In a recent Local Court case, the court had much to say on what was considered ‘reasonable’ legal expenses and ‘reasonable’ conduct in commencing levy recovery proceedings. The court was critical of the managing agent & the Owners Corporation and found for the defendant.
The Owners Corporation commenced legal proceedings for overdue strata levies, interest and costs. There was a history of litigation including a previous statement of claim for overdue levies which had incurred legal expenses. The lot owner had updated her address for service but this address was only used once before a previous address for notices was again used. The debtor lot owner claimed to have made a payment arrangement with the strata manager. The new strata manager could only provide evidence that a payment arrangement had been recorded.
The court found that the debtor lot owner had a history of making arrangements to pay levies within a “reasonable timeframe”. It preferred the debtor’s evidence to the new strata managing agent’s evidence and found that levies had not been served for a period of time and a payment arrangement had been entered into. The court found, upon reviewing the ledger statements, that the Owners Corporation had debited the lot owner’s ledger account for legal expenses incurred in levy recovery proceedings and that these expenses made it very difficult to determine the amounts being claimed by the Owners Corporation. The court reprimanded the Owners Corporation’s strata manager for this “flawed practice”. It held that legal expenses are not a debt immediately due and payable (unlike levies and interest) and that it was “pre-emptive” to add these costs to the lot owner’s ledger account until they had been the subject of either a Court judgment or a cost assessment. The conduct of the Owners Corporation in commencing the proceedings revealed “a significant element of unreasonableness”.
The casealso dealt with whether legal proceedings can be commenced or continued solely for the purpose of recovering the Owners Corporation’s legal expenses in recovering unpaid levies. The decision was that judgment may be awarded for expenses alone if the levies were unpaid at the commencement of proceedings but have since been paid.
Following on from this, when commencing legal proceedings to claim unpaid levies from a lot owner, the Owners Corporation should ensure:
- It is using the correct address for the levy notices (especially notices for special levies);
- It has a system in place to evidence the service of notices & any payment arrangements;
- It does not commence proceedings to recover legal expenses only; and
- It does not add arrears, fees or legal fees for letters of demand or recovery action to the lot owner’s ledger account until judgment or cost assessment has occurred.
For assistance with levy recovery action please contact us on these details:
Email: email@example.com or firstname.lastname@example.org
Date: 8 July 2014