction under Chapter 6 of the Act is founded.

At the core of the dispute between the body corporate and the applicant are questions regarding the amount the body corporate is entitled to require the applicant pay in terms of contributions, arrears in contributions, and recovery costs. I note that the applicant brought the present application rather than the body corporate. However, I am satisfied that the costs incurred by the body corporate in responding to the present application can be properly categorised as costs incurred in seeking recovery of outstanding contributions. In these circumstances I am satisfied that section 145 of the Standard Module gives the body corporate an independent right to obtain its costs in the present application as costs reasonably incurred in recovering the amount of a contribution from the applicant.[68]

I therefore proposed making orders allowing recovery of the costs related to responding to the present application. Upon review of the description of work performed in the invoices totalling $3,123.10, I was initially of the view that recovery costs of $2,547.68 should be awarded as being related to the present application rather than the enforcement of existing judgment debts. However, the body corporate has brought it to my attention that this calculation failed to include amounts for disbursements claimed in the invoices. Therefore, an amount of up to $2,975.78 appears more appropriate depending upon whether all claimed disbursements are allowed.

Again, it is not reasonably practicable to make all the relevant inquiries to evaluate exactly what disbursements relate to the present application and to then allow the parties to respond. I have taken a broad approach and decided that the amount of disbursements claimed should be reduced by around $150 to $200 to reflect the disbursement costs related to applying to register a warrant of execution and the extent to which general disbursements were likely to relate to enforcement rather than the present application.

In all the circumstances, I am satisfied that it is just and equitable to make an order that the applicant pay the body corporate $2,800 as costs reasonably incurred by the body corporate in making its initial response to the present application.

In addition to its initial response to the application, the body corporate has expended time in responding to my provisional views expressed in my letter of 2 June 2009. Collect Success has provided an invoice showing professional fees of $8069.70 incurred from 4 May 2009 to 26 June 2009. However, Collect Success has said that the actual professional fees charged to the body corporate were reduced to $4,353.70.

A rough break down of the $8069.70 in time costs incurred, prior to the discounting, is as follows:

As discussed above, in determining whether costs are “reasonably incurred” I consider it appropriate to consider matters such as the reasonableness of the rates charged, the relevance and reasonableness of the work done, the conduct of the body corporate in providing a reasonable opportunity for an owner to redress arrears before incurring significant costs, and the proportionality of costs incurred to the amount owed.[69] My main concern with the fees incurred by Collect Success subsequent to the formal submissions in response relate to the relevance of the work performed, the reasonableness of the work performed, and the proportionality of costs incurred.

My first concern is that the enquiries regarding the bailiff or council sale either relate to enforcement issues or are insufficiently relevant to the present dispute to justify those costs being "recovery costs". Secondly, the details of the invoice indicate that the majority of the correspondence between Collect Success and the body corporate was probably insufficiently related to relevant matters in issue to be "recovery costs". Thirdly, I do not consider the applicant should pay the substantial costs of around $1,000 for the drafting of a motion for the body corporate to allow owners to vote to ratify action the body corporate had taken without proper authority. These costs seem better characterised as the costs of the body corporate making a decision rather than "recovery costs". The costs associated with calling a meeting are not costs that I could ordinarily consider recoverable from a debtor under section 145 of the Standard Module. In this instance I also note that the body corporate was at fault in that it could have passed a simple motion authorising recovery action prior to any action commencing. This could have been done by the body corporate without involving lawyers and it would appear to unduly penalise the applicant if he had to pay the costs of the body corporate ratifying improperly authorised actions.

I have concluded that the further "recovery costs" reasonably incurred by the body corporate are primarily those amounts paid to Collect Success in relation to reviewing my letter of 2 June 2009, drafting a response to that letter, and engaging in correspondence with the body corporate associated with that response. In terms of relevant correspondence between Collect Success and the body corporate, I am satisfied a rough figure of around $500 in accrued professional fees would be sufficiently relevant to be considered as "recovery costs". It seems likely that the remainder of professional fees associated with Collect Success corresponding with the body corporate related to more general matters including enforcement and whether the body corporate should adopt a motion to ratify or authorise proceedings.

