Lynvale Pty Ltd as Trustee v Body Corporate for Surf Edge CTS 34002 [2017] QDC 191

District Court of Queensland|2017-07-21

REAL PROPERTY- STRATA AND RELATED TITLES AND OCCUPANCY- BODY CORPORATE - Whether defence and counterclaim brought against body corporate for recovery of corporate fees should have been struck out.

Civil and Criminal Jurisdiction Reform and Modernisation Amendment Act 2010 (Q).

Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue [2009] HCA 41; (2009) 239 CLR 27

Body Corporate of the Lang Business v Green [2008] QSC 318

Certain Lloyd's Underwriters Subscribing to Contract No IH00AAQS v Cross [2012] HCA 56; (2012) 248 CLR 378

Coco v Ord Minnett Ltd [2012] QSC 324

Forster v Jododex Australian Pty Ltd & Anor [1972] HCA 61; (1972) 127 CLR 421

Henderson & Anor v The Body Corporate for Merrimac Heights [2011] QSC 336

Highgate Gardens [2016] QBCCMCmr 223

JJ Richards & Sons Pty Ltd v Precast Concrete Pty Ltd [2010] QDC 272

James & Anor v The Body Corporate Aarons Community Title Scheme 11476 [2002] QSC 386; CA [2003] QCA 329; [2004] 1 Qd R 386

Law Society of New South Wales v Weaver [1974] 1 NSWLR 271

MacDonald & Anor v Clark & Anor [2012] QSC 418

Magog (No 15) Pty Ltd v The Body Corporate for the Moroccan Cts 17574 [2010] QDC 70

Palaniappan v Westpac Banking Corporation [2016] WASCA 72

Penberg Pty v Body Corporate for Market Town Community Title Scheme 2052 [2007] QDC 20

Piggott v Williams (1821) 6 Madd 95; 56 ER 1027

Platinum United II Pty Ltd & Anor v Secured Mortgage Management Limited (in liq) [2011] QCA 162

Projects Company No. 2 Pty Ltd v Cushway Blackford & Associates Pty Ltd & Anor [2011] QCA 102

Re Totalisator Administration Board of Queensland [1989] 1 Qd R 215

Santos Ltd v Pipelines Authority of SA [1996] SASC 5578; (1996) 66 SASR 38

Spencer v The Commonwealth [2010] HCA 28; (2010) 241 CLR 118

Teelow v Commissioner of Police [2009] QCA 84; [2009] 2 Qd R 489

The Body Corporate for Liberty CTS 27241 v Batwing Resorts Pty Ltd [2012] QSC 340

Westpac Banking Corporation v Body Corporate for the Wave Community Title Scheme 36237 [2014] Q Conv R 54-819; [2014] QCA 73

[1] This is an appeal against a decision made by a magistrate at Maroochydore on 22 February 2017 whereby the court struck out both parts of the defence and counterclaim dealing with an alleged failure to maintain common property and parts of lot 2 and equitable set-off.

[2] Section 45 of the Magistrates Court Act 1921 (Q) provides that any party who is dissatisfied with the judgment or order of a Magistrates Court in an action in which the amount involved is more than the minor civil dispute, then that party may appeal to the District Court as prescribed by the rules.

[3] The parties agreed that leave is not required because this is not a minor civil dispute. Regardless I would have granted leave as the case raises an important question of law.

[4] Section 47 of the Magistrates Court Act 1921 (Q) provides:

On the hearing of an appeal or special case, the District Court may do any of the following -

(a) draw inferences of fact from facts found by the Magistrates Court, or from admitted facts or facts not disputed;

(b) order a new trial on such terms as it thinks just;

(d) make any other order, on such terms as it thinks proper, to ensure the determination on the merits of the real questions in controversy between the parties;

(e) as regards any special case, remit the matter to the Magistrates Court with the opinion of the District Court thereon;

(f) make such order with respect to the costs of the appeal or special case as it thinks proper."

