Body corporate awarded costs in levy recovery dispute
SSKB, strata manager of the body corporate for The Wave, welcomes a Supreme Court ruling holding Westpac liable for outstanding levy recovery costs expected to be in the vicinity of $450,000.
Last week, the Queensland Court of Appeal ended a lengthy legal battle between the body corporate for The Wave and banking giant Westpac. Westpac, in its position as mortgagee, has been ordered to pay outstanding levies and the reasonable recovery costs to the body corporate for The Wave, with the total bill expected to be around $450,000.
The controversial aspect of this story is that the bulk of these costs were accumulated before Westpac took possession of the apartment. The ruling confirms that liability for accumulated body corporate levies (including reasonable recovery costs) rests with the current lot owner, or mortgagee in possession. The liability is extended to debt and recovery costs incurred prior to the current owner coming into possession.
The Supreme Court ruling has been widely welcomed by the body corporate industry, as it provides certainty in what was previously considered a grey area of body corporate debt recovery costs.
SSKB director Paul Wood said, “The legal proceedings have been long and draining on the community associated with The Wave. The committee has always explored all options taking into account the best interest of all owners in relation to the non-payment of levies. They have handled the entire situation in a highly professional manner and I would like to congratulate the committee and lot owners on the ruling.” Mr Wood adds, “The decision additionally supports SSKB’s interpretation of the legislation and the processes it follows when dealing with non-payment of levies. I see it as a big tick of approval for the support and direction given by the SSKB levy management team.”
How could a simple matter of unpaid body corporate levies turn into a full blown legal battle between banking giant Westpac and prestigious body corporate for The Wave?
To gain a proper understanding of this case, we have to go back to 2007 where Dr Prins and Mrs Prins took out a loan through St George Bank Ltd (now Westpac) to purchase an apartment in The Wave. The couple would later fail to pay their body corporate levies. The committee and SSKB took several steps to recover the debt owed by Dr and Mrs Prins, however, in 2011 after several attempts to mediate had been unsuccessful, the body corporate for The Wave saw legal action as the only remaining avenue to recoup the debt owed to the body corporate.
SSKB director Paul Wood said, “The entire team at SSKB, takes personal pride in providing industry leading service and advice to our bodies corporate in all areas of community living. We are especially proud of our debt collections team and their high success rate in ensuring that arrears matters rarely progress to legal action. In fact more than 95 per cent of our arrears matters are dealt with out of court, saving owners thousands of dollars every day.
The body corporate for The Wave tried to recoup the debt through legal action, meanwhile, Dr and Mrs Prins lodged a complaint with the Financial Ombudsman Service against Westpac. This lodgement effectively prohibited Westpac from taking any action against Dr and Mrs Prins or measurements to protect the lot until late 2012.
In October 2012, following lengthy legal proceedings and a five-day trial, a judgement was obtained by the body corporate against Dr and Mrs Prins for the reasonable recovery cost of what then amounted to $150,000.
It was concluded by the magistrate that:
1. A body corporate debt includes contributions, penalty interest and recovery costs (reasonably incurred).
2. The body corporate had satisfied section 143 (1) (c) of the Body Corporate and Community Management (Accommodation Module) Regulation 2008 that the costs incurred by it in the amount of $150,000.00 were reasonably incurred in the body corporate in recovering the body corporate debt.
However, the matter did not end here as the debt continued to grow Dr and Mrs Prins continued to lodge appeals which were subsequently dismissed. In April 2013 Dr and Mrs Prins were finally declared bankrupt on their own petition – the total costs at this point had escalated to more than $347,000.
Mortgagee Westpac gained possession of the lot in July 2013 and paid the outstanding levies to the body corporate but argued that it was not liable for any recovery costs.
More specifically, “Westpac contends that its liability under section 143(3) of the regulation for the body corporate debt as mortgagee in possession does not extend to “recovery costs” referred to in section 143(1)(c) of the regulation.”
On 11 April 2014, an appeal by Westpac to this ruling was dismissed by the Supreme Court with Westpac ordered to pay the legal costs of the body corporate for The Wave.
It is simply unacceptable for certain owners to believe they do not have to pay levies and rely on other owner contributions in order to maintain the operations of the building. This decision clearly reinforces this position and further confirms SSKB’s opinion that recovery costs are a body corporate debt and a liability that remains with the lot.
The Supreme Court decision, and background, can be read in full at the Supreme Court Library of Queensland website http://archive.sclqld.org.au/qjudgment/2014/QCA14-073.pdf
