Mittiga v Community Corporation - [2012] SASC 202

SUPREME COURT OF SOUTH AUSTRALIA
(Magistrates Appeals: Civil)
MITTIGA v COMMUNITY CORPORATION 20582 INC
[2012] SASC 202
Judgment of The Honourable Justice Stanley
14 November 2012
MAGISTRATES - APPEAL AND REVIEW - SOUTH AUSTRALIA - APPEAL TO SUPREME COURT
PROCEDURE - INFERIOR COURTS - SOUTH AUSTRALIA - MAGISTRATES COURT
PROCEDURE - MISCELLANEOUS PROCEDURAL MATTERS - CROSS-CLAIMS: SET-OFF AND COUNTERCLAIM - SET-OFF - WHAT MAY BE SET-OFF - EQUITABLE SET-OFF
Appeal against order for summary judgment of the Magistrates Court – respondent claimed sum from appellant for unpaid levies, expenses, fees and other costs owed pursuant to the Community Titles Act 1996 (SA) (the Act) – summary judgment ordered as there was no dispute between the parties as to the amount owing - parties have since agreed that the amount for which judgment was entered in the Magistrates Court had been erroneously calculated - parties agree that, should the appeal be dismissed, the judgment amount should be amended.
Before the matter came on for hearing in the Magistrates Court, the appellant unsuccessfully attempted to obtain a resolution of the corporation to amend the entitlement lots – following this the appellant instituted proceedings in the District Court seeking an order to amend the community plan to vary the lot entitlements – appellant submitted that the magistrate was in error in granting summary judgment due as District Court could still amend the community plan and vary the lot entitlements retrospectively – further submitted that the Court was empowered to grant remedies that constituted an equitable set-off – submission based on s 59(4)(c) or s 142(8) of the Act.
Held: appeal allowed for the purpose of amending the judgment amount.
Magistrate was correct in making order for summary judgment and in concluding that there was no real question to be tried.
The defence of equitable set-off is not arguable – appellant’s claim to obtain relief by way of order for payment of an amount ‘overcharged’, whether pursuant to s 59 or 142 of the Act, is not a claim that impeaches the respondent’s title to demand payment pursuant to s 114 of the Act – if lot entitlements were to be varied, the variation would only operate prospectively – a successful application to the District Court to vary the lot entitlements therefore cannot affect the appellant’s liability to the respondent in respect of past contributions – the closeness of the connection between the appellant’s liability and her claim for relief is not in itself sufficient to set up an equity by way of defence.
Community Titles Act 1996 (SA) s 20, s 59, s 114, s 142, referred to.
Spencer v the Commonwealth (2010) 241 CLR 118; Ceneavenue Pty Ltd v Martin (2008) 106 SASR 1; Aries Tanker Corporation v Total Transport Ltd (1977) 1 All ER 398; Walker v Secretary of the Department of Social Security (1995) 56 FCR 354; Forsyth v Gibbs [2009] 1 Qd R 403; Piggott v Williams (1821) 56 ER 1027, discussed.
James v Commonwealth Bank of Australia (1992) 37 FCR 445; Fancourt v Mercantile Credits Ltd (1983) 154 CLR 87; Rawson v Samuel (1841) 41 ER 451; Hill v Ziymack (1908) 7 CLR 352; Lord v Direct Acceptance Corporation (in liq) (1993) 32 NSWLR 362; Norman v FEA Plantations (2011) 195 FCR 97; Banks v Body Corporate "Noosa on the Beach" Community Titles Scheme 6417 [2000] QCA 146; JM Properties Pty Ltd v Strata Corporation No. 13975 Inc & Ors [2006] SADC 12, considered.

MITTIGA v COMMUNITY CORPORATION 20582 INC
[2012] SASC 202
Magistrates Appeal
STANLEY J:
Introduction

This is an appeal from an order for summary judgment in the amount of $38,219.46. The order was made by the Magistrates Court on 1 August 2012. The respondent claimed the sum from the appellant for unpaid levies, expenses, fees and other costs owed by the appellant to the respondent, pursuant to s 114 of the Community Titles Act 1996 (SA) (the Act).
Background
The respondent is a body corporate incorporated pursuant to the Act for the community title development located at 191 Greenhill Road, Parkside (the development). It is a residential apartment building. The appellant is the registered proprietor of one of the units in the development, unit no. 508. Pursuant to the Act, a community plan for the development was lodged with the Registrar-General and deposited on 13 June 2000. The community plan included plans of the development and attached a lot entitlement sheet. The lot entitlement sheet set out the lot entitlements of each of the units in the development. The lot entitlement is a number assigned to each unit in the development. It determines the shares in which lot owners make monetary contributions to the maintenance of the corporation.
