The Body Corporate for 399 Woolcock Street CTS 34700 v Sexton

[2013] QCATA 55

CITATION: The Body Corporate for 399 Woolcock Street CTS 34700 v Sexton & Ors [2013] QCATA 55

PARTIES:	The Body Corporate for 399 Woolcock Street CTS 34700 (Applicant/Appellant)
v
John Sexton and Yvonne Sexton atf Sexton Developments Superannuation Fund Arthur Browne, Beth Browne and Terence Browne atf Arthur Browne and Associates Superannuation Fund (Respondents)

APPLICATION NUMBER: APL159-12

MATTER TYPE: Appeals

HEARING DATE: On the papers

HEARD AT: Brisbane

DECISION OF: Mr Charles Brabazon QC, Member

DELIVERED ON: 22 January 2013

DELIVERED AT: Brisbane

ORDERS MADE: 1.    The parties are invited to make further submissions about the validity of the appeal and the amounts of money that must be paid by the respondents to the appellant.

CATCHWORDS:

BODY CORPORATE AND COMMUNITY MANAGEMENT -  Commercial Module – section 104 recovery costs – res judicata – “as a debt” – whether recovery costs are body corporate debts

Body Corporate for Liberty CTS: 27241 v Alotier Pty Ltd and Stewart Silver King and Burns [2009] CCT KA009-08

APPEARANCES and REPRESENTATION:

This matter was heard and determined on the papers pursuant to s 32 of Queensland Civil and Administrative Tribunal Act2009 (QCAT Act).

REASONS FOR DECISION

The issue

1. The basic issue in this body corporate dispute is this – who suffers the loss when a lot owner cannot pay the body corporate bills? Is it the body corporate or a new owner of the lot?

2. Here, a company called Llamedos Holdings Pty Ltd (“Llamedo Holdings”) owned four lots in 399 Woolcock Street in Townsville. It had financial difficulties. Mr and Mrs Glenister had lent it money, and they became its mortgagees in possession. They exercised their power of sale, and sold three lots to the Sexton family and one lot to the Browne family. The Sextons and Brownes are the present owners of those lots.

3. The body corporate filed a claim against Llamedos Holdings in the Townsville Magistrates Court on 16 July 2010. It claimed, ‘$30,289.96 for body corporate fees, levies and recovery costs, plus costs of $1,296.85.’

4. Lamedos Holdings did not defend the claim. The body corporate got a default judgment for $31,826.81, including $1,536.85 for costs. Unfortunately, nothing has been paid to the body corporate by that company or its liquidator.

The Adjudication

1. The body corporate then directed its claims to the Sextons and Brownes. They refused to pay anything. The issues led to a hearing by an adjudicator. Several orders were made in reasons published on 2 May 2012. The first order said this, in effect:

   Order that the body corporate shall not seek to recover or claim any amount from the Sexton and Browne interests, that has been awarded to the body corporate by the Magistrates Court, and that the body corporate is not entitled to seek as a debt, against those lot owners, any amounts levied by the body corporate, or payable to the body corporate, that were the subject of that judgment.

2. It will be helpful to note the Adjudicator’s reasons for that decision. They were to this effect:

   a)    Once a judgment is enforced, the original cause of action merges with the judgment. The body corporate has no continuing right to seek payment of the contributions once a judgment for those contributions has been entered.

   b)    The judgment was against Llamedos not against the Sexton and Browne interests.

   c)    The amounts of recovery costs that are claimed are not incontestable (ie, able to be challenged) and are not deemed statutory debts.

   d)    Section 104(3) of the Body Corporate and community Management (Commercial Module) Regulation 2008 does say that:

   A liability to pay a body corporate debt in relation to a lot is enforceable jointly and severally against each of the following persons –

   (a)  a person who was the owner of the lot when the debt became payable;

   (b)a person (including a mortgagee in possession) who becomes an owner of the lot before the debt is paid.

   e)    There is nothing in the definition of ‘body corporate debt’, which would mean that the amount in the Magistrates Court judgment is such a debt.

   f)      The body corporate incorrectly contends that the Sexton and Browne interests are liable for the amounts of contributions, penalties and recovery costs that were included in the Magistrates Court judgment.

3. It can be noted that ‘Body corporate debt’ means the following amounts owed by the owner of a lot to the body corporate:

   (a)     A contribution or instalment of a contribution;

   (b)     A penalty for not paying a contribution or instalment of a contribution by the date for payment;

   (c)     Another amount associated with the ownership of a lot.

The Magistrate’s Court Judgment

1. The first observation to be made is that the effect of the Magistrate’s Court judgment is wrongly understood. It was a contest between Llamedos Holdings and the body corporate. The body corporate had a continuing right to seek payment. The Sexton and Browne interests were not parties to it. The judgment had no impact on them.

