He Owners - Units Plan No 3866 v Aoun
[2018] ACAT 106
•31 October 2018
ACT CIVIL & ADMINISTRATIVE TRIBUNAL
THE OWNERS – UNITS PLAN NO 3866 v AOUN (Unit Titles) [2018] ACAT 106
XD 1202/2017
Catchwords: UNIT TITLES – unpaid levies – owners corporation incurred expenses when taking action to recover unpaid levies – whether the applicant or its agent should have sent the respondent an email prior to commencing legal proceedings, particularly given that previous communications had been by way of email – who should bear the responsibility for compliance with the payment plan
Legislation cited: Unit Titles (Management) Act 2011 ss 31, 113, 114, 124
Cases cited:In the Matter of the Ruling Tribunal section 31 of the Unit Titles Management Act [2017] ACAT 56
Tribunal: Senior Member H Robinson
Date of Orders: 31 October 2018
Date of Reasons for Decision: 31 October 2018
AUSTRALIAN CAPITAL TERRITORY )
CIVIL & ADMINISTRATIVE TRIBUNAL ) XD 1202/2017
BETWEEN:
THE OWNERS – UNITS PLAN NO 3866
Applicant
AND:
FADI AOUN
Respondent
TRIBUNAL:Senior Member H Robinson
DATE:31 October 2018
ORDER
The Tribunal orders that:
The respondent pay the applicant the section 31 expenses of $1,005.40.
………………………………..
Senior Member H Robinson
REASONS FOR DECISION
This is an application made pursuant to section 31 of the Unit Titles (Management) Act 2011 (UTM Act) for recovery of collection expenses. At issue is the extent of the applicant’s obligation to contact a debtor prior to commencing legal proceedings.
The test
Section 31 of the UTM Act provides, relevantly, that:
31 Recovery of expenditure resulting from member or unit occupier’s fault
(1) This section applies if an owners corporation for a units plan has in carrying out its functions incurred an expense, or carried out work, that is necessary because of—
(a)a wilful or negligent act or omission of a member of the corporation, or an occupier of the member’s unit; or
(b)a breach of its rules by a member of the corporation, or an occupier of the member’s unit.
(2) The amount spent or the cost of the work is recoverable by the owners corporation from the member as a debt.
Section 31 of the UTM Act has been the subject of numerous decisions by this Tribunal. Most significantly, In the Matter of the Ruling Tribunal section 31 of the Unit Titles Management Act [2017] ACAT 56 (Ruling Tribunal Case) a Ruling Tribunal determined that legal and collection expenses incurred in relation to Tribunal proceedings were recoverable, provided they were both reasonable in quantum and reasonably incurred.
The respondent did not dispute the quantum of costs claimed. The only issue before the Tribunal is whether they were reasonably incurred.
Facts
The parties were broadly in agreement on the facts.
The respondent owns a unit in the applicant corporation. As a unit holder, he is required to pay any validly raised levy. The respondent did not contest the validity of any of the levies in issue in this case.
The respondent failed to pay one such levy due on 1 March 2017 (March arrears), and the respondent’s manager sent an arrears letter sometime later, on 17 May 2017 (first arrears letter). The respondent does not deny that he was aware that he failed to pay the March 2017 levy. He also conceded that he received the first arrears letter and took no action in relation to it. He does not contest liability for the cost of the first arrears letter.
The respondent then failed to pay a further levy on 1 June 2017 (June arrears). Following this default, the respondent’s manager sent two further arrears letters on 19 June 2017 and then on 17 July 2017. The respondent agrees he likely received one or both of these letters, and that he took no immediate action in relation to them. He does not dispute that he is liable for the costs incurred by the applicant in sending them.
The respondent’s evidence was that his business was going through something of a tough time in the first half of 2017 and he was struggling to meet his debts. However, sometime in early August 2017 he realised that he needed to “sort things out” with the applicant before things got worse. He made a phone call to the applicant’s manager and entered into a brief negotiation. As a consequence of that negotiation, the parties agreed to a repayment plan that required the respondent to pay the accrued debt at $200 a fortnight.
