On 20 November 2015 ACAT heard a levy recovery matter and made a decision that has a significant impact on all strata levy recovery matters commenced in ACAT. The case was The Owners – Units Plan 840 V Richardson (Civil Dispute)  ACAT 77.
What was the case about?
The owners corporation sought to recover unpaid strata levies, interest and its expenses of taking the ACAT action under section 31 of the Unit Titles Management Act 2011 ACT (the Act). The costs of a previous ACAT action to recover levies were also claimed. In the previous ACAT matter default judgment had been awarded. The owners corporation applied for a redirection order in the Magistrates Court, the lot owner applied to set aside the default judgment and stay the redirection order and while the amount under the default judgement was ultimately paid, legal expenses were not.
The owners corporation argued that:
- as a matter of public policy the Act provides that the costs of recovering levies is to be met by the defaulting lot owner;
- the expenses incurred under section 31 were for costs incurred for steps ancillary to the failure to pay levies;
- the steps taken by the owners corporation were necessary and reasonable; and
- the quantum of the owners corporation’s costs was reasonable.
Section 31 of the Act permits an owners corporation to recover expenses as a debt from the lot owner if in carrying out its functions it incurred an expense or carried out work due to either a wilful or negligent act or omission by a lot owner or occupier or a breach of its rules.
The lot owner argued that there was no need to incur costs as he would have paid the levies if the levy recovery procedure of the owners corporation been followed. He also argued that the costs of the enforcement action should have been argued at the time of the enforcement proceedings.
What was the decision?
ACAT held that section 31 of the Act operates to create a statutory debt which does not require a court or Tribunal to find the money payable and that “[t]he right to recover expenses under section 31 is not an automatic award of indemnity for all costs incurred by an owners corporation”.
To recover costs under section 31 the following criteria must be met:
- there must be a “default” by the owner or occupier of the unit;
- as a result of the default the owners corporation took action within its functions;
- in taking the action the owners corporation incurred an expense;
- the action taken by the owners corporation was reasonably necessary; and
- the amount of the expense is reasonable.
The ACAT considered whether section 31 of the Act, which acts to make a lot owner responsible for expenses prior to an order being made, could apply to legal costs incurred in ACAT matters. Section 48 of the ACT Civil and Administrative Tribunal Act 2008 (the ACAT Act) provides that parties in an ACAT matter must bear their own costs unless ACAT makes an order otherwise.
The ACAT held that section 31 of the Act conflicted with section 48 of the ACAT Act. Paragraph 83 of the decision sets out the key finding which was:
“Costs incurred in tribunal proceedings are not recoverable by the owners corporation as a section 31 expense unless they have been ordered to be paid by the Tribunal or the ACAT Act otherwise provides.”
ACAT also held that the word “costs” under section 48 of the ACAT Act should be given its ordinary and natural meaning and should not be limited to legal professional costs and disbursements. Costs were awarded in the matter for some of the owners corporation’s claims.
ACAT also considered section 31 costs in respect of ACT Magistrates Court matters and held that unlike in the tribunal an application for section 31 costs could be made in the same proceedings.
What does this mean?
Costs can be claimed in certain circumstances in ACAT. Applications for legal costs in ACAT should be brought under section 48(2) of the ACAT Act rather than section 31 of the Act.
Claims for legal costs in the ACT Magistrates Court under section 31 can, and should, be made in the levy recovery proceedings.
This decision is currently under appeal and we understand that all levy recovery matters in ACAT have been or will be adjourned until after the appeal is determined.
Note this decision is currently under appeal.
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