This matter concerns recovery of unpaid levies by an owners corporation and the issues that arise when seeking to also recover the owners corporation's expenses of taking action in the ACT Civil and Administrative Tribunal (the tribunal) and the Magistrates Court.
The application the subject of this decision (the current application) was lodged on 28 July 2014, seeking an order that the respondent pay to the owners corporation:
(a) unpaid levies;
(b) the costs to the owners corporation of seeking an order for those unpaid levies; and
(c) the costs to the owners corporation of earlier proceedings in the tribunal for a money order for unpaid levies and enforcement of that order in the Court.
From the evidence provided by the parties, and information gleaned from the tribunal and court files, the following factual history of the matter was ascertained.
[2]
On 1 October 2013, The Owners - Units Plan No 840 (the applicant) filed a debt application in proceedings XD13/1697 (the first application) in the tribunal for an amount of $3154.30 being comprised of:
(a) unpaid levies: $1947.16;
(b) interest on that amount: $183.74;
(c) expenses for sending four letters and an amount for commencing proceedings: $451.00; and
(d) fee for commencing proceedings in the tribunal: $260.00.
On 5 November 2013, the applicant filed an application for default judgment in accordance with the tribunal's procedural directions. Default judgment was entered by the Tribunal the same day in the amount of $3174.04 (the default judgment), the difference from the amount originally claimed reflecting an increase in the interest accrued to the date of the default judgment.
On 28 November 2013, a certificate of registration of judgment was issued in the Magistrates Court.
On 24 March 2014, the applicant filed in the Magistrates Court an affidavit seeking a debt redirection order (the enforcement application). It was attested that the sealed copy of the judgment had been served on the respondent on 17 December 2013.
A debt redirection order was made on 8 April 2014 in the amount of $3837.80 which constituted the amount of the judgment plus the prescribed amount of $562.00 for legal costs in preparing the application for a debt redirection order[1] and $101.76 for the interest accrued on the default judgment.
On 15 May 2014, the respondent lodged in the Magistrates Court an application to stay the enforcement proceedings (the stay proceedings). The same day the respondent lodged an application in the tribunal to set aside the default judgment.
The stay proceedings were mentioned on 27 May 2014 and on 3 June 2014, on both of which occasions there was no appearance by the solicitor for the applicant.
The Tribunal dismissed the application to set aside the default judgment on 28 May 2014.
On 11 June 2014 the respondent paid to the applicant the sum of $3000 in respect of the default judgment.
On 17 June 2014 the stay proceedings were mentioned again, at which time there was no appearance by the solicitor for the applicant but a letter was on file from the solicitors agreeing to a further two week adjournment to allow for negotiation of a repayment plan. The letter explained that although $3000 had been paid by the respondent, the sum of $908.06 of the debt redirection order remained outstanding.
On 30 June 2015 the respondent paid $840 to the applicant.
On 2 July 2014 the stay proceedings were mentioned again, the applicant's solicitor appeared by telephone.
The final mention of the stay proceedings occurred on 16 July 2014, at which time the solicitor for the applicant appeared by telephone. It was noted that a sum of $71.06 remained outstanding, and the order for a stay of the debt redirection order was lifted. (In fact, the $3000 and $840 paid exceeded the amount of the debt redirection order by some $2.20. It is not clear what the $71.06 referred to and an examination of the owners ledger shows that a sum of $73.00 had been paid by the respondent on 11 July 2015).
An examination of the owners ledger shows that solicitors fees to the owners corporation, each in the amount of $385, have been debited to that ledger for solicitors appearances at the ACAT on 28 May 2014, and at the Magistrates Court on 17 June, 2 July and 16 July 2015.
In the meantime further levies had become due and payable. The respondent did not pay these levies by the due date.
On 28 July 2014, the applicant lodged the current application seeking an order for payment of the further levies, together with the expenses of that application and expenses relating to the obtaining and enforcement of the default judgment and the stay proceedings.
The current application sought orders for payment of a debt of $3064.07 comprising:
(a) unpaid levies: $982.44;
(b) interest on that amount: $54.82;
(c) expenses (the section 31 expenses): $1756.81; and
(d) fee for commencing proceedings in the tribunal: $270.00.
The section 31 expenses were itemised as follows:
(a) costs of collections agent for preparing and filing application for default judgment: $165.00;
(b) letter of demand by collections agent by registered mail (12 November 2013): $66.00;
(c) costs of collections agent registering the ACAT judgment in the Magistrates Court (27 November 2013): $66.00;
(d) costs of collections agent serving the registered order on the respondent: $66.00;
(e) costs of collections agent undertaking an 'office investigation' to identify the tenant of the unit: $44.00;
(f) collections agent costs for "Follow up on the garnishee": $55.00;
(g) solicitors fees for Magistrates Court teleconference of 2 June 2014 (fee including preparation and attendance): $385.00;
(h) solicitors fees for Magistrates Court appearances of 17 June and 2 July 2014: $770.00; and
(i) costs for preparing and filing the current application: $396.00.
On 29 July 2014 a further amount of $666 was debited to the owners ledger being for the collections agents costs for the ACAT Debt Application, which amount included the ACAT filing fee of $270.
On 27 August 2014 the respondent paid to the applicant the sum of $985 which was agreed by both parties to be on account of the unpaid levies sought in the current proceedings.
On 4 September 2014 the applicant applied for default judgment. Default judgment was not entered, a response having been filed by the respondent on 27 August 2014. An amount of $165 was entered on the owners ledger as owing on account of the solicitors costs of applying for the default judgment.