Based on the above findings, and after reviewing the invoice in detail, I am satisfied that work performed by Collect Success relevant to the definition of "recovery costs" could be roughly assessed as $5,000 of the $8,069.70 in professional costs accrued. However, I note that the total professional costs of $8069.70 originally accrued were reduced by nearly $4,000 or nearly 50%. This heavy discounting makes it impossible to make any exact calculation of what fees the body corporate actually incurred for the professional fees that I have determined were relevant to the definition of "recovery costs". Depending on which work was discounted, the professional costs actually paid by the body corporate in this respect would fall within the range of around $1,000 to $4,000. Assuming the discounting was relatively proportional across all types of work then the costs actually paid by the body corporate for the further work that I have determined to be of the nature of "recovery costs" would have been around $2,500.

Of the amount of $1,000 to $4,000 that the body corporate actually paid in respect of professional fees that I have determined to be of the nature of "recovery costs", questions arise as to the reasonableness and proportionality of the response. The body corporate has established that the applicant was nearly $2,000 in arrears in contributions and the body corporate is entitled to costs reasonably incurred in gaining an order allowing recovery of that amount. On the other hand, the body corporate had incorrectly claimed as contribution arrears substantial amounts of unliquidated recovery expenses and enforcement costs and was ultimately unsuccessful in establishing its claims in this regard. While the applicant is obviously at fault in not paying all amounts owed, the inclusion of these additional, unjustified amounts appears to have contributed to the ongoing nature of the dispute and the applicant’s refusal or inability to pay the entire amount claimed.

Further, a significant proportion of the work relates to jurisdictional issues and appears to be of general precedent value taking into account recent decisions in the area such as the Liberty decision and Dimitriou decision rather than being a response that is proportional to the specific questions of what amounts the applicant owes the body corporate. As discussed above,[70] I am satisfied the amount of $2,800 was reasonably incurred by the body corporate in making its initial response to the present application. However, subsequent to an indication that I would make orders setting the amount of contributions and recovery costs still owing by the applicant, Collect Success raised jurisdictional questions that have substantially complicated the dispute to an extent that appears unwarranted for the relatively small amounts in question. I accept that, to some degree, these costs are disproportional to the applicant’s circumstances and the legislative desire for an efficient dispute resolution service where an adjudicator must act as quickly and with little formality as is consistent with a proper consideration of the application.[71] On the other hand, I acknowledge the difficulties in interpreting the relevant provisions against the relevant case law and I am satisfied that a substantial amount of this work would be properly described as "reasonably incurred" by the body corporate in seeking an enforceable order for payment of contributions and recovery costs owed by the applicant. This is not a situation where all arguments relating to jurisdiction are merely of general precedent value or used tactically against an unrepresented party.

If the body corporate was seeking to recover the full amount of its incurred professional fees then I would have concluded that these costs were disproportional to the amount in dispute and were unnecessary for an effective resolution of the dispute. However, the work performed by Collect Success has already been substantially discounted and the body corporate is only seeking to recover this reduced amount. Assuming the discounting was relatively proportional I am prepared to accept the amount of $2,500 in further professional costs reasonably incurred by the body corporate in seeking an enforceable order for payment of contributions and recovery costs. Allowing for GST and disbursements, I will set the amount for further "recovery costs" at $2,850.

I acknowledge I have taken a broad approach in this regard and it would be possible to reach a more exact figure by way of a review of the file and engaging in discussions with Collect Success and the applicant. However, it is not reasonably practicable to make all the relevant inquiries and obtain responses as the costs of doing so would rapidly outweigh the benefit. I consider this broad approach to be suitable given the intention of the legislature to provide for the efficient resolution of disputes and the failure of the legislature to provide any scale or guidelines against which to evaluate whether recovery costs are "reasonably incurred".

The total of recovery costs I consider to be payable by the applicant is therefore $5,850. This is based on $200 still outstanding for obtaining judgment in the second Magistrates Court claim, $2,800 for the body corporate’s initial response to the present application, and $2,850 for the body corporate’s further costs prior to finalisation of this dispute.

I have concluded that the costs of enforcing a judgment are not "recovery costs" that can be recovered by the body corporate under section 145. However, I wish to emphasise to the applicant that interest and recovery costs will still be payable on any outstanding judgment amounts. As I have stated above, I do not consider I have jurisdiction to set the amount of interest and costs in relation to enforcement of judgments. If there is further dispute between the applicant and the body corporate about the amount of this interest and these costs then I would imagine that the bailiff or enforcement officer would be able to set an appropriate amount under rule 830 of the UCPR.

I note that I am not aware of any amounts paid by the applicant or any resolutions passed by the body corporate since the most recent written submissions were received. However, I have attempted to frame the orders to take into account the possibility that the applicant would have made payments or the body corporate would have passed resolutions between the time the final submissions were made and the above order issuing.