[5] This appeal is to be heard by way of rehearing.[1]

[6] In order for the appellant to succeed it must show the decision below is the result of some legal, factual or discretionary error.[2]

[7] On 19 October 2016, the respondent issued a claim from the Magistrates Court at Maroochydore claiming $21,669.77 in outstanding body corporate levies, interest and costs. In the statement of claim it was alleged that the respondent had at all material times been the body corporate for the scheme known as Surf Edge CTS 34002. It was alleged that the appellant at all times had been the owner of lot 2, a member of the body corporate and liable for all liabilities arising from ownership of the lot. It is alleged that the Body Corporate and Community Management (Standard Module) Regulation 2008 (Q) applies to the scheme. The body corporate at duly convened meetings of the body corporate had by ordinary resolution resolved, pursuant to s 144 of the Module, that interest be fixed at 2.5% per month. It was alleged that the respondent had issued body corporate levies at duly convened meetings of the body corporate and by reason of s 145 of the Module, the appellant was liable also for the reasonable recovery costs incurred by the respondent. It is alleged that the appellant had failed or refused to pay levies, interest and recovery costs in the sum of $21,669.77.

[8] On 15 November 2016, the appellant filed a notice of intention to defend. In the defence of the defendant it was alleged that:

1. At an AGM of the respondent on 11 September 2012, the respondent resolved to fix penalty interest to 2.5% per month on unpaid contributions on s 144.

2. The respondent did not so resolve at any of the meetings conducted in 2013, 2014 or 2015.

3. At an AGM on 25 July 2016, the respondent purported to resolve such a payment but this was legally incompetent as it was an unlawful attempt by the respondent to negate the appellant's legal entitlement to rely upon equitable set-off as a defence.[3]

[9] It is alleged that the appellant is entitled to set-off and seeks to set-off so much of the cost or damage or loss wrongfully occasioned to it by the respondent as is necessary to extinguish the amount of unpaid levies.[4] It is alleged that the respondent had duties and responsibilities and liabilities in respect of the common property including the edifice of House 2 under the Body Corporate and Community Management Act 1997.[5] Further, it is alleged that the respondent owed the appellant as a lot owner of the scheme, a duty to take reasonable care to ensure Surf Edge was regularly inspected to determine matters requiring rectification; to rectify matters promptly; to cause financial provision promptly to these ends so as to prevent damage and deterioration to the appellant's house. It is alleged for a significant time prior to April 2012 the rooves of the houses leaked which penetrated into the ceilings, walls, floors and other structures which caused substantial damage to House 2.[6] It is alleged, effectively, that the respondent was aware of this.[7] It was alleged that the respondent failed to repair this water penetration problem.[8] It is alleged that the appellant paid $16,126 to repair this work.[9] Also, in or about early September 2012, the appellant became aware of substantial cracking and propagating from the exterior of House 2 which also allowed water penetration to cause damage.[10] The appellant paid neoclassic contractors $7,370 including GST to carry out that rectification and repair.[11] Further rectification work was conducted on the house in the sum of $21,517.[12] It is alleged, in essence, that the respondent's negligence and breaches of statutory duty led to the damage suffered.

[10] Accordingly, it is alleged the sums of $16,126, $7,370 and $21,517 were loss and damage caused by the respondent's negligence and breaches of duty[13] and ultimately, the appellant claims to be able to set-off these sums as against the claim of the respondent.

[11] On 5 December 2016, the respondent filed an application seeking an order that paragraphs 7 to 35 of the defence and paragraphs 1 to 3 of the counterclaim be struck out as it was not a dispute related to the debt dispute contained in the claim.

[12] An affidavit of Rachel Alderdice was relied upon. The affidavit exhibited the levy notices, tax invoices and reminders from the respondent to the appellant in respect of the claim. The adopting budgets and authorising levies are also exhibited. There were minutes exhibited which authorised the debt recovery action by the respondent.

[13] The respondent submitted that the Body Corporate and Community Management Act 1997 (Q) provided that the matters raised in the defence and counterclaim needed to be heard elsewhere. It was submitted that such disputes can only be resolved by an adjudicator under Ch 6. It was submitted that the recovery of unpaid levies itself is expressly exempted from the dispute resolution process and are to be recovered in court as a debt. It was submitted that a dispute related to the claim can be heard as part of the claim, either as a defence set-off or counterclaim under s 229A(4) of the Body Corporate and Community Management Act 1997 (Q). However, to be a related dispute all three criteria set out in s 229A needed to be met. It was submitted that the challenged paragraphs in the defence and counterclaim were for a claim in negligence not relating to the calculation or issuing of the claimed levies. It was submitted that the body corporate did not seek to recover any unpaid levies since 1 November 2013 or any amount relating to the repairs complained about in the defence and counterclaim.

