ACAT Ruling Tribunal Decision: Recovering Costs in Levy Recovery Matters

On 2 August 2017, the ACT Civil and Administrative Tribunal (ACAT) handed down its decision In the Matter of Ruling Tribunal, section 31 of the Unit Titles (Management) Act 2011 (Civil Dispute) [2017] ACAT 56.

This is a long awaited decision which indicates what expenses an owners corporations can recover after suing a lot owner who fails to pay levies. It answers the issues raised by the decision in The Owners – Units Plan No 840 v Richardson [2015] ACAT 77.

In the Ruling Tribunal decision, ACAT held that if it was reasonable for an owners corporation to incur the following expenses (legal professional costs and disbursements incurred in bringing the Tribunal proceedings (e.g. lawyers fees, lawyers photocopying); company title and similar searches incurred in bringing the Tribunal proceedings; filing and hearing fees incurred in bringing the Tribunal proceedings; and administrative costs or disbursements incurred in bringing the Tribunal proceedings (e.g. charges by owners corporation managing agent, collections agency)), and each component of those expenses were reasonable in quantum then an owners corporation could recover those expenses under section 31 of the Unit Titles (Management) Act 2011 (UTMA). Further, the Ruling Tribunal held that legal professional costs and disbursements and administrative costs and disbursements in bringing enforcement proceedings in the ACT Magistrates Court were also costs that could be recovered by an owners corporation in later proceedings under section 31 of the UTMA.

This Ruling Tribunal decision also held that an owners corporation could only recover the following expenses (company title and similar searches incurred in bringing the Tribunal proceedings; filing and hearing fees incurred in bringing the Tribunal proceedings) under section 48 of the ACT Civil and Administrative Tribunal Act 2008 (ACAT Act). That is, the following expenses (legal professional costs and disbursements incurred in bringing the Tribunal proceedings (e.g. lawyers fees, lawyers photocopying); administrative costs or disbursements incurred in bringing the Tribunal proceedings (e.g. charges by owners corporation managing agent, collections agency)) are not recoverable under section 48 of the ACAT Act.

The full decision can be read here.

Call Kerin Benson Lawyers on 02 6140 3270 or email allison@kerinbensonlawyers.com.au or enquiries@kerinbensonlawyers.com.au

ACAT Ruling Tribunal: Section 31 Costs and Expenses

The following article provides an update on our article published 21 March 2016 titled ‘ACT Case note: Recovering costs in levy recovery matters’.

In The Owners – 840 v Richardson [2015] ACAT 77 Member Daniels determined that awarding legal costs in levy recovery proceedings was contrary to the provisions in the ACT Civil and Administrative Tribunal Act 2008 (ACAT Act). Pursuant to section 48 of the ACAT Act the Tribunal can only award costs in limited circumstances. Since Richardson the situation on whether legal costs can be awarded in levy recovery proceedings has been uncertain.

Due to pressure from ourselves and another legal services provider and to resolve the uncertainty the Tribunal established a Ruling Tribunal to determine the question. The hearing, where we appeared through Counsel on behalf of our Owners Corporation clients, was held on Friday 17 February 2017 before Presidential Member McCarthy, President Neate and Senior Member Fergusson.

At the hearing there were no appearances or submissions from any respondent. The Tribunal directed a series of focused questions to Counsel relating to the Tribunal’s power to award legal costs as an expense pursuant to section 31 of the Unit Titles (Management) Act 2011, when expenses are deemed to be incurred and therefore recoverable and the reasonableness of such expenses

Any questions about recovering strata levies?

Call Kerin Benson Lawyers on 02 6140 3270 or email allison@kerinbensonlawyers.com.au or enquiries@kerinbensonlawyers.com.au

ACT Case note: Recovering costs in levy recovery matters

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) [2015] 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.

Any questions about recovering strata levies?

Call Kerin Benson Lawyers on 02 6140 3270 or email allison@kerinbensonlawyers.com.au or enquiries@kerinbensonlawyers.com.au

Debt Collectors v Lawyers – When is it time to call in the Legal Professionals?

When seeking to recover unpaid strata levies, it is natural for Owners Corporations to want a fast result with as little money spent as possible. For this reason, many may shy away from enlisting the assistance of lawyers, fearing excessive legal fees will result in more money being spent than saved. But this is not always the case.