Finally, I consider it useful to note some potential difficulties that arise from the findings in the Liberty decision that recovery costs are not an automatically deemed debt and are not liquidated until the amount is agreed with the debtor or judgment is obtained.

Firstly, it would appear to simplify collection of outstanding judgements if a judgment founded upon outstanding contributions fell within the definition of "another amount associated with the ownership of a lot" and was enforceable against a subsequent owner (Standard Module, 145(3)). While I was initially of the view that this was intended, the Liberty decision emphasises the restrictive nature of the definition[72] and indicates that recovery costs would not be "another amount associated with ownership of a lot" even when ‘recovered’.[73] If a judgment debt for recovery costs is not "another amount associated with ownership of a lot" then a judgment debt for outstanding contributions (or mixed contributions/recovery costs) would also not be "another amount associated with ownership of a lot". This interpretation would be consistent with the judgment operating in personam against the person named rather than in rem against the lot and means that the judgment would not be enforceable against someone who purchased after the judgment had been entered. This appears to place the body corporate in a weaker position than if judgment had not yet been entered, although the existence of the judgment does give the body corporate an opportunity to protect its position by recording a writ of execution against the title.

As a result of the Liberty decision the legislature may wish to consider reviewing the definition of a "body corporate debt" and reviewing whether judgment debts should be disclosed on sale and automatically recoverable from a subsequent owner. In particular, the provision disqualifying owners from voting appears to assume that outstanding judgments would be a "body corporate debt" and it appears this provision should be reviewed (Standard Module, 84).

It may also be beneficial for the legislature to clarify the preferred jurisdiction for recovery of body corporate debts. I have some concerns about the capacity of adjudicators to accept jurisdiction to determine potentially large number of debt recovery applications. In particular, the obligation the Act places on an adjudicator to investigate the application to determine whether or not it is appropriate to make an order may result in inefficiency compared to standard court procedures allowing for default judgment or an amount to be assessed based solely on the evidence provided in court in the presence of both parties. On the other hand, determination by an adjudicator can avoid problems of multiplicity and duplication of proceedings in that it allows all matters relevant to the dispute to be resolved in the one proceeding. It may also be the case that, due to the ongoing relationship between an owner with the body corporate, it was the intention of the legislature that the Chapter 6 procedures allowing for conciliation of disputes be available to owners in most circumstances, while still allowing the dispute to be dismissed and commenced in a court with the appropriate monetary limit if the commissioner or adjudicator is satisfied that is appropriate.

Finally, I note that section 145 appears likely to encourage disputes between owners and their body corporate. This is because it allows the body corporate to claim all its debt recovery costs against the owner as an unliquidated amount but the owner is unlikely to share the body corporate’s view as to whether all of those costs were "reasonably incurred". It would appear that this results in a propensity for there to be more disputes requiring resolution and a greater evidential difficulty in resolving those disputes. The legislature may wish to consider whether it would be more beneficial to adopt a scale of allowable costs instead.