On 23 September 2015 the current application was the subject of a conference. The solicitors costs of $385 in relation to that conference was entered on the owners ledger as owing by the respondent on 26 September 2014.
A further sum of $330 was paid by the applicant on 30 September 2014 for the contribution due by 1 July 2014.
The interest on the unpaid levies, the filing fee for bringing the current proceedings, and the section 31 expenses remained outstanding at the time of the hearing.
[3]
The current application was heard on 12 November 2014, at which time the applicant was represented by a solicitor and the respondent unit owner was self-represented.
The bare facts of the matter were uncontested.
The respondent gave brief oral evidence of his perspective on the relevant events. He explained that until June 2014 he had not had the means to pay the new levies. The respondent gave evidence that he was aware of the obligation to pay those levies, but having had access to and experience of the written debt recovery procedure of the owners corporation he had thought that further correspondence could be expected before proceedings were instituted.
The solicitor for the applicant had not had personal conduct of the first application, the enforcement application or stay proceedings. By reference to the file and surrounding documentation the solicitor was able to make brief oral submissions. The solicitor for the applicant had filed with the tribunal copies of invoices rendered by the collections agent, an extract of the owners ledger kept by the managing agent (in the form of a 'statement of account and tax invoice'), and accounts for the owners corporation, the minutes of meeting at which the levies for the contributions were decided, and the managing agent agreement which set out amounts charged for various activities.
The solicitor for the applicant submitted that:
(a) as a matter of public policy the legislation provides for the costs of collection of unpaid levies to be met by the defaulting unit owner;
(b) the incurring of the section 31 expenses in this matter was for such costs or for the taking of steps ancillary to that failure to pay levies;
(c) those steps were both necessary and reasonably undertaken; and
(d) the quantum of the expenses incurred was reasonable.
At the hearing, the applicant sought in addition to the itemised section 31 expenses further expenses that had been incurred since the filing of the application. These were specified as $385 for the solicitor's attendance at the preliminary conference and $385 for the solicitor's appearance at the hearing. (The amounts entered on the owners ledger for the costs of the collections agent instituting proceedings, and the solicitor seeking default judgment were not sought.)
The respondent disputed the claim for the section 31 expenses and the filing fee of $270. He said that it was not necessary to proceed to legal action, as he would have paid the levies if the debt recovery procedure had been followed. He acknowledged that he would have challenged the section 31 expenses which he thought were disproportionate to the amount of the debt. The respondent also argued that the applicant should have sought the costs of enforcement at the time of the enforcement proceedings, and if that had been done it would not have been necessary to continue the current proceedings.
Because there was scant evidence before the Tribunal in relation to the earlier litigation history, the parties consented to the Tribunal obtaining access to the Tribunal file for the first application and the Magistrates Court file for the enforcement application in order to flesh out the history of the matter. A summary of the facts so obtained was emailed to the parties by the tribunal registry in December 2014, with a request that any further written submissions or authorities to be relied upon be provided to the Tribunal by 23 January 2015. No such submissions or authorities were filed.
[4]
The Unit Titles (Management) Act 2011 (UTM Act) sets out the requirements for payment of levies by owners of units and recovery by the owners corporation of unpaid levies and other expenses.
A levy is payable by a unit owner when it has been properly raised by the owners corporation and notice of the levy has been served upon the owner in accordance with division 5.2 of the UTM Act.
If a levy is unpaid, section 95 allows the owners corporation to recover it as a debt from the member of the units plan. Section 94 provides for the charging of interest on unpaid levies at a default rate of 10% or an alternative rate which has been decided by special resolution.
Section 31 of the UTM Act allows the owners corporation to recover from a defaulting unit owner certain expenses that it incurs while carrying out its functions:
Recovery of expenditure resulting from member or unit occupier's fault
[5]
_(1) This section applies if an owners corporation for a units plan has in carrying out its functions incurred an expense, or carried out work, that is necessary because of - _
[6]
(a) a wilful or negligent act or omission of a member of the corporation, or an occupier of the member's unit; or
[7]
(b) a breach of its rules by a member of the corporation, or an occupier of the member's unit.
[8]
(2) The amount spent or the cost of the work is recoverable by the owners corporation from the member as a debt.
[9]
(3) If the owners corporation recovers an amount under subsection (2) from a member for an act, omission or breach of an occupier of the member's unit, the member may recover the amount from the occupier as a debt.
[10]
work, carried out by an owners corporation, means maintenance or anything else the corporation is authorised under this Act to do.
[11]
Although section 31 is on its face straightforward, a number of complicated issues arise in the application of section 31 to the facts of this case, particularly in relation to expenses which might also be characterised as legal costs.
[12]
What is the nature of proceedings for an order for payment of a section 31 expense?
[13]
Section 31 of the UTM Act is broadly phrased. It allows the owners corporation to recover expenses that it has occurred which were necessary due to a wilful or negligent act or omission or a breach of the rules of the owners corporation.
The mechanism employed by section 31 is not to require the owners corporation to apply to the tribunal or a court for an order for payment of expenses by the unit owner, but rather to create a statutory debt. By this device, the unit owner is liable to pay the expense from the time it is incurred and the amount of the expense known. Legal liability does not depend upon a prior finding by a court or tribunal that the money is payable.[2]
Consequently an owners corporation is entitled to record in the owners ledger the amount of a section 31 expense as an amount payable by the owner, from the time it is incurred, and at that time advise the owner of the amount due and seek payment.
If payment is not made, a civil claim in debt may be brought by the owners corporation. For matters where the amount is less than $10,000 that action must be brought as a civil dispute application in the tribunal[3], for larger sums the proceedings may be instituted in the Magistrates Court or Supreme Court.