The lot entitlement of the appellant, like the lot entitlement of all other unit owners, is prescribed on the lot entitlement sheet.
For some time the appellant has been in dispute with the respondent over the correctness of the lot entitlement number assigned to her lot.
Pursuant to s 20 of the Act, the lot entitlement is a number assigned to the lot, that bears in relation to the aggregate of the lot entitlements of all of the community lots defined in the community plan (within a tolerance of plus or minus 10 percent), the same proportion that the value of the lot bears to the aggregate value of those lots.
The appellant contends that the lot entitlement number assigned to her lot does not comply with the requirements of s 20. Her existing unit entitlement is fixed at 334. The appellant engaged professional valuers, Propell National Valuers, who prepared two valuation reports, dated 2 February 2011 and 14 December 2011, in which they assessed, on a comparative basis, the lot entitlements of the corporation. The valuers concluded that the correct lot entitlement of the appellant should be 257 not 334. In other words, the valuation reports suggest that the appellant has been paying nearly 30 percent more by way of contributions to the corporation than her correct lot entitlement would require.
The appellant has complained about this “overcharging” since about 2004. She alleges that she has been overcharged an amount in excess of $20,000 in the period since she acquired her unit. It appears nothing satisfactory to the appellant was done by the corporation or its managers in relation to her complaint. In response, she simply stopped paying contributions. This led to the action in the Magistrates Court by the respondent to recover the monies it alleged she owed.
The proceedings in the Magistrates Court were brought pursuant to s 114 of the Act. It provides:
114—Contributions by owners of lots
(1)A community corporation must, in general meeting, fix the amount it requires by way of contributions from the owners of community lots.
…
(3) Subject to this Act, the share of an amount fixed under subsection (1) to be contributed by the owner of each lot is proportional to the lot entitlement of the lot unless otherwise provided by a unanimous resolution of the corporation.
(4) A corporation may, by ordinary resolution—
(a) permit contributions to be paid in instalments specified in the resolution;
(b) fix (in accordance with the regulations) interest payable in respect of a contribution, or an instalment of a contribution, that is in arrears.
(5) A contribution, or an instalment of a contribution, is payable on the day specified for payment in a notice served by the corporation on the owner of the lot.
(6) The notice must—
(a) include information required by regulation; and
(b) be served on the owner at least 14 days before the date for payment.
(7) Payment of a contribution, instalment or interest is enforceable jointly and severally against the owner or owners of the lot and the subsequent owner or owners of the lot.
(8) A contribution, instalment or interest may be recovered as a debt.
…
(12) An amount paid by a person under this section is not recoverable by the person from the corporation when he or she ceases to be the owner of the lot.
Proceedings were issued on 20 September 2010. The initial claim was for $14,161.93. The amount claimed in the action and the amount sought by way of summary judgment was subsequently amended to $38,219.46.
Before the matter came on for hearing in the Magistrates Court the appellant attempted to obtain a resolution of the corporation to amend the entitlement lots. This was unsuccessful. Following this the appellant instituted proceedings in the District Court pursuant to s 59 of the Act seeking an order of the Court amending the community plan for the purpose of varying the lot entitlements of the lots. This application had not come on for hearing before the District Court at the time the Magistrates Court heard the action for summary judgment. As at the hearing of this appeal the proceedings in the District Court are still pending.
Magistrate’s reasons
Before the Magistrate the respondent sought summary judgment on the basis that there was no dispute between the parties that the amount claimed by way of summary judgment was calculated correctly in accordance with the existing lot entitlements. The respondent submitted that it was entitled to summary judgment accordingly. Its right to summary judgment could not be affected by the District Court proceedings. It submitted that even if the District Court was to amend the community plan to vary the lot entitlements as sought by the appellant, that could only alter the rights and obligations of the unit owners, including, in particular, the appellant, prospectively.
The appellant sought to have the proceedings in the Magistrates Court transferred to the District Court to be heard together with the s 59 application.
The learned magistrate upheld the respondent’s submission. He found that the appellant had no arguable defence to the respondent’s claim for payment of the contributions in accordance with the assessments made pursuant to the current lot entitlements. He refused to order a transfer of the proceedings to the District Court on the basis that it was not open to the District Court to amend the community plan by varying the lot entitlements on a retrospective basis. Therefore there could be no relief for the appellant from her existing obligations.
