Dwyer v Civium Property Group Pty Ltd (Unit Titles)

[2020] ACAT 9

ACT CIVIL & ADMINISTRATIVE TRIBUNAL

DWYER & ANOR v CIVIUM PROPERTY GROUP PTY LTD (Unit Titles) [2020] ACAT 9

UT 21/2019

Catchwords:                UNIT TITLES – who bears the duty to insure in the ‘developer control period’ – ‘developer loans’ – duty to record developer loans – unjust enrichment in taking advantage of developer loans

Legislation cited:        ACT Civil and Administrative Tribunal Act 2008 s 17

Unit Titles (Management) Act2011 ss 8, 10, 16, 33, 70, 77, 100, 125, 129

Cases cited:Zeus and Ra Pty Ltd v Nicolaou [2003] VSCA 11

Tribunal:  Senior Member A Anforth

Date of Orders:  10 February 2020

Date of Reasons for Decision:     10 February 2020

AUSTRALIAN CAPITAL TERRITORY  )

CIVIL & ADMINISTRATIVE TRIBUNAL       )          UT 21/2019

BETWEEN:

MATHEW DWYER

First Applicant

MARK REYNOLDS

Second Applicant

AND:

CIVIUM PROPERTY GROUP PTY LTD

Respondent

TRIBUNAL:Senior Member A Anforth

DATE:10 February 2020

ORDER

The Tribunal orders that:

1.The application is dismissed.

………………………………..

Senior Member A Anforth

REASONS FOR DECISION

1.This matter relates to a Units Plan development (also known as a strata development) consisting of just two townhouses. The owners of the two units are Mathew Dwyer and Mark Reynolds who constitute the Owners Corporation. They bring this claim in their capacity as the Owners Corporation against the respondent, Civium Property Group Pty Ltd (Civium), who was the developer prior to registration of the Units Plan and thereafter became the managing agent for the Owners Corporation.

2.The dispute concerns who is responsible for the property and workers compensation insurance paid by the respondent on 27 October 2017 for the period 27 October 2017 to 27 October 2018 in the sum of $2,070. In July 2018 the respondent reimbursed itself from the Owners Corporation bank account without its knowledge. The respondent asserts that the payment made in October 2017 was made on behalf of the Owners Corporation in the form of a loan. It was made because the Owners Corporation did not exist at the time and therefore had no capacity to pay the premiums.

3.The facts are not in dispute. The dispute is solely one of law.

4.The relevant history is as follows:

(a)On 27 October 2017 the respondent paid the insurance premiums in question for the period 27 October 2017 to 27 October 2018. The policy was initially in the respondent’s name, but on 23 November 2017 the Owners Corporation became the insured and owner of the policy.

(b)The Units Plan was registered on 23 November 2017 at which time the Owners Corporation came into existence.

(c)On 23 November 2017 the inaugural meeting of the Owners Corporation resolved to set up the Owners Corporation bank account and to take out the insurances in question that had been already been affected on 27 October 2017. The bank account had nil balance at this time.

(d)Mr Dwyer settled his purchase on 4 December 2017.

(e)Mr Reynolds settled his purchase on 7 December 2017.

(f)On 11 April 2018 the first AGM of the newly constituted Owners Corporation occurred, and the respondent’s representative was present in the capacity of managing agent. No mention was made of the existence of the loan from the respondent for the insurance.

(g)On 20 and 23 July 2018, the respondent, acting in its capacity as the managing agent for the Owners Corporation, transferred the insurance premiums from the Owners Corporation’s account to its own account.

5.Mr Dwyer and Mr Reynolds complain that the minutes and accounts of the Owners Corporation do not record anything in the nature of a loan from the respondent. They assert that these insurances were properly a cost to the respondent in its capacity as the developer, as they were a necessary requirement before the Units Plan could be registered and the Owners Corporation came into existence. They argue that if the respondent was intending to recover these costs then it should have been done by way of adjustment in the settlement of the sale of the two units. They note that other out of pocket costs of the respondent were adjusted at settlement, and it is the respondent’s problem that it failed to include these insurance premiums.

6.The matter was listed for conciliation on 20 September 2019 and the matter did not settle. The matter was then immediately referred to the presently constituted Tribunal for a final determination. Mr Dwyer and Mr Reynolds appeared in person in their joint capacity as the Owners Corporation appeared for the applicant and Ms Tranzillo, solicitor from Trinity Law and Ms Smith of Civium appeared for the respondent.