Conversely, if a unit owner disputes a section 31 debt asserted by the owners corporation, the owner may apply for a debt declaration in the relevant jurisdiction.
I have considered whether an application for an order in relation to section 31 expenses could be brought in the tribunal pursuant to the dispute resolution provisions set out in Part 8 of the UTM Act. Such an approach would render irrelevant the jurisdictional limit on civil proceedings in the tribunal.
I do not consider that to be a permissible use of the dispute resolution jurisdiction provided by Part 8, and in particular the power to make 'any other order' provided by subsection 129(2) of the UTM Act, given the specificity of section 31 and lack of any indication in the UTM Act or surrounding extrinsic material that subsection 129(2) was intended to be utilised in that way.
There is no statutory liability to pay the expenses of the owners corporation except by section 31, which provides that the sum is recoverable as a debt. In that context, it would be inappropriate to use the dispute resolution jurisdiction of Part 8 of the UTM Act to avoid jurisdictional constraints applicable to civil proceedings.
When the Tribunal makes an order that a unit owner must pay to the owners corporation a sum of money owing by virtue of section 31, it is exercising the civil jurisdiction of the tribunal not the jurisdiction conferred by the UTM Act, although it is the UTM Act which creates the debt.
What is the test for recovery of an expense pursuant to section 31 of the UTM Act?
The right to recover expenses under section 31 is not an automatic award of indemnity for all costs incurred by an owners corporation.
As an important threshold question, recovery of any expense from a member of the owners corporation is subject to a causal requirement of necessity. The action giving rise to the expenses claimed must have been rendered necessary by either:
(a) a 'wilful or negligent act or omission' of the member or occupier of the members unit; or
(b) a breach of the rules of the owners corporation by the member or occupier of the members unit.
Those expenses that satisfy this test form part of the statutory debt created by section 31. Those that do not cannot form part of the statutory debt and are not recoverable by virtue of section 31, although they may be recoverable on another basis.
There is a question of how stringently the test of necessity is to be applied in this context. That question was addressed in The Proprietors Units Plan No 52 v Gold[4](Gold), a decision of the Federal Court on appeal from the Supreme Court of the ACT. That decision dealt with section 48 of the Unit Titles Act 1970 which was the legislative predecessor to section 31 of the UTM Act. That section provided as follows:
[14]
Where a corporation has incurred any expenditure or performed any repairs, work or act that it was required or authorized by its articles or by or under this Act or any other law in force in the Territory to perform, the expenditure, repairs, work or act having been rendered necessary by reason of any willful or negligent act or omission on the part of, or breach of any provision of its articles by, a member of the corporation, the amount of that expenditure or any money expended by it in performing the repairs, work or act is recoverable by it from the member as a debt.
[15]
While not identical in its wording, all of the elements of current section 31 are present in the old section 48. It refers to the "work or act having been rendered necessary" and that the "money expended ... is recoverable ... as a debt." The explanatory statement to section 31 of the UTM Act noted "this section is equivalent to a provision in the current UTA. The section has been redrafted consistent with the modern ACT drafting style to make it easier to read and understand. The substance and meaning of the provision is unchanged." Therefore case law relating to that old section 48 may be drawn upon in interpreting the current section 31.
In Gold the Court held that the word 'necessary' does not mean 'essential'. In coming to this conclusion the Court referred to the meaning of 'necessary' expressed by Allen J in State Drug Crime Commission (NSW) v Chapman(1987) 12 NSWLR 447 at 452:
[16]
As to the word 'necessary' it does not have, in my judgment, the meaning of 'essential'. The word is to be subjected to the touchstone of reasonableness. The concept is one as to what reasonably is necessary in a commonsense way. As Polock CB said in Attorney General v Walker [1849] EngR 223; (1849) 154 ER 833 -
[17]
'It may be stated as a general rule that those things are necessary for the doing of a thing which are reasonably required or which are legally ancillary to its accomplishment.'
[18]
The approach adopted in Gold has been followed in other jurisdictions, in relation to differently worded but in this respect equivalent provisions.[5] The concept of 'reasonableness' in this context has been judicially explored, and it seems to be generally accepted that the reasonableness test goes to both the incurring of the expense, and the quantum of the expense incurred. This was the test proposed in the submissions put on behalf of the applicant.
In order for an expense to be payable by the owner as a debt under section 31 of the UTM Act, then, it must be the case that:
(a) there was a 'default' by the owner or the occupier of the owner's unit;
(b) because of that default the owners corporation took action which was within its functions;
(c) in taking that action the owners corporation incurred an expense;
(d) the action taken by the owners corporation was reasonably necessary; and
In order for the Tribunal to make an order for payment of a section 31 expense as a debt, the Tribunal must be satisfied both that the debt exists (that is, the matters set out in paragraph 57 are made out), and further that that debt remains unpaid at the time the order is to be made.[7]
Recurring issues arising when seeking legal costs as an 'expense'
The use of provisions equivalent to section 31 to seek recovery of expenses which can be characterised as 'legal costs and disbursements' has provided fertile ground for legal argument since the decision in Gold. It is a useful starting point to summarise the conclusions commonly reached:
(a) The word 'expenses' should be interpreted broadly, as per the ordinary meaning of the word, and would ordinarily include legal costs and disbursements.[8]
(b) Legal costs can be claimed as an expense, even though no order for costs has been made in the proceedings in which the legal costs were incurred.[9]
(c) The Tribunal or Court making an order in relation to expenses that are in the nature of legal costs and disbursements may determine for itself the reasonable quantum of such expenses[10], although no assessment of costs has been conducted.