[14] The appellant, on the other hand, submitted that "dispute" was to be given its ordinary, contextual meaning. It was submitted that the appellant was entitled under r 173 of the UCPR to rely on a set-off in this case. It was submitted that an equitable set-off was available here. It was submitted that the court had jurisdiction and the application should be dismissed.

[15] The magistrate found that the appellant's equitable dispute was not a "debt dispute" or a "related dispute" within the meaning of those terms in the Act. He found that the equitable dispute could only be resolved by a dispute resolution process and therefore found that the plea was unnecessary and an abuse of the process of the court and hence, struck out the relevant paragraphs of the defence and counterclaim.

[16] The appellant, in its notice of appeal, alleges that the magistrate failed to give any proper reasons for his findings, gave inadequate reasons for his findings, erred in finding that an adjudicator needed to determine this dispute and otherwise erred in the reasoning process.

[17] The appellant submits that it was entitled to rely on equitable set-off and the magistrate erred in his conclusions.

[18] The respondent, on the other hand, submits the magistrate is correct in his conclusions and the matter needed to be resolved by an adjudicator.

[19] It is necessary to examine the relevant legislation in this matter.

"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 -

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

(2) If the amount of a contribution or contribution instalment has been outstanding for 2 years, the body corporate must, within 2 months from the end of the 2-year period, start proceedings to recover the amount.

(3) A liability to pay a body corporate debt in relation to a lot is enforceable jointly and severally against each of the following persons -

(a) a person who was the owner of the lot when the debt became payable;

(b) a person (including a mortgagee in possession) who becomes an owner of the lot before the debt is paid.

(4) If there are 2 or more co-owners of a lot, the co-owners are jointly and severally liable to pay a body corporate debt in relation to the lot.

(5) If an owner is liable for a contribution or a contribution instalment, and a penalty, an amount paid by the owner must be paid -

(b) second, in reduction of the outstanding contribution or instalment; and

(6) If the body corporate is satisfied there are special reasons for allowing a discount of a contribution, or waiving a penalty or liability for recovery costs, the body corporate may allow the discount, or waive the penalty or costs in whole or part."

[21] It is clear that a body corporate is entitled to recover as a debt the amount of a contribution or instalment.

[22] Turning then to the Body Corporate and Community Management Act 1997 (Q), ss 227, 228, 229 and 229A provide:

(a) the owner or occupier of a lot included in a community titles scheme and the owner or occupier of another lot included in the scheme; or

(b) the body corporate for a community titles scheme and the owner or occupier of a lot included in the scheme; or

(d) the body corporate for a community titles scheme and a caretaking service contractor for the scheme; or

(e) the body corporate for a community titles scheme and a service contractor for the scheme, if the dispute arises out of a review carried out, or required to be carried out, under chapter 3, part 2, division 7; or

(f) the body corporate for a community titles scheme and a letting agent for the scheme; or

(g) the body corporate for a community titles scheme and a member of the committee for the body corporate; or

(h) the committee for the body corporate for a community titles scheme and a member of the committee; or

(i) the body corporate for a community titles scheme and a former body corporate manager for the scheme about the return, by the former body corporate manager to the body corporate, of body corporate property.

(2) An application by a person mentioned in subsection (1)(a) to (h) for a declaratory order about the operation of this Act is also a dispute even if there is no respondent or affected person for the application.

an application by a body corporate for an order declaring the financial year for the body corporate.

(1) This chapter establishes arrangements for resolving, in the context of community titles schemes, disputes about -

(a) contraventions of this Act or community management statements; and

(b) the exercise of rights or powers, or the performance of duties, under this Act or community management statements; and

(d) matters arising under the engagement of persons as body corporate managers, the engagement of certain persons as service contractors, and the authorisation of persons as letting agents.

(1A) Subsection (1)(c) applies subject to sections 47AA and 412.

(2) Also, this chapter authorises the provision of education and information services aimed at promoting the avoidance of disputes.

Exclusivity of dispute resolution provisions

(1) Subsections (2) and (3) apply to a dispute if it may be resolved under this chapter by a dispute resolution process.