7.The Tribunal renewed an attempt to promote a settlement, without success. The parties indicated their wish for the matter to proceed to hearing. There was discussion on the facts and issues from which it readily emerged that the facts were not in dispute; the dispute concerned the interpretation of the Unit Titles (Management) Act2011 (the Act). The parties were given a timetable to file and serve submissions on the legal issues involved and it was agreed that the Tribunal would then proceed to a ruling without further hearing.

8.On 24 September 2019 the respondent filed its submissions. The respondent denied any intention to make a gift to the applicant. It did concede:

(a)the amount of $159.23 for the pro-rata premium to the date of registration of the Units Plan, that is, for the period 27 October 2017 to 23 November 2017;

(b)that it had failed to comply with section 70 of the Act which requires a special resolution of the Owners Corporation to raise a loan. The respondent described this omission as a “technicality”; and

(c)that it should not have transferred the funds from the Owners Corporation’s account without the Owners Corporation’s knowledge and permission.

9.The respondent argued that it was common for the developer to pay initial necessary costs for the newly formed Owners Corporation, which were described as “developer loans”.

10.The respondent argued that its failure to pass the required resolution to accept the loan from itself caused no unfairness or loss to the applicant; rather the applicants’ position was an attempt to take advantage of this omission to become “unjustly enriched”.

11.The applicant filed its submissions. It argued:

(a)that section 100 of the Act required the developer to pay the insurances as a prerequisite to registration of the Units Plan;

(b)section 77 prohibited the transfer to the funds from the Owners Corporation’s general account without resolution of the Owners Corporation, of which none had occurred; and

(c)the respondent should have sought adjustment for the insurance costs in the settlement of the purchases which it did not.

Legislation

12.The Tribunal has two possible sources of jurisdiction to hear this dispute:

(a)section 125 of the Unit Titles (Management) Act 2011; and

(b)section 17 of the ACT Civil and Administrative Tribunal Act 2008 (ACAT Act).

13.Section 125 of the Act provides:

(1)     This section applies to a dispute relating to an owners corporation for a units plan between the corporation and any 1 of the following:

(a)an owner or occupier of a unit in the units plan;

(b)the manager (if any) for the owners corporation;

…

(2)     A party to the dispute may apply to the ACAT for an order in relation to the other party if the application relates to the dispute.

14.The power in section 125 arises insofar as the respondent is a party in its capacity as the manager appointed by the Owners Corporation. This is a different capacity to that of the developer.

15.Section 129 of the Act then provides:

(1)     The ACAT may make the following orders:

(a)an order requiring a party to do, or refrain from doing, a stated thing;

…

(2)     The ACAT may make any other order it considers reasonably necessary or convenient to resolve a dispute under this part.

(3)     This section does not limit the orders the ACAT may make in relation to a dispute under this part.

16.Section 17 of ACAT Act gives the Tribunal jurisdiction in ‘civil disputes’ under the statutory monetary limit. A ‘civil dispute’ is defined to include contractual disputes and dispute in tort. Both of these heads of claim are relevant in this case. The actions of the respondent in taking the money from the Owners Corporation’s bank account was done in its capacity as the contracted manager. It is also a tort to take the money of another person without lawful authority.

17.The Tribunal has the power to hear the matter under either source of jurisdiction unencumbered by any internal administrative division of the Tribunal.[1]

[1] Zeus and Ra Pty Ltd v Nicolaou [2003] VSCA 11

18.An Owners Corporation comes into existence upon registration of the Units Plan.[2] The members of the Owners Corporation are the owners of the units.[3]

[2] Unit Titles (Management) Act 2011 section 8

[3] Unit Titles (Management) Act 2011 section 10

19.The Owners Corporation has the responsibility for the management and control of the common property and any other function imposed upon under the Act.[4]

[4] Unit Titles (Management) Act 2011 section 16

20.Section 100 of the Act imposes on the Owners Corporation, inter alia, the duty to take out various insurances:

(1)     An owners corporation for a units plan must insure and keep insured all buildings on the land for their replacement value from time to time against all of the following risks:

…

(2)     The owners corporation must take out an insurance policy that covers, to the greatest practicable extent—

(a)the risks mentioned in subsection (1); and

(b)costs incidental to the reinstatement or replacement of the insured building, including the cost of removing debris and the fees of architects and other professional advisers.