Acting as Agent

Debt collectors act as agents for Owners Corporations. This means that Owners Corporations may be held responsible for the actions of their debt collectors. If improper conduct is alleged against the debt collector, the Owners Corporation may quickly find itself embroiled in legal proceedings instigated by the very debtor from whom the Owners Corporation is trying to recover levies.

If Owners Corporations use debt collectors, they should carefully monitor the actions taken by the debt collectors and should familiarise themselves with the Debt Recovery Guidelines. (For more information on the Debt Recovery Guidelines, see our article “Debt Recovery Guidelines: Are You Following Appropriate Procedure?”)

Paying Double?

If debt collectors are unsuccessful in recovering the debt, the Owners Corporation may refer the matter to lawyers for legal action. This means the Owners Corporation may have to pay the debt collector fees for recovery attempts as well as paying legal fees to the lawyers.

Quite often a letter of demand from a law firm carries more weight than a similar letter issued by debt collectors. If lawyers are approached from the outset, Owners Corporations can save money by not paying two different businesses to do the same job. Whereas many debt collection agencies charge commission on successful levy recovery, Kerin Benson Lawyers does not, so Owners Corporations may end up with more money in their pocket.

It’s Complicated

If a debtor disputes a debt, puts forward a settlement offer or wants to negotiate a payment arrangement, there are certain pitfalls that must be avoided to ensure the interests of the Owners Corporation are properly protected. Kerin Benson Lawyers provide Owners Corporations with practical, sound advice on resolving disputes and recovering unpaid levies, ensuring Owners Corporations are legally protected in the event that the debtor defaults or challenges the debt.

For cost-effective, pragmatic advice on debt recovery, please contact:

Allison Benson Angie Rennie
Legal Practitioner Director Lawyer
Ph: (02) 4032 7990 Ph: 02 8706 7060
E: allison@kerinbensonlawyers.com.au E: angie@kerinbensonlawyers.com.au

 

New Debt Collection Guidelines: Are you following the appropriate procedure?

In July 2014, Australian Security Investments Commission (ASIC) and Australian Competition and Consumer Commission (ACCC) jointly released a publication entitled “Debt Collection Guideline: for collectors and creditors” (the Guideline). The Guideline is a timely reminder to Owners Corporations that certain practices must be observed when chasing a recalcitrant debtor for non-payment of levies.

Respect thy debtor

Owners Corporations should ensure any communications with the debtor regarding unpaid levies are made in an appropriate manner and with the debtor only. Owners Corporations should:

  • Ensure contact addresses (e.g. postal address, email address) are current prior to revealing details of the debt by that medium
  • Avoid contacting the debtor at the workplace where possible
  • Not broadcast details of the debt to tenants, co-workers, family or friends of the debtor
  • Respect the debtor and avoid using discriminatory, aggressive or threatening language and/or behaviour towards the debtor

Failure to respect the privacy of the debtor can constitute a breach of the Privacy Act and end up causing more problems for the Owners Corporation. Similarly, aggressive language or unnecessarily frequent contact may be perceived as harassment or coercion.

Documentation is key

Owners Corporations should maintain accurate records in respect of their correspondence and/or attempted communication with the debtor. Records should include:

  • The date, time and location of any discussion, including the names of people present
  • The exact terms of any payment proposal or settlement discussion
  • The date(s) and method(s) by which instalment payments are made to reduce the debt

Honesty is the best policy

Misleading a debtor as to the creditor’s intentions or misrepresenting the potential consequences of non-payment of a debt can constitute misleading conduct and breach Commonwealth consumer protection laws. If a lot owner disputes the debt, Owners Corporations should obtain legal advice.

For assistance with recovering unpaid levies or for more information on debt recovery services, please contact Kerin Benson Lawyers.

Newcastle Sydney
 Ph: (02) 4032 7990  Ph: 02 8706 7060
E: enquiries@kerinbensonlawyers.com.au E: enquiries@kerinbensonlawyers.com.au
Canberra  
 Ph: (02) 6140 7061
E: enquiries@kerinbensonlawyers.com.au

 

Meeting Notices: Why it is vital to get the timing right

When recovering strata levies or defending an application by a lot owner in respect of the validity of a meeting, it is essential that you have good processes in place and can demonstrate that you have followed these processes when sending meeting notices and levy notices.