The applicant’s manager confirmed the payment plan by way of an email to the respondent.
On the respondent’s evidence, he was ready, willing and able to pay this amount. After his offer was accepted by the applicant’s manager, he immediately logged onto internet banking and implemented a direct debit arrangement with his bank. Or at least, he thought he did. The first payment was certainly effected on 17 August 2017, but no further payments were made after that date. Something went wrong.
During the hearing, the respondent suggested that there may have been a bank error that led to the cancellation of his direct deposit, but he also, quickly and reasonably, conceded that it was just as likely that he had accidentally not made the payment a recurring one. Ultimately I do not need to decide what went wrong – the key factor is that something did go wrong, and the respondent defaulted on the payment plan.
Unfortunately for the respondent was, around this time, required to go overseas to attend to family affairs. He was away for a number of weeks, during which time he did not have access to his postal mail. He also did not routinely monitor the bank account from which payments were to be made.[1] He received no contact from the applicant or its manager, and therefore simply assumed that everything was alright.
[1] The respondent explained that he had two accounts – a day to day account and another account where direct debits were drawn from. He monitored only the prior on a day to day basis.
Meanwhile, the applicant’s manager monitored their accounts and waited for a further payment that did not arrive. Then, on 14 September 2017 (that is, four weeks later), an agent of the applicant sent the respondent a demand letter (the final letter). The letter was sent to the respondent’s postal address, as listed in the corporation’s register. The respondent did not get this letter until many weeks later, as he was still overseas.
A further two weeks after sending the demand letter, on 28 September 2017 the strata manager commenced legal proceedings.
The respondent’s evidence was to the effect that that he had assumed any communication about the repayment plan would be by email. He had good reason for this, as all his communications with the manager about the payment plan had been by telephone or email, and his assumed that these mediums would be used in the future. The respondent further stated that he had other creditors, including another owners corporation, and in his experience each of those creditors contacted him by email when a payment was missed or something went wrong.
The respondent was served with a copy of the application on 10 October 2017. On his evidence, he found out about the failure of his direct debit arrangement only because of the application. He says that a simple email from the applicant, earlier in the process when a payment was breached, would have avoided the need for legal action at all, and consequences the expenses incurred in commencing legal proceedings were not ‘reasonably incurred’.
Consideration
For the purposes of these reasons, I will accept the respondent’s evidence that:
(a)he established a direct debit arrangement for payment of the instalment plan;
(b)he was at all times ready, willing and able to comply with the instalment plan;
(c)something went awry such that the payments, after the first payment, were not made;
(d)he did not become aware of that the instalments were not being paid until after legal proceedings had been commenced;
(e)had he been advised that the instalment plan had failed, he would have immediately taken steps to reinstate payments; and
(f)had the applicant sent him an email, he would have been so advised.
The real issue, therefore, is whether the applicant or its agent should have sent the respondent an email prior to commencing legal proceedings, particularly given that previous communications had been by way of email.
The starting point is to consider how the UTM Act deals with the service of notices and communications required under that Act.
Section 113 of the UTM Act requires that an owners corporation establish a register. Section1 14 provides that the registrar must include the full name and an address for correspondence for each unit holder.
Section 124 of that Act then deals with service as follows:
124 Service of documents on members, interested people and occupiers
(1) For this Act and the Unit Titles Act 2001 (including an application for a court order under either Act) a document may be served on a unit owner or anyone else with an interest in a unit or the common property on a units plan by—
(a)sending it by prepaid post as a letter to the relevant address for correspondence recorded on the corporate register; or
(b)if the latest address for correspondence recorded in the corporate register is the postal address of a building or unit on the land—placing it in a letterbox for mail addressed to the building or unit; or
(c)serving it in another way directed by the person to be served.
The applicant in this case had established such a registrar, and the respondent’s mailing address was entered onto it. Accordingly, it was appropriate for the applicant (and its agents and representatives) to send correspondence to that address, unless the respondent had ‘directed’ it be served another way.