For a dispute about a body corporate decision under section 47A, see section 47AA.
For disputes about a decision of a body corporate committee under section 410, or a body corporate decision under section 411, see section 412(5).

(i) an order of a specialist adjudicator under chapter 6; or

(ii) an order of QCAT exercising the tribunal's original jurisdiction under the QCAT Act; or

(b) an order of the appeal tribunal on appeal from a specialist adjudicator or QCAT on a question of law.

(3) Subject to section 229A, the only remedy for a dispute that is not a complex dispute is -

(a) the resolution of the dispute by a dispute resolution process; or

(b) an order of the appeal tribunal on appeal from an adjudicator on a question of law.

(4) However, subsections (2) and (3) do not apply to a dispute if -

(a) an application is made to the commissioner; and

(b) the commissioner dismisses the application under part 5.

(i) refer a question of law to the Court of Appeal; or

(ii) transfer a proceeding, or a part of a proceeding, to the Court of Appeal; or

(b) the right of a party to make an appeal from QCAT to the Court of Appeal under the QCAT Act.

(1) A claim to recover a debt the subject of a debt dispute that is a claim under the Queensland Civil and Administrative Tribunal Act 2009, schedule 3, definition minor civil dispute, paragraph 1(a) is, under paragraph 2 of that definition, a minor civil dispute.

(2) Subsection (1) does not affect a body corporate's right to start proceedings in a court of competent jurisdiction to recover a debt the subject of a debt dispute.

(3) To remove any doubt, it is declared that an adjudicator does not have jurisdiction in a debt dispute.

(4) A dispute resolution process does not apply to a debt dispute or a related dispute to a debt dispute once a proceeding to recover the debt the subject of the debt dispute is started before QCAT or in a court of competent jurisdiction.

(a) a dispute resolution process has started for a debt dispute or a related dispute to a debt dispute; and

(b) a proceeding to recover the debt the subject of the debt dispute is subsequently started before QCAT or in a court of competent jurisdiction;

(6) A dispute is a related dispute to a debt dispute if -

(a) the subject matter of the dispute is related to the subject matter of the debt dispute; and

(b) there are proceedings in a court or before QCAT to recover the debt the subject of the debt dispute; and

(c) the commissioner considers that the dispute and the debt dispute are connected in a way that makes it inappropriate for the dispute to be dealt with by a dispute resolution process.

debt dispute means a dispute[14] between a body corporate for a community titles scheme and the owner of a lot included in the scheme about the recovery, by the body corporate from the owner, of a debt under this Act."

[23] There is no suggestion this is a complex dispute as defined.

[24] It seems to me that the crucial issue here is whether the dispute here was a "debt dispute". It was not a "related dispute to a debt."

[25] This is because s 229A(4) provides that a dispute resolution process does not apply to a debt dispute.

[26] "Debt dispute" is specifically defined in s 229A(7).

[27] As to the term dispute it means "a disagreement, debate, controversy or quarrel."[15]

[28] There is no doubt a dispute between the body corporate and the owner of the lot, but is the dispute about the recovery of a debt under the Act?

[29] The appellant says it is. The appellant submits that s 229A(7) should be broadly interpreted. It submits that equitable set-off operates as a true or substantive defence which may be set up by a person indebted to another. It submits that UCPR r 173 is relevant. This rule provides:

"(1) A defendant may rely on set-off (whether or not of an ascertained amount) as a defence to all or part of a claim made by the plaintiff whether or not it is also included as a counterclaim.

(2) If the amount of a set-off is more than the amount of the claim against which it is set-off, then, regardless of whether the set-off is pleaded as a counterclaim -

(a) the set-off may be treated as a counterclaim; and

(b) the court may give judgment for the amount of the difference or grant the defendant other relief to which the court considers the defendant is entitled.

injunction, or stay, if within the court's jurisdiction

(a) if the court considers a set-off can not be conveniently dealt with in a proceeding, the court may set aside a defence or counterclaim in the proceeding by way of set-off and may order that the set-off be dealt with in a separate proceeding; or

(b) if the court considers a set-off should not be allowed, the court may set aside a defence or counterclaim by way of set-off."

[30] It submits there was a dispute between the parties.