In a relatively recent NSW case, the Supreme Court was critical of an Owners Corporation who had commenced levy recovery proceedings against a debtor lot owner. The lot owner was successful on a number of points. Although a NSW case the principles also apply in the ACT.

What happened?

The Owners Corporation sent notices for a general meeting out to lot owners by post on Tuesday 17 January. The general meeting was held on 30 January and at this meeting a special levy was raised. The lot owner fell into arrears. When the Owners Corporation took action to recover the strata levies the lot owner challenged the validity of the 30 January meeting on the basis that inadequate notice of the meeting had been provided.

The Court determined that the Owners Corporation, to prove a meeting notice was sent, must be able to satisfy the Court that:

  1. the meeting notice was correct;
  2. the notice was placed in to an envelope;
  3. the envelope was properly addressed;
  4. the correct postage was paid for the envelope; and
  5. the envelope was physically deposited in a mailbox or post office.

The Court found Clause 32 of Schedule 3 of the Strata Schemes Management Act 1996 (NSW) required at least seven clear days’ notice of a general meeting must be provided. This time frame excludes the postal service rule under the Interpretation Act 1987 (NSW) which deems service to be effected on the fourth working day after the notice was posted. What this means is that the meeting notice was deemed served on Monday 23 January (the fourth working day after the notice was posted). With seven days’ notice required the meeting could not validly have been held until 31 January. Therefore the special levy was invalid.

What do I need to do to ensure the meeting is validly held?

  • Be aware of the postal rule. The date of deemed service is the fourth working day after the notice is posted (s32 Interpretation Act 1987 (NSW) & s160 Evidence Act 2011 (ACT))
  • Make sure that the notice period for the meeting is strictly adhered to. In NSW this is 7 clear days’ notice (Schedule 2, cl 32) and in the ACT this is 14 or 21 days’ notice depending on the motion (Schedule 3, cl 3.6); and
  • Keep a record of the date the notices were sent, who sent them and that your office processes were adhered to.

Kerin Benson Lawyers

Author: Allison Benson

Email: allison@kerinbensonlawyers.com.au

Date: 15 July 2014

Debt Recovery For Overdue Strata Levies: Recovering Legal Expenses

An Owners Corporation is entitled to “recover as a debt a contribution not paid at the end of one month after it becomes due and payable, together with any interest payable and the expenses of the owners corporation incurred in recovering those amounts” under Section 80 of the Strata Schemes Management Act (1996).

The good news is that legal costs are considered expenses for the purposes of section 80 however there are restrictions imposed on the recovery of expenses to be aware of.

What are the limitations?

 In The Owners Strata Plan P 36131 v Dimitriou [2009] NSWCA 27, the Court considered the nature of “expenses” under section 80 of the Act and held that legal costs and expenses incurred in recovery of a debt, including court proceedings, may be claimed by an Owners Corporation under section 80.

However, the Court imposed several limitations on the recovery of legal costs, including those set out below:

  • Legal costs and disbursements must be proven by the claiming party to be reasonably incurred;
  • Legal costs and disbursements must be proven by the claiming party to be reasonable in amount;
  • The Owners Corporation’s conduct in commencing proceedings must be reasonable; and
  • Any claim for expenses, including legal costs, must be made in the same proceedings as the claim for the unpaid levies.

These limitations have been upheld in later cases. In particular, there has been emphasis on legal costs being reasonably incurred and reasonable in amount.

Owners Corporations should take care when making any payment arrangements with lot owners or when commencing proceedings for recovery of overdue levies to ensure their right to claim expenses is not lost, either through unreasonable conduct of the Owners Corporation or by trying to claim expenses after the levies have been fully recovered.

Whilst seemingly straightforward, the recovery of levies can become complicated very quickly.

For advice on levy recovery and further information on what amounts can be claimed from a recalcitrant lot owner, please contact either:

Newcastle Office Sydney Office
Ph: (02) 4032 7990 (02) 8706 7060
Canberra Office Email for all offices
Ph: (02) 6140 3270 enquiries@kerinbensonlawyers.com.au