Disputed debts in body corporate matters

Many lot owners in community titles schemes will have on occasion, for one reason or other, missed making a contribution levy payment by the due date and thus lost the benefit of the payment discount.

Things can however get worse if the body corporate then institutes a body corporate debt recovery action.

Can a contribution levy be recovered?

Under section 166 of the Body Corporate and Community Management (Standard Module) Regulation 2020 if a contribution levy is not paid by the date for payment, the body corporate may recover each of the following amounts as a debt:

• the amount of the contribution or instalment;
• any penalty for not paying the contribution or instalment; and
• any costs (recovery costs) reasonably incurred by the body corporate in recovering the amount.

Cases such as the Westpac Banking Corporation v Body Corporate for the Wave Community Title Scheme 36237 illustrate how recovery costs, which are overwhelming the body corporate’s claimed legal costs, can quickly grow in size and become disproportionate to the unpaid levies initially sought to be recovered.

Often the claimed recovery costs is just a line item in the levy statement with an amount, but no indication how that amount has been calculated.

What factors affect how the levy statement is calculated?

Moreover, it is not unusual for other amounts said to be associated with the ownership of the lot, to be included on a levy statement, again with little or no indication as to how that amount has been calculated.

Many lot owners when faced with claims for body corporate debts pay the amount and then seek to dispute them at a later date, either directly with the body corporate or through the Office of the Commissioner for Body Corporate and Community Management.

A recent decision adjudication decision illustrates the risks in adopting such an approach, both within a disputed body corporate debt context and a disputed debt more generally.

In Chichester Court [2022] QBCCMCmr 9, the lot owner was charged on a levy notice for amounts said to be owing as a debt and for claimed repairs to a bollard asserted to have been damaged by the lot owner.  The lot owner denied liability.

The lot owner had entered into a contract to sell the lot and not wanting to jeopardise the sale, paid the body corporate debt claimed and then sought reimbursement of the payment by way of an adjudication application.

The adjudicator noted it was unclear as to the legal basis upon which the body corporate had the right to add the disputed amounts to the levy notice.

However, as the lot owner had voluntarily paid the disputed body corporate debt, in order to recover it he needed to establish a legal entitlement to have it paid back.

The adjudicator made reference to the QCATA decision in The Body Corporate for The Grove CTS 9356 v Comerford, noting that in that case the body corporate had no legislative entitlement to recover claimed cleaning expenses from the lot owner.

However, it was held in The Grove the owner would only be entitled to reimbursement if he had paid the amount by way of mistake – that is, but for the mistaken belief that he was required to pay the amount, he would not have paid it.

The adjudicator in Chichester then referred to the High Court decision of David Securities Pty Ltd v Commonwealth Bank of Australia which held that a payment which is voluntary will not be recoverable on the ground of mistake, that position reflecting the policy that the law seeks to uphold bargains and enforce compromises freely entered into.

A payment will be voluntary if the payer chooses to make the payment even though he or she believes a particular law or contractual provision requiring payment is, or may be, invalid.

As the lot owner in Chichester had made the payment voluntarily, was he was unable to establish a legal right to have the body corporate pay back the money and accordingly the application for reimbursement was dismissed.

Takeaways

Disputed body corporate debts are a major source of conflict between lot owners and bodies corporate.

When lawyers become involved in such disputes on behalf of a body corporate, the size of the disputed body debt will quickly balloon.   While it may appear tempting at first instance for disgruntled lot owners to advocate on their own behalf, the wiser course of action is to take appropriate legal advice at the outset to be fully appraised of the position.

Links and further references

Legislation

Body Corporate and Community Management Act 1997

Body Corporate and Community Management (Standard Module) Regulation 2020

Cases

Chichester Court [2022] QBCCMCmr 9

David Securities Pty Ltd v Commonwealth Bank of Australia [1992] HCA 48

The Body Corporate for The Grove CTS 9356 v Comerford [2019] QCATA 172

Westpac Banking Corporation v Body Corporate for the Wave Community Title Scheme 36237 [2014] QCA 73

Further information about body corporate disputes

If you need advice on any kind of body corporate dispute, contact Dundas Lawyers Gold Coast for a confidential and obligation-free discussion:

Disclaimer

This article contains general commentary only.  You should not rely on the commentary as legal advice.  Specific legal advice should be obtained to ascertain how the law applies to your particular circumstances.

---

Related insights about body corporate disputes