[31] In oral submissions the appellant submitted:

(a) It is the text of the statute which is crucial.

(b) There is a connection between the claim and the set off.

(c) In was inappropriate for these proceedings to have been terminated summarily.

(d) Equitable set off is not a remedy it is a shield.

(e) There was clearly a dispute about recovery of the debt here.

[32] The respondent on the other hand submits that s 229 provides that the dispute resolution process is the exclusive jurisdiction to resolve disputes - the only remedy is the resolution of the dispute by a dispute resolution process or an appeal from that process.

[33] Effectively it submits here that what we have is a dispute - not a dispute about the recovery of a debt. It submits that a "debt dispute" can only be about whether a body corporate has complied with the requirements of Ch 7 of the Standard Module.

[34] It submits that the entire scheme of the Module and the Act leads one to a conclusion that the meaning of "debt dispute" is constrained by the word "debt" and in those circumstances the dispute in this case is within the exclusive jurisdiction of the adjudicator.

[35] In oral submissions the respondent submitted:

(b) Therefore the dispute has to be about the way the debt is raised.

(c) Claims like that brought by the appellant should be dealt with by an adjudicator under section 281 of the Act.

(d) The scheme of the module leads to the conclusion contended for.

(e) The cases referred to in its submissions supports the respondent's argument.

[36] The parties agreed there is no decision which directly considers the issue before the court.

[37] In James & Anor v The Body Corporate Aarons Community Title Scheme 11476,[16] Holmes J (as her Honour then was) considered a situation where there had been a long standing dispute between the parties as to repairs. The respondent applied for the application to be dismissed on the basis the dispute was within the exclusive jurisdiction of an adjudicator. The section considered by her Honour was in different terms to the present section. Her Honour held that the dispute was one in respect of which the adjudicator had the power to make orders and therefore jurisdiction of the court was excluded. However her Honour did not deal with the same provisions with which I am concerned.

[38] In Body Corporate of the Lang Business v Green[17] Daubney J considered a claim by a Body Corporate under the BCCM Act 1997. The issue was whether summary judgment should be entered in favour of the plaintiff. His Honour at [40]-42] said:

"[40] Returning then to the primary point for determination, it appears that, had the defendant instituted separate proceedings in this court challenging the Notices of Contribution, he would have been thwarted by the exclusivity provisions of the BCCM. He has not, however, done so. Rather, the defendant has raised particular matters in defence of the plaintiff's claim. I would be loathe to conclude, in the absence of a specific statutory provision compelling such a conclusion, that a defendant to a claim such as the one advanced by the plaintiff could not, under any circumstances, raise in a defence a matter which might trespass into the territory covered by the dispute resolution provisions of the BCCM. There is no legal or statutory impediment to these matters being raised by way of defence.

[41] My view is reinforced by reference to Independent Finance Group Pty Ltd v Mytan Pty Ltd, in which the Court of Appeal was called upon to consider whether an appeal to the Court of Appeal lay from a decision of the District Court made under the appeal provisions of the dispute resolution processes set out in the BCCM, McMurdo P expressed a 'preliminary view' in the context of the precursor to s 229, that 'it would be surprising if, in the absence of the clearest words, the inherent jurisdiction of the Supreme Court was diminished by ch. 6.' In the same vein, it would be 'surprising' indeed if chapter 6 of the BCCM were read as so significantly constraining the right of a defendant to advance a defence as to render it unable to advance a simple contention that it is 'only liable to pay such contributions as have been properly identified, calculated and resolved to be payable by members of the Body Corporate.'

[42] For these reasons, the application for summary judgment should be dismissed."

[39] Both parties relied on this case to support their positions. However the difficulty with that case is that it was decided before the introduction of Section 229A. The respondent says I should infer that section 229A was inserted by way of response to Daubney J's decision. However I would not be disposed without more to make such an inference.

[40] The respondent also relied on Magog (No 15) Pty Ltd v The Body Corporate for the Moroccan Cts 17574.[18] However I do not consider that case of much assistance as the matter was not the subject of argument.

[41] The respondent also relied on MacDonald & Anor v Clark & Anor.[19] However I do not consider that case overly relevant. It involved an encroachment dispute and did not involve the recovery of a debt.