(d) The making of an order for payment of legal costs as a debt may remove the entitlement of the unit owner to seek that such costs be assessed. [11]
A question that may arise and has not been entirely resolved is whether it is possible to recover as a section 31 expense a legal cost which was not awarded on a costs application in the relevant court or tribunal, whether that be the entire amount of the expense or the 'gap' between the amount of the expense and the amount of costs awarded. In the current matter, it is unnecessary to consider or determine that issue.
The 'usual' conclusions cited above should not be slavishly followed. Each turns upon a consideration of the particular legislation and specific circumstances of the case.
Specifically, can section 31 of the UTM Act apply to legal costs incurred in tribunal proceedings?
The first question which arises in the current proceedings is whether legal costs incurred in prior tribunal proceedings are recoverable under section 31 of the UTM Act. This question arises because of the peculiar nature of the tribunal as a forum in which parties ordinarily bear their own costs.
Subsection 48 of the ACT Civil and Administrative Tribunal Act 2008 (ACAT Act) relevantly provides:
Costs of proceedings
[19]
(1) The parties to an application must bear their own costs unless this Act otherwise provides or the tribunal otherwise orders.
[20]
(a) if the tribunal decides an application in favour of the applicant, the tribunal may order the other party to pay the applicant--
[21]
(ii) any other fee incurred by the applicant that the tribunal considers necessary for the application; or
[22]
a fee for a business name or company search
a filing fee for a subpoena
hearing fees
[23]
Note An example is part of the Act, is not exhaustive and may extend, but does not limit, the meaning of the provision in which it appears (see Legislation Act, s 126 and s 132).
[24]
(b) if the tribunal considers that a party to an application caused unreasonable delay or obstruction before or while the tribunal was dealing with the application - the tribunal may order the party to pay the reasonable costs of the other party arising from the delay or obstruction; or
[25]
(c) subject to section 49, if a party to the application contravenes an order of the tribunal - the tribunal may order the party to pay the costs or part of the costs of the application to the other party; or
[26]
There is a conflict in the circumstances of the current case between subsection 48(1) of the ACAT Act and section 31 of the UTM Act. This is so even though subsection 48(1) contemplates the costs being payable when a Tribunal order is made, and the current proceedings seeking the making of an order. The conflict arises because section 31 of the UTM Act makes the respondent legally liable for the 'expenses' as a debt prior to an order being made. This creates a situation where, if section 31 operates in relation to costs incurred in tribunal proceedings, that is against the clear wording of subsection 48(1).
I have considered whether the preliminary words used in section 48(1) are simply a policy statement and are not intended to have a substantive legal effect. This would be contrary to the general principle that all words used in a statute have some meaning and effect.[12]
The operation of section 48 was considered by Penfold J in Mainore[13]. Her Honour commenced by noting that:
[27]
(a) That the default position is that the parties bear their own costs.
[28]
(b) That the default position may be varied by provisions of the ACAT Act.
[29]
(c) That the default position may be varied by an order of ACAT.
[30]
(d) That in four specified circumstances, ACAT may make particular costs orders.
[31]
Her Honour went on to explore the nature and effect of section 48, and what could be concluded to be the intention of the legislature in relation to that provision:
[32]
41. On the face of it, s 48(1) creates a default position (that parties to ACAT proceedings bear their own costs) that can be overridden in two circumstances, namely by other legislative provisions, or by an order made by ACAT under a power which on its face is unqualified. Section 48(1) standing alone would be a meaningful provision.
[33]
Her Honour concluded, after a comprehensive examination of the history of amendment of section 48 and the explanatory statements, that subsection 48(1) did not provide an unqualified costs power but that subsection 48(1) provided a limited power to order costs in the circumstances listed in subsection 48(2).
There was no suggestion in Mainore that section 48 could be interpreted such that the 'default position' described by the preliminary words of section 48(1) was to be of no legal effect. I do not think that that interpretation of section 48(1) can be adopted given the clear wording of the subsection, and lack of support for such an interpretation in the extrinsic material. The preliminary words in subsection 48(1) words are clear and must have some legal effect.[14]
I am satisfied therefore that in relation to costs of an owners corporation incurred in tribunal proceedings, there is an apparent conflict between section 31 of the UTM Act and subsection 48(1) of the ACAT Act. How is that conflict to be resolved?
In Ford & The Owners Units Plan No. 259[2012] ACAT 59 the Tribunal concluded that section 31 applied notwithstanding apparent conflict with the terms of section 48. However, the conclusions reached in that case must now be viewed with caution, because the submissions adopted by the Tribunal in that case were predicated on the interpretation of section 48 of the ACAT Act as providing a broad costs power, an interpretation which was ultimately rejected in Mainore on appeal. It is necessary, therefore, to consider afresh how to deal with the conflict between section 31 and section 48 which arises in these circumstances.
The solicitor for the applicant submitted that section 31 exists for good policy reasons, as an owners corporation should not be put to expense in recovering unpaid contributions. Equally, there are significant policy reasons why the tribunal is established as a jurisdiction in which self-representation is the norm, and as a corollary parties bear their own legal costs except where the Tribunal in limited circumstances is empowered to make a costs order.[15]
The question of recovering as expenses those legal costs not recoverable as costs in the original jurisdiction was contemplated in Gold (with reference to costs incurred in the Small Claims Court), Dimitriou (with reference to costs incurred before the adjudicator) and SunseekerApartments (with reference to limits on costs provided by the rules). The latter two cases referred to the decision of the High Court in Anderson v Bowles[16] in which the majority stated at page 323:
[34]
The legislature having determined that costs shall not be recoverable in proceedings of the character now in question, it would be contrary to the principles which these cases exemplify if they were included in the damages and made recoverable by a side wind.
