Chelsea Apartments [2009] QBCCMCmr 386 (8 October 2009)

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

I hereby order that, within 30 days, the Body Corporate for Chelsea Apartments must pay to Maureen Smith, former owner of lot 1, the amount of $13,704.96, which amount represents costs incorrectly charged by the body corporate to Ms Smith.

I further order that, in all other respects, the application is dismissed.

This application is brought by the now former owner of lot 1, Maureen Smith (also known as Maureen Wooler) (Applicant), against the body corporate, seeking an order that all levies and penalties and recovery costs be removed so that she doesn’t have to pay them.

I hereby order that pending a final determination of this application, the body corporate for Chelsea Apartments Community Titles Scheme 7529 (including its committee or any member of its committee) must take any reasonable action to delay recovery proceedings and minimise recovery costs against the owner of lot 1.

This interim order has effect until six (6) months have elapsed from the date of this order, a further interim or final order for the application is issued, or until the application is withdrawn, rejected or otherwise ended (whichever is earlier).

“Chelsea Apartments” was registered as a building units plan (now known as building format plan) of subdivision on 9 March 1989 comprising 10 lots and common property. The scheme is regulated by the Body Corporate and Community Management Act 1997 (the Act) and the Body Corporate and Community Management (Standard Module) Regulation 2008 (the Standard Module).

This is a dispute between a, now former, owner of one lot and the body corporate. Section 239C provides that if a party to an application stops being a relevant person for the application before it is disposed of, unless someone else is substituted as the relevant person, the application continues as if the party continued to be the relevant person for the application. In this case, although the Applicant has sold her lot and is no longer an owner in the scheme, an amount of $21,793.08 has been paid to the body corporate subsequent to the sale of lot 1, the amount coming out of the sale proceeds of lot 1 at settlement. I am therefore satisfied that the Applicant maintains a continuing interest in this dispute and that the outcome she seeks is still relevant.

As stated in my letter of 9 June 2009, an Adjudicator’s jurisdiction to make orders determining the amount of any contributions and recovery costs payable arises from sections 227 – 229 of the Act and section 145 of the Standard Module. Provided certain steps are followed, an order of an Adjudicator requiring payment of such amounts is enforceable in the same way that a Magistrates Court order is enforced, even if the amount is greater than the Magistrates Court limit (Act, 286).

In accordance with section 243 of the Act, a copy of the application was provided to the body corporate manager, Stansure Strata, for distribution to all owners (excluding the Applicant) and the committee, with an invitation to respond to the matters raised in the application. Stansure Strata were also invited to make a submission. Four submissions from individual owners were received. The submissions were to the following effect:

The grounds to the application are scant, to say the least. Further, as stated in my reasons for the Interim Decision, what scant information was provided by the Applicant appears to have little relevance to the issue of the body corporate claiming to have been owed money from her. It is somewhat incongruous for the Applicant to complain of a lack of maintenance when her failure to pay her body corporate levies has been largely responsible for the lack of funds necessary to undertake that maintenance.

I commented in my reasons for the Interim Decision that the information provided by both the Applicant and the body corporate manager has not revealed a specific sum claimed to be owed by the Applicant to the body corporate. I stated that, in order to determine the application for final orders, much more specific information would be required from the parties, including the exact amount claimed to be owed by the Applicant to the body corporate and particulars of that amount, including, but not limited to, copies of Notices of Contribution sent to the Applicant’s address for service and copies of Invoices for any legal fees claimed to have been incurred by the body corporate.

Despite the comments I made in my reasons for the Interim Decision, and the seeking of submissions, neither party provided the information necessary for me to determine this dispute. I found it necessary to cause numerous requests for further information to be made of both parties, culminating in my letter of 9 June 2009 to the body corporate. The necessity to seek further information on numerous occasions has caused the delay in the finalisation of this dispute. It was not until 28 August 2009 that complete copies of invoices for legal fees were provided.