[42] Similarly in Highgate Gardens[20], Penberg Pty v Body Corporate for Market Town Community Title Scheme 2052[21] and The Body Corporate for Liberty CTS 27241 v Batwing Resorts Pty Ltd[22] there was no claim for debt.

[43] I consider the answer to this issue is to consider the clear text of the words used in the statute.

[44] Before I turn to an interpretation of the relevant legislation I apply the following principles.

[45] Firstly in order for the jurisdiction of a court to be ousted by statute there must be a very clear expression of legislative intent.[23]

[46] Secondly as was noted in Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue:[24]

"This Court has stated on many occasions that the task of statutory construction must begin with a consideration of the text itself. Historical considerations and extrinsic materials cannot be relied on to displace the clear meaning of the text. The language which has actually been employed in the text of legislation is the surest guide to legislative intention. The meaning of the text may require consideration of the context, which includes the general purpose and policy of a provision, in particular the mischief it is seeking to remedy."

[47] Thirdly it is permissible to look at extrinsic material where the words of the statute are unclear or ambiguous.[25]

[48] Fourthly an Act should be interpreted to achieve its best purpose.[26]

[49] Finally as was stated in Certain Lloyd's Underwriters Subscribing to Contract No IH00AAQS v Cross:[27]

"[25] Determination of the purpose of a statute or of particular provisions in a statute may be based upon an express statement of purpose in the statute itself, inference from its text and structure and, where appropriate, reference to extrinsic materials. The purpose of a statute resides in its text and structure. Determination of a statutory purpose neither permits nor requires some search for what those who promoted or passed the legislation may have had in mind when it was enacted. It is important in this respect, as in others, to recognise that to speak of legislative "intention" is to use a metaphor. Use of that metaphor must not mislead. '[T]he duty of a court is to give the words of a statutory provision the meaning that the legislature is taken to have intended them to have' (emphasis added). And as the plurality went on to say in Project Blue Sky:

'Ordinarily, that meaning (the legal meaning) will correspond with the grammatical meaning of the provision. But not always. The context of the words, the consequences of a literal or grammatical construction, the purpose of the statute or the canons of construction may require the words of a legislative provision to be read in a way that does not correspond with the literal or grammatical meaning.'

To similar effect, the majority in Lacey v Attorney-General (Qld) said:

'Ascertainment of legislative intention is asserted as a statement of compliance with the rules of construction, common law and statutory, which have been applied to reach the preferred results and which are known to parliamentary drafters and the courts.' (footnote omitted)

The search for legal meaning involves application of the processes of statutory construction. The identification of statutory purpose and legislative intention is the product of those processes, not the discovery of some subjective purpose or intention.

[26] A second and not unrelated danger that must be avoided in identifying a statute's purpose is the making of some a priori assumption about its purpose. The purpose of legislation must be derived from what the legislation says, and not from any assumption about the desired or desirable reach or operation of the relevant provisions. As Spigelman CJ, writing extra-curially, correctly said:

'Real issues of judicial legitimacy can be raised by judges determining the purpose or purposes of Parliamentary legislation. It is all too easy for the identification of purpose to be driven by what the particular judge regards as the desirable result in a specific case.' (emphasis added)

And as the plurality said in Australian Education Union v Department of Education and Children's Services:

'In construing a statute it is not for a court to construct its own idea of a desirable policy, impute it to the legislature, and then characterise it as a statutory purpose.' (footnote omitted)"

[50] Section 229A was enacted by Act No 26 of 2010.[28]

"This section clarifies that adjudicators do not have jurisdiction for debt disputes, and clarifies the jurisdiction for dealing with debt disputes."

[52] Further the second reading speech noted that:

"The bill also amends the BCCM 1997 to clarify that an adjudicator does not have jurisdiction in debt recovery matters."

[53] It is true that when the 2003 amendment occurred it was said in the explanatory note that the recovery of contributions was a significant issue for some body corporates and could cause financial hardship,[29] but that was before Section 229A was introduced. Also as noted previously it is the words of the Act which achieve primacy.

[54] It seems to me that the word "recovery" as it is used in section 229A(7) is a crucial one to be considered. It seems to me one cannot just look at the meaning of "debt under this act" as contended for by the respondent.