[35]
The cases of Gold, Dimitriou and Sunseeker Apartments confirm that it is in the end a matter of statutory interpretation whether the incurred costs are able to be recovered as an expense, or not. In the first two cases it was held that the legal costs remained recoverable as an expense.[17] In those cases the statutory limitation on costs was interpreted as a limitation on the power of that particular Tribunal or Court to make an order for costs. In Sunseeker Apartments at pages 8 and 9 McGill DCJ considered, but was not obliged to determine, the issue.
The wording and effect of subsection 48(1) of the ACAT Act is very different to the ACT provisions considered in 1993 in Gold and the NSW legislation considered in Dimitriou. Subsection 48(1) is not a limitation on the Tribunal's power to make an order for costs, but rather a statement of principle of general application, accompanied by a costs power exercisable in the limited circumstances set out in subsection 48(2). Subsection 48(1) of the ACAT Act is more akin to the kind of provision described by the High Court in Anderson v Bowles than the section of the Small Claims Act 1974 considered by the Federal Court in Gold.
In reconciling the competing provisions, the starting point is the intention of the legislature.[18] It is not clear in the wording of the UTM Act or ACAT Act how the legislature intended the conflict between section 31 and section 48 to be resolved. An examination of the explanatory statements for the UTM Act and the ACAT Act, the second reading speeches to the bills, and speeches and explanatory statements for subsequent amendments to section 48 of the ACAT Act provide no assistance on the intention of the legislature in relation to the inconsistency identified in this case.
In relation to the intended operation of each provision on its own, there was limited commentary on the envisaged operation of section 31, or its predecessor in the Unit Titles Act 1970.
By contrast, section 48 of the ACAT Act has been the subject of direct comment in both explanatory statements and speeches, including in 2014 acknowledgement of the interpretation adopted in Mainore.[19] The significance of the general principle that parties bear their own costs in tribunal proceedings has been at the forefront of the legislature's mind since the tribunal was established. The second reading speeches also demonstrate the Legislature was well aware that unit titles matters would be litigated in the tribunal. Reference to the broader legislative context demonstrates that the legislature has in other cases clearly expressed the intention that section 48 not apply in certain circumstances.[20] If section 31 was intended to apply notwithstanding section 48 of the ACAT Act, one would have expected to see similar provision made in the UTM Act when enacted.
In addition to the extrinsic material, there are a number of principles of statutory interpretation which may assist in discerning how the conflict is to be resolved.
There is a presumption that the legislature intended both section 31 and section 48 to operate together. However as already noted it is difficult to see how that can be achieved given the legal effect of each provision. It is not possible, for example, to simply assert that the section 31 expenses which are tribunal expenses are not payable until the Tribunal makes the order in the civil dispute proceedings. This is because the jurisdiction of the Tribunal to make such an order is dependent upon the Tribunal first finding that the debt is owing, and unpaid.[21]
The doctrine of implied repeal, whereby the later of the two statutes displaces operation of the earlier to the extent of inconsistency, might be called upon for assistance.[22] The doctrine can only be applied with some reservation in the current matter because section 31 has been in existence previously before being re-enacted in 2011 the UTM Act. The UTM Act is the more recent of the current Acts to be enacted, although section 48 of the ACAT Act is the section to most recently draw the attention of the legislature, when amendments were made to subsection 48(2) in 2014.
One might also consider whether one of the provisions is 'specific' and the other 'general' and apply the maxim that the general provision is not intended to derogate from the specific, adjusting the rules of implied repeal accordingly. The application of that principle can appear idiosyncratic.[23] While I consider that section 48 is the more specific provision, as it deals with costs incurred in Tribunal proceedings which are a subset of section 31 expenses, an argument could be made to the contrary.[24]
In the end, on a balance of all of the matters discussed above, I consider that the inconsistency between section 31 of the UTM Act and subsection 48(1) of the ACAT Act, in relation to recovery under section 31 of costs incurred in tribunal proceedings, must be resolved by finding that section 31 does not apply to the extent of any inconsistency. Although arguments both for and against this conclusion can be made, the weight of those arguments is in favour of subsection 48(1). This means that costs incurred in tribunal proceedings are not recoverable by the owners corporation as a section 31 expense unless they have been ordered to be paid by the Tribunal or the ACAT Act otherwise provides.
This reasoning leads to an outcome that is different to that reached by the Federal Court in Gold. This is because the legislation which was considered in Gold was very differently worded to the current legislation. It is also different to the outcome in Ford. This is because the conclusion reached in Ford was predicated on an understanding of the scope of section 48 which is no longer preferred.
Before leaving the issue of costs incurred in Tribunal proceedings, it is necessary to consider whether the word 'costs' in section 48 of the ACAT Act means only professional legal costs and disbursements, or means all costs incurred by a party for tribunal proceedings. The latter interpretation would prohibit expenses such as a filing fee or agents costs incurred in the Tribunal proceedings being recovered as a section 31 expense.
An expansive interpretation of the word 'costs' is increasingly being taken by the VCAT in relation to the costs power provided under the VCAT Act - see Aussie Invest Corporation Pty Ltd v Hobsons Bay CC[2004] VCAT 2188. This approach has also recently been applied in the CTTT in NSW.[25]
In Aussie Invest President Morris reasoned that when regard was had to the nature of tribunal proceedings in which lawyers rarely appear, and the purposes and practices of the VCAT:
[36]
...it would be odd if the Parliament intended that the word "costs", where used in the Act and particularly in section 109 of the Act, was confined to money paid to, or a liability incurred for, professional legal services.
