Body Corp for Q1 v BERNAL
[2018] FCCA 2897
•26 July 2018
FEDERAL CIRCUIT COURT OF AUSTRALIA
| BODY CORP FOR Q1 v BERNAL | [2018] FCCA 2897 |
| Catchwords: HOME AND COMMERCIAL UNITS – Body Corporate Fees – proceedings to recover unpaid contributions – recovery costs – test for assessment of. COSTS – Assessment – recovery for costs in respect of proceedings to recover unpaid body corporate contributions – test on assessment. |
| Legislation: Bankruptcy Act 1966 Federal Circuit Court (Bankruptcy) Rules 2006 |
| Cases cited: Body Corporate for Sunseeker Apartments CTS 618 v Jasen [2012] QDC 51 O’Mara Constructions Proprietary Limited v Avery (2006) 230 ALR 581 Owners of Strata Plan No 36131 v Dimitriou (2009) 24 NSWLR 370 |
| Applicant: | BODY CORPORATE FOR Q1 CTS 34498 |
| Respondent: | JEMI-PRINCE LOPEZ BERNAL |
| File Number: | BRG 317 of 2018 |
| Judgment of: | Judge Jarrett |
| Hearing date: | 26 July 2018 |
| Date of Last Submission: | 26 July 2018 |
| Delivered at: | Brisbane |
| Delivered on: | 26 July 2018 |
REPRESENTATION
| Counsel for the Applicant: | Mr N.J. Derrington |
| Solicitors for the Applicant: | Holman Webb Lawyers |
| Solicitors for the Respondent: | Nelson McKinnon Lawyers |
ORDERS
The application be dismissed.
The respondent pay the applicant’s costs of and incidental to the proceeding, to be agreed, or taxed on the footing that the applicant is entitled to all costs of and incidental to the proceeding that have been reasonably incurred, of a reasonable amount.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT BRISBANE |
BRG 317 of 2018
| BODY CORPORATE FOR Q1 CTS 34498 |
Applicant
And
| JEMI-PRINCE LOPEZ BERNAL |
Respondent
REASONS FOR JUDGMENT
The outcome in these proceedings that is in dispute is the form of the costs order that ought to be made. The proceedings take the form of a creditor’s petition. The parties are agreed that it ought to be dismissed. The petitioning creditor seeks an order that the respondent pay the applicant’s costs of and incidental to the proceeding to be agreed or taxed on the footing that the applicant is entitled to all costs of and incidental to the proceeding that have been reasonably incurred of a reasonable amount. The respondent says that the order ought to be that the respondent pay the applicant’s costs of and incidental to the proceeding, I expect perhaps, to be taxed and paid in accordance with the Federal Circuit Court (Bankruptcy) Rules 2006. At its heart the dispute is about, it seems, whether the costs ought to be taxed on what I might call a solicitor and client basis or a party and party basis.
The petitioning creditor has a special place in the scheme of land ownership in this state. It is a body corporate and was in these proceedings seeking to pursue the enforcement of a debt to which it was entitled by reg.145 of the Body Corporate and Community Management (Standard Module) Regulations 2008. By reg.145(1):
(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—
(a) the amount of the contribution or instalment;
(b)any penalty for not paying the contribution or instalment;
(c) any costs (recovery costs) reasonably incurred by the body corporate in recovering the amount.
The issue is whether that sub-regulation means that the order for costs ought to be in the form sought by the petitioning creditor or whether the appropriate order is that sought by the respondent.
The petitioning creditor argues that reg.145(1)(c), or sub-regulations in similar form, have a particular meaning and the costs referred to therein are generally seen as being costs which are reasonably incurred and are of a reasonable amount.
I am taken to a decision of the NSW Court of Appeal in the Owners of Strata Plan No 36131 v Dimitriou (2009) 74 NSWLR 370 in which there was a determination that, in similar circumstances to those that exist here, the Court of Appeal formed the view that an owners corporation – a body corporate – was required to prove that the costs and disbursements that they were entitled to under a similar legislative scheme had been reasonably incurred and are reasonable in amount. It is said that that interpretation and that construction has been applied in Queensland regularly.
The argument for the respondent is that because the costs which the applicant seeks to recover are “recovery costs” under the Regulations, they necessarily extend beyond what might ordinarily be considered legal costs and they ought not be treated as costs in the bankruptcy proceedings. That is so because the costs dealt with by reg.145(1)(c) are really amounts by way of a debt – reg.145(1) says so – whereas the costs that are an issue here are the costs in proceedings that were designed to establish the insolvency of the respondent debtor. They are, it is said, two different things.
The petitioning creditor submits that, whilst generally that might be seen to be so, it would be against principle not to recognise that a creditor’s petition has an enforcement effect as well as a more general purpose of ensuring the estates of bankrupt people are dealt with according to the Bankruptcy Act 1966.
I was taken to a decision of the Full Court of the Federal Court of Australia in O’Mara Constructions Proprietary Limited v Avery (2006) 230 ALR 581 in which the Full Court, after considering some English insolvency authorities, recognised that, at paragraph 53:
These cases certainly establish that proceedings in bankruptcy or for a winding up order are “new” and not a continuation of any previous proceedings to recover a relevant debt. They also establish that insolvency proceedings are not by way of enforcement or any earlier judgment. They recognise that a creditor may proceed in insolvency for the purpose of recovering his or her debt.
I am aware of other authorities, the names of which escape me, particularly a judgment of Justice Dowsett, which underscores the proposition that, notwithstanding the public policy nature of insolvency proceedings to ensure that insolvent individuals and companies are wound up and their assets distributed amongst their creditors, there is, nonetheless, an enforcement role played by those proceedings in individual cases.
The petitioning creditor’s argument is that the costs that are referred to in reg.145(1)(c) will properly include the costs of these insolvency proceedings and, if they do, then they ought to be assessed on the higher basis identified. I accept that argument.
I conclude that the costs referred to in reg.145(1)(c) include costs in proceedings such as these and, having regard to the authorities to which I have been taken, they would be costs assessed or taxed on the basis identified by the petitioning creditor.
By way of a test of that argument, the petitioning creditor points to a decision and some remarks by McGill SC DCJ in Body Corporate for Sunseeker Apartments CTS 618 v Jasen [2012] QDC 51 where his Honour points out the gap that might exist if costs, and the way that word appears in reg.145(1)(c), were not interpreted in the way in which the petitioning creditor here contends. The plaintiff in that case, as identified by Judge McGill, might then have to bring further proceedings to enforce what might be an unidentifiable gap in certain cases, between costs on one basis and the other.
I am satisfied, in all of the circumstances, that the orders sought by the petitioning creditor are appropriate. There will be an order in terms of the draft, initialled by me and placed with the papers.
I certify that the preceding thirteen (13) paragraphs are a true copy of the reasons for judgment of Judge Jarrett delivered on 26 July, 2018.
Date: 12 October, 2018
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