Note: If a developer is the only member of the owners corporation, the developer must on behalf of the owners corporation take out an insurance policy under s (2), unless exempted under s 101.

…

(4)     For all purposes related to any insurance taken out by it under this section, an owners corporation is taken to have an insurable interest in the buildings on the land to the extent of their replacement value. (emphasis added)

21.The duty in section 100 is placed upon the Owners Corporation and not the developer. Obviously that duty cannot be fulfilled before the Owners Corporation exists. Even after registration of the Units Plan it is often the case that the sole member of the Owners Corporation is the developer until the units are sold. This is the reason for the ‘Note’ to subsection 100(2) which alerts the developer of its duty once the Owners Corporation has come into existence, and that the insurance is to be that of Owners Corporation and not the developer.

22.Section 70 of the Act limits the capacity of the Owners Corporation to borrow money without resolution:

70     An owners corporation may, if authorised by a special resolution, do 1 or more of the following:

(a)borrow amounts required for the exercise of its functions;

(b)secure the repayment of amounts borrowed by it and the payment of interest on amounts borrowed by it.

23.The period following the registration of the Units Plan, but prior to the purchases of the units by a third party, is called the ‘developer control period:’

“developer control period”, for a units plan, means the period that—

(a)     starts on the day the owners corporation for the units plan is established; and

(b)     ends on the day people other than the developer hold ¹/3 or more of the unit entitlements for the units plan.

24.In the present case there are only two units and so the ‘developer control period’ ended when Mr Dwyer completed the purchase of his unit on 4 December 2017.

25.Section 33 of the Act limits what the developer can do in the name of the Owners Corporation during the ‘developer control period’:

(1)     An owners corporation for a units plan must not, during the developer control period, do any of the following:

(a)enter into a contract unless—

(i)the contract is disclosed in each contract to sell a unit in the units plan; and

(ii)either—

(A)the contract is for a period not longer than 2 years; or

(B)the ACAT authorises the corporation entering into the contract in accordance with subsection (3);

…

(2)A developer or, if an owners corporation is established for the units plan, the owners corporation may apply to the ACAT for the authority to enter a contract during the developer control period.

(3)The ACAT may authorise the owners corporation entering into the contract if satisfied that the terms of the contract are reasonable in all the circumstances.

…

Consideration of the issues

26.In the present case the issue is not so much the fact of the insurance contract having been taken out in the ‘developer control period’, but rather the failure of the respondent to tell the incoming purchasers that a loan existed from the developer to the applicants for this cost. The relevant contract that needs to be considered is the loan contract.

27.Both the insurance contract and the alleged loan contract with the developer were for less than two years. However, the liability under the loan contract with the developer was not disclosed by the developer in the contract for the sale of the units to Mr Dwyer and Mr Reynolds. The respondent submits to the contrary, but the Tribunal has not been taken to where this disclosure occurs in the contracts themselves. It is not sufficient that the contract for sale had a general adjustment clause; nor is it sufficient that there was an agreed adjustment on settlement for pro-rata body corporation levies. The fact of the adjustment for the cost of the premiums is what needed to be disclosed where an adjustment is sought for it.

28.The bottom line is that the contracts for sale did not disclose the outstanding loan to the respondent and in fact this issue was not even raised by the respondent with the applicant until after the respondent had taken the money from the Owners Corporation’s bank account in July 2018.

29.For present purposes the sequence of events needs to be dissected into:

(a)the period prior to the registration of the Units Plans, that is, prior to 23 November 2017 at which time the Owners Corporation did not exist, and all costs were those of the respondent;

(b)the period 23 November 2017 to 3 December 2017 when the respondent was the sole member of the Owners Corporation (the developer control period); and

(c)the period from 4 December 2017 – being the settlement of Mr Dwyer’s purchase – to the present, during which time the respondent could not pass any resolution or make any decision without the consent of Mr Dwyer.