[37]
Whether such an approach should be taken in relation to section 48 of the ACAT Act depends upon how the word 'costs' appearing in section 48 is interpreted.
The word 'costs' appearing in section 48 is not defined and would take its ordinary and extended meaning, unless it is considered to be a legal term of art. There is no suggestion in either the section itself, the ACAT Act or the extrinsic material that the word was intended to be interpreted in the legal sense.[26]
The word 'costs' according to both the Macquarie and Oxford Dictionaries would ordinarily include all expenses. Both dictionaries acknowledge, however, that in ordinary parlance the word also has an accepted legal meaning when used in the plural. That accepted legal meaning is 'the sums the successful party is usually entitled to recover for reimbursement of particular expenses incurred in the litigation' or 'legal expenses, especially those allowed in favour of the winning party or against the losing party in a suit'. Unfortunately, recourse to this legal meaning is unhelpful in the current matter because it raises the very question sought to be answered: what costs are to be allowed.
A consideration of the word 'costs' as it is used in section 48 and surrounding sections suggests that the ordinary and natural meaning of the word 'costs' should be adopted. For example, if the word 'costs' included only professional legal costs, then the reference in subsection 48(3) to 'costs' not including 'holding costs' such as bank interest would be unnecessary.
The reasoning set out in Aussie Invest would also supports the natural meaning of the word 'costs' being adopted in relation to section 48 of the ACAT Act.
I am satisfied that the word 'costs' as appearing in section 48 of the ACAT Act should be given its ordinary and natural meaning and should not be limited to legal professional costs and disbursements.
This means that it is not open to recover as a section 31 expense those expenses which can be described as a cost or expense of bringing or participating in tribunal proceedings, however it is open to seek an order for payment of such costs or expenses in appropriate cases under subsection 48(2) of the ACAT Act.
Can section 31 apply to legal costs incurred in Magistrates Court proceedings?
An issue also arises in the current case in relation to recovery, as section 31 expenses, of costs incurred in Magistrates Court proceedings.
In the stay proceedings in the Magistrates Court the owners corporation incurred legal professional costs, which were not sought in those proceedings. Rule 1720 of the Court Procedures Rules 2006 (Rules) provides:
Costs - entitlement to recover
[38]
(1) A party to a proceeding cannot recover any costs of the proceeding from another party or anyone else otherwise than by agreement, under a territory law, or an order of the court under a territory law.
[39]
Note A territory law includes these rules (see Legislation Act, s 98).
[40]
(2) If, under a territory law or an order of the court, a party is entitled to costs, the costs are to be assessed costs.
[41]
Note The parties may agree that the costs be set at a certain amount (see r 1702 (Costs - agreement about costs).
[42]
_(3) However, instead of assessed costs, the court may order a person liable for costs to pay to the party entitled to costs - _
[43]
(a) a stated part or percentage of assessed costs; or
[44]
(b) assessed costs to or from a stated stage of the proceeding; or
[45]
(d) an amount for costs to be decided in a way the court directs.
[46]
The recovery of legal costs incurred in the Magistrates Court as a section 31 expense would be permissible under subrule 1720(1) as being 'under a territory law'. However, subrule 1720(2) then provides that such costs are to be 'assessed costs'.
The term 'assessed costs' is defined in the Dictionary to the Rules as being "costs and disbursements assessed under part 2.17(Costs)". Part 2.17 provides for the assessment to be conducted by the registrar or court,[27] although provision is made for the parties to agree in writing an amount of costs which is then taken to be 'assessed costs'.[28]
The issue of inconsistency between the equivalent of section 31 and court rules for legal costs was considered in Sunseeker Apartments, however that question did not finally need to be determined in that case.
In relation to the ACT legislation, one must again commence with the starting point that the legislature has intended both pieces of legislation to operate together.
Rule 1720 acknowledges that costs of proceedings in the court may be payable otherwise than under an order for costs made by the court in those proceedings, but provides that the costs so payable must be assessed costs. In other words, it specifies a process by which the amount of those costs may be ascertained.
In Gold at page 127 the Court stated:
[47]
In our opinion, s 48, like many similar provisions, creates a statutory debt for which a member is liable as soon as the amount of the body corporate's expenditure has been ascertained.
[48]
Section 31 and rule 1720 can be interpreted so as to operate together, given the liability to pay the owners corporation the legal costs arises not at the time that the action incurring those costs is undertaken, but instead at the time the cost of taking that action is ascertained.
This reasoning also leads to an outcome that is on its face different to that reached by the Federal Court in Gold. Again, this is because the relevant legislation - the Court Procedures Rules - were not considered in Gold. Although the Federal Court in Gold specifically considered the need for an assessment of costs, that consideration was in the context of determining the reasonableness of the quantum of costs. In the current case, an assessment is required not to determine whether the costs are 'reasonable' in quantum, but because of the specific provision made by the Court Procedure Rules, which were not in existence in 1993.[29]
The need for further 'assessment' proceedings to be undertaken could lead to further expense to the owners corporation, however it is in the hands of the owners corporation to obviate the need for further assessment proceedings by simply seeking an order for costs in the relevant proceedings, at the appropriate time. From the interstate authorities, it seems such an application would be considered on a broadly similar basis to that on which a section 31 expense is allowed, and the amount ordered would in the majority of cases be for an amount calculated by reference to the prescribed scale and percentage used in assessment.
