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 Limited (now Westpac) to purchase an apartment in The Wave. The couple would later fail to pay their body corporate levies.
The Body Corporate for The Wave 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 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, take 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% percent of our arrears matters are dealt with out of court, saving owners thousands of dollars every day.”
“Unfortunately, there are rare occasions where levy responsibilities are ignored by a lot owner to such an extent that legal action is inevitable.”
In December 2011 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:
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