It was not suggested by the respondent that he had expressly ‘directed’ that the applicant serve him at an address other than the address in the register. I am also not convinced that such a direction could be implied from the email correspondence. There is nothing in the correspondence before the Tribunal that indicated the applicant wished to update his address for official communications. Had the respondent requested in an email, for example, that the manager contact him by return email if there is any problem with the payment, than I might be satisfied that section 124(1) was met. I am not so satisfied.
Still, that leaves the question as to whether the manager should reasonably have been expected to communicate with the owner by both mail and email, given the circumstances of this case.
I have considerable sympathy for the respondent’s position that the applicant should have sent him an email advising him that the payments had not been successful. The respondent, unsurprisingly, was unaware of the intricacies of the UTM Act, and having communicated with the applicant’s manager through email to establish the payment arrangement, it was not unreasonable to assume that further communication would likewise be by way of email. Many, if not most, reasonable people would assume that communication would be in a consistent medium.
It was perhaps, also, not unreasonable for the respondent to assume, in the absence of further communication, that the payments were being made.
Unfortunately for the respondent, however, the test is not whether he behaved reasonably – and there is nothing to suggest that he did not – but whether the applicant reasonably incurred the expenses that it did.
From the applicant’s perspective, it had a debtor who had failed to pay two levies, who had failed to respond to three arrears letters for several months, and who, after entering into an instalment plan, had failed to make the second payment. The applicants did not commence action immediately, but waited a number of weeks, before sending a formal, final letter to the respondent’s address for correspondence on the corporate register. Two weeks after receiving no response to that final arrears letter, they commenced legal proceedings. There is nothing in that course of conduct that is inherently unreasonable.
I do not accept that the fact the applicant had an alternative address for the respondent, being the respondent’s email address, necessarily changes this position.
That said, I do accept that sending an email to the respondent would have been helpful, and perhaps ideal, and may have prevented litigation, at least at that stage. However, there is a difference between reasonable practice and ideal practice. Section 31 requires the applicant meet the former test, not the latter.
Ideal practice comes at a cost. Following every line of communication before commencing legal proceedings would provide the best protection to the debtor, and the highest opportunity for the parties to avoid litigation. However, every communication between the corporation or its manager or agents, on one hand, and a defaulting owner on the other, incurs costs, and those costs must be borne by someone. To impose extra steps on the process will mean that, either every debtor, including those who cannot pay, must bear the additional costs of multiple communications prior to litigation being commenced, or those costs are spread across all owners as part of increased management or debt recovery fees generally. I must take this broader perspective into account when considering this respondent’s personal circumstances.
There is another issue I also must take into account – who should bear the responsibility for compliance with the instalment plan, the creditor corporation, or the debtor? On balance, I satisfied that it should be the debtor. While I do not suggest that the applicant has done anything unreasonable – no doubt many people would not do anything different to what he did – ultimately the instalment plan was to his benefit and it was a matter for him to ensure the direct debit arrangement was put in place and stayed in place. He did not do that, he did not monitor his account or his correspondence, and unfortunately he must bear the consequences.
Notwithstanding that the respondent did not contest the amounts claimed, I have reviewed them. The arrears fee of $75 for the third arrears notice is reduce to $44 consistent with the charge for the other notices, and the approach taken to these charges in other cases. Otherwise all claims are allowed.
Accordingly, I order that the respondent pay the applicant the section 31 expenses of $1,005.40.
………………………………..
Senior Member H Robinson
HEARING DETAILS
FILE NUMBER: | XD 1202/2017 |
PARTIES, APPLICANT: | The Owners – Units Plan No 3866 |
PARTIES, RESPONDENT: | Fadi Aoun |
COUNSEL APPEARING, APPLICANT | N/A |
COUNSEL APPEARING, RESPONDENT | N/A |
SOLICITORS FOR APPLICANT | CCA Legal |
SOLICITORS FOR RESPONDENT | N/A |
TRIBUNAL MEMBERS: | Senior Member H Robinson |
DATES OF HEARING: | 17 October 2018 |
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