[49]
E. APPLYING THE LEGAL FRAMEWORK TO THE FACTS OF THE CASE
[50]
In the current matter in relation to the threshold question of default, I am satisfied that there was a wilful or negligent failure by the owner to pay the amount ordered by the default judgment which reasonably necessitated the institution of the enforcement proceedings. There was no evidence that the respondent had communicated with the owners corporation after being served with the default judgment, although once enforcement proceedings were instituted communication occurred. Involvement in the stay proceedings was equally reasonably necessary.
In relation to the institution of the current proceedings to recover the further levies and section 31 expenses, I am satisfied that there was a wilful failure to pay those levies by the respondent.[30] While the institution of proceedings to recover those levies was undertaken more quickly than contemplated by the debt recovery procedure, given the respondent acknowledged he at all times contested the section 31 expenses, in the circumstances of this case the institution of legal proceedings was reasonably necessary.
Turning to the specific items sought in the current proceedings, as listed in paragraph 19 above, items (b), (c), (d), (e) and (f) are expenses which were the costs of actions undertaken to enforce the default judgment by an agent working at the direction of the owners corporation. I am satisfied in the circumstances explained by the respondent and applicant's solicitor that it was reasonable to incur these expenses, and the amounts sought are, in my experience of like matters, reasonable in amount. I am satisfied therefore that they fall within the statutory debt created by operation of section 31 of the UTM Act.
I am satisfied from the evidence given in the proceedings that these amounts remain unpaid, and accordingly propose to make an order that the respondent pay those sums to the owners corporation.
Items (g) and (h) are in the nature of legal costs incurred in stay proceedings in the Magistrates Court. While I am satisfied that it was reasonable to take enforcement action and participate in the stay proceedings, the amount of the expense attributable to the owner of taking that action is not currently ascertainable. That is because those costs have not been assessed under Part 2.17 of the Rules, either by assessment or by written agreement of the parties. Consequently, there is not currently a debt owing under section 31 for those expenses and the claim for an order for payment of those amounts as a debt must be dismissed.
If I am incorrect in my view in relation to the need for assessment, I would note for completeness that there is no evidence on the Court file that the solicitor attended a teleconference on 2 June - it records there being no appearance of the solicitor at a mention on 3 June. On 17 June the solicitor did not appear but sent a letter, however reimbursement of a solicitors fee of $385 is sought for that date. The appearances on 2 and 16 July 2014 were by telephone; $385 is sought for each appearance.
The solicitor for the applicant was hampered in making submissions on this aspect of the matter, as he had not had the conduct of the file for the stay proceedings. It was submitted that the standard fee of $385 included the taking of instructions, the appearance and the reporting back to client, presumably by letter. Nonetheless, on a consideration of the amounts for such items set out in the scale contained in Schedule 4 of the Rules the amount of $385 seems excessive, particularly when reduced to the prescribed percentage of 33%.[31] In the end it falls to the applicant to satisfy the Tribunal in relation to the reasonableness of each amount claimed and I would not have been so satisfied in this case in relation to the costs of the stay proceedings.
Item (a) was the expenses of the agent incurred in the tribunal for the proceedings for the first application and item (i) the solicitors fees for the current application. At the hearing, the solicitor for the applicant also sought further legal costs that had been incurred in the tribunal since the filing of the application. These were $396 for the legal costs of bringing the current proceedings, $385 for attendance at the preliminary conference and $385 for the appearance at the hearing. All of these amounts can be characterised as costs incurred in relation to proceedings in the Tribunal, and thus within the contemplation of section 48 of the ACAT Act.
I do not consider that those types of expenses can be the subject of a statutory debt under section 31 of the UTM Act. Consequently, it is not possible to make an order for the respondent to pay those amounts to the applicant as section 31 expenses. If I am wrong in that conclusion, I would note only that it is difficult to see how expenses of such quantum could be considered reasonable given the amounts usually allowed on assessment in the Magistrates Court by reference to the relevant scale.
I have considered whether those amounts incurred in the current proceedings should in any event be awarded by exercise of the Tribunal's limited costs power provided by subsection 48(2), and I do not consider any of those costs could be properly the subject of a costs order in this case.
[51]
g) and h) Should an order for reimbursement of the filing fee and payment of interest be made?
[52]
Subsection 48(2) provides that the Tribunal may make an order for payment of the filing fee where an application has been successful. The exercise of that power is in the discretion of the Tribunal. In the current matter the proceedings were properly brought for payment of outstanding levies, and those amounts were paid prior to hearing. There was no communication with the respondent prior to bringing the proceedings, although a line of communication in relation to previously unpaid levies had been established and payments were being made. The applicant has been largely unsuccessful in the remainder of the claim pursued at hearing, however some section 31 expenses have been allowed and it was the position of the respondent that he opposed payment of those expenses. In the overall circumstances of the cases I consider it is appropriate to make an order for payment of the application fee under subsection 48(2) of the ACAT Act.
The UTM Act provides that interest is payable on outstanding levies at a rate of 10%, and the owners corporation is entitled to interest on the unpaid levies (totaling of $982.44) from the dates they were payable to the date of payment of 27 August 2014. The amount of interest so calculated amounts to $64.24.
[53]
As a general principle, section 31 of the UTM Act permits expenses of an owners corporation to be recoverable from the unit owner as a debt provided that the elements of that section are satisfied. In the ACT, because of clear provisions of the ACAT Act and Court Procedures Rules this general principle is subject to the following limitations:
(a) Expenses incurred in bringing proceedings in the Tribunal are not recoverable under section 31 as an expense but in certain circumstances may be sought by way of an order for costs under section 48 of the ACAT Act.
