Recovering legal costs in levy recovery actions in the ACT: Good news for owners corporations

Section 31 of the Unit Titles (Management) Act 2011 (ACT) (the Act) enables an owners corporation to recover expenses from a lot owner if such expenses relate to work conducted by the owners corporation because of a wilful or negligent act or omission by an owner or occupier, or because of a breach of the rules of the units plan by an owner or occupier. This provision has been considered in the context of levy recovery proceedings.

The Federal Court’s decision in the case of The Proprietors Units Plan No 52 v Patricia Isobel Gold [1993] FCA 385 held that (the then equivalent of) section 31 of the Act creates a statutory debt, for which the owner is liable as soon as the amount of the owners corporation’s expenditure can be ascertained. The Court held that non-payment of contributions was a clear breach of the rules of the units plan, and the expenditure of costs for legal action taken to recover such contributions was both rendered necessary by the debtor’s failure to pay and considered reasonable in the circumstances. This decision overturned an earlier Supreme Court decision, which had found section 31 did not apply to levy recovery proceedings.

The Federal Court decision was then applied in Hugh Russell Ford v The Owners Units Plan No. 259 [2012] ACAT 59. This is a particularly interesting decision as ACAT (the ACT Civil and Administrative Tribunal) is primarily a non-costs jurisdiction. This means that costs are usually not awarded, subject to very particular circumstances.

However, the Tribunal found that it was empowered to award costs in levy recovery proceedings brought under the Act because of the existence of section 31. Importantly, the costs awarded in this case were reduced due to a lack of “efficient” handling of the proceeding by the owners corporation. This suggests that even though costs can be awarded by the Tribunal, the amount of costs will be subject to the discretion of the Tribunal and the reasonableness of costs incurred will be assessed.

The result of these decisions is good news for owners corporations wishing to recover unpaid contributions from its lot owners. Not only are reasonable legal costs likely to be ordered payable by the debtor, but the possibility of having to pay the debt, interest and legal costs in addition may provide further incentive for the debtor unit owner to pay the debt without the need for court or Tribunal proceedings.

For more information about recovery of unpaid contributions, please contact Allison Benson of our office.