[1] Body Corporate for Liberty v Alotier Pty Ltd & Stewart Silver King and Burns CCT KA009-08 (11 February 2009).
[2] Owners of Strata Plan 36131 v Dimitriou [2009] NSWCA 27 (25 February 2009)
[3] Hablethwaite & Anor v Andrijevic & Ors [2005] QCA 336, Jerrard JA, Keane JA, Cullinane J, 9 September 2005, per Keane JA at paragraph 31.
[4] Johnston v The Body Corporate for Waterside Runaway Bay CTS 34678 [2009] CCT KA008-08, KD Dorney QC, 6 February 2009 at paragraph 25.
[5] [2003] 1 Qd R 374.
[6] [2008] QSC 318.
[7] James v Body Corporate for Aarons [2002] QSC 286 and James v Body Corporate for Aarons [2003] QCA 329.
[8] [2007] QDC 020.
[9] Subsequently renumbered, to be section 229.
[10] James v Body Corporate for Aarons [2002] QSC 286 at paragraphs 12-14.
[11] Subsequently renumbered as section 229.
[12] Subsequently renumbered as section 276.
[13] Subsequently renumbered as section 281.
[14] James v Body Corporate for Aarons [2003] QCA 329 at paragraphs 11 and 12.
[15] Refer footnote 4 – Section 201(2) subsequently being renumbered as section 250(2) – “The commissioner may dismiss the application only if the commissioner is satisfied that the dispute should be dealt with in a court or tribunal of competent jurisdiction”.
[16] Market Town decision at paragraph 24.
[17] (1951) 83 CLR 402.
[18] Foster v Aloni [1951] VLR 481.
[19] Statutory Instruments Act 1992, section 21.
[20] Butterworths Australian Legal Dictionary, January 1997.
[21] Acts Interpretation Act 1954, section 36.
[22] Liberty [2008] QBCCMCmr 229 (30 June 2008).
[23] Liberty decision, [2009] CCT KA009-08, at paragraph 46.
[24] [1999] QDC 45, 30 March 1999, at paragraph 17.
[25] At paragraphs 46, 56.
[26] Refer Act sections 229, 250(2), 270(1)(b) and 312(1) and Liberty decision, at paragraph 56 - Order 1(b).
[27] Act, section 4(i).
[28] Sail Isle Pty Ltd v Body Corporate for Surfers Aquarius [2006] QDC 109 (19 May 2006) at paragraphs 10-12.
[29] Woodrange Pty Ltd v Le Grande Broadwater Body Corporate [2004] QDC 215.
[30] Dimitriou decision, supra, at paragraphs 127-129.
[31] See section 286(4) of the Act. Also, refer to James v Aarons, [2003] QCA 329 at paragraph 20, Sail Isle Pty Ltd v Body Corporate for Surfers Aquarius [2006] QDC 109, at paragraph 14.
[32] Contrast section 32 of the Building Units and Group Titles Act 1980 which provides "A contribution... may be recovered, as a debt, by the body corporate in any court of competent jurisdiction". Further, contrast section 34(3) of the Builders Licensing Act 1971 providing "Any amount paid by the Board under a house purchaser’s agreement...may be recovered by the Board in a court of competent jurisdiction as a debt", as considered in Builders’ Licensing Board v Inglis (1985) 1 NSWLR 592, at page 597 per Kirby P.
[33] Liberty decision, at paragraph 47.
[34] For orders requiring payment of money, see generally Sail Isle Pty Ltd v Body Corporate for Surfers Aquarius [2006] QDC 109 (19 May 2006) at paragraphs 10-12.
[35] Except under Part 5 of the Standard Module where owners cannot establish a committee and the body corporate manager has been formally granted authorised powers (Act 120-121); or where a body corporate manager is appointed as an administrator (Act, 278).
[36] Refer generally to Humphries and another v The Proprietors "Surfers Palms North" Group Titles Plan 1955 [1994] HCA 21.
[37] Note that money owed does not appear to be body corporate "property" or a body corporate asset - Azure Waters [2006] QBCCMCmr 210.
[38] Refer the Liberty decision, supra, at paragraphs 28, 47 to the effect that claimed recovery costs are a claim in an unliquidated amount. Section 312 of the Act normally requires a special resolution to be passed to authorise the commencement of a proceedings, although if the body corporate instead elected to lodge an application under Chapter 6 of the Act then a committee resolution would be sufficient (Act 100, 312(2)(d), Standard Module 42(e)(iv)).
[39] Warren v Body Corporate for Buon Vista Community Titles Scheme 14325 (No 2) [2006] QDC 398 at paragraph 7.
[40] Warren v Body Corporate for Buon Vista Community Titles Scheme 14325 (No 2) [2006] QDC 398 at paragraph 26.
[41] Warren v Body Corporate for Buon Vista Community Titles Scheme 14325 (No 2) [2006] QDC 398 at paragraph 55.
[42] Greiner v Independent Commission Against Corruption (1992) 28 NSWLR 125; Commonwealth Bank of Australia v Human Rights and Equal Opportunity Commission (1997) 150 ALR 1 at page 12.
[43] Secretary, Department of Foreign Affairs and Trade v Styles [1989] FCA 342; (1989) 88 ALR 621. See also McKinnon v Treasury [2006] HCA 45 per Hayne J at paragraph 61.
[44] Commonwealth Bank of Australia v Human Rights and Equal Opportunity Commission (1997) 150 ALR 1 at page 34.