Submissions on appeal
The appellant submits that the learned Magistrate was in error in granting summary judgment. She submitted it was not to the point that the District Court could not amend the community plan to vary the lot entitlements pursuant to s 59 of the Act retrospectively. Assuming the District Court was disposed to amend the community plan and vary the lot entitlements as sought by the appellant, which would operate on a prospective basis only, the Court was still conferred with other powers which would permit relief from the obligation to make the payments sought by the respondent in the Magistrates Court action. She highlighted s 59(4)(c) of the Act which empowers the Court on an application pursuant to s 59 to make any further order that may be necessary to achieve justice between those affected by the amendment, and ss 142(8)(c) and (f) which empowers the Court to order that a party take such action as is necessary to resolve any dispute or give any judgment on any monetary claim. Accordingly, she submitted that the power of the Court to grant such remedies constituted an equitable set-off against the respondent’s liquidated claim. Therefore, she submitted, the respondent could not satisfy the Court that there was no real question to be tried, thereby erasing the foundation necessary for an order for summary judgment.
The respondent submitted that the learned magistrate was correct in the approach he took. The appellant’s application in the District Court seeking to vary the unit lot entitlements could not operate retrospectively. It is an entirely separate action from the claim in the Magistrates Court. It could not act as an equitable set-off. The test for equitable set-off is that there must be such a close connection between the claim and the cross-claim which is said to impeach the plaintiff’s claim that it would be positively unjust that there should be recovery by the plaintiff without deduction for the amount of the cross-claim. A sufficient connection does not exist in this case because the District Court is not empowered to order a payment to the appellant by the respondent to adjust for any “overcharging” in circumstances where any amendment it might make to the community plan to vary the lot entitlements would operate prospectively.
Summary judgment
The power to order summary or final judgment is one that should be exercised with great care, and should never be exercised unless it is clear that there is no real question to be tried.[1]
[1] Fancourt v Mercantile Credits Ltd (1983) 154 CLR 87 at 99.
As the High Court emphasised recently in Spencer v The Commonwealth,[2] albeit in the context of an application for summary dismissal, the test to be applied is one of demonstrated certainty of outcome.[3]
[2] (2010) 241 CLR 118.
[3] (2010) 241 CLR 118 at 140 [55].
Consideration
In order to succeed on appeal the appellant must establish that the learned magistrate erred in concluding that summary judgment was warranted because there was no real question to be tried on the principal action.
As Debelle J said in Ceneavenue Pty Ltd v Martin:[4]
The expression “no real question to be tried” connotes such factors as whether the defendant really has a bona fide defence, and that the defendant does not have an arguable defence which ought to be fairly tried. The defendant must show that he is not wasting the court’s time or abusing the court’s procedures to delay or defeat a just claim by the plaintiff. In this context, the word “real” is intended to distinguish a bona fide defence from one that is fanciful or spurious or an abuse of process seeking to delay and defeat the plaintiff’s just claim. The onus of satisfying the court that the application should be granted lies on the applicant. When considering whether that onus has been discharged, the court will look to the cogency of the defence as raised by the defendant.
(Citations Omitted).
[4] (2008) 106 SASR 1 at 20 [78].
In my view the learned magistrate was correct in concluding that there was no real question to be tried.
The appellant sought to defeat the application for summary judgment on the basis that she relied on an equitable set-off of the liability she otherwise owed to the respondent by way of contributions calculated or assessed in accordance with the existing lot entitlements. That equitable set-off was based on a claim for an order for payment pursuant to s 59(4)(c) or s 142(8) of the Act.
In my view the appellant’s claim for relief under those provisions cannot constitute an equitable set-off.
Equitable set-off arises where a person against whom a claim is made can show some equitable ground for being protected against that demand.[5]
[5] Rawson v Samuel (1841) 41 ER 451 per Lord Cottenham LC at 458; Hill v Ziymack (1908) 7 CLR 352.
To establish an equitable set-off as claimed by the appellant, which should more precisely be described as the equitable defence of set-off, the appellant must have an equity which impeaches the respondent’s title to demand payment. The mere existence of a cross-demand is not sufficient. While historically there has been some doubt, it now appears settled that the “impeachment” test correctly states the current position in Australian law.[6]
[6] James v Commonwealth Bank of Australia (1992) 37 FCR 445 at 457 – 462; Lord v Direct Acceptance Corporation (1993) 32 NSWLR 362 at 367; Norman v FEA Plantations (2011) 195 FCR 97 at 112 – 116.
