The respondents are owners of a unit and members of the applicant owners corporation. The applicant applied to the Tribunal for orders in relation to a range of unapproved alterations the respondents had made without the consent of the executive committee in contravention of Article 4(1) of the Articles of the Units Plan. At the hearing on 17 January 2020, the Tribunal upheld the application and made orders requiring the respondents to remedy the contravention. As part of the same application the applicant sought to recover legal professional costs and disbursements, and the fee for lodging the application, which it incurred in bringing the proceedings as expenses pursuant to section 31 of the UTMA.
The Tribunal stated that to prove a debt pursuant to section 31 a corporation must establish, amongst other things, that the expenses claimed meet the double reasonableness test. That is, it was reasonable for the owners corporation to incur expenses of the type described and the amount of each component of the expenses sought is reasonable. After a review of its previous decisions on this issue, the Tribunal was of the view that a corporation should only resort to legal proceedings to resolve a dispute with a member after other reasonable avenues are exhausted. In this case, the only attempt the corporation made to notify the respondents that the works performed by them had contravened its rules before commencing proceedings was a letter which contained insufficient information to justify legal action being launched against the respondents without further steps being taken. The corporation failed to take other pre-litigation steps which might be regarded as usual and reasonable in the circumstances, such as inviting the respondents to retrospectively seek the approval of the executive committee for the works.
Therefore, it was not reasonable for the corporation to commence proceedings and the expenses it incurred were not recoverable as necessary expenses under section 31.