[45] Refer generally Angas Law Services Pty Ltd v Carabelas [2005] HCA 23; (2005) 53 ACSR 208 per Gleeson CJ and Heydon J as to inability to ratify a breach of statutory duties.
[46] Liberty decision, supra, at paragraph 56(1)(b).
[47] Liberty decision, supra, at paragraph 46.
[48] Liberty decision, supra, at paragraph 48.
[49] Liberty decision, supra, at paragraph 51.
[50] These claimed recovery costs presumably included costs incurred in pursuing the first Magistrates Court action that were incurred subsequent to that action being commenced and were not able to be included in that claim. The body corporate has provided further invoices claiming a further $379.51 in relation to costs of the second Magistrates Court claim incurred after that claim was lodged.
[51] Due to section 145(2) of the Standard Module it would appear that a reasonable period of time for an instalment plan to clear contributions could not be greater than two years.
[52] eg. Notice of Maintenance Contributions dated 2 September 2008, claiming ‘arrears/adjustments’ of $4,631.06
[53] Refer McDonald v Scobie [1980] Qd R 477 for references to the general position of a cause of action merging in judgment and exceptional circumstances where this does not apply. Refer also to Commonwealth of Australia and Commissioner of Taxation v Precision Pools Pty Ltd, Queensland Pool and Spa Const. Pty Ltd, FCA, O’Loughlin J G 159 of 1992 BC9400264 for an example of where legislation did not apply to an in situ pool tax refund payment because the cause of action had merged in the judgment.
[54] Refer generally to Thoday v Thoday [1964] 1 All ER 341 at 352 and Port of Melbourne Authority v Anshun Pty Ltd HCA [1981] HCA 45; (1981) 36 ALR 3 at 7.
[55] Ebber v Isager [1995] 1 Qd R 150.
[56] In fact, this judgment is probably not even a "body corporate debt" for which a subsequent owner would be liable – refer paragraph 48 of the Liberty decision, indicating that recovery costs will not even constitute a “body corporate debt” even if ‘recovered’ by way of judgment.
[57] Refer Dimitriou decision, [2009] NSWCA 27 at paragraph 116
[58] Dimitriou decision, supra, at paragraphs 127-129.
[59] Dimitriou decision, supra, at paragraph 132.
[60] Refer generally to the Dimitriou decision, supra, at paragraph 130.
[61] In particular, as there is no scale of costs for applications before an adjudicator I see no basis upon which the claimed costs should be limited by any scale – cf Dimitriou decision, supra, at paragraph 40, 131.
[62] Dimitriou decision, supra, at paragraphs 46-48, 143.
[63] Dimitriou decision, supra, at paragraph 128.
[64] Refer UCPR, Schedule 3, Part 2 – Items 1 and 4, assuming claimed amount in range $5,0001 to $10,000.
[65] Refer above under heading "Judgment debt is not a contribution amount" and refer generally to Thoday v Thoday [1964] 1 All ER 341 at 352 and Port of Melbourne Authority v Anshun Pty Ltd HCA [1981] HCA 45; (1981) 36 ALR 3 at 7.
[66] Dimitriou Decision, supra, at paragraph 49,
[67] Refer to Clause 205 of Explanatory Notes for SL 2003 No 263 (Re Amendment of section 99 of the Standard Module 1997 by the Body Corporate and Community Management Legislation Amendment Regulation (No. 1) 2003). It is apparent that the legislature intended that a body corporate be required to take action to recover outstanding contributions and that the body corporate would be entitled to an order requiring payment of any penalty and recovery costs at the same time. However, the provision itself and the explanatory material do not go so far as to say the body corporate should also have a special cause of action to subsequently seek any costs of enforcing such an order once a judgment has been obtained and there is no longer an amount owing that could properly be described as ‘contributions’ or ‘contribution arrears’.
[68] Refer Dimitriou decision, supra, at paragraphs 43-45.
[69] Refer generally to the Dimitriou decision, supra, at paragraph 130.
[70] 3C. Costs of responding to the present application
[71] Refer sections 4(i) and 269(3)(b) of the Act.
[72] Based on the Liberty decision, it is difficult to contemplate "another amount associated with ownership of a lot" including any amounts apart from an agreed payment for supply of services by body corporate (Standard Module, 169(2)) and an agreed payment under an exclusive use by-law (Standard Module, 173(1)).
[73] Liberty decision, supra, at paragraphs 30-32 and 47-48.

Number of Scheme:	3504
Name of Scheme:	Pacific Breeze Apartments
Address of Scheme:	6 / 62 Albert Street

Queensland Body Corporate and Community Management Commissioner - Adjudicators Orders

Pacific Breeze Apartments [2009] QBCCMCmr 317 (26 August 2009)