It has been suggested that the test for the existence of the defence is that it would be unconscionable that the plaintiff’s claim be enforced without taking account of the cross-demand. Dr I C F Spry QC, in his article Equitable Set-Offs,[7] describes the test as requiring a relationship between the claim of the plaintiff at law and the claim of the defendant that the right of the plaintiff should be regarded in equity as dependent on the satisfaction of the claim of the defendant.
[7] (1969) 43 ALJ 265.
The requirement that the equity impeaches the respondent’s title to demand payment is explained by Lord Simon of Glaisdale in Aries Tanker Corporation v Total Transport Ltd,[8] in the context of a claim by shipowners for freight where there had been a short delivery of cargo. His Lordship rejected the defence of equitable set-off on the basis that a title to a claim for freight is not impeached by short delivery of cargo unless the short delivery amounts to a repudiation of the contract of carriage.
[8] (1977) 1 All ER 398 at 406 – 407.
In Walker v Secretary of the Department of Social Security[9] Cooper J (with whom Spender J agreed) held that the department could not establish an equitable set-off against a proper claim for sickness benefits where the claimant had previously been overpaid benefits as the result of fraudulent claims. This was because the department was under a statutory duty to pay the subsequent claim for sickness benefit. The claimant’s title to receipt of the sickness benefit could not be impeached by any right the department had to recover from him earlier overpayments.
[9] (1995) 56 FCR 354.
The principle was further explained by Keane JA in Forsyth v Gibbs[10] (McMurdo P and Fraser JA agreeing) where his Honour said:[11]
It is important to emphasise that the availability of an equitable set-off between cross-claims does not depend upon an unfettered discretionary assessment of whether it would be “unfair” in a general sense for a plaintiff to insist on payment of a debt owed to it while the cross-claim remains unpaid. It is essential that there be such a connection between the claim and cross-claim that the cross-claim can be said to impeach the claim so as to make it unfair for the claim to be allowed without taking account of the cross-claim.
[10] [2009] 1 Qd R 403.
[11] [2009] 1 Qd R 403 at 406 [10].
His Honour referred to Piggott v Williams[12] where a claim of a solicitor who sued his former client to recover fees for services rendered was successfully met by a plea of equitable set-off on the basis that the fees were only incurred by reason of the solicitor’s lack of due skill and diligence. The solicitor’s breach of his obligations of skill and diligence was itself the source of the claim for his fees. As Keane JA notes, Piggott v Williams affords an example of what is meant when it is said that the claim to set off must “impeach” or go to “the root of” the plaintiff’s claim.[13]
[12] (1821) 56 ER 1027.
[13] [2009] 1 Qd R 403 at 406.
The appellant’s claim to obtain relief by way of an order for payment of an amount alleged to be “overcharged” by the corporation because of the incorrect calculation of the entitlement lots, whether pursuant to s 59 or s 142 of the Act, is not a claim that impeaches the respondent’s title to demand payment pursuant to s 114 of the Act.
The liability of the appellant to pay contributions, as the owner of a community lot, is determined by reference to the terms of the community plan lodged with the Registrar-General pursuant to the provisions of the Act. Until that plan is amended to vary the lot entitlements, the lot owner is obligated to make the contributions assessable by reference to the lot entitlement applicable to the owner’s lot. If the lot entitlement is varied, that variation will only operate prospectively.[14]
[14] Banks v Body Corporate “Noosa on the Beach” Community Titles Scheme 6417 [2000] QCA 146 at [11]; JM Properties Pty Ltd v Strata Corporation No. 13975 Inc & Ors [2006] SADC 12 at [443] – [445].

Accordingly, a successful application by the appellant to the District Court pursuant to s 59 of the Act, to vary the lot entitlements, cannot affect her liability to the corporation in respect of the past contributions the subject of the order for summary judgment.
Without an order pursuant to s 59 varying the appellant’s lot entitlement, she could not pursue the consequential relief provided by s 59(4)(c), or for that matter, s 142(8) of the Act.
The making of any order pursuant to s 59(4)(c) is conditional upon the making of an order pursuant to s 59(4)(a) or (b). So much is apparent from the opening words of s 59(4)(c), namely, “any further orders”(emphasis added).