Because of the lack of information forthcoming from both parties to this dispute and the resultant difficulties in determining this dispute, on 1 September 2009, I took the unusual step of writing to both parties, setting out my preliminary views based on my investigation of the dispute and giving both parties the opportunity to query any of my preliminary views. The Applicant responded to this correspondence with an email and facsimile, both dated 8 September 2009. Neither piece of correspondence specifically addressed any of the points I had raised in my letter of 1 September 2009. The body corporate requested an extension of time within which to provide a response to my letter of 1 September 2009 until 7 October 2009, when it sent a brief email stating that it wishes to appeal my decision for the following reason “The Magistrates Court has twice ruled in favour of the body corporate and ordered that Mrs Wooler pay all outstanding levies and legal costs at that time. It is unclear to the Committee as to why the Commissioner’s Office would rule differently to the Magistrates Court. For consistency in this ever growing problem of owners not paying owner contributions, they feel that Mrs Wooler should pay all outstanding amounts.”

Given that I have provided both parties with an opportunity to inform me if they have a different view to my preliminary views, as expressed in my letter of 1 September 2009, and neither party has availed themselves of it, other than to agree or disagree in a very general way, I intend to make a final order in the same terms as my preliminary views, as expressed in my letter of 1 September 2009. Nothing in the further submissions from either party to this dispute has persuaded me to alter my preliminary views in this matter.

The submission made by Stansure Strata in response to the request for interim orders indicates that the body corporate has already obtained two judgments from the Magistrates Court in the amounts of $6,128.96 and $10,093.03.[1] It is understood that these judgments include the below unpaid contributions (plus at least some associated recovery costs):

I consider these judgments to be res judicata and that no further orders can be made in relation to outstanding contributions or recovery costs for this period. I therefore consider that the only contributions owed by the Applicant to the body corporate at the time of the sale of lot 1 are those from 1 July 2006 to the time of sale (18 May 2009). The following are the contributions for that period, according to the minutes of previous AGMs held, which I requested copies of from the body corporate:

Levy Period	Administrative Fund - Amount Per Lot Entitlement	Sinking Fund – Amount Per Lot Entitlement	Amount Owed by Applicant Prior to Sale of Lot 1
01/07/06 – 30/09/06	386	91	477
01/10/06 – 31/12/06	387	92	479
01/01/07 – 31/03/07	387	92	479
04/04/07 – 30/06/07	365	95	460
01/07/07 – 30/09/07	368	115	483
01/10/07 – 31/12/07	368	115	483
01/01/08 – 31/03/08	369	115	484
01/04/08 – 30/06/08	369	115	484
01/07/08 – 30/09/08	302	130	432
01/10/08 - 31/12/08	302	130	432
01/01/09 – 31/03/09	303	130	433
01/04/09 – 30/06/09	303	130	433

TOTAL	4,209	1,350	5,559

* All 10 lots within the scheme have a contribution schedule and interest schedule lot entitlement of 1.

It is understood that although the body corporate purported to apply penalty interest to outstanding levies, it had not, in fact, passed an ordinary resolution authorising this, as required by the legislation[2]. The body corporate is therefore not entitled to claim penalty interest from the Applicant in respect of the levies above that she had not paid. Stansure Strata advised in a facsimile of 25 June 2009 that in recent months, it had come to their attention that no motion was passed to charge penalty interest for overdue levies and that any interest charged was removed from lot 1’s ledger. I note that the body corporate, at its most recent AGM held on 28 April 2009, has now resolved to charge penalty interest on over due levies at the rate of 2.5% per calendar month.

The only remaining costs the body corporate may recover under section 145 of the Standard Module are “any costs (recovery costs) reasonably incurred by the body corporate in recovering the amount”.