2. A short statement of the applicable principle is in Halsbury, “Laws of Australia” at para 190-85:

   A judgment in former proceedings precludes reliance on a cause of action, the subject of that judgment, in subsequent proceedings between the same parties, litigating in the same capacity, or their privies. However, the judgment does not destroy an independent cause of action available to or against a third party.

3. The Magistrates Court decision dealt with the claims by the body corporate, against Llamedos Holdings. It did not deal with an independent claim against the Sexton and Browne interests. Those claims are still on foot. Having recovered nothing from Llamedos Holdings it was entitled to pursue the new owners of the lot.

The Decided Case

1. Secondly, there is the conclusion of Mr Dorney QC (as he then was) in the Liberty decision.[1] He had to consider the impact of provisions in The Standard Module similar to those in s 104(3). With reluctance, he accepted the conclusions of an adjudicator in an earlier case, who said that:

   …since “recovery costs” must be “pursued” as a “debt”, the costs did not become payable by the owner until the body corporate had obtained a judgment or order as to the costs (para 9).

   [1]Body Corporate for Liberty CTS: 27241 v Alotier Pty Ltd and Stewart Silver King and Burns [2009] CCT KA009-08.

2. As he put it, in para 46 of his reasons:

   …recovery costs … are not body corporate debts and are, otherwise … even in the nature of a debt that is deemed to be a debt for the purposes of a statute. The “debt” appears to be one that permits its recovery only as part of a procedure whereby proceedings are brought in some court … of competent jurisdiction.

3. With respect, that cannot be the meaning of the Act. While there are some difficulties in the words of the statute, as he correctly observed, it is impossible to accept that parliament actually intended that no body corporate had any right to recovery costs, as a body corporate debt, without proceedings in a court or this Tribunal.

4. The cases mentioned in his reasons do not compel that conclusion. Rather, they emphasise the long standing meaning of recovering money, ‘as a debt’. The expression means that it might be summarily recovered as a fixed amount, rather than as an amount that has to be proved in detail. That is this case – see s 104(1) of the Commercial Module. If contributions are not paid on the due date the body corporate ‘may recover them as a debt’. That is a provision intended to facilitate the recovery process, and avoid the need to prove an unliquidated claim at greater length.

5. (Section 50 of the QCAT Act sets out comparable rules for the recovery of ‘a debt or liquidated demand of money’.)

6. It follows that the new owners of the lots became liable to pay the outstanding amounts for their lots.

7. The decision in Liberty meant that recovery costs could not be regarded as a ‘body corporate debt’, which is a defined term, unless they were ordered by QCAT or a court. The result has been an inconvenient one. Cases such as ‘Chelsea’ and ‘Pacific Breeze’ show that (see 2009 QBCCMC 386, and 2009, QBCCM 317).

8. In this case, as the submissions for the Sexton and Browne interests demonstrate those cases have had a considerable impact. Without that impact it will be easier to deal with the actual financial position of a body corporate, and its right to recovery costs.

An indemnity?

1. It seems that the Glenisters may have given the Sextons and Brownes an indemnity against clauses under s 104(3)(b). They are not parties to the proceedings.

2. Attention has to be paid to the amounts that they will have to pay to the body corporate. In any event, the dispute is now before QCAT, so an appropriate order for the recovery costs can be made.

The levy Notices

1. It was suggested for the Sextons and Brownes that outstanding amounts could not be demanded from them as copies of their levy notices could not be found. It seems that the amounts of the levies are recorded in the body corporate books of account. In that case, the accounts will be a sufficient record of the amount owing.

Uncertain matters

1. It is now necessary to mention some areas of uncertainty. This appeal on the papers means that immediate responses from the parties are not available.

2. First, paragraphs 5 and 8 of the submissions on behalf of the Sexton and Brown interests say that this appeal is incompetent, as the decision to appeal a ‘restricted issue’ had to be made by a general meeting – which has not taken place.

3. That submission was made in August 2012. Since then, a great deal of paperwork has been generated, in several files, with no apparent reference to it and no response on behalf of the body corporate.

4. It is appropriate to now invite the body corporate to make a written submission about the validity of the appeal.

5. There also seems to be uncertainty about the amount of money said to be owed to the body corporate by the Sextons and Browne interests. The claim against Llamedo Holdings was for $30,289.96 per costs.

6. However, the body corporate’s submissions of 22 pages refer to claims against the Sextons for $36,730.93, and to claims against the Brownes for $15,064.13 – a much greater total of $45,354.09. What is the actual amount to be recovered by the body corporate?

7. The parties are at liberty to make further written submissions, if that is necessary, as they see fit. In the light of the principal judgment about the body corporate’s position, and the debts owed to it, the parties may now be able to reach an agreed outcome.

8. Of course, any submissions will be exchanged.