I doubt that the District Court could grant relief of the kind sought by the appellant pursuant to s 142(8). The court can only exercise the powers conferred by that subsection in respect of an application pursuant to s 142. Section 142(1) provides:
(1)     An application may be made under this section—
(a)     if the applicant claims that a breach of this Act or of the by-laws of the community scheme has occurred; or
(b)     if the applicant claims to have been prejudiced, as occupier of a lot, by the wrongful act or default of the community corporation or of a delegate or the management committee of the corporation or of the owner or occupier of another lot; or
(c)     if a member of a community corporation claims that a decision of the corporation or a delegate or the management committee of the corporation is unreasonable, oppressive or unjust; or
(d)     if a dispute arises—
(i)between a community corporation and a member of the corporation;
or
(ii)between two or more members of a corporation, in relation to—
(iii)any aspect of the occupation or use of a lot; or
(iv)the position in which a cable, wire, pipe, sewer, drain, duct, plant or equipment should be laid or installed; or
(e) for an order authorising a person to use force to enter a lot or a building on a lot.
In my judgment, none of the circumstances prescribed by s 142(1) apply to the circumstances of the appellant. Accordingly, any relief to which she is entitled must be found in s 59 of the Act.
There must be some doubt whether the terms of s 59(4)(c) are sufficiently wide as to permit a grant of relief by the District Court of the kind sought by the appellant. The language of s 59(4)(c) is broad. Nonetheless, a question must exist as to whether it extends so far as to permit an order to be made for payments by the corporation to lot owners to adjust for liabilities incurred prior to the variation of lot entitlements. This is because such adjustments would necessarily require the recovery of additional contributions from past lot owners who may no longer own lots. Such monetary adjustments would be fraught. Moreover, it is not difficult to contemplate other work that can be performed by s 59(4)(c), which does not include orders for payments of the kind sought by the appellant. In any event, it is not necessary for the purpose of deciding this appeal, to reach any conclusive decision as to the construction of s 59(4)(c).
This is an appeal from an order for summary judgment. It is merely necessary for me to proceed on the basis that the construction of s 59(4)(c) contended for by the appellant, is arguable. I am satisfied it is. However, that does not resolve the matter in favour of the appellant.
If the District Court is empowered to make an order of the kind sought by the appellant pursuant to s 59(4)(c) for payment to her of an amount representing past “overcharging” of contributions by the respondent, that remedy is no more than an inchoate right. It is consequential upon the primary relief sought pursuant to s 59 which is an order varying lot entitlements prospectively. The inchoate right to a payment is at best a right to be compensated for what might be considered some past unfairness in the way the lot entitlements operated. That does not impeach the corporation’s entitlement to have charged those contributions based on the lot entitlements which existed at the time. Those were vested rights affording the respondent good title to demand payment. The inchoate right to seek an order for payment by way of compensation pursuant to s 59(4)(c), if it exists, cannot set up an equity that impeaches that right or title.
I come to this conclusion notwithstanding the observation of Gummow J in James v Commonwealth Bank of Australia[15] that it is not, of itself, an objection to the availability of equitable set-off that either or both of the legal demands is made pursuant to a statute which creates new obligations and rights which give rise to debts or liabilities in unliquidated damages.
[15] (1992) 37 FCR 445 at 459.
There can be no doubt that there is a close connection between the appellant’s liability in respect of which the order for summary judgment was made and her claim for relief pursuant to s 59, but the closeness of the connection is not itself sufficient to set up an equity by way of defence to the claim for monies owed to the respondent. Any order which might be made by the District Court for payment of monies pursuant to s 59(4)(c) would not be made on the basis that the respondent did not have the right to claim those monies by way of contributions, but rather would represent the exercise of a discretionary remedy on the part of the court to do justice between the parties in particular circumstances where the court might consider that the lot entitlements had been erroneously calculated and the appellant should be paid a sum that compensates her for that fact. Any order of that kind made by the District Court would create new rights and liabilities. It would not declare the existence of past rights and liabilities. Those new rights and liabilities would operate prospectively only. Such an order would not impeach the respondent’s entitlement to claim the monies presently owed in respect of past contributions assessed in accordance with the existing lot entitlements.
For these reasons, I conclude that the learned magistrate was correct in making the order for summary judgment. The defence of equitable set-off to the respondent’s claim for monies owed pursuant to s 114(8) is not arguable.
The judgment amount
At the hearing before this Court, it transpired that the amount for which judgment was entered in the Magistrates Court had been erroneously calculated.
The parties have agreed that, should the appeal be dismissed, the judgment amount should be amended to $34,539.86.
Accordingly, I would allow the appeal for this reason only.
Conclusion
I allow the appeal and set aside the judgment of the learned magistrate. In lieu thereof I order judgment for the Respondent in the amount of $34,539.86.
The respondent is to have 90 percent of its costs of the appeal to be agreed or taxed.