In response to my request for further information dated 14 May 2009, Stansure Strata included a table headed “Lot 1 Chelsea Apartments – Legal Fees Outstanding as at 4 March 2009” which covers the period 18 September 2006 to 6 March 2009 and totals $16,440.98. A further table headed “Lot 1 Chelsea Apartments – Debt Collection Fees Outstanding as at 4 March 2009” which covers the period 12 January 2007 to 6 February 2009 totals $189.20. The amounts provided for “outstanding legal fees” and “debt collection fees” differ from those provided in the submission made in response to the application for interim orders. On 23 July 2009, the body corporate was notified in writing that I would not allow the body corporate to recover (or in this case retain) any money spent on recovery costs for which an invoice (or copy thereof) could not be provided. On 4 August 2009 Stansure Strata sent incomplete copies of further invoices. Complete copies of invoices were provided on 20 August 2009, after further requests for same were made.

Copies of invoices which substantiate the following amounts in respect of legal fees and debt collection fees were provided:

Strata & Corporate Collections Pty Ltd		Nicol Robinson Halletts Lawyers		Stansure Strata
20/05/2008	*313.50	18/09/2006	1,358.35	26/05/2008	7.70
25/06/2008	*1,583.60	18/12/2006	*602.31	26/06/2008	7.70
03/07/2008	*685.14	20/02/2007	*342.30	08/07/2008	7.70
29/07/2008	*66.00	27/02/2007	*668.75	01/08/2008	7.70
07/08/2008	*579.15	29/03/2007	*1,071.27	18/08/2008	7.70
28/08/2008	729.30	30/04/2007	*1,732.50	01/09/2008	7.70
04/09/2008	*132.00	26/07/2007	*1,244.93	14/10/2008	7.70
09/10/2008	*1,201.75	27/08/2007	*462.00	29/10/2008	7.70
24/10/2008	*66.00	14/04/2008	*2,874.79	30/10/2008	33.00
05/11/2008	133.12		$10,357.20	12/11/2008	7.70
13/11/2008	66.00			20/11/2008	7.70
18/11/2008	132.00			25/11/2008	7.70
21/11/2008	*108.00			05/12/2008	7.70
03/12/2008	588.70			19/12/2008	7.70
17/12/2008	66.00			21/01/2009	7.70
31/12/2008	198.00			06/02/2009	7.70
04/02/2009	467.50				$148.50
	$7,115.16

It is understood that the two Magistrates judgements referred to above include some recovery costs even though the basis of calculation of those recovery costs is not clear on the material. A perusal of the invoice dated 18 September 2006 from Nicol Robinson Halletts Lawyers in the amount of $1,358.35 reveals that this amount relates to costs incurred in recovering contributions prior to 1 July 2006.

As outlined above, I consider that the two judgments entered against the Applicant in relation to contributions prior to 1 July 2006 are res judicata and no further orders can be made in this respect. I therefore do not consider that the body corporate has a right to recover this amount from the Applicant in this application.

As my colleague found in Pacific Breeze Apartments[3], I too, am of the view that the costs of enforcing the judgment debts are not “recovery costs” incurred in recovering the amount of a “contribution” for the purposes of Section 145 of the Standard Module, even if the judgment is based upon contributions that were owed to the body corporate. As my colleague explained in Pacific Breeze Apartments, this view is based on the general rule that, once a judgment is entered, the original cause of action merges with the judgment.[4] 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.[5]

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.[6] Because the body corporate is then incurring costs in enforcing a judgment rather than recovering contributions, section 145 does not operate to give the body corporate a special right to recover those enforcement costs.

It seems to me that the right provided by section 145 of the Standard Module for the body corporate to claim recovery costs for a proceeding only applies where those costs are reasonably incurred as part of a proceeding seeking an order for payment of contributions, penalties, and/or recovery costs as a debt. I do not consider this right extends to the costs of enforcing payment of a judgment debt where there is no independent cause of action remaining for payment of one of the amounts referred to in section 145(1)(a)-(c) of the Standard Module.

This interpretation also avoids the concern about a proliferation of proceedings arising from the opportunity for a body corporate to independently seek an order for payment of recovery costs and, in doing this, incurring additional recovery costs for which another proceeding could be subsequently commenced. This avoids the concern expressed by Hodgson JA in the Dimitriou Case[7] for which there would otherwise seem to be no solution in Queensland due to the absence of any need under section 145 to seek recovery costs "together with" outstanding contributions.

