Bodies corporate may now have a tougher time recovering costs

14 June 2017

Recently, Mahoneys appeared for the appellant before Judge Butler SC of the District Court of Queensland in the matter of Thompson v Body Corporate for Arila Lodge CTS 14237.

The matter involved the appeal of a summary judgment obtained against the appellant in the Magistrates Court by the body corporate of the Community Titles Scheme in which she was a lot owner.

The body corporate had obtained summary judgment against the appellant (who represented herself) for $49,037.70, comprising:

  • $16,049.02 in unpaid body corporate contribution instalments;
  • $817.49 in interest; and
  • $32,171.21 in recovery costs pursuant to s.145(1)(c) of the Body Corporate and Community Management (Standard Module) Regulation 2007.
What the law says

145 Payment and recovery of body corporate debts

(1) If a contribution or contribution instalment is not paid by the date for payment, the body corporate may recover each of the following amounts as a debt:

(a) the amount of the contribution or instalment;

(b) any penalty for not paying the contribution or instalment;

(c) any costs (recovery costs) reasonably incurred by the body corporate in recovering the amount.

What happened in Round 1

The body corporate put material before the Magistrates Court to establish the amount of the costs it sought to recover (costs incurred through engaging solicitors and prosecuting the proceedings).

This included copies of invoices issued by the solicitors and barrister, which varied in the degree of particularisation of the items within them. The material was evidently accepted by the Magistrate, who found as follows:

So far as recovery costs are concerned, as I have already alluded to, s 145, subsection (1), paragraph (c) of the Module provides, the recovery costs reasonably incurred become a debt. Although the recovery costs in this matter seem particularly high, there is no material before me that would indicate they have not been reasonably incurred given the strength of the opposition to the claim that has been mounted by the defendant in the first place and the significant evidential material that the plaintiff has been forced to put on in support of this application.

What happened in Round 2

The appellant argued before the District Court that the term “reasonably incurred” should be limited to costs and disbursements reasonably incurred and reasonable in amount, or, in the reasoning of His Honour McGill DCJ in Body Corporate for Sunseeker Apartments CTS 618 v Jasen, “that if ‘expenses incurred’ are limited by implication to those reasonably incurred and reasonable in amount, then ‘costs reasonably incurred’ must be equally so limited”.

It was further submitted that the body corporate could not satisfy the court that the expenses in question were “costs reasonably incurred” simply because the solicitor swore that to be the case. What was required of the body corporate was scrutiny of the individual items claimed.

The respondent argued that there had been no error on the part of the Magistrate, that evidence had been provided and that it was up to the appellant to provide evidence to the contrary.

His Honour found that the evidence of the body corporate’s solicitor could only be admissible on the basis of special expertise. That is, that it met the requirements of an expert witness.

What it all means

The effect of His Honour’s decision is that one struggles to imagine how a body corporate could ever satisfy the burden of proof in establishing that their recovery costs were “reasonably incurred” for the purposes of s 145(1)(c) without first obtaining a costs assessment or an affidavit from a costs assessor confirming that, in their view, the costs claimed are “costs reasonably incurred”.

This decision represents a significant shift in how bodies corporate must go about recovering levies from delinquent lot owners, indicating a move away from the idea that bodies corporate will be entitled to recover 100% of the fees incurred through the recovery of unpaid levies.