[55] "Recovery" is defined in the Australian Oxford Dictionary as "the act or an instance of recovering; the process of being recovered". "Recover" "to obtain or secure by legal process." "About" means in inter alia "in relation to."

[56] It seems to me that the key issue is whether the raising of this counterclaim by way of set-off is "about the recovery" of the debt. This leads one to consider the status of a claim for a set-off.

[57] As explained in Derham on the Law of Set-off,[30] a characteristic of equitable set-off is that it operates as a true or substantive defence as an immediate answer to the liability to pay the debt otherwise due. It operates as complete or partial defeasance of the plaintiff's claim.[31]

[58] I am prepared to accept that a "set-off" may be about recovery,[32] but it is a question of fact in this case whether it was available to the appellant.

[59] The nature of a set-off was discussed by the Queensland Court of Appeal in Forsyth v Gibbs.[33] In that case the appellants had sued for moneys owing under loan agreements. The respondent claimed that a company acting through the male appellant as finance broker with respect to the loans was negligent and breached s 52 of the Trade Practices Act. He contended he was entitled to set-off these claims against the appellants' claim. The Primary Judge dismissed the appellants claim for summary judgment. The Court of Appeal allowed the appeal. It was held that it was essential to the availability of an equitable set-off that there be such a connection between the claim and cross claim so as to impeach the claim so as to make it unfair for the claim to be allowed without taking account of the cross claim. There was no sufficient connection.

[60] It was noted by Keane JA that any claim for set-off at common law would fail as the claims were not for liquidated amounts.[34] His Honour held that the respondent's claims arose quite separately from the appellants' claim to repayment of the loan.[35] There must be such a connection between the claim and cross claim that the "cross claim can be said to impeach the claim." For example in Piggott v Williams,[36] the claim of a solicitor who sued his former client was successfully met by a plea of equitable set-off on the basis the fees were only incurred through negligence. Ultimately his Honour held that the claims by the respondent were entirely distinct from the loans.

[61] What about in the present case? Was there a sufficient connection?

[62] The claim by the respondent here was for $21,668.77 in outstanding body corporate levies.

[63] The appellant became owner of Lot 2 on 27 July 2012.

[64] Exhibit REA 03 set out the nature of the levies as follows:

[65] The invoices (Exhibit REA 4) disclose that (aside from interest and recovery charges) the levies were for the admin and sinking fund 1 November 2013 to 31 January 2014;[37] admin and sinking fund 1 February 2014 to 30 April 2014;[38] admin and sinking fund 1 May 2014 to 31 July 2014;[39] admin and sinking fund 1 August 2014 to 31 October 2014;[40] admin and sinking fund 1 November 2014 to 31 January 2015;[41] admin and sinking fund 1 February 2015 to 30 April 2015;[42] admin and sinking fund 1 May 2015 to 31 July 2015;[43] admin and sinking fund 1 August 2015 to 31 October 2015;[44] admin and sinking fund 1 November 2015 to 31 January 2016;[45] and admin and sinking fund 1 February 2016 to 30 April 2016.[46]

[66] Ms Alderdice says that on 11 September 2012 the body corporate resolved to replace the rooves on all of the lots. REA 7 is a copy of the quotation from Laguna Building Consultants showing the cost was $66,900. The appellant advised by letter that it had conducted their own repairs. As a result at a body corporate meeting on 6 February 2013 it was resolved the special levy would only be for Lots 1, 3 and 4 in an amount of $14,000 each. The appellant did not pay this special levy.

[67] Ms Alerdice swears that at no time has the body corporate budgeted for or levied any lot owner for work procured by the defendant.

[68] As to the claims by the appellant, the damage it alleges was suffered occurred prior to April 2012 - before it became the owner, although it says further damage occurred after this time.

[69] The purpose of the sinking fund and admin levy is set out in s 148 of the Body Corporate and Community Management (Standard Module) Regulation 2008 (Q). This provides:

"148 Application of administrative and sinking funds

(a) spending of a capital or non-recurrent nature; and

(b) the periodic replacement of major items of a capital nature; and

(2) All other spending of the body corporate must be met from the administrative fund.

At a glance

Court

Decision date

Catchwords

Source

Catchwords

Judgment (251 paragraphs)

Parties

Legislation Cited (5)

Cases Cited (6)