30.In the period prior to registration there was no obligation on the respondent to take out insurance on behalf of the applicant. This obligation did not arise until 23 November 2017. It would be expected that the respondent did insure the buildings and work in this prior period, but this insurance was for its own sake. This was a business cost to the developer and not one that he could lawfully pass onto the applicant. The respondent has now rightly conceded this point and offered the appropriate adjustment.

31.In the developer control period, the respondent was required to take out the insurance effective from 23 November 2017 and did so. There can be no criticism of this action.

32.The problem for the respondent was that that the Owners Corporation did not exist when the premiums were paid on 27 October 2017. Then on 23 November 2017 the newly formed Owners Corporation had no funds with which the pay the insurance. This left the respondent with the choice of not complying with the law and leaving the premises uninsured, or the newly formed Owners Corporation somehow raising the necessary money on its first day of existence to pay the insurance. How could the Owners Corporation do this, other than raising a loan from some source or insisting on the respondent paying advanced levies that had not yet been fixed? There was no real choice, the respondent did what was the sensible and prudent thing to do, it paid the insurance “on behalf of the Owners Corporation” and the policy showed the Owners Corporation as the insured party from the inception of the Owners Corporation on 23 November 2017.

33.The problem arises in the method in which the respondent went about the processes. Had the respondent formally recorded the resolution to borrow the money for the insurance premiums at the inaugural AGM or disclosed it as an adjustment in the contracts of sale, then there would be no problem. But it did neither. The proper cause of action was the former not the latter. The insurance cost was that of the Owners Corporation and not that of Mr Dwyer and Mr Reynolds personally. Mr Dwyer and Mr Reynolds may be the members of the Owners Corporation, but they are not the Corporation itself. The Owners Corporation is a separate and distinct legal entity.

34.The immediate consequence of this failure under the Act is that the loan contract between the respondent and the applicant is void, being contrary to law. It is too late for the retrospective inclusion of any adjustment to the settlement amounts of the two purchases. Those rights merged on settlement.

35.If the matter rested at this point, then the applicant would be entitled to a return of the money taken from its account without its permission. But there is the equitable consideration (unjust enrichment) raised by the respondent. The applicant asserts that when the respondent took out the insurance prior to the inception of the Owners Corporation on 23 November 2017, the respondent was insuring the premises for its own sake, as a usual cost of doing business, and not on behalf of the applicant. This is plainly correct.

36.The applicants then reason that because the premium was paid for a year, most of which fell after the inception of the Owners Corporation, the pro-rata premiums for the period following the creation of the Owners Corporation on 23 November 2017 was still a business cost of the respondent’s and not a cost for the Owners Corporation. The Tribunal does not accept this argument.

37.From its creation on 23 November 2017 onwards, the duty to insure fell upon the Owners Corporation. All that has happened is that the respondent has discharged that duty as it was required to do by law, by using its own money to do so. Had the relevant resolution been passed or the relevant adjustment made on the settlement, Mr Dwyer and Mr Reynolds would have lawfully inherited the duty to pay for their own insurance.

38.For these reasons the Tribunal agrees with the respondent that the applicants are attempting to rely on a technicality to take advantage of the respondent’s method of dealing with the issue. They have suffered no loss from the respondent’s actions.

39.In general, a party cannot raise a complaint of unjust enrichment against its opponent if some default on the part of the complaining party was itself the cause of the circumstances. In the present case, the respondent’s default was its failure to minute the loan and perhaps to refer to it at the inaugural AGM. This is a minor oversight for a small sum of money. The unfairness rests in the applicants attempting to take advantage of this.

40.None of this in any way justifies the respondent in its capacity as managing agent accessing the Owners Corporation’s bank account and taking the funds without prior approval. This may raise a disciplinary issue, but this issue is not presently before the Tribunal.

41.The application is dismissed.

………………………………..

Senior Member A Anforth

HEARING DETAILS

FILE NUMBER:	UT 21/2019
PARTIES, APPLICANT:	Mathew Dwyer and Mark Reynolds
PARTIES, RESPONDENT:	Civium Property Group Pty Ltd
COUNSEL APPEARING, APPLICANT	N/A
COUNSEL APPEARING, RESPONDENT	N/A
SOLICITORS FOR APPLICANT	N/A
SOLICITORS FOR RESPONDENT	Trinity Law
TRIBUNAL MEMBERS:	Senior Member A Anforth
DATES OF HEARING:	20 September 2019