(b) Legal professional costs incurred in proceedings in the Magistrates Court may be recovered as section 31 expenses, despite no order for costs having been made, provided that those costs are 'assessed costs' under Part 2.7 of the Rules.
In the circumstances of this case, there are a number of expenses sought which were incurred in Tribunal proceedings, or were incurred in Magistrates Court proceedings but have not been assessed. I consider that these expenses and costs cannot be the subject of an order by the Tribunal, and in any event are excessive and cannot be considered reasonable in amount.
I am satisfied that the owners corporation incurred some expenses to enforce the default judgment which are recoverable as a debt pursuant to section 31. I am satisfied in the circumstances explained by the respondent and applicant's solicitor that it was reasonable to incur these expenses, and the amounts sought are, in my experience of like matters, reasonable in amount.
I am also satisfied that interest was payable on the outstanding levies, and that in the circumstances of this case it is appropriate to make an order that the respondent reimburse to the applicant the application fee for bringing these proceedings.
The orders that the Tribunal will make are as follows:
The respondent is to pay to the applicant, by close of business on 18 December 2015 the sum of $631.24 being comprised of $297 for expenses of the owners corporation, $64.24 for interest and $270 for the filing fee.
[5] See for example the Owners Strata Plan No 36131 v Dimitriou[2009] NSWCA 27; Body Corporate for Sunseeker Apartments CTS 618 v Jasen[2012] QDC 51 (Sunseeker Apartments)
[59]
[6] The amount of the debt must be known in order to it to be considered reasonable; implicitly the debt must be certain or liquidated as is required at common law. See Jelin Pty Ltd v Johnson(1987) 5 ACLC 463; Meales Concrete Pumping Pty Ltd v Probuild Constructions (Aust) Pty Ltd[2015] VSC 594
[60]
[7] That is not to suggest that there is any onus on the applicant to disprove payment, if payment is raised as a defence it falls to the respondent to prove payment to the required standard: Young v Queensland Trustees Ltd[1956] HCA 51(1956) 99 CLR 560
[61]
[10]Gold; Dimitriou per Hodgson JA the preferred test being party party costs on the ordinary basis
[62]
[11]Dimitriou per Hodgson JA at page 381; Sunseeker Apartments
[63]
[12]Project Blue Sky Inc v Australian Broadcasting Authority[1998] HCA 28
[64]
[13]CIC Australia Ltd v ACT Planning and Land Authority, Mainore Pty Ltd and ACT Civil and Administrative Tribunal[2013] ACTSC 96
[65]
[14] I note that other legislation in force in the Territory is worded on the basis that s 48(1) has some legal effect - see for example s. Legal Profession Act 2006 s434 would be unnecessary if s 48(1) did not have legal effect. See also the comments of Refshauge J at paragraph 90 in Pires v DibbsBarker Canberra Pty Limited[2014] ACTSC 283
[66]
[15] McGill DCJ eloquently describes some of the competing policy considerations at paragraph 26 of Sunseeker Apartments
[21] I do not think that this difficulty could be avoided by utilising Part 8 of the UTM Act to make the section 31 expenses order, even if that were thought to be appropriate. This is because no matter the source of the power to make the order, the Tribunal must first be satisfied as to the liability to pay the expenses, which requires a finding that the debt exists under section 31.
[73]
[22] The difficulties of utilising implied repeal in this area was discussed by Basten J in a dissenting judgment in Dmitriou at page 390
[74]
[23]Goodwin v Phillips[1908] HCA 55; (1908) 7 CLR 1 at 14.; see also Refshauge J comments in Blundell v Sentence Administration Board of the Australian Capital Territory, The Australian Capital Territory and the Chief Executive of the Department of Justice and Community Safety[2010] ACTSC 151 at 133
[75]
[24] I reach this conclusion even taking into account my conclusion about the meaning of the word 'costs' in section 48, discussed in following paragraphs
[26] Unlike the situation in Cachia v Hanes[1994] HCA 14; (1993) 179 CLR 403 in which the High Court found the word 'costs' took meaning from the statutory context and was limited to legal professional costs
[78]
[27] This definition, by use of the word 'under', does not accommodate an assessment of costs by the Tribunal itself applying Part 2.17 of the Rules.
[79]
[28] Rule 1702 provides that a signed agreement as to the amount of costs can be lodged with the court and the agreed amount is then taken to be 'assessed costs'
[80]
[29] In reaching this conclusion I have had regard to the comments of his Honour Refshauge J at paragraphs 83 - 86 in Pires, where his Honour found that the Legal Profession Act provides that an assessment of fairness and reasonableness of legal costs is exclusively reserved to the Supreme Court. Those comments were made in the context of a law firm seeking payment by a client, it does not seem that his Honour was required to consider the position of a third party payer or the interaction of that legislation with the Court Procedures Rules, nor intended his conclusion to apply in the circumstances of this matter
[81]
[30] On the issue of default, I note that default rule 2 provides that an owner must pay all amounts payable for a unit. This rule does not refer to the requirement to pay either levies or section 31 expenses, such that a failure to pay section 31 expenses or levies is a failure to comply with the Rules. Default rule 2 is clearly directed at the payment of rates, electricity accounts and taxes. Section 31 expenses and levies are made payable by the UTM Act itself, and a failure to comply with those obligations is not a breach of default rule 2
Aussie Invest Corporation Pty Ltd v Hobsons Bay CC[2004] VCAT 2188
Blundell v Sentence Administration Board of the Australian Capital Territory, The Australian Capital Territory and the Chief Executive of the Department of Justice and Community Safety[2010] ACTSC 151
Body Corporate for Sunseeker Apartments CTS 618 v Jasen[2012] QDC 51