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 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).

I have perused the complete copies of the invoices detailed in the above table. It appears to me that a substantial number of them relate to costs of enforcing the two Magistrates’ Court judgements against the Applicant. I have identified those which I believe relate to enforcement costs (as opposed to “recovery costs” within section 145 of the Standard Module) and which I do not consider to be recoverable in this jurisdiction with an asterix (*).

For the reasons above, I am satisfied that the body corporate was not entitled to recover these asterixed amounts from the Applicant.

Once a judgment debt has been entered, the body corporate can no longer separately seek the contribution amounts upon which that judgment was based. I have concluded that the body corporate cannot claim the judgment debt amounts to be outstanding "contributions" or "contribution arrears".

In any event, I understand from the submissions that the Applicant paid the body corporate some $26,000 in September 2008, in respect of the two judgment debts against her. The only "contributions" owed by the Applicant at the time of the sale of lot 1 were therefore those outlined above, totalling $5,559 for the period 1 July 2006 to 30 June 2009.

I therefore believe that the only remaining recovery costs outstanding relate to any costs reasonably incurred by the body corporate in recovering the above outstanding contributions totalling $5,559 for the period 1 July 2006 to 30 June 2009 (the last of these levies being due on 1 April 2009, prior to the sale of lot 1 in May 2009). As stated above, it appears to me as though a substantial amount of the “recovery costs” claimed against the Applicant relate, in fact, to the enforcement of the judgments made against her in 2006, which were not satisfied until September 2008.

The only remaining recovery costs outstanding relate to any costs reasonably incurred by the body corporate in recovering the outstanding contributions totalling $5,559 for the period 1 July 2006 to 30 June 2009. I calculate this amount to be a maximum of $2,529.12 (total of invoices supplied, less the amounts which relate to costs of enforcing (or obtaining) the two previous Magistrates Court judgments).

I am satisfied that section 145 of the Standard Module provides the body corporate with a substantive right to its costs reasonably incurred in recovering contributions.[8] However, I consider the body corporate needs to establish its right to costs by providing evidence that those costs are reasonable in amount and reasonably incurred.[9]

In this instance, there is no evidence that Nicol Robinson Hallet Lawyers or Strata Collections Pty Ltd were 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 Nicol Robinson Hallet Lawyers and Strata Collections Pty Ltd. The Applicant has not suggested that some of the work was unnecessary or that the body corporate could have obtained similar work at a cheaper rate. I am generally satisfied that the claimed costs are reasonable in amount and reasonably incurred. I have allowed the body corporate to retain all of these costs recovered from the Applicant, totalling $2,529.12.

For the above reasons, I have made an order that the body corporate pay the Applicant, within 30 days, the amount of $13,704.96. This amount represents the amount the body corporate retained upon the sale of lot 1 ($21,793.08), less the amount I have determined the Applicant owed in unpaid contributions at that date ($5,559), less the amount I have determined were the body corporate’s reasonable recovery costs in recovering the unpaid contributions owed by the Applicant ($2,529.12).

[1] The judgment of $6,128.96 obtained on 4 April 2006 and the judgment of $10,093.03 obtained on 7 September 2006.
[2] See s.144 of the Standard Module
[3] [2009] QBCCMCmr 75 (2 March 2009)
[4] 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.
[5] 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.
[6] 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.
[7] Dimitriou Case, supra, at paragraph 46.
[8] Dimitriou Case, [2009] NSWCA 27 at paragraph 125-129.
[9] Dimitriou case, supra, at paragraph 132.

Number of Scheme:	7529
Name of Scheme:	Chelsea Apartments
Address of Scheme:	19 Lower King Street CABOOLTURE QLD 4510

Queensland Body Corporate and Community Management Commissioner - Adjudicators Orders

Chelsea Apartments [2009] QBCCMCmr 386 (8 October 2009)